renewable energy.doc

8/14/2019 renewable energy.doc

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Experience with Promotion of Renewable Energy:Successes and Lessons Learned

Parliamentarian Forum on Energy Legislation and Sustainable Developmentape !own" South #frica

$%& 'ctober" ())$

Richard L* 'ttinger +

#bstract: Renewable energy is becoming economic in all markets as its rapid growth results in morecompetitive prices. It is particularly appropriate and increasingly being adopted for providing electric

power services to rural areas in developing countries unlikely to be served by grid electricity. Policiesneeded to implement renewable energy systems in rural areas are discussed in this paper. Most prominentare removal of subsidies to traditional energy primarily benefiting the wealthiest; involving the local

populace in decision making; educating financial institutions about the economics of investing in renewableenergy systems and creating investment vehicles appropriate to financing them in poor localities; training

personnel on management, maintenance and drafting contracts; requiring vendor provision of maintenanceand parts; and effective regulation and oversight of system management and financing.

,* , -!R'D. !,'-

he recent sharp increases in the prices of oil, natural gas, uranium and coal underline theimportance for all countries to focus on development of alternative energy resources. !ordeveloping countries, these price increases can have ruinous economic consequences; formany countries already plagued by poverty this means a choice between fuel and food,health care, education and other essentials. Renewable energy resources need priority

because" #$ the overwhelming scientific evidence that anthropological emissions ofgreenhouse gases from carbon combustion threaten catastrophic results from rapid

climate change; %$ the severe health and environmental consequences from fossil fuelcombustion being e&perienced in every ma'or developing country city; and ($ the highcost, environmental damages and security threats of nuclear power.

he world already is responding to these imperatives. )*nnual investment in renewableenergy was an estimated +# billion worldwide in %--%, up from + billion in #//0. *ndcumulative investment of at least +1- billion was made in renewable energy during the

period #//0 2 %--%.3 #

4irtually all those who have addressed the energy aspects of sustainable developmenthave concluded that renewable resources should play a ma'or role. hus in the latest

international pronouncement of the Plan of Implementation of he 5orld 6ummit on6ustainable 7evelopment, *rticle %- 8e$ states"

)8e$ 95ith a sense of urgency, substantially increase the global share of renewableenergy sources with the ob'ective of increasing its contribution to total energy supply,

# 7ean :meritus, Pace aw 6chool;


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recogniCing the role of national and voluntary regional targets as well as initiatives,where they e&ist, and ensuring that energy policies are supportive to developingcountriesD efforts to eradicate poverty, and regularly evaluate available data to review

progress to this end;3 %

Eet, in both developed and developing countries, renewable resources, while they are themost rapidly growing energy resource, still have not reached anywhere near theirtechnical and economic potential. Indeed, world@wide, the share of renewable resourcesaccounts for only about (F of total global energy supply. (

here are a host of economic, social and legal barriers that account for the failure ofrenewable resources to reach their potential. hose barriers can be overcome. hey have

been overcome successfully in many 'urisdictions. here are successful e&amples inmany developing countries. egislation can remove these barriers, get the price signalsright, and encourage successful utiliCation of renewable resources anywhere. his papere&plores mechanisms that can be used and that have been used successfully in developing

countries in various parts of the world to remove those barriers and to promote greateruse of renewable resources, particularly in rural areas of developing countries.

,,* R ES'.R ES '/ERED

Renewable resources covered here include" electricity produced from the light of the sunvia photovoltaic cells on individual buildings or for communities of buildings, or for the

production of central station power in vast arrays; from the heat of the sun, again forlocaliCed tasks like providing homes and businesses with hot water or space heating, or

providing central station power using fields of parabolic collectors focused on a fi&ed hotwater source G or solar ponds; from the power of the wind; from the heat below the earththrough various geothermal applications; from the power of ocean tides and waves; fromthe temperature variations between ocean surfaces and depths; from small hydroelectricinstallations; from agricultural wastes through biomethanation; and from biomass cropsgrown for energy use or from crop waste cellulose; the biomass can be refined to produceethanol or gasified for heat, electric and transportation applications.

raditional biomass in the form of firewood is not covered as a renewable resource,however, because it most often involves the cutting down of ecologically valuable foreststhat act as protection against floods and erosion and as sinks for carbon dio&ide and

because the gathering of firewood is so debilitating to women and children who alsosuffer serious health haCards when the firewood is burned in enclosed spaces for heatingand cooking. he same is true of burning animal dung for heating and cooking.Bowever, so@called modern biomass consisting of crops to ethanol and gasified wood andcrop wastes is included.

?uclear energy is e&cluded from this analysis as a development option because of its highcapital and operating costs, comple& technical requirements for operation andmaintenance, and its unresolved problems of proliferation and waste disposal. *fter theattacks on the 5orld rade


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problem with nuclear plants is their great vulnerability to terrorist attack, particularly onthe control rooms and spent fuel pools that are located outside the containment vessels.

?uclear energy at any rate is not renewable because of the limits on supply of uraniumunless reprocessing of spent fuel is utiliCed, an even more prohibitively e&pensive andtechnologically challenging option for developing countries. Reprocessing is a

technology that is particularly vulnerable to proliferation because of its resulting plutonium that can readily be used in weapons and is virtually detection@proof.

5aste@to@energy power from trash incineration is e&cluded because it is so highly polluting and because recycling options for wastes are so much cleaner and moreeconomic.

arge hydroelectric dams also are e&cluded because of their e&pense, their unreliability because of vulnerability to droughts as recently demonstrated in HraCil and the west coastof the >nited 6tates, because of their potential haCard in breaching, and because of theirenvironmental damages both from flooding large areas of productive and often populated

lands and their carbon dio&ide releases from decaying vegetation in their reservoirs, particularly in shallow reservoirs.

