CLIMATE CHANGE AND RENEWABLE ENERGY CHALLENGES AND OPPORTUNITIES IN DEVELOPING NATIONS

Sustainable management solutions

RUTH P. BRIONES, MPA, LlB

October 5,2011 Webinar, PMI Global Sustainability Community of Practice

Abstract The intention of this presentation is to focus on the challenges that developing nations in order to reduce emissions in view of the refusal of developed nations to sign an extension of the Kyoto Agreement.

This is in view of the a great divide between developed nations and developing nations as to how these countries cut their emissions. It could be noted that the Kyoto Protocol set emissions targets only to developed nations and that the said agreement is ending, the challenge is on the developing nations to implement measures to cut emissions by speeding up development of sustainable green technological change and the transition towards renewable energy.

It will be emphasized that the real challenge for the future is to introduce policy measures that can really enhance inclusive and sustainable growth on renewable energy, which is an opportunity to developing nations.

Parts of the presentation

Background on Climate Change,

impacts and effects

Challenges, Cause of action

Management and Development

The Opportunities

Climate change…

Climate change is a significant and lasting

change in the statistical distribution of

weather patterns over periods ranging from

decades to millions of years. It may be a

change in average weather conditions or

the distribution of events around that

average (e.g., more or fewer extreme

weather events).

Climate change may be limited to a

specific region or may occur across the

whole earth.

CAUSES

OF

CLIMATE

CHANGE

COAL, OIL,

NATURAL GAS- when burned release carbon dioxide (greenhouse gas emissions),transportation, power generations

DEFORESTATION:

when wood is burned; wood rots in swamp methane is produced

LANDFILLS,

GAS PIPELINES

RICE PADDIES.

COAL MINERS

FERTILIZERS

AND OTHER

CHEMICALS.

HOW MUCH WARMING ?

SCIENTISTS SAY----

ABOUT 2.5 DEGREE FAHRENHEIT 1.4 DEGREE CENTIGRADE BY THE YEAR 2050

Climate Change? Causes…a blanket

around the earth…

A layer of greenhouse gases – primarily water vapor, and including much smaller amounts of carbon dioxide, methane and nitrous oxide – act as a thermal blanket for the Earth, absorbing heat and warming the surface to a life-supporting average of 59 degrees Fahrenheit (15 degrees Celsius).

Source: NASA

Main causes of

global warming

Human

expansion of

Greenhouse

Effects

Water Vapor

Carbon Dioxides

Methane

Nitrous Oxide

Chroloflourocarbon

Effects of Climate Change in

developing nations

• Untold Sufferings to

developing nations

• Little mitigation or no

capacity to mitigate

the impacts

• Worst affected

• Hunger

• Famine

• Widespread

Diseases

• Desertification of

some arable lands

•Food Security Scarcity

•Worsening economy

•Poor development

infrastructure

•Political instability

•Mushrooming

population in urban

areas

The United Nations Framework Convention on Climate

Change (UNFCCC) recognizes that the industrialized countries

are responsible for a major part of historical and current global

emissions of greenhouse gases, and they must therefore take

the lead in making commitments to reduce their emissions.

Cost

of Climate

Change

HIGH

OUR

RESPONSIBILITY

IN TWO WAYS

CUTTING OF EMISSIONS OF

GREENHOUSE GASES

GREENING OF ECONOMIES THAT WILL PROVIDE GLOBAL LEAD

USE OF ADVANCED

TECHNOLOGIES

BUILDING LOW OR CARBON ENERGY

STRUCTURES

SHARING SCIENTIFIC UNDERSTANDING AND

TECHNOLOGICAL EXPERTISE

• This will cost money -------

• but, will save humanity and long term health of economy

CHANGING

COURSE…

WORLD AGENDA • REDUCE DEPENDENCE AND

DEMAND ON FOSSIL FUELS

GROWING POPULATION

BURGEONING ECONOMIC

DEVELOPMENT

ENERGY SECURITY

ENVIRONMENTAL DEGRADATION

ALTERNATIVE COURSE OF ACTION

DEVELOP FOSSIL FUEL

ENERGY ALTERNATIVES

INCREASE ENERGY EFFICIENCY

REDUCE ENERGY CONSUMPTION

ACHIEVING SOLUTIONS WILL NOT BE EASY, BUT ENHANCING

ENERGY SECURITY AND AVERTING FUTURE HARMS TO THE

ENVIRONMENT IS POSSIBLE AND CAN ALSO BE PROFITABLE.

