Lessons learned from studying public initiatives to support energy efficiency finance in Thailand from 1992 to 2014

Despite the huge technical and market potential for cost-effective energy efficiency investments in Southeast Asian markets, only a small fraction of this potential has been realised. Given that the major share of global future energy demand, and associated greenhouse gas emissions, will come from emerging economies, it is important to understand the barriers to mainstreaming energy efficiency into the financial sector. This paper focuses on public initiatives that support one of the main barriers: access to capital. The researchers chose Thailand as a case study because of the range of energy efficiency finance programmes that have been designed and implemented since the early 1990s. Interviews with 21 experts from government, the private sector and academia provided the core data for this research. The analysis employed a multi-level perspective and focused on the historical evolution of public support of energy efficiency finance in the country. We identified three distinct phases of public policy development over the past two decades. Despite an impressive variety of ambitious and creative programmes, the initiatives have not yet succeeded in integrating energy efficiency into the financial sector in a meaningful way. Some of the key lessons found are that (a) it is better to treat energy efficiency and renewable energy in separate financing initiatives, (b) governments find it challenging to design effective mechanisms to de-risk financial investments, and (c) international organisations play an important role in testing and facilitating the introduction of new financing approaches and mechanisms. In emerging economies, cost-effective implementation of energy efficiency measures is a promising alternative that can reduce the need for investment in large-scale power generation capacity. The researchers hope that this paper will contribute to more effective design of programmes to incentivise energy efficiency financing in Thailand and in other economies in Southeast Asia.     

Voluntary agreements with white certificates for energy efficiency improvement as a hybrid policy instrument

In this paper we examine the implementation of a combined policy scheme that consists of a traditional instrument, the voluntary agreements (VAs), and an innovative one, the white certificates (WhC). The basic structure of this scheme is that energy suppliers who undertake an energy efficiency obligation under a white certificate scheme can make use of voluntary actions to enhance investments in innovative energy savings projects. Energy suppliers and other market parties can additionally or in parallel participate in voluntary agreements and set energy efficiency targets. For fulfilling their voluntary agreement target, these market parties can receive tax exemptions or receive white certificates that they can sell in the market. Transaction costs and baseline definition for demonstrating energy efficiency improvement deserve special attention. This policy can assist a country to enhance energy efficiency improvement while it stimulates innovation. Cost effectiveness can be higher than the case of stand-alone policy instruments, since more financing options are available for more expensive projects. Nevertheless, the added value of the scheme lies more in the implementation of innovative measures for enhanced energy efficiency. Furthermore, market parties can discover more business opportunities in energy efficiency and establish a green image; hence an integrated scheme should achieve higher political acceptability.     

Impact of energy efficiency measures on the economic value of buildings

A main objective of energy policies is to make all levels of the society, from governments to citizen, interested in increasing the energy efficiency of buildings. One of the most important barriers in implementation of energy policies is that the cost of potential energy savings, typically considered being the only financial benefit, does not sufficiently motivate investments. The target is therefore to identify further possible drivers pushing positive reaction according to energy saving action.The paper discusses whether a market-based instrument, capturing the increase of the economic value of energy efficient buildings, can be also used. Methods that quantify the added value due to energy performance, including recommendations on how they can be incorporated in the financial analysis of investments in weatherization, are developed. By applying the proposed methods, the payback period of investments in energy efficiency measures depends on two factors: potential energy savings and the added value to the property. Case studies on some existing condominiums from Romania are analyzed and provide evidence to the research question.The market sensitivity to energy efficiency measures, the possibility of an intangible added value as well as the impact to financial investment decisions is subsequently in the focus.     

The economic case for low-carbon development in rapidly growing developing world cities: A case study of Palembang,Indonesia

Where costs or risks are higher, evidence is lacking or supporting institutions are less developed, policymakers can struggle to make the case for low-carbon investment. This is especially the case in developing world cities where decision-makers struggle to keep up with the pace and scale of change. Focusing on Palembang in Indonesia, this paper considers the economic case for proactive investment in low-carbon development. We find that a rapidly growing industrial city in a developing country can reduce emissions by 24.1% in 2025, relative to business as usual levels, with investments of USD405.6 million that would reduce energy expenditure in the city by USD436.8 million. Emissions from the regional grid could be reduced by 12.2% in 2025, relative to business as usual trends, with investments of USD2.9 billion that would generate annual savings of USD175 million. These estimates understate the savings from reduced expenditure on energy subsidies and energy infrastructure. The compelling economic case for mainstreaming climate mitigation in this developing country city suggests that the constraints on climate action can be political and institutional rather than economic. There is therefore a need for more effective energy governance to drive the transition to a low-carbon economy.     

