Developing Implementation Tools andIdentifying Technologies & Financing Options

Dr. PARK, Chanho, Director of GGGI MENA ProgramNovember 7th, 2014

Green Growth Strategy• Green Growth “Actions” with required “Enablers “(Policy & Regulation/Infrastructure/Capacity)• Green Growth “Outcomes” listing benefits to Green Economy (Economic/Environmental/Social)• GG “Roadmap” suggesting implementation Timeframe• GG “KPIs” highlighted for monitoring successful implementation• GG “Governance” Recommendations outlining Governance Structure, Roles and Responsibilities for Implementation

Approach to Developing Implementation Strategy

= Models used

Setting the Green Growth VISION1

Plan Green Growth IMPLEMENTATION5

DESIGN Green Growth ACTIONS3

“Outcomes”

• ECONOMIC GROWTH & DIVERSIFICATION• SOCIAL DEVELOPMENT• GHG EMISSIONS:• CLIMATE CHANGE RESILIENCE• BIODIVERSITY & ECOSYSTEM SERVICES

Macro-Economic Impact Assessment(Extended Cost-Benefit Analysis)

MEEM Model(CGE)

Non-CGE Analysis

Estimate the Macro-Economic impact of Green Growth Actions being achieved through implementing all enablers

“Enablers”Determine required enablers to implement each Action – listing all instruments to be employed by the Government to enable GG Actions to be successful in country

“Actions”Package promising levers into GG Actions targeting specific sectors or issues, combining technology and behaviour levers)

“Levers”a) List all possible Levers (Technology,

Behaviours)b) Shortlist most attractive Levers for the

Green Economy Visionc) Prioritise according to GG attractiveness

(GG benefits potential and GHG abatement cost)

Behavioural Levers

Technology Levers

ACTION 1:Industrial Energy

sustainability

ACTION 2:Domestic Waste

ReductionETC.

Policy & Regulation

Infrastructure Enablers

Capacity Building Enablers

GHG Abatement Cost Analysis

Green Growth Criteria

Green Growth

“Vision”

“KPIs”“Governance”Develop Suggestions for GG Governance Stcurture

Determine Key Performance Indicators for implementation to monitor and manage GG progress and successful outcomes

“Roadmap”Plan Implementation of all enablers to Achieve GG Actions

ESTIMATE Green Growth OUTCOMES4

Assess Green Growth LEVERS2

YSocia

l

Approach to Developing a National Strategy for Green Growth (Definitions)

Green Growth “Levers”

Green Growth

“Actions”Green Growth

“Outcomes”

Green Growth

“Enablers”

ACTION 1:Industrial Energy sustainability• Energy-Efficient Industrial

Building Design • Energy-Efficient lighting• Waste-Heat Recovery• Solar Industrial Steam• On-site PV generation

Action 3: Utility Scale Solar Developments

Policy & Regulation

Infrastructure Enablers

Capacity Building Enablers

• Mandatory Green Building Regulation

• Cost-Reflective Electricity Pricing• Customs Exemptions policy for EE

equipment• Green Fund Establishment • Carbon Policy• Etc.

• Grid Upgrades for increased RE Feed-in

• Electric vehicle Charging Stations• Separation of Water and Electricity

networks for RO plants• Etc.

• Public Media & Awareness Campaigns

• Government Sector Training Schemes

• Industrial Green Training & Certification Schemes

• School & University Curriculum adaptation

• Etc

“Focus on most attractive”

“Innovate and develop most effective

instruments for implementation

“Clearly demonstrate quantitative and

qualitative outcomes to stakeholders”

ECONOMIC GROWTH & DIVERSIFICATION: • Growth (E.g.GDP)• Employment (Jobs)• Productivity (e.g. $/Capita,

SOCIAL DEVELOPMENT• Social Cohesion (multinational society)• Social Advancement (education, gender)• Awareness & Sustainable Behaviours• Equitable Development across Emirates

GHG EMISSIONS:• Absolute Emissions vs. BAU• Economy Carbon intensity (CO2/$GDP)• Per Capita Footprints (CO2/capita)

CLIMATE CHANGE RESILIENCE:• Flooding Protection• Infrastructure Vulnerability

BIODIVERSITY & ECOSYSTEM SERVICES:• Resource Use• Water Stress• Protected Areas

Actions which combine a number of levers into packages’ targeting specific

sectors or problems, combining technology and behaviour levers)

Enablers are the instruments Government can put in place to

stimulate/implement green growth Actions.