,,,* R E-E0#1LE R ES'.R ES # -D DE/EL'P,-2 '.-!R,ES

Renewable resources hold great promise for meeting the energy and development needsof all countries throughout the world, but particularly for developing countries where inmany areas commitment has not been made to fossil fuel dominance and where ruralareas may be served more economically than with traditional resources like kerosene anddiesel fuel.

>se of renewable resources in developing countries has grown markedly in the pastdecade. Many countries have significant renewable installations and programs asdemonstrated in able # below.

!#1LE + Renewable energy markets in developing countries

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#pplication ,ndicators of existing installations and mar3ets 4as of ()))5#. Rural residential and community lighting, 4, radio and telephony"

ver 0- million households are served by small@hydro village@scale and community mini@grids.#- million households get lighting from biogas.

#.# million households have solar P4 home systems or solar lanterns.#-,--- households are served by solarJwindJdiesel hybrid mini@grids.

%. Rural small industry, agriculture other productive uses" b

>p to # million water pumps are driven by wind turbines, and over %-,--- water pumpsare powered by solar P4.>p to -,--- small enterprises are powered by small@hydro village scale minigrids.

housands of communities receive drinking water from solar P4@powered purifiersJpumps.

(. =rid@based bulk power"c

G0,--- M5 installed capacity produces #(-,--- =5hJyear 8mostly small hydro and biomass, with some geothermal and wind$.More than %0 countries have regulatory frameworks for independent power producers.

G. ResidentialJ commercial cooking and hot water"%%- million households have more@efficient biomass stoves.#- million households have solar hot water systems.1--,--- household have solar cookers.

0. ransport fuels"

#G billion liters per year ethanol vehicle fuel is produced from biomass.#1- million people live in countries mandating mi&ing of ethanol with gasoline.

a!igures are authorsD estimates based on tabulations of country@level statistics fromsources cited in the te&t and other sources. 4ery few of these indicators are summariCedwell in a single source. !igures are appro&imate.

b*griculture and productive@use applications are difficult to estimate because little published data e&ists.c* share of stated grid@based power capacity serves small village [email protected]*R I? , :. ET AL, Global Renewable Energy Markets and Policies ,http"JJwww.martinot.infoJMartinotK?*R.pdf

IndiaDs renewable energy program is e&emplary, demonstrating many measures that canmake programs successful. *s a result, India today is a world leader in use of renewableenergy. It has pioneered in renewable energy applications research through itsinternationally renowned ata :nergy Research Institute. India is the only country in theworld to have created a cabinet@level department for promotion of renewable energytechnology, the Ministry of ?on@


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S'L#R 6olar energy presents great development opportunities in developing countries,

particularly since most of them are in the 6un Helt. 6olar photovoltaic energy is uniquelyuseful in rural areas unserved by electric grids to provide basic services such asrefrigeration, irrigation, communications and lighting. *n estimated #.# million solar

photovoltaic home systems and solar lanterns e&isted in rural areas of developingcountries as of %---. 15 6olar thermal energy is particularly suited to the large demandfor heat and hot water in the domestic, agricultural, industrial and commercial sectors ofthe economy. It is applied successfully for water heating, industrial process heating,drying, refrigeration and air conditioning, cooking, water desalination and purification8through use of solar ponds$, pumping and power generation. 16 )Bot water for residentialand commercial uses, both in rural and urban areas, can be provided cost@effectively bysolar hot water heaters in many regions. *n estimated #0 million domestic solar hot watercollectors are installed worldwide, about two thirds of them in developing countries.


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consumed by cars and light trucks. %% It is estimated to have saved HraCil over +G- billionin oil imports, e&cluding the costs of the program. :thanol was heavily subsidiCed by thegovernment until #//1 when it was deregulated and ta&es from gasoline sales weresubstituted to subsidiCe its costs. o get the program started, the state@owned oil companyguaranteed ethanol purchases on a cost plus basis and ta& incentives were provided for

the purchase of neat ethanol@using vehicles. he subsidies have now been phased out andthe program thrives on its own. In #///, almost thirteen mega@tonnes of carbonemissions were reduced as a result of the program, and local emissions of lead, sulfur andcarbon mono&ide have been greatly reduced. %( In addition, the ethanol productionsupports about --,--- rural 'obs. %G

In #/10, HraCil established a very successful national electricity conservation andrenewable energy program, known as PR


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78DR'2E-Bydrogen, while not an energy resource in itself, is the most promising alternative fuelfor the future. It currently is produced from natural gas in a process less polluting than oilor coal@fired power plants. 5ith improved and more economic technology, hydrogen can

be produced from photovoltaic or wind@powered electrolysis, separating hydrogen from

water 2 the focus of current :> research.%

Most hydrogen utiliCation research in the >.6.is centered on fuel cells that are pollution@free, involving no combustion. !uel cells can power vehicles or stationary electric generators, but they still require substantial researchto bring down their costs and are not e&pected to be available commercially forappro&imately twenty years.

