STRATEGIC ENERGY IMPERATIVES IN ASIA
RENATO REDENTOR CONSTANTINO
Business Mirror; Malaysia Sun
August 6, 2007

A decade ago you would have probably been thrown into the box called " fringe group" for simply speaking against something as esoteric-sounding as global warming. Nowadays -- thanks to those who tirelessly ploughed the ground earlier -- it has become easier, even popular, to talk about climate change. The issue has even become de rigeur for institutions with claims to aims of sustainability such as the Asian Development Bank (ADB). Considering the magnitude of the climate crisis, and however late, the ADB's entry into the debate is not exactly unwelcome.

This year the ADB is set to approve a supposedly new energy strategy crafted to address challenges that may impede or undo the sustainable development objectives of its developing member countries (DMCs). Unfortunately, if the draft strategy the ADB released to the region recently is any indication of the role that the bank will play in the next decade, the financing institution is set to exacerbate, not alleviate, the economic and ecological vulnerabilities of Asia and the Pacific.

Despite the immense resources at its command and over a year allocated to research and writing, the ADB has produced an embarrassing document which, aside from a few highlights, has mostly elicited comments ranging from "not visionary" to "of poor quality" and "seriously flawed".

Indeed, a close reading of the ADB strategy shows in embarrassing detail how defective the document is. There are no timetables, targets or benchmarks in the ADB document that will determine where it's resources will be spent and whether the ADB strategy will be successful or not. The bank document even includes an appalling caveat stating, "The contents herein do not necessarily reflect the views and policies of the ADB" which "does not guarantee the accuracy of the data included ... and accepts no responsibility for any consequences of their use."

While the ADB identifies coal as one of the leading contributors to global warming, the bank also advises its DMCs that it will continue to support more coal-fueled power plants by promoting the myth of "clean coal", an oxymoron redolent of fraudulent economics.

The ADB paper largely avoided referencing available literature or used sources such as Wikipedia in sections that could have leveraged market growth trajectories, cost projections and policy imperatives based on reports from leading sustainable energy industry groups and consulting firms. The bank even employed the dubious work of a nuclear industry group to belittle sustainable energy options.

As the ADB correctly recognizes and probably the only matter with adequate clarity, economic growth in Asia will not be sustainable if it will be fed by fossil fuels, which "will significantly increase greenhouse gas (GHG) emissions and result in dangerous levels of global warming." Unless fossil fuel use -- particularly coal-fired power generation -- is curbed dramatically and soon, runaway climate change will intensify prevailing misery by devastating the region's fresh water supplies, agriculture, and fragile ecosystems.

Today, Asia represents nearly a quarter of global greenhouse gas emissions, compared to its previous one-tenth share. This is largely attributable to the steep increase in the region's coal-fueled energy consumption, which rose by 230 percent in the period 1973 to 2003. Unless financing and policy measures are diverted to energy solutions, Asia's dependence on coal, currently representing 42 percent of Asia's CO2 emissions, is projected to grow alongside the anticipated increase in the region's energy demand. But alongside coal expansion is the rapid growth of risk.

The ADB itself recognized the problem twelve years ago when it issued its still operative Energy Policy, which recommended that the bank must "emphasize the need for DMCs to incorporate systematically environmental considerations as well as social considerations ... so that project costs adequately reflect the environmental and social costs." Unfortunately, the ADB has little to show in terms of its success in mainstreaming "external costs", which refer to costs arising from the ecological and social impacts of a power project that are passed on (externalized) to taxpayers. In fact, the issue of external costs is one of the key items in the bank's 1995 policy that was dropped from the ADB's 2007 energy paper.

Coal is a strategic option only for the shortsighted. In a carbon-constrained world, electricity costs are projected to rise as coal-fired emissions become increasingly regulated. Contrary to coal industry prattle, coal plants today typically reach only up to 38-40 percent thermal efficiencies while improvements using even the most modern coal-fired power plants have demonstrated marginal results. More expensive coal-fired power stations utilizing supercritical and ultrasupercritical boilers can reach no higher than 50 percent efficiency while plants using fluidized bed systems fare worse. Even the few integrated combined cycle (IGCC) coal plants in pilot project stage, which are considered costlier than conventional coal technologies, are expected to improve coal combustion efficiencies of only up to 50 percent. Promoting the option of carbon capture and storage (CCS) is even more problematic. The use of CCS will actually increase power generation costs between 40 to 80 percent. Between 10-40 percent more fossil fuel must also be burned when CCS is used just to achieve the same power output. CCS is also not expected to begin commercially till 2020 (at the earliest), which means during the very period when huge emissions reductions are required CCS will not be relevant.