Energy and the World Summit on Sustainable Development: what next?

Given the importance of energy issues to sustainable development, energy was a priority issue at the World Summit on Sustainable Development in August 2002. The objective of this paper is to examine the outcomes of the Summit on energy, and to assess them against proposals to address the lack of access to modern energy and the need to move toward a cleaner energy system. We find that lack of political leadership from key countries prevented agreement not only on targets for renewable energy, but also on a programme to promote access. The achievements of the Summit were limited to enabling activities such as capacity building and technology transfer, rather than substantive agreements. While WSSD put energy higher on the agenda than before, no institutional home or programme to take the issues forward has emerged. This therefore remains a critical challenge to be addressed. Achieving this broad goal will require building a coalition to promote cleaner energy, and committing resources to programme for energy access. Based on analysis of proposals and the negotiations, we propose several key areas where progress is still possible and necessary, including: shifting more international public and private energy financing toward access investments and cleaner energy investments, advancing regional approaches to access and renewable energy targets, and a range of mechanisms to strengthen institutional capacity for integrating energy and sustainable development.     

Development of a modelling framework in response to new European energy-efficiency regulatory obligations: The Irish experience

Momentum has been building for an EU-wide approach to energy policy in which energy end-use efficiency is regarded as one of the main planks. Member States are already obliged to plan for the achievement of energy savings targets in respect of the period 2008–2016 and they now face additional economy-wide targets for 2020. Efficiency investments are widely regarded as capable of improving industrial competitiveness, security of energy supply and the abatement of greenhouse gas emissions. Nevertheless, the design of policy packages may involve trade-offs between these objectives. The challenge for energy modellers is to quantify future energy savings associated with combinations of efficiency measures. This paper draws on the international experience in energy modelling and tracks recent progress that has been made towards a harmonised European framework for verification of savings. It points to the significant development work that remains to be done, particularly to enable an increased reliance on bottom-up evaluation methods. One significant gap in our knowledge relates to the required adjustment of technical savings due to behavioural factors such as rebound effects. The paper uses one country (Ireland) as a case study to demonstrate how a framework is being developed to respond to these new requirements.     

Scaling up energy efficiency: the case for a Super ESCO

In developing countries the implementation of energy efficiency projects has fallen far short of the potential due to a number of institutional and financial barriers. The concept of energy performance contracting (EPC) implemented by energy service companies (ESCOs) has been recognized as a mechanism to overcome some of these barriers. However, despite the fact that the potential for application of performance contracting in developing nations is enormous, the growth of the ESCO industry has been rather slow. In particular, EPC and ESCOs have played a very limited role in implementation of energy efficiency projects in the public sector. This paper identifies barriers to the development of a viable ESCO industry in developing countries and identifies the need for and the potential role of a “Super ESCO” as a means of facilitating large-scale implementation of energy efficiency projects. While there are different definitions of the term Super ESCO, this paper refers to a Super ESCO as an entity that is established by the Government and functions as an ESCO for implementing projects in public facilities and supports capacity building and project development activities of existing private ESCOs. The Government capitalizes the Super ESCO with sufficient funds to undertake public sector performance contracting projects and to leverage commercial financing. The Super ESCO may also act as a financing or leasing organization to provide private ESCOs and/or customers financing for EE projects or leasing for EE equipment. The paper identifies examples of existing and proposed Super ESCOs in developing countries and defines how Super ESCOs may address some of the barriers to large-scale implementation.     