Bowever, hydrogen can be used directly in todayDs motor vehicles without furtherresearch. Bydrogen combustion is virtually pollution free with a byproduct primarily of

pure water. he principal challenge for its widespread adoption is to create aninfrastructure to transport the hydrogen to wholesale markets @@ although e&isting naturalgas pipelines can be used if treated or lined 2 and a retail infrastructure for fueling

vehicles at service stations. his infrastructure work will involve very large initial capitale&penses. here is a circular problem in accomplishing this infrastructure investmentsince hydrogen manufacturers donDt want to invest in production without a transportationand distribution system and established market, while pipeline manufacturers and utilitiesdonDt want to invest in pipelines without an assured supply and distribution system in

place. Bydrogen is sufficiently developed today so that a number of ma'or vehiclemanufacturers are planning to market fuel cell vehicles in the ne&t few years and it is

beginning to be used as an electric power source, but virtually no attention has beendevoted to use of hydrogen in e&isting vehicle engines. %1

,/* RE-E0#1LE E-ER28 1#RR,ERS

here are many barriers to wider spread use of renewable energy resources; while theycan be overcome and have been in many countries, doing so will require a large,concerted, prioritiCed effort. he main constraints to the more widespread use ofrenewable resources are"

ack of information by the public, and even many government, commercial andindustrial energy officials, about the availability, costs and benefits of renewableenergy technologies;

ack of knowledge by pro'ect initiators and managers of the social and energy

related needs of rural communities, how to adapt pro'ects to meet these needs, andinvolvement of the communities in the design of pro'ects. !ailure of publicinvolvement may be the most significant barrier. If pro'ects fail to meet the localneeds for which they are intended, such failures can impede renewable energyapplications for decades. Rural community residents can ill afford unsuccessfule&periments;

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!ailure to get the prices right, particularly distorting the energy market whenheavily subsidiCed traditional energy is compared to renewable energy options @@and the failure to value all resources on a life@cycle cost basis taking into accounte&ternality costs to society.

Preference for known fossil resources over newer renewable resources bygovernment, commercial and industrial officials responsible for making energydecisions and by banking and other financing officials;

7iscrimination against intermittent energy sources such as solar and wind power by pool power dispatchers, utilities and government procurement agencies, eventhough these resources often are available at peak times of power needs.7ispatchers often require commitments of availability with penalties for failure tocomply that are unreasonable for intermittent resources. >tilities placeunreasonable interconnection requirements such as e&cessive standby rates, costrecovery through fi&ed unavoidable charges which lengthen the payback period to

intermittent r source providers, and e&it fees charged the intermittent generator tocompensate for stranded costs that are over@stated or even fictitious. =overnmentagencies also often require e&cessively burdensome approval requirements forinterconnection of intermittent resources. 7ispatchers, utilities and government

procurement regulators all usually fail to credit intermittent resources with the benefits they provide such as elimination of pollution emissions, prevention of power surges, fuel diversity and absence of fuel costs.

Buge well@financed sales forces for traditional energy sources and frequently afinancial stake by energy decision makers in these sources;

Paucity of sales forces for renewable energy resources and lack of financial and political clout to promote them effectively;

ack of personnel trained in the installation, operation and maintenance ofrenewable energy equipment;

ack of knowledge and personnel trained in financing mechanisms available tosupport renewable energy pro'ects;

Import duties on renewable equipment and other barriers to foreign investmentgenerally and as related to renewable energy resources; and

he small amount of R 7 effort and funding being devoted to improvingrenewable technologies.

Renewable energy resources require substantial up@front capital costs, but solar, wind,geothermal and small hydroelectric technologies achieve considerable savings fromcostless fuels, low maintenance requirements, and elimination of future fuel price and

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availability risks. %/ !or those technologies that are not yet commercially competitive,financing of initial capital costs is required in developing countries.

7espite this formidable list of constraints, renewable energy is the fastest growing energysupply resource in the world today. (- he barriers listed can be and have been overcome.

oday, small hydro, geothermal generation, biomass, wind farms, and photovoltaics inniche applications are well established technologically and sufficiently ine&pensive to becompetitive even in providing grid electricity in many countries and applications. (#

/* 6E 7#-,S6S F'R RE-E0#1LE E-ER28 ,6PLE6E-!#!,'-

Many mechanisms have been successfully used around the world for achievingrenewable energy utiliCation by both the public and private sectors and in both developedand developing countries and their municipalities. he mechanisms discussed includeeconomic and market mechanisms, government procurement, utility regulatory measuresand programs, standards, government@encouraged voluntary programs, and citiCen suit

enforcement. hese measures are by no means mutually e&clusive, and in many casesmore than one mechanism has been applied.

# . Education and Training

:ducation is vital to inform the public, energy decision@makers, ?= s and the privatesector about the available renewable energy options, their application and their costs and

benefits. 6uch knowledge also is essential to build the political support necessary forenactment of appropriate legislative measures to promote renewable resource use.:ducation of the public really should start at the primary and secondary school levels andcontinue as a part of professional and technical training for those whose 'obs will involveenergy related@decisions. (%

:ducation is particularly important for architects, engineers, builders, commercialenterprise managers, trades people, and government officials at all levels, to inform themof available economic renewable energy technologies and applications, and also of therequirements of laws that have been adopted to promote energy efficiency and renewableresources and of the costs and benefits of the measures they can take either voluntarily or

pursuant to legal requirements. (( It is important that retail sales staff, contractor installersand maintenanceJservice personnel understand the benefits of renewable technologies andthat they can personally benefit from promoting these products to end users.

It is essential that technical staff be trained and available in sufficient quality and quantityto maintain and operate all renewable systems installed.


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Much of the necessary renewable energy education must be conducted or contracted bygovernments that must create a legislative framework for this educational effort andappropriate or seek grants for the necessary funding. =overnments also need to providefor staff to do mailings, conduct workshops and conferences, and do media education. *s

commercial enterprises learn of the economic advantages of renewable energy measuresthat can be profitable for them, they also will participate in the educational efforts. ?= sadvocating for renewable energy measures can perform an important part of theeducational effort; many international, national and local ?= s have created internetsites and listserves to inform advocates and the public of renewable and efficiencyresource opportunities, advantages and costs. Political leaders can play an importanteducational role as well and governments can demonstrate technologies and set ane&ample by installing renewable energy in their own facilities and vehicles, publiciCingtheir use and requiring their procurement on government pro'ects...

