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Powering the world

To survive in a world of volatile energy prices, businesses need to commit to responsible environmental and energy management

By Arif Zaman

With the UN Conference on Sustainable Development (Rio+20) scheduled for June 20-22, the case for renewable energy and the need to address the energy challenge that the world is facing – and private sector interest in it – has never been more timely.

Energy is not just a concern for the developing world but all countries who must reconcile current energy supply with future demands and limitations. Further, they must also examine the huge possibilities provided by new and renewable energy technology.

Renewable energy has been a focus of the Commonwealth Business Council’s (CBC) programme, which hosted the first Power Summit in London in 2011. At the 2009 Commonwealth Heads of Government Meeting in Trinidad and Tobago, the participants committed to “work to facilitate and enable the transition to low-emission economies.”

The size of the international green economy is estimated at £3.2 trillion annually and in the UK, more than 900,000 people are employed in the environmental and low-carbon market. Today, renewable energy sources account for 13 percent of the world’s primary energy supply. The share of renewable energies for electricity generation is 18 percent, while their contribution to heat supply is around 24 percent — to a large extent accounted for by traditional uses such as collected firewood. About 80 percent of the primary energy supply today still comes from fossil fuels.

The renewable industry offers great business opportunities for those able to capitalise on them. To thrive in a future likely to be characterised by volatile energy prices, businesses need to commit to a long-term, strategic approach towards environmental and energy management. It is recommended that businesses adopt a structured approach to benefit from renewable energy by:

* Systematically investing in cost-effective energy efficiency measures to minimise energy requirements

* Establishing a clear and long-term business case for using renewable energy

* Implementing a strategy that enables measures to be developed quickly and allows for in-house expertise to grow

* Implementing measures on a trial basis to test their viability and acquire experience prior to likely energy price increases and growing regulatory pressure

* Following a learning phase by acting quickly to benefit from the funding available under national government initiatives

* Keeping a close eye on energy policy and market developments

There is a clear role for governments too. Since renewable energy is most typically attractive in a policy-driven market, it will require a concerted public and private commitment, supported by more ambitious policies. The CBC’s paper on green economic development urges governments to reengineer the use of fiscal incentives in order to eradicate perverse subsidies that encourage poor use of resources. Further, it argues in favour of redesigning green taxes to deliver behavioural change rather than ever-increasing revenue dependency by government on polluting activities. It is clear that setting a CO2 price will not be enough to achieve the revolution.

Governments need to take action on each of the following policy measures:

* A clean energy revolution can be achieved by way of a comprehensive policy approach. Several countries have achieved dramatic changes in their energy markets. Creating a strategic, comprehensive approach that communicates to the public the energy, economic and environmental benefits of clean energy investments is essential to success.

* Developing national strategies that work with the private sector to identify a set of priority technologies, and provide a package of coordinated, predictable policies to accelerate technology development. It also requires providing smart interventions along the technology development chain from research to demonstration, large-scale integration and market commercialisation, and pulling technologies into the market using targeted policies.

* Implement supportive energy policies, including removing non-economic barriers and providing transparent, predictable and adaptive incentives for cleaner options.

South Asian countries are under immense social and political pressure to secure a reliable, sustainable and affordable energy supply that would meet the region’s growing demand for commercial energy. Constrained with limited reserves of fossil fuels, the region offers ample opportunities for tapping the renewable energy potential. Environmental concerns and access to energy in rural off-grid areas also favour the development of renewable energy resources. In South Asia, as in other parts of the world, a number of renewable energy projects were initiated with a great deal of enthusiasm. Many of these projects were successful but a significant number collapsed within a few years of implementation, either due to declining oil prices, or because of institutional failures.

In South Asia energy supply and security have become pressing issues. All countries of the region are dependent on imported oil whose supply and price are both volatile. Therefore there is now a greater emphasis on developing indigenously available renewable energy resources (RES).

A report from the SAARC Energy Centre, headquartered in Islamabad, provides a number of very useful lessons regarding the design and implementation of renewable energy policies, programmes and projects. The report identifies factors leading to the successful and not-so-successful experiments and large renewable energy programmes in South Asian countries. The major lessons learnt are:

First, each country, small or large, should set up an agency to deal exclusively with the development of renewable energy resources and energy efficiency.

Second, the renewable energy development agency should first organise a well-designed and time-bound RES assessment and energy efficiency programme for the scientific assessment of the renewable energy resource potential and the country’s long-term energy demand. Such an assessment of the potential is only to plan power development on a long-term basis with an appropriate share of different locally available energy resources. For short-term power development plans, if there is an indication from measurements over a couple of years that wind velocity and sustainability are adequate in some regions, one could start the projects based on the limited but reliable data for that location. The agency should draft an appropriate comprehensive renewable energy policy for the country and work towards obtaining cooperation from all concerned agencies in implementing the policy.

Third, for each RES like wind power, solar and small hydro-power generation, at least one pilot plant should be established in the public or private sector using state of the art technology and reliable contractors. This should be popularised as a model for prospective investors and for launching a larger programme by the government or non-government agencies.

Fourth, these model projects should be used to induce external development aid agencies as well as bilateral, multilateral and philanthropic organisations to take up large programmes of renewable energy technology (RET) usage in each country.

Fifth, procedures for identifying project locations, obtaining licenses and permissions and clearances by investors in renewable energy projects should be simplified and the approval procedures should be governed by clearly defined datelines. Additionally, procedures must include consultation with all stakeholders at all stages of project selection, design and implementation.

Sixth, fund flow to renewable energy projects in the public and private sector — be it in the form of a grant or loan — should be smooth and timely.

Seventh, academic and technical institutions should be encouraged to take up research on all aspects of RET and its adoption on a wide scale in their respective countries. Ample opportunities should be created for these organisations to participate in the discussions on renewable energy issues and to provide knowledge support for renewable energy projects.

Eighth, encouragement should be given for setting up efficient energy consulting organisations and a large number of contracting firms to support implementation efforts in the renewable energy sector.

Finally, nation-wide campaigns should be launched to educate civil society on the need and benefits of adopting renewable energy using equipment and energy conservation technology.

The agreement between the Alternative Energy Development Board (AEDB) and the Zorlu Energy of Turkey to set up a 56MW wind power project at Jhimpir in Sindh from December this year is an encouraging development. However, it is just the tip of the proverbial iceberg.

The writer is an adviser to the CBC and an associate with Mettle Consulting.

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