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Climate Action 2011-2012


62 bigger systems without any subsidies, for instance in Laos (Sunlabob) or The Gambia (NICE International). Of course public money and subsidies play a fundamental, and unavoidable, role in accelerating energy access and in supporting these systems, but it is worth mentioning that off-grid renewables are not only clean and sustainable, they are also economically sound. Renewables represent the most local, flexible, adaptable, easy to scale up, to operate and to maintain sources of energy, capable of turning natural burdens (e.g. deserts) into opportunities. And they are available. The potential for RE in the regions where energy is the most needed is immense. Sub-Saharan Africa has tremendous natural advantages. Some experts estimate the continent’s potential for power generation from renewables is more than 200,000 TWh/year, including more than 30,000 TWh/year rated as competitive in the short term. In Asia, some countries receive some of the highest solar irradiations in the world, whereas others already have important experience in wind, biomass or small hydro. Finally, there is growing evidence that investment in small and medium scale renewable energy systems may have more impact in improving energy services for the majority of developing countries’ population. Therefore, emphasis should be given to small and medium scale renewables more than any other. How aRe we to tRansFoRm potential into economic success? So if renewables offer immediate cost-competitive solutions, especially for rural areas, why are they not more widespread? First of all, in developing countries worldwide there is a problem of education and information about renewables, at every level. Governments still do not believe in RE technologies, banks do not understand the financial structures of RE projects and do not lend to them, even villagers sometimes consider these technologies to be second class. These educational and information barriers are the first ones to address on a large scale to support widespread deployment of RE. There is no lack of success stories and experience, hence powerful dissemination is key. In parallel, capacities of each stakeholder concerned need to be consolidated on topics such as project development, financing, operation and maintenance. The second point is linked to the previous one: energy policies remain short-sighted in many countries, and without coherent strategy. “In most countries, policies and regulations currently tend to emphasise short-term costs and supply, rather than the long-term benefits of clean technologies” (Athena Ronquillo-Ballesteros, in the REN21 forum, Many countries keep focusing on grid extension, urban electrification or on large hydro, gas or coal power plants without any long-term strategy or with sustainability (including of supply) as primary concern. Such reasoning has high economic costs (power shortages, losses for the economic sector) and underlines the need for diversified electricity generation capacities especially in rural areas, where off-grid technologies can now bring reliable electricity. Suitable policies supporting RE projects are still rare and often not applied and, as in other economic sectors, uncertainties tend to delay projects, especially in a sector where investments need to be made over long periods of time. RE off-grid and mini-grid methods often offer the most competitive solutions, but translating this potential into success remains challenging. The deployment of hybrid mini-grids, for instance, involves complex financial and organisational questions. The bottlenecks are not in the technologies, but in the financing, management, business models, sustainable operations and maintenance (O&M) and socio-economic conditions. However, here too, positive experiences exist and answers adapted to every situation can be formulated either with stand-alone solutions (e.g. SHS with micro-credit or fees for service) or mini-grids (e.g. different business models, capital subsidies and cost recovery tariffs etc.). Countries need to use this experience and must target the local economic growth that is the only way to ensure the revenue generation that will support the long term O&M of the power systems. Therefore a proactive approach regarding productive uses of electricity, especially, but not only, piggy-backed onto an existing developed network, should be encouraged as an integral part of any rural electrification programme. More detail on these subjects can be found in Renewable Energies for Africa: Potential, Markets and Strategies, REN21, 2010 (; and Productive Uses of Electricity to Increase the Impact of Rural Electrification Programs (2008) and other technical papers, ESMAP ( Simon Rolland is Secretary General of ARE. He has worked for ARE for the past five years. He is responsible for the policy sector and outreach of the association. ARE has become a pioneer in the field of sustainable development, and Simon an expert in the emerging offgrid markets in developing countries. The Alliance for Rural Electrification (ARE) is the only international business association in the world focusing on the provision and the promotion of small scale renewable energy solutions for rural electrification in developing countries. ARE serves as an international platform for sharing the knowledge and experience of the private sector interested in operating in developing countries. Based on their experience, it develops technological, political and financial recommendations, which are made available for policymakers and other actors in the field of rural electrification. Alliance for Rural Electrification Renewable Energy House, Rue d’Arlon 63-65 1040 Brussels, Belgium Tel: +32 2 400 10 52 | Fax: +32 2 400 10 10 Email: | Web:

green economy climate policy, governance & Finance Investing in a green economy By Oliver Greenfield, Convenor, Green Economy Coalition, and Victor Anderson, One Planet Economy Leader, WWF-UK The vision of a green economy is no longer merely the stuff that dreams are made of. The transition is already under way. Governments across the developed and developing world are investing in renewable energy, low carbon infrastructure and new technologies. The challenge is to scale up the level of investment in time, and also to ensure that those investments generate a just transition and a more equitable society, both within and between countries. In the following article the authors have outlined the challenges, opportunities and solutions for scaling up financial investments in a green economy. The challenges The movement of finance is the main factor determining how resources are allocated and reallocated in the world economy. Influencing the direction and allocation of those financial flows is therefore crucial to the transition to a green economy. However, the state of our global financial system presents a number of challenges for influencing financial flows. These include: • The ‘financialisation’ of the world economy. A large proportion of the money in the world is tied up in trading for directly financial purposes (e.g. speculation on exchange rate movements, trading in commodities, derivatives), as distinct from trading in goods and services. • The financial system crisis of 2008 exposed some huge weaknesses and fragilities embedded in our global economy. There is rightly a debate about the future of finance, both in many individual countries and in the world system as a whole (for example, the discussion about the Basel III proposals on banking reform). • Public sector financial problems in many parts of the world make it difficult to persuade governments to increase expenditure to tackle problems such as climate change and ecosystem deterioration, or to find funds to stimulate green economic activity. There is a risk of political retreat; spending what little is available supporting the brown economy or setting targets on green growth without the means of achieving them, increasingly depending on the private sector to come up with the money, and perhaps most worrying of all – doing nothing and placing the burden of greening the economy on future generations. • At this point it is worth remembering that the main conclusion of the Stern Review (2006) was that the benefits of strong, early action on climate change far outweigh the costs of not acting. According to the review, without action, the overall costs of climate change will be equivalent to losing at least 5 per cent of global GDP each year, now and for ever (a wider range of risks and impacts could increase this to 20 per cent of GDP or more). In June 2008, Stern increased the estimate for the annual cost of achieving stabilisation between 500 and 550 ppm CO 2 to 2 per cent of GDP to account for faster than expected climate change. • In the absence of government leadership, the private sector appears unwilling to provide finance for creating new markets, or bringing new green products and services to markets in the volumes needed when existing high carbon industries are still bringing in the profits and providing jobs. • Meanwhile the climate, ecosystem, and other problems requiring finance, continue to worsen, with the resources required to deal with these problems not being available. The consequences of this degradation, such as increasingly volatile weather conditions, are arguably already feeding through into an already stressed economic system – most notably through commodity price rises. These rises are affecting the ability of countries to grow their economies or worse, adequately feed their people. The opporTuniTies It is increasingly clear we are entering a prolonged crisis, with no clear economic vision or leadership, and still 63