B. Assessment and Adaptation to Local Needs

?o aspect of renewable energy promotion is more important than assessment oflocal needs, adaptation of pro'ects to meet those needs and inclusion of localcommunities in design of pro'ects. 5hile these requisites may seem obvious, they are fartoo often overlooked 2 and not 'ust for renewable pro'ects. *nd while they may be

burdensome, failure to involve the affected public in pro'ect planning and implementationare inevitably more burdensome. oo often well meaning international and nationalagencies, equipment suppliers, and pro'ect funders and promoters are ignorant aboutcommunity needs, customs and cultures. hey ignore local input to the peril not only oftheir pro'ects but also to successful introduction of renewable resources throughout theircountries and even regions.

Renewable energy can be an important instrument of advancing economic andsocial development in communities, but only if the pro'ects are knowledgeably designedand carefully planned with full local input and cooperation. Particularly in poor ruralareas, the costs of renewable energy pro'ects will absorb a significant part of the smallincomes of participants. hey can not afford unsuccessful pro'ects that may not only failto meet development ob'ectives, but also leave participants destitute.

he governments promoting renewable energy pro'ects should institute absoluterequirements of assessment of local needs and participation by local communities in thedesign of pro'ects. *ll pro'ect designers, architects, engineers, suppliers, technicaloperation and maintenance personnel, educators, trainers, pro'ect funders, governmentofficials, ?= s and others having a say in design and e&ecution of renewable energy

pro'ects must be required to participate in such local assessment and participation effortsand should undergo training to prepare them adequately to meet these needs.

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* Environmental Assessments & Disclosure

ne of the most effective means of promote renewable resources is adoption of arequirement for an environmental impact assessments or statements 8:I6$ for all ma'orenergy related pro'ects. 6uch an :I6 is required for all ma'or )federal actions

significantly affecting the quality of the human environment3 by the ?ational:nvironmental Policy *ct of #/ / in the >.6. (G he :I6 must detail the environmentalimpacts of any proposed action; any adverse environmental effects, including cumulativeimpacts from other related pro'ects 8as with several polluting resources on the same bodyof water$; alternatives that may have less environmental impacts than the proposedaction; short vs. long term effects; and any irreversible commitments of resources. :I6assessments that do not conform to the *ct must be sub'ect to court challenge, a measurethat has been very effective in assuring that the consequences of proposed actions beconsidered before they are implemented in the >.6...

More than # 0 countries have enacted their own environmental impact assessment

legislation and such assessments have been required in a number of internationalenvironmental treaties such as in *rticle %- of the >?


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without them. Hut these subsidies both encourage increased use of fossil and nuclearfuels and discourage the use of clean alternatives by making them less economicallycompetitive. 6ubsidies usually are granted by governments under the prete&t of protecting domestic

'obs, promoting use of domestic resources and protecting the poor from high energy prices. In fact, the subsidiCed traditional resources usually create fewer domestic 'obsthan renewable resources; they require very e&pensive imports of equipment and e&pert

personnel, displacing funds available to invest in basic needs such as education, healthcare and the environment; and they do virtually nothing for the poor, being enacted under

pressure from the wealthiest elements of society to reduce their energy costs. Indeveloping countries, the poor do not even have electricity or automobiles and thusreceive virtually no benefit from the subsidies. G-

7eveloping countries like nited Ningdomdecreased coal subsidies from + billion in #/1/ to Cero in #//0. G0

he political difficulties of eliminating subsidies and the transition problems for localeconomies in fossil@producing countries can not be minimiCed. ?evertheless, countries asdiverse as HraCil,


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but also for the heating of homes and commercial buildings and for home cooking, posing horrific health threats because the pollution is in a confined area. ?o accurateassessment can be made of the comparative costs of clean energy without inclusion ofe&ternality costs.

. $se of Life%#"cle #osts

he costs of introducing clean energy resources often entail substantial first cost capitalinvestments, but the savings over the life of these resources make them cheaper comparedto fossil fuel generation over time. his phenomenon is particularly evident withefficiency measures and with solar, hydroelectric and wind energy resources where thefirst cost of equipment acquisition can be considerable, but the total absence of fuel costsand very low maintenance costs result in their being much more economicallycompetitive to fossil fuels over the anticipated life of their use. 0- he costs of fossil fuelsshould always be compared to efficiency and renewable resource costs on a life@cycle

basis. egislative or regulatory requirements for the utiliCation of life cycle costing are

feasible and costless. . Removing nvestment and mport Restrictions

In many developing countries there are high duties on import of equipment, includingequipment required for renewable energy. 0# 6uch duties should be eliminated ifrenewable energy use is to be promoted. Many restrictions also e&ist on investment offoreign capital that need to be removed to create a climate encouraging investment. Hutwherever possible, local manufacture of renewable energy equipment should beencouraged, eliminating the need for imports altogether.

D . mposing ollution Ta!es

a&ing pollutants or polluting fuels can be not only an effective way of promotingemission reductions in the marketplace, but also of making the polluters pay thee&ternality costs of the damages to society from their pollution. hey raise the price ofemissions@intensive goods and lower profits for use of polluting fuels, thus allowingmarket forces to encourage adoption of renewable resources.

a&ing pollution that causes harm to society also makes far better sense for raisingrevenues than does ta&ing income and labor, the usual government revenue sources. !ar

better to discourage pollution that society seeks to avoid than to ta& income and labor thatsociety seeks to promote.

a&ation of polluting fuels is one of the most direct ways of promoting renewableresources. 0% Pollution ta&es 8including carbon emission ta&es$ have been imposed inHraCil, 7enmark, !inland, Italy, atviaJ ithuania, 6weden and the >nited Ningdom. 0(

Pollution ta&es are politically difficult since inevitably some energy@intensive industriesand 'obs are affected. Bowever, if the pollution ta&es are offset by reductions in other

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business ta&es, they can produce a net economic benefit. 0G he political difficulty isillustrated by the fact that in a number of the countries that have legislated such ta&es,ma'or industries have been e&empted to avoid competitive disadvantage to domestic

production. Ideally, pollution ta&es should be imposed internationally to eliminateadverse competitive effects. Bowever, the competitive effects of pollution ta&es can be

ameliorated with border tariffs and rebates. *n international ta& on fossil fuels or oncarbon dio&ide emissions would be a good means of funding technology transfer andacquisition of sustainable energy resources by developing countries.

