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Markets, Barriers and Opportunities for Renewable Energy in APEC Economies

Markets, Barriers and Opportunities for Renewable Energy in APEC Economies. Lydia La Ferla Energy & Security Group May 14, 2004. OVERVIEW. Market: Demand, Supply, Benefits Barriers: Technological, pricing, policy, market Incentives: mandatory, cost/pricing, Recommendations.

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Markets, Barriers and Opportunities for Renewable Energy in APEC Economies

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  1. Markets, Barriers and Opportunities for Renewable Energy in APEC Economies Lydia La Ferla Energy & Security Group May 14, 2004

  2. OVERVIEW • Market: Demand, Supply, Benefits • Barriers: Technological, pricing, policy, market • Incentives: mandatory, cost/pricing, • Recommendations

  3. The Market: APEC 1990-2020 Rapid Regional Economic Growth: 3.5% pa -$12.5-$32 trillion Expected Economic Growth: • N. America 3.2%pa • S.E. Asia 4.9% pa • Latin America – driven by strong investments in Europe & US

  4. The Market: Energy Demand • Total Energy Demand Expected increase from 3.6 to 6 Btoe • Main Drivers for total energy : population growth and increases in living standards • Main Drivers for RE: emission reductions, cost reductions, performance improvements, policy and regulatory incentive programs, and energy security

  5. The Market: Energy Supply • RE - 1.2% (exc. Hydro) 1999; • Fossil Fuel • 36% oil • 27% coal • 22% natural gas APEC Primary Energy Supply (1990-2020)

  6. Benefits of Renewable Energy • Recouped RE Investment • Localized Employment/Income • Enhanced Country Prosperity • National/Global Environmental Benefits • Increased Access in Rural Areas • Reduced Need for Grid Capacity

  7. The BarriersWhat are the Barriers? • Costs and Pricing of RE • Policy and Regulatory Climate • Market and Investment Climate

  8. The Barriers: Costs/Pricing of RE • High up-front development and capital costs • Continued subsidies for fossil fuels • Need for long amortization periods on loans • Small scale • Inadequate valuation of environmental externalities and input/electricity costs

  9. The Barriers: Policy and Regulatory Climate • Harmonization of policies • Incentives that reflect stages of RE technology development • Complex government approval processes • Lack of national/local policy coordination • Pricing incentives

  10. The Barriers: Market/Investment Climate • Lack of in-country capacity • Lack of awareness of costs, benefits, and applications of RE • Investor reluctance and risk perception • Lack of stimulus for private sector participation • Lack of information on and access to financing

  11. The Barriers How to Mitigate the Barriers to Financing? • Use of “smart” subsidies • Pool/share risks • Support credit needs of consumer • Manage and operate funds locally in local currency • Encourage public/private partnerships • Work with IFIs to leverage RE investments • Support productive uses of RE • Tailor policy and regulatory measures to specific market • Use mix of policies to design RE promotion strategies

  12. The Opportunities Public Intervention to Scale-Up RE Financing • Successful Policy Incentives -reduce costs and provide regulatory certainty -promote voluntary investments -encourage IPPs -promote public investment/market conditioning -develop rural electrification -support of entrepreneurship

  13. Draft Recommendations • Adoption of policy and regulatory reforms • Development of Financial Mechanisms • Capacity-building & Info. sharing

  14. Draft Recommendations • Adoption of Policy and Regulatory Reforms • -Structure incentives for market sustainability • Tailor policies to various stages of RE technology development • Develop new cost assessment methods • Harmonize technical standards • Ensure consistency of existing/future policies • Adopt procedures to evaluate programs to reflect “best/good practice”

  15. Draft Recommendations • Development of Financial Mechanisms Work with multilateral/bilateral organizations to increase lending in RE to: 1. Establish standardized procedures for project assessment and review 2. Integrate RE lending with agricultural, health, education, housing lending 3. Include environmental/social costs in program design 4. Encourage to continue to provide seed funding and technical assistance 5. Design risk sharing and mitigation instruments

  16. Draft Recommendations • Capacity-Building & Information Sharing • Produce and disseminate info. Database on “best practices” • Establish market facilitation network to promote RE investments • Work with local financial institutions to establish consumer/microcredit facilities and training • Increase awareness of costs, benefits and applications of RE

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