WE MUST CUT OUR

EMISSIONS OF

GREENHOUSE GASES

Global renewable energy

investment growth (1995-2007)

International Climate Change Negotiations

I. Earth Summit, 1992

II. United Nations’ Framework

Convention on Climate

Change,1992

III. Kyoto Protocol,1997

IV. Copenhagen Accord, 2010

V. Bonn Climate Change

Negotiation,2011

Kyoto Protocol’s target : reduce by 5.2% compared to the year 1990 (but note that, compared to the emissions levels that would be expected by 2010 without the Protocol.

The goal is to lower overall emissions from six greenhouse gases - carbon dioxide, methane, nitrous oxide, sulfur hexafluoride, HFCs, and PFCs - calculated as an average over the five-year period of 2008-12;

National targets range from 8% reductions for the European Union and some others to 7% for the US, 6% for Japan, 0% for Russia, and permitted increases of 8% for Australia and 10% for Iceland.“ –

The low commitment from rich nations

to reduce emissions is unsurprising.

The major emitters (USA, the

European Union will continue to retain

the highest share of emissions over time.

Countries such as USA, Australia and

Japan had signified that they do not favor

signing a post Kyoto 2012 emissions

constraints agreements.

In 2010, investments in clean energy

rose up to US$ 243 Billion and a 30%

increase of 2009 levels.

An IPCC report stated that the world

could meet as much 43% of global

energy demand with renewable energy

sources by 2030 and 77% by 2050. This

30% renewable energy penetration is

realistic.

The Challenge to Developing

Nations

Developed nations imposed that a new

legally-binding framework should

include all major emitters including the

developing nations.

Developing nations are for the

extension of Kyoto, obliging all

industrialized nations to cut greenhouse

gas emissions by 5.2% below 1990

levels during 2008-2012.

Developed nations refuse any legally

binding agreement to reduce emissions

after 2012.

Pledge amount to more mitigation and move toward stop growth of energy related emissions

Speed up green technological change and transition towards

renewable energy.

The post 2012

challenges for

developing

nations

Why

Renewable

Energy?

1. Viable alternative

2. Environmental concerns

3. Fossil fuel are more expensive

4. Limitless fuel to turn a Renewable

Energy Infrastructure like wind, solar,

and wastes

5. Increase range of technologies

6. Renewable energy gets cheaper

Project Design and Management

A successful renewable energy

project is one that

1. Links energy with social aspects 2. Meets needs 3. Use appropriate and proven technology that will effectively use

as alternative energy source at the same time reduces and eliminate carbon dioxides and greenhouse gases

4. Is reliable and sustainable 5. Is economically viable

Issues in the management and development of

Renewable Energy Projects

THE POLICY ISSUES

FEED-IN-TARIFF REQUIREMENT

BIAS TOWARDS FOSSIL FUELS

LACK OF REGULATORY FRAMEWORK

DEREGULATION OF ENERGY SECTOR

THE TECHNOLOGY ISSUES

LACK OF ENOUGH INVENTIONS

REQUIREMENT OF PROVEN TECHNOLOGIES

COMPLIANCE UNDER INTERNATIONAL ENVIRONMENTAL STANDARDS

PERMITTING PROCESS ARE TEDIOUS

LACK OF WORKING TECHNOLOGY REFERENCES

POLICY

TECHNOLOGY

INSTITUTIONAL

FINANCIAL

Issues in the development

of Renewable Energy Projects

INSTITUTIONAL/REGULATORY

ISSUES

i. LACK OF CAPACITY TO

DEVELOP, IMPLEMENT,

OPERATE RE PROJECTS;

ii. LACK OF SOUND RENEWABLE

ENERGY POLICY;

iii. WEAK IMPLEMENTATION OF

THE UNFCCC CLEAN

DEVELOPMENT MECHANISM

iv. NEED OF FLEXIBLE AND SELF-

SUSTAINABLE SUPPORT

MECHANISM FOR RENEWABLE

ENERGY DEVELOPMENT

THE FINANCIAL ISSUES

i. SOURCES OF FINANCING

ii. NEED FOR PRE-DEVELOPMENT

FUNDING

iii. LIMITED ACCESS TO EQUITY

iv. HIGHER PROJECT

PREPARATION/TRANSACTION

COST

v. REQUIREMENTS FOR LOCAL

GUARANTEE FUND

vi. GRANT MENTALITY OF

DONORS/COUNTRIES

In order to achieve self reliance in the development of

Renewable Energy project s Policy Framework should

have the following directions:

Adoption of sustainable energy

development strategies to

reduce the dependence on fossil fuels and

thereby minimize exposure to price fluctuations in the international fossil

fuel markets.