/,,* PR'6'!,'- 6E#S.RES

#* Tec'nolog" ncentives

5hile long@term subsidiCation of any fuel, technology or product distorts the market andis therefore undesirable if sustained, temporary subsidies to bring new technologies intothe marketplace can be effective, useful, and often essential to accelerate their market

acceptance. *lso, where fossil fuel subsidies persist, non@fossil fuel subsidies are 'ustifiable to level the playing field for them.

he Poland :fficient ighting Pro'ect, financed by the =lobal :nvironment !und 8=:!$of the 5orld Hank and administrated by the International !inance .6. 7epartment of :nergy under its )=olden


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1* Standards

6tandards are a particularly effective way of assuring that emission reductions will beachieved. hey result in higher costs for polluting fossil fuels, thus promoting renewable

energy applications. 6tandards for minimum efficiency performance of products likeappliances, light fi&tures, ballasts and electric motors are effective in removing from themarketplace the least efficient products. Politically, standards can only be set where technological and economic feasibility has

been demonstrated and where the businesses affected can be persuaded to agree to thelevel of control. hey therefore generally represent minimum rather than ma&imumfeasible efficiency achievements. ther incentives are required to reach ma&imum

penetrations. 6uch incentives may include temporary subsidies, ta& incentives,government procurements, information programs, labels and other measures discussed

below. *lso, many products involve rapid technological change so that standards become

quickly obsolete. Regular updating of the standards is therefore required. 6tandards also must be set with care as to their applicability. !or e&ample, it makes senseto require installation of compact fluorescent lamps only where usage is reasonably high;they may be uneconomic where lamps are only used a few hours a day. *lso, it isdifficult to use standards for new technologies that are still relatively unproven andcostly, in which case information, incentive and R 7 programs may be moreappropriate. astly, standards are ineffective if not enforced, so regular reporting,inspections and enforcement mechanisms must be included, as well as training of the

personnel who will be involved with their application.

Bowever, standards are one of the most effective means of promoting renewabletechnologies if properly applied. + . Rene(able ortfolio Standards and )oalsIn >.6. states and many countries, renewable portfolio standards have been adopted orare being considered. hese standards require electric utilities to purchase a certain

percentage of their power from renewable resources. *t present fifteen >.6. states haveadopted some form of renewable portfolio standard utility requirement. - =oing evenfurther, Massachusetts and


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delivered %--,--- systems towards this goal with the assistance of 5orld Hank and=lobal :nvironmental !acility 8=:!$ loans. %

( . ollution Standards

6tandards for air polluting emissions from power plants and tailpipe emissions fromvehicles can be very effective in promoting renewable energy resources. he >nited6tates 8through its .6. states have adopted standards for construction of new buildings. Many have now included energy efficiency requirements in these buildingstandards. *ll the I:* countries and many >.6. states have energy efficiencyrequirements as a part of their building codes and many recently are strengthening them.

G

< . Standards* Enforcement :ffective enforcement is critical to the success of any standards program. heoretically,the governments adopting the standards should enforce them, and any standards program,to be effective, should incorporate substantial resources for training, inspection andenforcement. In practice, however, governments and their regulatory agencies often cometo identify with the industries or companies that they regulate. *lso, political pressuresoften prevent effective government enforcement. .6. in the .6. environmental statutes has been found to

be a most effective enforcement mechanism. ?= s in the >.6. are able to holdregulatorsD feet to the fire very effectively by filing suit to enforce standards, with theaward of attorneyDs fees for such litigation; the very presence of citiCen suit provisionsenables the ?= s to influence government enforcement policies.

. )overnment rocurement

*ll governments are ma'or energy users. egislation or regulation to require purchase bynational, state andJor municipal governments of clean energy products and processes cando much to promote the use of renewable resources. =overnment procurements of green

products also create markets to bring down their prices and set an e&ample of thefeasibility of their use for the private sector.

=overnments also can aggregate procurements to make production of renewable energytechnologies and other energy superior equipment more economic for manufacturers. he

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International :nergy *gency has sponsored a number of efficient technology procurement pro'ects.

D . Tec'nolog" Transfer and Researc'+ Development & Demonstration

=overnment@sponsored research, development and demonstration pro'ects 8R7 7$ inthe >.6. have dramatically reduced the cost and increased the performance of renewableresources. !or e&ample, resulting technology improvements have reduced P4 generationcosts from +#.0-Jk5h in #/1- to a range of +.(-@+.G-Jk5h today.

!or developing countries, technology transfer is a critical factor in enabling them to takeadvantage of renewable technologies used in industrialiCed countries. echnicalassistance and education of key energy players is essential to success. here are manysuch efforts being conducted around the world sponsored by governments andinternational agencies.