Outcomes are the expected economic, social and environmental outcomes in a Green Economy where GG Actions have

been achieved through successful implementation of enablers to achieve a

Green Economy

ACTION 2:Domestic Waste Reduction• Sustainable Urban

Infrastructure Design• Waste-to-Energy (W2E)• Low-Waste Product Design• Water-efficient fittings• Waste-aware consumer

behaviour

Behavioural Levers:(New & Already in place)E.g.• Recycling• Responsible Waste Disposal• Sustainable Water Use• Conservative AC Use• Energy-Efficient Building Design• Low-Waste Product Design• Safe, Responsible Driving• Sustainability-conscious Consumerism• Etc

Technology Levers:(New & Already in place)

E.g.• Solar PV• Energy-Efficient lighting• Electric Vehicles• Water-efficient fittings• Drip-feed irrigation• Waste-to-Energy (W2E)• Waste-Heat Recovery Technology• Solar Industrial Steam• Road Speed-monitoring Technology• Flood-Defence System• Etc

“Exhaust all possibilities”

Levers are options to consider as valuable additions to an economy

including new green technologies and behaviours that can drive Green Growth.

Examples:

Guiding Principle:

Definition:

Vision

Current Barriers

NeedsTechnology Economic

Policy and Regulation

Institutions and Human Capital

Behaviours

“Utility scale solar systemswill contribute a significant amount of electricity generation capacity”

•Current thermal desalination systems bundling electricity and water

•Ability of solar to meet demand profile (without storage)

•Dust and sand requires regular cleaning and maintenance

•Large scale feed in would require grid system management adaptation

•Immature procurement and supply chains for solar plant components

•Low electricity prices

•Utility-scale solar cost gap to alternatives

•Storage to meet base load is prohibitively expensive

•Appropriate financing models/ mechanisms

•No carbon price in economy

•No clear regulatory framework for connecting solar to the grid

•No existing policies to support solar in the context of cheap electricity prices

•Lack of certainty over long term commitment (of utilities) as off-taker

•No Federal level solar policy including targets

•No production targets in place (capacity only)

•Banks lack standard financial assessment tools e.g. Tier rating of equipment suppliers for risk valuation

•Underdeveloped insurance market for solar projects

•Limited local solar engineering talent

•Lack of research funding for academic institutions

•Littleawareness/ experience with solar in the amongst consumers

•Unmanaged demand profile

•Competitive local market for project development (PM), engineering procurement and construction (EPC), operations and maintenance (O&M)

•Better management of demand profile

•Competitive and experienced local capital market for solar finance

•Green fund to finance solar projects

•Grid expansion & upgrades including solar integration regulations

Identify Barriers and Needs(Example)

Overview of GHGs Abatement Cost Analysis(ACA) Model

Levers Levers Levers Levers

Levers Levers Levers + XX levers

“Interface”• Set lever lifetimes, switch levers on/off• Set number of units to deploy• define difficulty and timeframes

Microeconomic lever analyses:• Set size of lever unit• Set local assumptions (tech cost profile, tech uptake rates etc)• Calculate energy, carbon and water savings• Calculate financial savings• Calculate CAPEX and OPEX• Set profile of savings for 2015, 2021, 2030 and 2050

“Engine”• Compiles a discounted cash flow (DCF)

calculation• Calculates the marginal abatement

cost for each unit

“Green GrowthScenario Builder”• Set level of lever uptake on year-by-

year (2013-50) basis for 5 GG scenarios

Abatement Cost Curve (ACC)

Marginal Abatement Cost

Curve (MACC)

Data feed into Macro-Economic

Equilibrium Model (MEEM)

Implementation Difficulty/

Timeframe Analysis

GG Scenario Timeseries

analysis

User Editable General Information

User Editable configuration of specific Estimations/calculations

“Stock Model”• Stock profile of

levers uptakenfor each scenario

• Cumulative energy, water and financial savings

Calculation Engine

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UAE GHG Abatement Cost Curve 2021

Color Key:

Central Assumptions:• Technology Cost (CAPEX, OPEX)• Resource Prices (natural gas, transport fuel,