Increase the utilization of

renewable energy by institutionalizing the development of

capabilities in the use of renewable energy systems;

Encourage the development and

utilization of renewable energy resources as tools

to effectively prevent or reduce harmful emissions

and thereby balance the goals

of economic growth and

development;

Establish the necessary

infrastructure and mechanisms.

PROJECT MANAGEMENT

FOR RENEWABLE ENERGY

PROJECTS

RESEARCH AND DEVELOPMENT

ECONOMIC VIABILITY

TECHNOLOGY SELECTION

PRELIMINARY STUDIES

PROJECT SIZING

INSTITUTIONAL, POLICY, AND REGULATIONS

STAKEHOLDER AND OFFTAKER REQUIREMENTS

FINANCING OPTIONS, ECONOMIC VIABILITY AND COST

TIMETABLE

Factors to be

considered at the

planning stage

THE PROJECT DEVELOPMENT AND MANAGEMENT SYSTEMS

INTEGRATION REQUIREMENTS FOR RENEWABLE ENERGY

PROJECTS

PREPARATION OF LONG TERM

COMPREHENSIVE DEVELOPMENT PLAN

CONDUCT OF FRONT END ENGINEERING

DESIGN

DETAILED INVESTIGATION AND ANALYIS OF THE TECHNICAL, ECONOMIC, INSTITUTIONAL,

LEGAL,REGULATORY ELEMENTS OF THE PROPOSED

PROJECT TO SUBSTANTIATE THE PROJECT’S ECONOMICS

THE TOTAL PROJECT COST ESTIMATE

CIVIL WORKS PROCESS FLOW

DIAGRAM

PRELIMINARY HEAT AND BALANCE

DETERMINATION OF THE FIRM PRICE QOUTE AND

THE DELIVERY SCHEDULE FOR THE PROJECT EQUIPMENT

Infrastructure Market oriented

reform Human capacity

building

Local workforce training

requirements

Capacity expansion

Technology transfer and productivity

enhancement

Regulatory, legal and policy

requirements

Project management and

maintenance

Project sustainability and

risks

Factors to be considered in the preparation of a long term

project management plan for Renewable Energy Projects

The Business Plan

Executive Summary

• Scope of the project

• commercial rationale for implementing the project,

• where located,

• who are involved,

• who is doing, what, where, when, how and why

• Total investment involved;

• investment/financing required,

• market opportunity;

• business objectives;

• projected headline returns

Business Model and Strategy

• Detailed business plan

• Operations/Planning

• Expansion/Growth Strategy

• Marketing Strategy

• Management and manpower

• Management expertise and credentials partnerships

• Technologies and Suppliers

• Industry analysis, external analysis

• Competitive advantage analysis

Investment

• Investment structure

• Equity cash flow

• Exit Strategy

FOUR STAGES OF PROJECT MANAGEMENT FOR

RENEWABLE ENERGY PROJECTS

The challenge and objective that project managers should participate is to involve in undertaking concerning the technological change that will stabilize greenhouse gas concentrations in the atmosphere at a level that will prevent dangerous human interference with the climate.

As managers, Renewable Energy project management deals with climate change in a way that balance a broad array of relevant policy imperatives, which include energy security, sustainable economic growth, economic competitiveness and the other non-environment issues and directions.

Renewable Energy is broad project management agenda—a flexible market based approach towards a low carbon, zero emission based action towards an effective climate change mitigation.

On Managing Renewable Energy Projects in

developing nations…

FINANCING RENEWABLE ENERGY PROJECTS IN

DEVELOPING NATIONS

Twenty (20) United Nations agencies

support renewable energy projects in

developing and underdeveloped countries.

Technical assistance and training

Institutional development

Capacity building

Policy development

Power sector reform

Energy access and poverty reduction

UN Activities

in Renewable

Energy

FINANCING RENEWABLE ENERGY

PROJECTS IN DEVELOPING NATIONS

Bilateral Development Agencies

Global Environmental Facility

International & Local Financial Institutions

Asian Development Bank

Carbon Finance, World Bank

Opportunities as per New

Energy Finance Report – CANREA

Total amount of RE investment – over US $ 42 Billion in 2005 and five fold increase thereafter

CANREA sees the rapid growing investment interest in renewable energy globally involving developing nations.

Wind energy dominates RE investments at $ 12 Billion in 2005;

Solar photovoltaic climbs over 5 GWp per year by 2011.

Top 20 utilities in Europe targets to double RE capacity in the next five years.

Renewable energy development in developing

nations during the last ten years

Brazil- 90% of electricity comes from Hydro electric plants and 15 % of

total energy comes from Renewable Energy projects; 2,000 MW of

Biomass cogeneration power plant , 5 GW of wind power and 14 GW

of hydro power.