Improved technology offers great potential for developing countries to leapfrog to use ofmodern renewable technologies. hey can adopt these cleaner technologies from thestart, avoiding the economic and pollution costs of using more e&pensive traditional

polluting fuels and then having to replace or retrofit them to meet pollution standards, ashas been done in the industrialiCed countries.

ne particularly successful effort has been the establishment of :nergy utreach


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service ventures, demonstration and training, and public education and informationdissemination. #

E* Rec"cling rograms

Many countries today have laws providing for the recycling of their waste paper, glassand metal products. !or e&ample, in 7enmark, half of all waste is recycled and 1-F ofnew paper is made from used paper. % *lmost every municipality in the >.6. hasestablished a recycling program for paper, glass, plastic and metal wastes, with eithercurbside pickup or establishment of a central recycling municipal facility. Many

businesses and institutions not required by law to do so recycle their waste products on avoluntary basis.

In the industrial and commercial sectors, the recycling of wastes also is economically andenvironmentally advantageous. !or e&ample, the >.6. throws away enough aluminum torebuild the countryDs commercial aircraft fleet every three months, even though recycling

aluminum takes /0F less energy than manufacturing it.(

Interface, the worldDs largestcarpet@tile maker, estimates it cuts its materials flow by about tenfold by leasing floor@covering services instead of selling carpets and by remanufacturing old carpets. G andand coal mine gas recovery turns heat@trapping and haCardous methane emissions into thevoluble fuel that also displaces fossil fueled power plants. 0

F. ndustr"%)overnment artners'ips

Many industries recently have undertaken ma'or programs to promote efficiencymeasures and renewable energy use, often in partnership with sponsoring governments ona shared funding basis. 6ome of these efforts are in anticipation of Nyoto Protocolrequirements and credits. arge international companies such as 7upont, 6hell il, HPand others have instituted such programs.

2 . $tilit" rograms and Regulator" Re,uirements

+ . $tilit" ncentives>tilities in many states of the >.6. have been required by regulatory commissions toundertake integrated resource planning 8IRP$, including detailed assessment of the costsand benefits of renewable resource use. 1 he utilities are required to provide incentivesto their customers to purchase energy efficiency and renewable resources whereeconomically 'ustified. /

In the >.6. states that have deregulated their utility generation, environmental advocateshave been quite successful in getting utility regulators or legislators to impose a )systems

benefit charge3 on the distribution utility, which remains a regulated monopoly, to fundefficiency, renewable and other public benefit investments. 1- he revenues from thesecharges often are placed in independently administered public benefit funds. *s of Quly#///, fifteen >.6. states have adopted utility system benefit charges and benefit funds. 1#

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( . $tilit" urc'ases* number of >.6. utilities have acquired renewable resources for their own use. !or

e&ample, Pacific =as and :lectric


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energy efficiency measures achieve such large savings over time as to provide verysubstantial revenue resources. a&es on pollutants and fossil fuels have been used inmany countries to help finance renewable energy measures. :mission trading rights have

been utiliCed to lower the costs of pollution reduction measures. =overnments have usedgeneral ta& revenues to support efficiency and renewable programs and R 7 for new

technologies. hey also have initiated programs to require purchase of renewable fortheir own use. *nd they have required their electric utilities to do integrated resource planning which includes efficiency and renewable resources and to assist customers inacquiring them.

( . $tilit" rograms Funded from Electricit" #'arges*s mentioned earlier, many utilities in the >.6. have been required by state regulatorycommissions to assist in the financing of energy efficiency and renewable resources fortheir customers. hese programs were usually in the form of rebates for renewables andefficient equipment and energy audits of customersD homes or places of business. 10 Insome cases, the utilities provided loan programs repayable by a charge on customer

utility bills. 6imilar programs have been enacted in other countries.1

In a few cases, theutility may act as retailer of renewable and energy efficiency equipment.In many instances, renewable energy measures can be funded internally by electricitycharges. hus, QapanDs successful #--,--- Roofs solar P4 program was funded byelectricity surcharges to pay one@third the installation costs of household P4 systems,with utilities purchasing any e&cess power at retail electricity prices. 1 .6. 7epartment of :nergy has 'oined with top finance firms to create theInternational Performance Measurement and 4erification Protocol. /- he ProtocolstandardiCes streams of energy savings in buildings so that they can be aggregated and

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securitiCed. he Protocol as of ?ovember #// had been adopted by more than %-countries including HraCil, kraine and the >.6. heProtocol has been successful in stimulating a market in which loans to finance energysavings and use of renewables can be originated and can be affordably financed withoutuse of internal capital or competition with other internal investment needs. /#

< . Aggregated Loansne way to overcome the problems with small loans for distributed resources is to

aggregate the loans in various ways; e&amples follow"

a* ,nstallment Loans . *n innovative credit arrangement to overcome these problems has been adopted by several countries, to make loans to credit@worthy institutions like localutilities which set up revolving funds to manage installment loans to individual and small

business basis on relatively attractive terms. 6uch arrangements have been adopted inIndonesia for its 6olar Bome 6ystems Pro'ect, in India for a solar photovoltaic program,in Nenya for its wood stove upgrading program and for off@grid photovoltaic systems,

and in Hangladesh, the 7ominican Republic and Bonduras./%

b. Micro >tilities. *nother innovative mechanism is financing service providers withthe creation of renewable energy micro utilities which sell energy services, permittingfinancing to be aggregated to the service provider, the end@user being required to make

payments based on the level of energy services received. his approach has beensuccessfully demonstrated in the 7ominican Republic and is now being implemented in a#-,--- solar home system program by a rural electric cooperative in Holivia; andmortgage financing, allowing homeowners to incorporate the costs of installingrenewable systems into the overall costs of their homes through mortgage financing. /(

his approach is being tested in a rural housingJelectrification program in 6outh *frica. /G

c* 2rameen 1an3 . * particularly fascinating development is the creation of microlending organiCations in some of the poorest countries for their most impoverished

populations. hus, =rameen Hank 8)village bank3 in Hengali$ in Hangladesh has started alending program for people earning on average less than +# a day. oday, =rameen isestablished in nearly (/,--- villages in Hangladesh, lending to appro&imately %.G million

borrowers. :stablished in #/1 , it reached its first +# billion cumulative loans in #//0. Ittook only two more years to reach +% billion. he repayment rate hovers between / and#--F. In a typical year, 0F of =rameen borrowers, representing #%0,--- families, riseabove the poverty level. he =rameen model has now been applied in G- countries. In all,about %% million poor people around the world now have access to small loans. =rameenhas now established more than a doCen enterprises, often in partnership with otherentrepreneurs. ne such enterprise is =rameen 6kakti 8:nergy$ that has been helping toinstall solar energy systems in village households. /0

