Sustainable energy is opportunity – it transforms lives, economies and the planet

GOALS for 2030

Energy Access

Energy Efficiency

Renewable Energy

100% access to electricity & modern fuels for cooking

Energy Access

•Essential to end poverty•1.2 bln people have no access•Pace needs to increase by38%•Business as usual will leave12-16% without electricity

•2.8 bln use wood/ coal for cooking•Access to cleaner fuel will end 4 mln deaths/ year due to toxic indoor smoke•Pace needs to increase 2.5 times•Business as usual will leave 30-35% without access

Energy Efficiency

Doubling the rate of improvement in Global Energy Efficiency

Renewable Energy

Doubling the share of Renewable Energy

Energy is the dominant contributor to climate change, accounting for around 60 per cent of total global greenhouse gas emissions

Reducing the carbon intensity of energy is a key objective in long-term climate goals.

Expand infrastructure and improve technology for supplying sustainable energy for everyone in developing countries, particularly the least developed ones, landlocked developing countries, and small island developing states, with respect to their respective support programmes.

Enhance international cooperation to facilitate access to clean energy research and technology, including renewable energy, energy efficiency and advanced and cleaner fossil-fuel technology, and promote investment in energy infrastructure and clean energy technology

Introduce a country specific approach to tackle specific country related issues (I have focused on INDIA in this project)

Way Forward…

India: Current Status

• Almost 400 million Indians - about a third of the subcontinent’s population, don’t have access to electricity. This power deficit, which includes about 100,000 un-electrified villages, places India’s per capita electricity consumption at just 639 kWh (among the world’s lowest rates).

• The access gap is complicated by another problem: more than three-quarters of India’s electricity is produced by burning coal and natural gas. With India’s rapidly-growing population (currently 1.1 billion) along with its strong economic growth in recent years, its carbon emissions were over 1.6 million kilotons in 2007 (among the world’s highest).

• This is unsustainable, not only from a climate change standpoint, but also because India’s coal reserves are projected to run out in 45 years. India already imports about 10% of its coal for electricity generation, and this is expected to reach 16% this year.

India: Action required

• India’s national and state governments are taking action to correct this vicious circle of power deficits and mounting carbon emissions by rolling out ambitious plans to generate more electricity, deliver access to the poor, and do it by replacing coal with renewable sources.

• The national government has set a target of increasing renewable energy generation by 40 gigawatts (GW) by 2022, up from current capacity of 15 GW, itself a threefold increase since 2005. Still, renewable sources account for just 3.5% of India’s energy generation at present, so the scale of the challenge is formidable, and the cost of meeting it will be high.

• A new World Bank study estimates that achieving the Indian government’s renewable energy goals for the next decade will cost $10 - $64 billion in subsidies.

• Power generation is just part of the challenge involved in exploiting India’s estimated 150 GW of renewable energy potential. Transmission and distribution capacity will have to be raised to tap India’s abundant solar, wind and small hydropower potential.

India: Opportunity

• By 2050, some estimates put India’s power generation requirements at one terawatt, or one trillion watts. This would be a six-fold increase in India’s current installed power capacity. It is a big challenge. But it is a big opportunity too, for Indian companies, for the creation of Indian jobs, for greater Indian prosperity. Because most of India’s power plants have yet to be built, India has options that many countries can only dream of. Instead of being locked into following a high-carbon energy track, India can lead the way to a lower-carbon, renewable energy path.

• Investing in renewable energy would enable India to develop globally competitive industries and technologies that can provide new opportunities for growth. This should motivate the government, official aid provider or private sector to participate.

Financing Challenges

• The high cost of debt, that is, high interest rates, is the most pressing problem facing renewable energy financing in India and has significant impact on the levelized cost of electricity. As of now, neither the cost nor the availability of equity is a major problem, but this could change, particularly if debt becomes less available.

• General Indian financial market conditions are the main cause of high interest rates for renewable energy. Growth, high inflation, and country risks all contribute. A shallow bond market and regulatory restrictions on capital flows also adds to the problem. Continued high government borrowing keeps the risk-free rate elevated.

• Regulation and the structure of the India power sector also raise significant issues. State-level policies — including the financial weakness of the state electricity boards —increase project risk. National policies designed to weave state policies together do not adequately reflect the realities of financial markets or state-level risks.

• Differences in national financial markets impact renewable energy policy design and effectiveness. Lessons learned from, and policies developed by, developed economies may not be particularly useful given these differences in financial markets.

Next steps…

• Create conducive investment climate – stable laws and regulationsMDBs can play an important role as policy advisors.

• Using ODA to mobilize other sources of finance (public and private) and focus on domestic resource mobilization

• Examining the design and implementation of funding mechanisms that would provide long-term, low-cost debt — for example, by examining best practices worldwide, including Brazil and China.

• Expanding the scope to include projects in different Indian states — to cover policy as well as institutional variations

• Extending the analysis to compare renewable energy markets and corresponding design features — for example, how sensitive are financing costs to a price band that is intended to provide stable price signals?

• Understanding how financiers and developers will alter their financial requirements when investing in portfolios of projects — for example, how does the cost of increasing development uncertainty impact willingness to invest – use blended finance

References

• The Sustainable Development Goals: All you need to know

• The Role of Private Finance in Financing for Development : Mr. Jay Collins, Vice Chairman, Corporate & Investment Banking, Citi

• Infrastructure Finance: Setting A Plan, Overcoming Obstacles, and Attracting Private Investment : Richard Abadie, Partner and Global Leader of Capital Projects & Infrastructure, PwC, London

• The Financing role of Multilateral Development Banks – Climate Finance: Rachel Kyle, World Bank Group Vice President and Special Envoy for Climate Change

• Meeting India’s Renewable Energy Targets: The Financing Challenge: Climate Policy Initiative