India—Non-commercial biomass energy comprise 1/3 of total India

energy use ; the transition to RE is visible of energy capacity

initiatives to mitigate climate change, has instituted a sizeable RE

program over the past 20 years- 3.3 million of household uses

biomass gasification plants. High penetration of small hydro, wind,

biomass and industrial waste –to-energy technologies sustains RE

markets.

Other countries such as Mexico, Thailand, Malaysia, Philippines,

Morocco, Croatia, Jordan, South Africa, Tunicia have programs in

sustainable development of renewable energy projects.

i. Guaranteed connection to the grid

ii. Long term contract to sell

Renewable energy

iii. Fixed price sufficient to recover

their costs plus a reasonable

profit.

iv. Democratizing energy

v. Encouraging decentralized

production from many producers

and many renewable sources

vi. Spreading the power and

economic benefits as widely as

possible.

The Feed-In-Tariff for Renewable Energy

Projects

The Feed-in-Tariff is the best renewable energy policy and political mechanism to provide investment security and spread the decentralized production of renewable energy.

As a renewable energy policy, feed-in-tariff would provide flexible, self-sustainable support mechanism for renewable energy development in developing countries.

The CDM allows industrialized nations to fulfill some of their legally binding greenhouse gas emissions reduction targets by financing projects in developing nations .

The Clean Development Mechanism (CDM) and the development

of Renewable Energy projects in developing countries

Each tonne of reduced and verified

CO2 equivalents resulting from the

project can be traded- and profits

made - - on the international carbon

market in the form of Certified

Emission Reduction Units (CERs)

Can CDM and Feed-in-Tariff

be combined to sustain the

commercial viability of a

Renewable Energy Project?

Is there a need for a renewable energy policy fund?

According to World Future Council - a national renewable energy policy

fund can cover the feed-in-tariff rate and the concrete shares of

developing country could be determined on the criteria reflecting the

development status of the respective country, GDP /capita PPP/capita.

Is there a need to impose tax CDM in developing nations? This is ideal in

the sense that the imposition of tax on CDM generated within its borders,

this is an additional revenue.

Financial incentives

Users’ Tax

Income Tax Holidays

Market support

Green Option

Feed-in-Tariff Rules

Low interest loans

Building domestic capacity for RE

development

Leveled playing field

Access to funds for R & D for RE

technologies

Domestic supports for RE technology

standards and energy efficiency standards

leveling

Introduction of revenue neutral

environmental taxes

Policies for

leveraging

renewable

energy

investments

Opportunities in renewable energy projects in

developing nations

Energy Efficiency Improvement: In the near future, the amount of primary energy required for a given energy service could be cost-effectively reduced by 25 to 35 percent in industrialized countries (the higher figure being achievable by more effective policies). In transitional economies, reductions of more than 40 percent will be cost-effectively achievable.

And in most developing countries – which tend to have high economic growth and old capital and vehicle stocks – the cost-effective improvement potential ranges from 30 to more than 45 percent, relative to energy efficiencies achieved with existing capital stock.

However, when this potential is made use of there will still remain 20 to 40 percent in 20 years time due to technological progress. (Johansson et al, 2004)

The European Union supports for RE

development in developing countries

About $115 M annually has been assisted over period 1997-2001

A 250 million euro facility created to finance RE/EE

Setting up Global RE funds (GREFF) to support several investor-financed funds

Target capitalization of 75 million euros

EU had set up development assistance in renewable energy in developing countries.

EC-ASEAN Energy Facility (EAEF) aims to promote climate-friendly and clean energy sources as its primary focus in the ASEAN which ran between 2002-2007 with EU funding of 215 M Euro. Renewable Energy and energy efficiency components compose about 77 projects.

Conclusions

Efforts among developing nations to speed up development of Renewable Energy can be crucial during the post-Kyoto scenario, however, these challenges provides opportunities with developing nations in the forefront of climate change mitigation and reduction of GHGs emissions.

The global initiatives and supports towards the maximizing energy efficiency investments, continuing market and policy reforms could move to the direction towards clean technologies and the transition towards renewable energy.

For more information, please contact:

RUTH P.BRIONES, MPA, LlB.

Chairman/Chief Executive Officer

Greenergy Solutions Inc.

Rm.401/411,Verde Oro Bldg.,

535 Commonwealth Ave. Diliman

Quezon City, Philippines

Phone Nos: +632-490-5776 / + 63 917 5556948

E-mail Address: gsiwte@gmail.com

Website: www.greenergy-solutions.com