Download - Session 9 Naoyuki Yoshino
How to boost green energy
development ?
Role of Financing
Farhad Taghizadeh-Hesary, Ph.D. Faculty member, Keio University Visiting Professor, The University of Tokyo
Oct 14, 2016
ADBI - OECD
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Naoyuki Yoshino, Ph.D. Dean, Asian Development Bank Institute (ADBI) Professor Emeritus, Keio University, Tokyo, Japan
10/14/2016
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Outline:
1- ADB report on sustainable energy for all
2, Asian Situation of renewable energy
3- How to cope with the current slowed growth in the
renewable energy supply?
4, Financing method of Renewable Energy
and Green bond
1.
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3. How to cope with the
current slowed growth in
the renewable energy
supply?
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1. Raise the renewable energy subsidy
by raising tax on CO2, NOX etc.
2, Raise the governmental R&D expenditures
on technologies related to the renewable
energy resources
3. Introducing new way of financing
HTIT = Hometown Investment Trust Fund
Green bond
4. Removing trade barriers (FTA,..)
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Wind Power Fund
Construction costs = 2 million US $
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Various Wind power generators were constructed in Japan
The fund constructed more than 16 regions of wind powers
Tsunami and earthquakes Accident of Nuclear power
FUKUSHIMA 2011-3-11
Private Financial Scheme of Wind Power Collected by Individuals (started in 2001-Sept)
Hokkaido Green Fund
Construction
Costs = 2million US $
Investors 2000
people
Each person
1000 US$
Sell to Power
Company
Final User
PE 1+0.05
5% surcharge
Financial Scheme of Wind Power
Collected by Individuals
Hokkaido
Green
Fund
(60%)
Senior Bank Loans
(20%)
Donation
Investors
(249)
Sell to Power
Company
Final User
PE=5% surcharge
Sales
Of Power Government
Fund, Carbon Tax (20%)
Structure of Wind Power Fund
249 people participated (donation and investment)
Total cost of one wind power = 2 million US $
5% extra price is charged = (1+0.05)X PE
People should reduce Energy consumption by 5%
so that total energy costs remain the same
<Bank Loans to environmental projects>
Revenue : sales price of electric power supply
cannot set the price based on MC (Price=MC)
Revitalization of Tsukubane Hydro Power
(Nara state)
250 investors, total 525 thousand US dollars, Japan
Original
Dam was
constructed
more than
100 years
ago
Solar Power Panel
Funds
in Japan
(Iida city)
Scheme of Financing for Power Panel
Local Government
Subsidies (2/3)
Private Individuals
Hometown Trust Funds
1000 US$ -– 5000 US $
Power
Company
377 power panels
8-years’-Fund - per person 1000 US $:
Expected Dividends
125 US$ 140 US$
Total = 1090 US $
Solar Powers in Japan
Government Financing (Externality Effects)
1, Measure the negative external effects of CO2 and NOX
2, Levy Tax on CO2 and NOX
Transfer to renewable energy
3, Provide R&D subsidy to renewable energy projects
Injection of tax revenues to investors in renewables
R&D (renewable energy sector)
Infrastructure Investment
Highway
Railway
Non-affected
region
Non-affected region
Private investment
SME development
Agricultural farmers
Employment
Human capital
Positive
Spillover
effect
Spillover effect
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Spillover effects Return to investors 1956-60
1961-65
1966-70 1971-75 1976-80 1981-85
Direct Effect (Kg) 0.696 0.737 0.638 0.508 0.359 0.275
Indirect Effect (Kp) 0.453 0.553 0.488 0.418 0.304 0.226
Indirect Effect (L) 1.071 0.907 0.740 0.580 0.407 0.317
20% Returned 0.3048 0.292 0.2456 0.1996 0.1422 0.1086
%Increment 43.8 39.6 38.5 39.3 39.6 39.5
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1986-90 1991-95 1996-00 2001-05 2006-10
0.215 0.181 0.135 0.114 0.108 0.195 0.162 0.122 0.1 0.1 0.193 0.155 0.105 0.09 0.085
0.0776 0.0634 0.0454 0.038 0.037
36.1 35.0 33.6 33.3 34.3
Financing for Energy Projects
Accumulation of long term domestic saving is required
Renewable Energy
Government Subsidy
Government Loan
Tax on CO2, NOX
Postal Insurance
Institutional Investors
(Pension Funds
and Insurance)
Individual contributions
Hometown Trust Fund
Green Bond (Patient Investors)
long-term bonds
revenue bonds (rate of return)
Long term and Patient investors are required
(Institutional Investors)
1, Bank deposits – Bank loans (2-5 years)
2, Life insurance (20 years, 30 years)
3, Pension funds (20, 30, 40 years)
Long term financing
4, Utilize post office network to Insurance etc.