Intelligent use of energy, not abstinence, is an imperative in a regional energy regime increasingly dominated by the concerns of climate change and energy security. Even the ADB's Operations Evaluation Division (OED) recognized this in its review of the bank's energy sector performance where it explicitly called on the bank to make as its single highest priority the full utilization of the energy efficiency potential of a DMC before considering financing any power capacity additions in its DMCs. This discussion, however, is absent from the ADB energy paper.

Keeping to rigorous environmental and efficiency targets in the energy sector will pay off in terms of economics. According to the European Renewable Energy Council (EREC), which is composed of some of the largest global players in the sustainable energy industry, it is technically and economically possible to halve CO2 emissions in the power sector by 2030 not through the expansion of coal or nuclear but through energy efficiency measures, combined heat and power (CHP) and renewables. Numerous studies have shown that the increased use of CHP will improve the supply system's energy conversion efficiency by increasingly utilizing natural gas and sustainably sourced biomass. With the right policy support, it is also commercially feasible for 70 percent of global electricity to be supplied using renewable energy sources by 2050.

Large up-front costs of renewable electricity systems are one of the key barriers to greater market penetration but a number of programs friendly to renewables have been put to use over the years to address such hurdles. These are policies that the ADB have avoided to promote with even a fraction of the zeal that has marked its region-wide backing of debacle-ridden, cookie-cutter privatization schemes.

One instrument involves feed-in tariffs where producers of electricity are given the right to feed renewable electricity into the public grid, receive a premium tariff per generated kilowatt hour that reflects the benefits of renewable electricity compared to power produced from fossil sources, and receive the premium tariff over a fixed period of time. Feed-in tariff systems are responsible for the rapid growth of renewables in countries such as Germany, Denmark, Spain and even India. Another policy mechanism is the Renewable Portfolio Standard (RPS) responsible for the surge of development that has attended the wind market in Texas, US.

Renewables-friendly policy programs are behind the dramatic growth of the global renewable energy (RE) market, which saw China lead the global increase in renewable power capacity (excluding large hydropower) in 2004. In 2006 RE-oriented policies leveraged around $100 billion (or 18 percent) of global investment in power generation. Much of the investments have come from the wind industry, which enjoyed a record year in 2006 when wind turbine sales alone were valued at around US$23 billion and when global demand for wind power capacity grew by 32 percent. In terms of total installed wind capacity, India has jumped to fourth place in the global ranking -- ahead of Denmark -- when it added 1.4 GW in 2005. Solar applications, geothermal expansion and the increase in uptake of mini hydro options have also registered phenomenal growth.

Industry advocates such as EREC calculate that fuel cost savings under a sustainable energy scenario can reach up to $202 billion per year, which would dwarf the "extra global annual investment of $22 billion in clean and renewable power plants on top of current expenditure." In addition, converting the $250 billion in subsidies that coal and gas receive annually to sustainable renewables could more than cover the shift towards more efficiently run, renewable energy-powered economies.

Deep-seated changes to the way energy is produced and used will require determination on the part of governments and institutions to put in place policies that can tap into the renewables investment sector. "The renewable industry is willing and able to deliver the power plants the world needs," said EREC policy director Oliver Shafer. Renewables simply need the right climate and energy policies. "Decisions made in the next few years," said Schafer, "will continue to have an impact in 2050. Only if a renewable energy path is taken can we avoid the worst excesses of climate change." #

Photos: 1) A couple stroll in traditional dress through Huiteng Xile Wind Farm, Inner Mongolia. Huiteng Xile is China's largest wind farm - so far. China has huge wind resources, which could be easily and profitably exploited by switching investment from climate destroying fossil fuels into harvesting this clean, abundant energy resource. By Hu Wei/Greenpeace. 2) ADB office in Vientiane, Laos, 2006. By Red. 3) Activist protest at the ADB headquarters, 2006. By Luis Liwanag/Greenpeace.

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