26 March 2014
Betting On Clean Energy

Renewable energy in the Asian Century

Asia is very rich in renewable energy resources like solar, wind and geothermal. What role can they play in the realization of an Asian Century?

Asia is very rich in renewable energy resources like solar, wind and geothermal. What role can they play in the realization of an Asian Century? Here are the main points that I presented to a recent conference organized by the Friedrich-Ebert-Stiftung in Tokyo.

As we look ahead a few decades, Asia has the potential to continue its spectacular development by continuing on its catchup path to the West. The Asian Development Bank (ADB) estimates that Asia's share of global GDP could rise from 28% in 2010 to some 44% in 2035.

But lots of energy will be necessary to fuel this Asian Century, as energy demand tends to grow in tandem with the economy, even if improvements in energy efficiency can moderate that linkage. And some 700 million people in Asia still have no access to modern electricity.

Already in 2010, Asia accounted for 34% of world energy consumption. And this figure could rise to around 50% by 2035 according to the ADB. But most regrettably, the ADB does not see a big role for renewable energy.

In 2010, renewable energy accounted for just 14% of Asia's sources of energy, way behind coal and oil which supplied 49% and 23% respectively. And the 2010 renewable energy share for Asia had fallen by almost half since 1990 when it accounted for 26%. Over this twenty year period, we saw large increases in the use of all other energy sources, namely hydroelectricity, nuclear, natural gas, oil and coal.

According to the ADB, the share of renewable energy would drop further to 10% by 2035. Coal, oil, and natural gas would remain more important energy sources than renewables. And while nuclear would remain less important than renewables, it is set to grow much more quickly.

The ADB does recognize the importance of renewable energy. But it concludes that the uncompetitive costs of renewable energies hold them back from playing a much greater role. It notes that "Many argue that being cost competitive should be understood as factoring in environmental and other social costs that are external to the standard equations of microeconomics. However, capturing these "externalities" with subsidies or the imposition of taxes and mandates runs up energy prices and cramps economic activity."

Such blatant dismissal of the enormous environmental, health and safety costs of coal, oil and nuclear energies is simply scandalous.

Let's have a closer look at some of the issues related to renewable energy. While renewable energy may account for currently 14% of Asia's energy sources, almost all of this is in the form of biofuels, namely, wood, charcoal and agro-residues, which are used by poor people in rural areas. The share of energy coming from solar, wind and geothermal is miniscule.

A few country examples serve to highlight the point. In 2009, 12% of China’s total energy supply came from renewables, 27% for India, 35% for Indonesia, 6% for Malaysia, 44% for the Philippines, less than 1% for Korea, and 3% for Japan. In none of these cases is the combined share of solar and wind above 1%.

Geothermal energy is a particularly interesting case. In Indonesia and the Philippines, the shares of geothermal are 8% and 23%. But in Japan, the land of the famous "onsen", geothermal only accounts for 1% in Japan.

In short, the renewable energy situation in Asia is extremely different from Germany and Sweden.

Nevertheless, it is critical for Asia to take much more seriously the role of renewable energy as an alternative to coal, oil, gas and nuclear.

Fossil fuels, especially coal, have disastrous effects on the environment and human health. For example, the air in many Asian cities is severely polluted, with terrible consequences on the health of their citizens. Recent studies suggest that Beijing residents are losing 5 years of their life due to air pollution.

Global warming is another consequence of fossil fuels. And while this is a global problem, whose origin lies in two centuries of Western industrialization, Asian countries will be suffer the adverse consequences of climate change more than other regions of the world. The vast majority of the world’s cities exposed to rising sea levels are in Asia. Thus, Asian countries have a keen interest in reducing carbon emissions.

Another challenge for Asia's energy future is that of energy security. The only energy source that Asia has in abundant supply is coal. And its dependence on importing oil and gas from the politically unpredictable Middle East and Russia will only grow with time. And even if imported energy supplies were secure, they are costly, and will likely become even more costly over time.

Lastly, there are the manifold risks and costs of nuclear energy, like waste management, proliferation and, as highlighted by the case of Fukushima, safety. This has provoked great public opposition to nuclear by the Japanese public, which the government is trying to ignore. But there is strong public opposition to nuclear energy elsewhere in Asia, as evident from recent protests in China.

At the same time, nuclear companies from Japan, Korea, Russia, and the US are pushing developing countries in Asia to develop nuclear energy, with financing from their foreign aid and/export credit agencies.

The potential for renewable energy in Asia cannot be dismissed. Most Asian governments have and are implementing many policies to increase the use of renewable energy, and have absolute targets. And there are many promising developments.

In less than a decade, generating capacity rose from negligible to 82 gigawatts (GW) for wind and to 20 GW for solar, with great potential to further expand both, as the ADB itself noted. Asian countries are among the world leaders in the manufacture of renewable energy plants, which already power microgrids commercially in some remote communities. Wind and solar are becoming cheaper and are expected to reach grid parity in some countries in a few years, but in the meantime they require favorable policy and financial incentives.