$ . Leasing rogramseasing equipment is an innovative approach to overcoming the financing problems for

small systems and to make them affordable. !or e&ample, the !rench government and!ranceDs largest utility developed the largest leasing program for compact fluorescent

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lights 8

hirty@four percent of all households redeemed the coupons for an average of .1

distribution of (G0,--- .6. and :urope. #-# he customercontracts with an :nergy 6ervice .6., however, filling onlyniche efficiency applications for large industrial, commercial and institutionalcustomers. #-% *dequate long@term financing for :6< operations is critical, since the:6< must put up initial capital that may not be paid off from savings for several years.:6< financing is particularly important to establish :6< s in developing countries.

>*#oncessions* relatively new approach to the financing applications of renewable energy to rural

populations not served or likely to be served by electric power grids is through )energy@service concessions granted by the government to a renewable energy developer fore&clusive rights for sales in a designated area. his concession approach is being

pioneered by the 5orld Hank, >?7P and he =lobal :nvironment !acility. he 5orldHank has published a 5orking Paper on concession program case studies in si&developing countries" *rgentina, Henin, Holivia,


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to supply electricity to #.G million rural residents 8about (--,--- households$ and morethan ,--- public facilities 8e.g. schools and hospitals$ through private rural energy@service concessions. #-G he 5orld Hank said that this publicJprivate partnership for the

provision of electricity service to remote, low@income areas is unique in the world andconsidered internationally as a highly innovative approach to the problem.3 #-0

)>nder P*:PR*, the provincial government sets tariffs for particular types of electricityservices. * competitive tender is held, under which companies bid for a #0@yearmonopoly concession contract. >nder the contract, the concessionaire is obligated toservice all households and public facilities within the province at tariffs set by the

provincial government 8although concessionaires have the right to discontinue service ifcustomers do not pay in a timely manner$.


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1 . E!ternal Resources

In the past few years, the international lending organiCations" the 5orld Hank, regional banks, the International !inancing ?7P$ and the >? =lobal :nvironmental !acility 8=:!$ have started ma'or programsof financing energy efficiency and renewable pro'ects in developing countries. #-1 heymust do more, but their resources will never be sufficient to meet developing countryrequirements. he capital requirement of electric power growth in developing countrieshas been estimated to be +#. trillion over the ne&t two decades. #-/ >nfortunately, the5orld Hank currently lends less than +G billion per year to the energy sector, whilecommercial lending stands at about +# billion per year 8as of #//#$. ##- It is clear that

private and public internal sources also will be required if the need is to be met.

he 5orld Hank and its sister international lending institutions, which had for manyyears made wasteful investments in highly capital@intensive energy inefficient traditional,

polluting technologies, have started to change direction and are now making ma'orfunding available for energy efficiency and renewable technologies. !or e&ample, the5orld Hank has established the *sia *lternative :nergy >nit 8*6 *:$ to develop onlyrenewable and energy efficiency pro'ects; *6 *: has helped the Hank to lend over +0--million for renewable pro'ects in the *sia region. ### he 5orld Hank also financed aRenewable :nergy 6mall Power Pro'ect in Indonesia, a component of which fundsmedium@scaleJisolated grid systems there. ##% * 5orld Hank Market ransformationInitiative loan of +0 million fosters a photovoltaic industry in Nenya that is selling over%-,--- systems annually with a (--k5 capacity, and has already sold over 1-,---systems providing electricity for some %0-,--- rural dwellers. ##(

Recent e&amples in other international financing institutions" he International !inance


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. 1"oto rotocol -ec'anisms

*rticle #% of the Nyoto Protocol provides for :missions rading, Qoint Implementation,and a new


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) ne important lesson emerging is that donations without any cost recoverydestroy markets. 7espite bad e&perience with unsustained use of donatedrenewable energy equipment in developing countries donors still are underminingmarkets with large capital cost subsidies and donated equipment.3 121

*nother problem found is that when equipment is donated it can inhibit commercialmarkets by creating e&pectations of more donor aid. *nd donor@subsidiCed equipmentcan create perceptions that the renewable power is not commercial and requires continueddonor aid. *lso prices for the equipment can be increased because of the perception thatthe equipment is not commercial and requires donor aid. !urther, the funding ofequipment without provision for training, maintenance and spare parts can result in

program failures. 122

)6mart subsidies3 have been advocated that are given only for a limited time duration tointroduce new technology and )to build up initial market volume, local e&pertise, userawareness, appropriate technology adaptation, quality standards and entrepreneurial

activities.3123

he study also found that subsidies based on operational performance aremore effective than those based on capital investment. 124 hus a successful ?epal biogas program provided subsidy payments for operational milestones over periods of up tothree years. Recent =:!@funded renewable energy pro'ects have adopted theseapproaches. 125

,?* '- L.S,'-

here are abundant e&amples, only a few of which have been identified here, in bothdeveloped and developing countries, of successful adoption of cost@effective renewableenergy measures to ameliorate pollution while aiding their economies. * wide variety oflegislative and voluntary programs have been undertaken and the legal and financialmechanisms for doing so also are many and varied. It is possible to meet the worldDsenergy, development and environmental needs. his achievement can even be done on a

basis of long term profitability. Hut achieving these goals will take determined action and political will among all the governments and international institutions of the world. !orthe developed countries and international institutions, achieving these goals will require avast increase in the resources they devote to funding sustainable energy, technologytransfer and education and training in the developing countries. !or developing countries,achieving these goals will require an increased commitment to eliminating the barriers toadoption of sustainable energy measures and creating a climate and legislation toencourage private investment in them.