Electric power grid interconnection in Northeast Asia

In spite of regional closeness, energy cooperation in Northeast Asia has remained unexplored. However, this situation appears to be changing. The government of South Korea seems to be very enthusiastic for power grid interconnection between the Russian Far East and South Korea to overcome difficulties in finding new sites for building power facilities to meet its need for increased electricity supplies. This paper analyzes the feasibility of this electric power grid interconnection route. The issues addressed include electricity market structures; the prospects for electric power industry restructuring in the Russian Federation and South Korea; the political issues related to North Korea; the challenges for the governments involved and the obstacles anticipated in moving this project forward; project financing and the roles and concerns from multilateral and regional banks; and institutional framework for energy cooperation. While there are many technical issues that need to be resolved, we think that the great challenge lies in the financing of this commercial project. Thus, the governments of the Russian Federation and South Korea involved in the project need to foster the development of their internal capital markets and to create confidence with international investors. To this end, on energy side, this involves defining a clear energy policy implemented by independent regulators, speeding up the already started but delayed reform process of restructuring electric power industry and markets, and establishing a fair and transparent dispute resolution mechanism in order to reduce non-commercial risks to a minimum. The paper argues that establishing a framework for energy cooperation in this region will contribute positively towards that end, although views differ regarding its specific form. Finally, given that North Korea has a crucial transit role to play and faces a very unstable political situation, it is concluded that moving the project forward needs to be contingent on a resolution of the North Korea's nuclear crisis.     

Potential of best practice technology to improve energy efficiency in the global chemical and petrochemical sector

The chemical and petrochemical sector is by far the largest industrial energy user, accounting for 30% of the industry’s total final energy use. However, due to its complexity its energy efficiency potential is not well understood. This article analyses the energy efficiency potential on a country level if Best Practice Technologies (BPT) were implemented in chemical processes. Two approaches are applied and an improved dataset referring to Europe has been developed for BPT energy use. This methodology has been applied to 66 products in fifteen countries that represent 70% of chemical and petrochemical sector’s energy use worldwide. The results suggest a global energy efficiency potential of 16% for this sector, excluding savings in electricity use and by higher levels of process integration, combined heat and power (CHP) and post-consumer plastic waste treatment. The results are more accurate than previous estimates. The results suggest significant differences between countries, but a cross-check based on two different methods shows that important methodological and data issues remain to be resolved. Further refinement is needed for target setting, monitoring and informing energy and climate negotiation processes. For the short and medium term, a combination of benchmarking and country level analysis is recommended.     

Innovative financing models for low carbon transitions: Exploring the case for revolving funds for domestic energy efficiency programmes

The IEA has estimated that over the next four decades US$31 trillion will be required to promote energy efficiency in buildings. However, the opportunities to make such investments are often constrained, particularly in contexts of austerity. We consider the potential of revolving funds as an innovative financing mechanism that could reduce investment requirements and enhance investment impacts by recovering and reinvesting some of the savings generated by early investments. Such funds have been created in various contexts, but there has never been a formal academic evaluation of their potential to contribute to low carbon transitions. To address this, we propose a generic revolving fund model and apply it using data on the costs and benefits of domestic sector retrofit in the UK. We find that a revolving fund could reduce the costs of domestic sector retrofit in the UK by 26%, or £9 billion, whilst also making such a scheme cost-neutral, albeit with significant up-front investments that would only pay for themselves over an extended period of time. We conclude that revolving funds could enable countries with limited resources to invest more heavily and more effectively in low carbon development, even in contexts of austerity.     

Algerian renewable energy assessment: The challenge of sustainability

Algeria plays a very important role in world energy markets, both as a significant hydrocarbon producer and as an exporter, as well as a key participant in the renewable energy market. Due to its geographical location, Algeria holds one of the highest solar potentials in the world. This paper presents a review of the present renewable energy situation and assesses present and future potential of renewable energy sources (RESs) in Algeria. This paper also discusses the trends and expectation in solar systems applications and the aspects of future implementation of renewable energies in the Middle East and North Africa (MENA) region status. The problem related to the use of RES and polices to enhance the use of these sources are also analysed in this paper. In addition the available capacity building, the technical know-how for each RES technology and localizing manufacturing of renewable energy equipments are defined. The co-importance of both policy and technology investments for the future Algerian markets of RES and competitiveness of the solar/wind approach is emphasized. Some examples of policy significantly impacting Algerian markets are reviewed, and the intention of the new Algerian RES initiative is discussed.     