5, Post office receives commissions and fees
6, Sell private bank deposits and insurance
7, Financial education has to be developed
8, “Tsunami and earthquake” Big increase
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Asset Allocation (USA, JAPAN, Europe)
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Green Bond and Revenue Bond 1, Frequent Issue
2, Various maturities (5 years, 10 years, 20 years)
3, Rate of return and Principal guarantee
4, Secondary Market (Retail government bond)
5, Credit Rating of each green bond
6, Sales channels (Post office, Regional banks)
7, Internet, mobile phone
Hometown Investment Trust Funds
8, Small scale renewable energy
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Mutual Funds – Holding Period Fee Structure is important
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Holdings of Mutual Funds By family Ratio of US and Japanese households’ holdings
Investment trusts and Mutual Funds
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Possible Solutions Financing for renewable energy
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Hometown investment trust funds a new way to
finance for Wind power generators, solar power
panels etc.
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Financial Scheme of Wind Power
Collected by Individuals
Hokkaido
Green
Fund
(60%)
Senior Bank Loans
(20%)
Donation
Hometown Investment
Trust Funds (HTIF)
Sell to Power
Company
Final User
PE=5% surcharge
Sales
Of Power Government
Fund, Carbon Tax (20%)
No Efforts Efforts to improve
No Efforts (50, r)
Operating Company investors
(50, αr)
Operating Company investors
Efforts to improve
(100, r)
Operating Company Investors
(100, αr)
Operating Company investors
Removing Trade barriers: i.e. TPP
-TPP and Energy
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• The TPP negotiations initially included four countries with which the
United States already has bilateral FTAs (Chile, Peru, Singapore,
and Australia, which is also Japan’s largest supplier of coal and
LNG),
• Two oil and gas exporters: Brunei and Malaysia
• And New Zealand and Vietnam.
• Canada and Mexico, neighboring U.S. energy trading partners and
members of the North American Free Agreement (NAFTA), joined
negotiations in October 2012.
• Japan joined in July 2013.
• Prior to that, however, the leaders of the then nine TPP countries on
November 12, 2011, announced that they had achieved agreement on
numerous issues and released a detailed outline of the TPP framework,
which never once mentioned the word “energy.”
The Energy Products Sector includes products such as turbines, solar cells,
static convertors, civil nuclear equipment, and high-voltage electric
conductors
Removing Trade barriers: i.e. TPP
Source: International Trade Administration, Department of Commerce, U.S.
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TPP Implementation Offers
New Opportunities for U.S. Exporters
Japan’s efforts to diversify its energy sources is expected
to generate significant growth in the renewable energy
sector, including solar power, wind power, geothermal,
and biomass. Projections indicate that Japan will install
more renewable energy capacity over the next two years
than any country but China. While the Japanese renewable
energy market has always been important to U.S.
companies, Japan’s decision to use policy incentives to
adjust its energy mix has increased the demand for
renewable energy technologies over the last three years,
providing additional opportunities for U.S. exporters
Market Opportunity Spotlight
Japan – Renewable Energy
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Reference
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1. “Monetary Policy and the Oil prices” (2016). N. Yoshino and F. Taghizadeh-Hesary. eds. Tokyo: Springer
2. N. Yoshino and F. Taghizadeh-Hesary. (2016), Causes and Remedies of the Japan's Long-lasting Recession: Lessons for China. China & World Economy, 24: 23–47. doi: 10.1111/cwe.12149
3. F. Taghizadeh-Hesary. and N. Yoshino and (2015) “Macroeconomic effects of oil price fluctuations on emerging and developed economies in a model incorporating monetary variables”. Economics and Policy of Energy and the Environment. Issue 2: 51-75, DOI: 10.3280/EFE2015-002005
4. N. Yoshino and F. Taghizadeh-Hesary (2015) “Effectiveness of the Easing of Monetary Policy in the Japanese Economy, Incorporating Energy Prices”. Journal of Comparative Asian Development. 14(2): 1–22. DOI:10.1080/15339114.2015.1059059
5. N. Yoshino and F. Taghizadeh-Hesary (2015) “An Analysis of Challenges Faced by Japan’s Economy and Abenomics”. The Japanese Political Economy. 40: 1–26.
6. DOI: 10.1080/2329194X.2014.998591 7. Yoshino, N. and Taghizadeh-Hesary, F. (2014), ‘Monetary Policies and Oil Price Fluctuations
Following the Subprime Mortgage Crisis’. Int. J. Monetary Economics and Finance, 7(3), 157-174, 10.1504/IJMEF.2014.066482
8. Taghizadeh-Hesary, F. and Yoshino, N. (2014), ‘Monetary Policies and Oil Price Determination: An Empirical Analysis’, OPEC Energy Review, 38 (1): 1-20, DOI: 10.1111/opec.1202
9. Taghizadeh-Hesary F., Yoshino, N., Abdoli, G. and Farzinvash, A. (2013), ‘An Estimation of the Impact of Oil Shocks on Crude Oil Exporting Economies and their Trade Partners’, Frontiers of Economics in China, 8(4): 571–591, DOI: 10.3868/s060-002-013-0029-3