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1 Martinot, :., Global Renewable Energy Markets and Policies , http"JJwww.martinot.infoJMartinotK?*R.pdf at p. #...2 6ee www.'ohannesburgsummit.orgJhtmlJ documentsJsummitKdocsJ%(-/K plan final.htm.3 Martinot, supra note # at p. #.4 he largest solar thermal pro'ect was constructed by uC International, td., which constructed nine 8I@IS$ 6olar :lectric=enerating 6ystem 86:=6$ plants in the Mo'ave 7esert. =eneration costs have decreased by more than half since buildingthe first plant. he cost of the 6:=6 I plant was + % million 8+G,0--Jk5$, generation costs were %G centsJk5h 8in #/11 realleveliCed dollars$. Investing +(,G--Jk5 in improving technology reduced the generation costs of 6:=6 III@4I to #%centsJk5h; investing +%,1 0Jk5 reduced costs further to between 1 and #- centsJk5h for 6:=6 4III and IS. uC was ableto finance the 6:=6 plants by raising over +# billion and taking advantage of the available federal and state ta& credits.

In the end, uC International was forced to file for bankruptcy and turn over the 6:=6 plants to its investors. hefollowing factors contributed to uCDs financial difficulties" the piecemeal fashion of e&tending energy ta& credits for solarenergy property, building 6:=6 IS in months to obtain the ta& credit, the fact that the credit could not be applied againstthe alternative minimum ta& established in the #/1 a& Reform *ct, and the siCe limitation of P>RP*Ds ualifying!acility specifications for mandatory utility renewable purchases. See Profiles in Renewable Energy: Case Studies ofSuccessful tility!Sector Pro"ects# ?ational Renewable :nergy aboratory 87enver,


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18 !redrik undberg, P+ Lig'ting# International *ssociation for :nergy@:fficient ighting 8I*:: $ ?ewsletter, !ebruary,#// , a$ailable at http"JJwww.iaeel.orgJI*:: J?:56 J#// Jtva#// J iRenKaK%K/ .html.

19 =oldemberg, Q. Reid, 5., eds., %ssues , -ptions: T'e Clean *e$elop(ent Mec'anis(# >?7P 8?ew Eork #//1$.

20 Martinot supra note #G at p. (%(.

21 .ra/il 0as 1ater Power and Et'anol .ut Can T'ey Meet Rising 2eeds , ?I :7 ? * I ?6 7 :4: PM:? PR =R*M , 5 R 7 : ?:R=E * 66:66M:? 8%---$ at %%/.

24 %d .

25 =eller, B. et& al pdate on .ra/il4s 2ational Electricity Conser$ation Progra( 5PR-CEL6 /, *merican


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R I " PR 6P:< 6 *?7 < B* :?=:6 8#// $.

40 Mendis, Matthew 6., 3inancing Renewable Energy Pro"ects . Constraints and -pportunities , *lternative :nergy7evelopment, Inc., 6ilver 6pring, M7 8Quly #//1$.

41 !lavin,


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61 R. 5iser and N. Porter # Renewable Energy Markets in State Electric %ndustry Restructuring , :*P etters, *ugust #///,a$ailable at http"JJwww.spratley.comJleapJstuffJ#///.- .-1.guestKperspective.php(.

62 International :nergy *gency 8I:*$, Stand!alone P+ Syste(s in *e$eloping Countries , *ugust #///, a$ailable at http"JJ#G#.0#.#01.(GJieaJPublicationsJ6tandardsF%-MarchF%-%--#F%-coverF%-andF%-te&t.pdf .

63 G% >.6..6. ?I :7 ? * I ?6 7 :4: PM:? PR =R*M , 5 R 7 : ?:R=E * 66:66M:? 8%---$.

68 ?I :7 ? * I ?6 7 :4: PM:? PR =R*M , 5 R 7 : ?:R=E * 66:66M:? 8%---$ at %/G.77 International Petroleum Industry :nvironmental


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84 os *ngeles 7aily ?ews, L&A& leads way in de$eloping true 9Green Power 8Qune %, #///$.

85 :to, et al supra note /( at (.

86 Moore Ihle, supra note %.

87 %d& at #1.

88 %d&

89 Mendis, supra note G-

90 ovins, supra note , at ##@#%.

91 %d&

92 %d&

93 %d&

94 %d&

95 Eunus, Muhammad, he =rameen Hank @@ * small e&periment begun in Hangladesh has turned into a ma'or new conceptin eradicating poverty, 6cientific *merican 8?ovember, #///$ at ##G@##/; see also, !riedman, homas ., 6ocial 6afety

?et, ?.E. imes 8?ovember (, #///$.

96 Results


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110 evine. M., et& al Report to t'e &S& 1orking Group on Global Energy Efficiency# Energy Efficiency# *e$eloping 2ations and Eastern Europe# awrence Herkeley ?ational aboratory 8#//#$ at ( .

111 Mendis, supra note G-

112 International :nergy *gency 8I:*$, Stand!alone P+ Syste(s in *e$eloping Countries , *ugust #///, a$ailable at http"JJ#G#.0#.#01.(GJieaJ7eveloping

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