How much market do market-based instruments create? An analysis for the case of “white” certificates

Among the diverse economic instruments to foster energy efficiency (EE) and climate protection, tradable certificates have been investigated for renewable energy, and the EU directive on an emissions-trading scheme for CO₂ certificates has been approved in 2003. In contrast, tradable energy efficiency—or “white”—certificates have only lately been considered as a market-based tool to foster EE as compared with standards and labelling, for example. Theoretically, there is little doubt about the advantages. In practice, however, some fundamental problems arise. Critical issues are the design of an efficient artificial market for white certificates, its compatibility with the European emissions-trading system, the identification of a suitable target group for an EE obligation and the measurement of energy savings as compared with a reference use of energy. We use the theoretical framework of transaction cost economics to elaborate these issues. We conclude that transaction costs and investment specificity will restrict markets for white certificates in practice. Long-term contracts rather than spot trade will be the prevailing form of governance for EE investments.     

Energy efficiency outlook in China’s urban buildings sector through 2030

This study uses bottom-up modeling framework in order to quantify potential energy savings and emission reduction impacts from the implementation of energy efficiency programs in the building sector in China. Policies considered include (1) accelerated building codes in residential and commercial buildings, (2) increased penetration of district heat metering and controls, (3) district heating efficiency improvement, (4) building energy efficiency labeling programs and (5) retrofits of existing commercial buildings.Among these programs, we found that the implementation of building codes provide by far the largest savings opportunity, leading to an overall 17% reduction in overall space heating and cooling demand relative to the baseline. Second are energy efficiency labels with 6%, followed by reductions of losses associated with district heating representing 4% reduction and finally, retrofits representing only about a 1% savings.     

Electric power grid interconnections in Northeast Asia: A quantitative analysis of opportunities and challenges

Power grid interconnection has gained attention in Northeast Asia (NEA) as a means to build an economically efficient power system and to effectively utilize renewable energy, such as wind and solar resources in the Gobi Desert and hydro resources in Eastern Russia.In order to quantify the potential economic and environmental benefits from connecting power grids and developing renewables in NEA, we build an NEA-wide multi-region power system model using linear programming techniques. Our analysis considers power system characteristics, such as the seasonal and daily electric load curves of the various NEA economies.Compared to a “no grid extension” scenario, increased access to renewables contributes significantly to emissions reductions and fuel cost savings. However, the results imply modest benefits in lowering total cost because of the large initial investments needed in developing the renewables and the transmission lines. These limited total cost savings are likely to pose an implementation challenge for NEA grid interconnections. Our results also suggest that grid interconnections become more economically attractive in higher fuel price or lower initial cost situations. The relevant planning organizations should carefully consider the initial cost and future fuel price trends when considering how to interconnect power girds in an economical manner.     

Policy analysis for energy efficiency in the built environment in Spain

Energy efficiency is considered one of the most cost effective ways to enhance security of energy supply and reduce greenhouse gas emissions. According to Europe's Energy Efficiency Plan, the biggest energy savings potential in the EU lies in the built environment. However, the many barriers to energy efficiency have prevented the implementation of the existing potential so far. This paper evaluates the existing policy instruments aimed at energy efficiency in buildings in Spain as laid down in the 2nd National Energy Efficiency Action Plan (NEEAP). The results show that the current policy package is insufficient to yield the existing energy savings potential in this sector. As much of the savings potential can be found in existing buildings and realization of this potential very much relies on voluntary action, the renovation sector is in need of an appropriate financial framework that mobilizes sufficient public and private financial resources, and transparent and efficient mechanisms to ensure the return on investment and payments from those who benefit from the renovation. Such financial framework needs to be supported by a regulatory framework that is tuned to existing buildings and an organizational framework that effectively connects the different policy layers in Spain.     

Kyoto Protocol implementation in Serbia as precognition of sustainable energetic and economic development

The paper gives reasons for low energy efficiency typical of the Serbian economy, which is based on outdated and dirty technologies. The comparison of selected economic indicators and indicators of energy efficiency in both Serbia and the European Union points out the benefits of the Kyoto Protocol implementation due to the growth of competitiveness in the global market. Serbia has no obligation to reduce GHG emissions, the authors point to the proposals whose implementation along with the mechanisms of the Protocol can enable Serbia the access to markets that trade GHG emissions and the access to dedicated funds, self-financing or attracting foreign investments to raise energy efficiency, which will be accompanied by adequate economic benefits. A similar principle can be applied in all countries that are not obliged to reduce GHG emissions. The application of different mechanisms aiming to increase energy efficiency in Serbia, could contribute to the increase of GDP annual growth rate from 5% to 7%, which cannot be achieved by any other economic instrument. Energy efficiency, which is actually a question of competitiveness of each economy, can finance itself through the mechanisms of the Kyoto Protocol by selling excess emissions resulting from improved energy efficiency.     