Wind power has been rapidly expanding throughout the world, including in China and India. The potential in Asia is enormous. According to one study, China and Mongolia could each install over 1 terawatt (1 million megawatts or 1,000 gigawatts) of wind capacity, which together would generate more than 3,000 terawatt-hours annually. China has the largest wind resources in the world and three-quarters of them are offshore.

According to World Wind Energy Council, a leading industry association, the installed capacity of wind power in Asia in 2011 was 82.0 GW, or 36% of the total world capacity of 237.5 GW and comparable to Europe’s 96.5 GW. By the end of 2012, global capacity had increased by 19% to 282.5 GW. With 75.5 GW, the PRC leads the world, and India is ranked fifth with 18.5 GW. As of 2010, China has become the world's largest maker of wind turbines, surpassing Denmark, Germany, Spain, and the United States.

Six countries in Asia and the Pacific have over 100 MW of grid-connected photovoltaic solar systems: China with 7,000 MW, Japan 6,914 MW, Australia 2,200 MW, India 1,461 MW, Korea 963 MW, and Thailand 360 MW. China produces 30% of the world's solar photovoltaics. It has emerged as the world's largest manufacturer of solar panels in the last two years.

Geothermal energy. The installed capacity of geothermal plants in the Philippines is second only to the US. Further, the Philippines plans to expand geothermal capacity by 75% by 2027.

Over time, this potential of renewables will only grow. Pushing up renewable usage accelerates the learning process, increases scale and starts to bring down costs. Greater R&D efforts will spur more innovation. And the relative position of renewables will only improve as the price of fossil fuels only rises in the future.

To improve the scope of renewables, Asian governments need to do many things, especially: reducing administrative hurdles for investment; and removing distortionary subsidies for fossil fuel consumption and production. But most of all, a big leadership push is necessary.

Western countries can also provide much help. Countries like Germany and Sweden, which have had great success with renewables, can share technology, knowledge and experience. Western donors and development banks can also play an important role.

Germany's foreign aid agency, GTZ, has been working with Bangladesh on the Renewable Energy and Energy Efficiency Program. By the start of 2013, a total of 2 million solar home systems had been installed, this being partly financed by GIZ. The programme is regarded as being one of the most successful of its kind in the world. Advisory services to the Ministry of Power, Energy and Mineral Resources have helped to improve the legal and institutional framework of the energy sector. This has led not only to renewable energy technologies now becoming more widespread but also to increased energy efficiency in industries and households.

The Indian Renewable Energy Development Agency Limited and Germany's Development Bank KfW signed an Agreement on 7 March 2011 for financial assistance of 200 million euros for promotion of new renewable energy projects in India. In addition, technical assistance is being extended for capacity building and other activities.

For its part, over the past 20 years, the ADB provided over $25.8 billion in assistance for energy projects, extending electricity and modern fuels to hundreds of millions of people in Asia and the Pacific. ADB’s updated Energy Policy aims to promote energy efficiency and renewable energy.

One specific ADB initiative is the Philippine Investment Alliance for Infrastructure (PINAI), a fund which is partly financed by the ADB, and which is investing up to $85 million for a wind farm project in the northern part of the country. The 81-megawatt project – PINAI’s first investment ever – is a joint venture with AC Energy Holdings Inc., a wholly-owned subsidiary of Ayala Corporation, and UPC Renewables Partners (UPC) through UPC Philippines Wind Holdco BV.

Another example is that of the Indian Solar Loan Program which is supported by the United Nations Environment Program. It won the prestigious Energy Globe World Award for sustainability for helping to establish a consumer financing program for solar home power systems. Over three years, more than 16,000 solar home systems have been financed through 2000 bank branches, particularly in rural areas of South India where the electricity grid does not cover.

Asian countries also need help for comprehensive assessments of their clean energy resource potential. In April this year, a regional training workshop on "Renewable Energy Resource Assessment and Geospatial Analysis" was held in Bangkok, Thailand. The U.S. Department of Energy's National Renewable Energy Laboratory (NREL) and the USAID Low Emissions Asian Development (LEAD) program organized the event, in support of the US Government's Enhancing Capacity for Low Emission Development Strategies (EC-LEDS) initiative.

The objective of the workshop was to share best practices on using renewable energy resource data and geospatial analysis to assess renewable energy potential. Approximately 45 technical and policy leaders representing eight countries (Bangladesh, Cambodia, India, Indonesia, Malaysia, Philippines, Thailand, and Vietnam) attended the two-day event.

Successfully navigating and managing Asia’s energy future is critical for Asia’s future, and especially critical to the future of the planet. There is no doubt that renewables must play a critical role. Their cost disadvantage will surely disappear over time. And it is critical to make much greater efforts to use renewables now. Governments from developing Asia must resist the "easy option" of buying nuclear with soft financing Japanese, Korea and other governments.


John West
Executive Director
Asian Century Institute
Tags: asia, renewable energy, nuclear energy, Asia's energy future

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