coal, nuclear, electricity, water etc.)• carbon intensities

Key Assumptions and Sensitivities

Set year >>> 2021

Select gas value scenario >>> MEDIUM

Display ACC and MACC in >>> AED

Senstivities Units 2015 2021 2030 2050

Original electricity value (ADWEA) AED/kWh 0.35 0.35 0.55 0.60

Unsubsidised Levelised electricity cost AED/kWh 0.35 0.35 0.35 0.35

Unsubsidised Levelised electricity cost AED/kWh 0.35 0.35 0.35 0.35

INTERMITTENT FUEL COST ONLY AED/kWh 0.25 0.25 0.25 0.25

Fraction of LCOE that is fuel cost % 70% 70% 70% 70%

LOW AED/kWh 0.08 0.08 0.08 0.08

MEDIUM AED/kWh 0.25 0.25 0.25 0.25

HIGH AED/kWh 0.57 0.57 0.57 0.57

AVERAGE FUEL COST ONLY AED/kWh 0.19 0.19 0.19 0.19

Fraction of LCOE that is fuel cost % 55% 55% 55% 55%

LOW AED/kWh 0.07 0.07 0.07 0.07

MEDIUM AED/kWh 0.19 0.19 0.19 0.19

HIGH AED/kWh 0.45 0.45 0.45 0.45

Gas cost $/MMBtu 6.50 6.50 6.50 6.50

LOW $/MMBtu 2.2 2.2 2.2 2.2

MEDIUM $/MMBtu 6.5 6.5 6.5 6.5

HIGH $/MMBtu 15 15 15 15

Nuclear cost $/MMBtu 0.72 0.72 0.72 0.72

Coal cost $/MMBtu 2.40 2.40 2.40 2.40

Oil cost $/bbl 94.00 94.00 94.00 94.00

Water cost $/m3 1.47 1.47 1.47 1.47

Gasoline cost $/litre 1.00 1.00 1.00 1.00

Diesel cost $/litre 0.64 0.64 0.64 0.64

Waste (Incinerator) cost $tonne

Waste (Biogas) cost $tonne 45.7 45.7 45.7 45.7

Abatement Potential Analysis

Data feed into Integrated Impact Assessment (IIA)

x 46

Additional Functionality Built for Future Use

Selecting Green Growth Policy Instruments

Overview of Policy Instruments for Green Growth Outcomes

"Information Provision"

"Voluntary Codes & Agreements"

“Market-Based Instruments"

“ Regulation"

"Policy to create awareness and provide better

information to inform greener Consumer and

Corporate Choices"

"Policy to set or negotiate voluntary standards and

targets for regulated entities to achieve"

“Policy instruments initiating market-based

transformation towards green growth outcomes”

“Regulation, compliance-oriented central government

direction towards green growth outcomes”

Instead of relying of one type of instruments, SMART regulation aims to deploy a customised “Policy Mix” with selected instruments from all four categories

• For example, an awareness campaign alone will not achieve much energy efficiency in households. Neither would be Eco-labelling of appliances by itself. Equally, price reforms for water and electricity alone are hard to implement without context.

• A “Policy Mix “of a media campaign to raise consumer awareness, eco-labels to help consumer choose energy & water efficient products coupled with price reforms will create economic incentives to choose them.

NATIONAL LEVEL POLICIES & PLANSNational Visions, Multi-year Development, National Budget, etc

SECTORAL LEVELSector Development Plan / Investment Programme

PROJECT LEVELProject Cycle

LOCAL LEVEL (Local Rural Level / Local Urban Level)

Local Government and Community Action to Manage Climate Risks

Enabling

Conditions

Allocate Budget

Propose Investment in different Sectors

Propose Projects that

support Sectoral Goals

Bottom-Up Project Identification, Design,

Implementation, Monitoring and Evaluation

Top-Down Project

Financing and

Implementation

Identification and

Select Projects

Implementation Scheme(Project Cycle)

Snapshot of Green Financing Strategy

1. Financing Instruments• Carbon Market• Public(Government) Investment(direct and/or indirect) with incentive and certification system• Private Investment(PPP)• Carbon Tax• Reformation of Subsidies(to establish Green Fund System)

2. Private Sector’s engagementTo improve efficiency and Value for Money(VFM)

•Private sector management and innovation can lead to better VFM.

-Advantage of bundling DBFO(Design, Build, Finance and Operate) in one contract – lower lifecycle cost

-Delivery on time and within budget

-Innovation – focusing on output, not prescribing inputs

-Incentive for better performance

-Sharing risk and management burdens

To complement limited fiscal resources

•Private capital can serve infrastructure investment needs without increasing government spending or borrowing.

Private participation in infrastructure has gradually recovered since financial crisis, while the

number of projects has been fluctuating.

• Recent private investment commitments were concentrated on large scale projects in a

small number of countries

• Investment was increased in energy, water and transport sectors in 2012.

Private Investment in Infrastructure in Low & Middle Income Countries(1990~2012)

PPP Trends in Developing Countries

Source: World Bank & PPIAF, PPI Database

Localization and Optimization: Masdar in UAE

Green Cluster in Masdar

City

Masdar

(Technology)

GGGI (Trusted Advisor)

Private Companies

(Siemens, Etihad Airways, banks

and SMEs)

IRENA (Renewable

Energy)

• Masdar operate across the industry value chain by merging higher education, R&D, investment , and large-scale clean energy development

• Masdar holistic business model fosters innovation and commercializing viable technologies • GGGI has supported UAE strategy development, UAE National Green Growth Strategy, which is being in UAE

Cabinet, and provide Knowledge Sharing Program(Capacity Building Program) for governmental officials in collaboration with concerned ministries, Masdar, local governments and key private stakeholders(e.g. ADNOC, ADWEA, DEWA, etc

• Currently, two late stage private equity funds with US$540 million under management:- Masdar Clean Tech Fund: a 2006 fully invested fund with Credit Suisse and Consensus Business Group - DB Masdar Clean Tech Fund: a 2010 fund with Deutsche Bank which still has capital available to be invested

in some of the most exciting technologies in cleantech

The Masdar Institute of Science and Technology was established in collaboration with the Massachusetts Institute of TechnologyAn independent, graduate-level research university dedicated to advancing renewable energy and sustainable technologies

Research, Education, Development and Implementation