Refrigerator efficiency in Ghana: Tailoring an appliance market transformation program design for Africa

In some cases, a simple replication of developed country appliance efficiency labels and standards may not be completely feasible in Ghana, Africa. Yet by creatively modifying the developed country appliance efficiency market transformation model, it should be possible to achieve dramatic energy use reductions. As was true in developed countries in the previous two decades, refrigeration efficiency improvements provide the greatest energy savings potential in the residential electricity sector in Ghana. Although Ghana, like many African countries may impose standards on imports since Ghana does not have manufacturing facilities for appliances in country. This approach may hurt some consumers who patronize a very diverse market of used appliances imported from Europe. We discuss how meeting the challenges of the Ghanaian market will require modification of the usual energy efficiency labeling and standards paradigm. But once a refrigerator market transformation is accomplished in Ghana, we estimate an average energy savings potential of 550 kWh/refrigerator/year, and a monetary savings of more than $35/refrigerator/year. We discuss how this modified refrigerator efficiency market transformation may occur in the Ghanaian context. If successful, this market transformation is likely to be an example for many other African countries.     

Developing markets for renewable energy technologies

Although renewable energy resources are now being utilised more on a global scale than ever before, there is no doubt their contribution to the energy economy can still be greatly increased. Recently international support for developing these relatively new sources of energy has been driven by their benefits as assessed by reduced environmental impact, particularly reduced greenhouse gas emissions.After several decades of continuous but somewhat erratic funding for research and development of renewables, it is time to take stock of the key issues to be addressed in terms of implementation of major renewable energy programmes on a large scale worldwide. One of the first steps in this process is the identification and encouragement of reliable continuous markets both in developed and developing nations. Future energy policy and planning scenarios should take into account the factors necessary to integrate renewables in all their diverse forms into the normal energy economy of the country.Other critical factors in market development will include the mass production of high quality, reliable and reasonable cost technical products and the provision of adequate finance for demonstrating market ready and near market renewables equipment.Government agencies need to aid in the removal of legislative and institutional barriers hindering the widespread introduction of non-conventional energy sources and to encourage the implementation of government purchasing schemes.Recent moves by companies in Australia to market ‘green energy’ to customers should also aid in the public awareness of the ultimate potential of renewables leading to greater use in the industrial, commercial and domestic sectors.     

The impact of EU policies on energy use in and the evolution of the UK built environment

Energy use in buildings is influenced by a variety of factors in complex ways. Historically, in the UK the efficiency of energy use in buildings has not been a major consideration in their design. Now policy concern with climate change is changing this, because buildings have come to be perceived as the locus of energy use with the highest cost-effective energy savings potential. In the UK, the energy efficiency of the building stock is rather low. The paper focuses largely on energy use in the UK's existing building stock and the two main European Union Directives which affect it: the Energy Performance in Buildings Directive and the Energy Services Directive. The Directives are complex, and there are a number of supporting programmes set up by the European Commission to aid their implementation. Even so, they have been implemented in differing ways in different European countries, and implementation remains patchy. The Directives have the potential to be a major influence on the evolution of the UK's built environment, but their effect will depend on the details of the Directives’ implementation and enforcement, many of which are not yet clear.     

Energy-urban transition: The Mexican case

In this paper I present a study regarding the institutional conditions of Mexican cities based on a post-petroleum urban model that considers transport, architecture, urban planning and land use, renewable energy sources, energy saving and efficiency, and urban metabolism issues. The model was constructed with recommendations of authors and organizations that have analysed the energy dimension of cities under an energy-availability, environmental or petroleum-independent view. To make the study I sent a questionnaire to some local governments of all the country. The information indicates that Mexican cities do not have institutional conditions to manage the urban-energy transition that signify the end of cheap oil and the peak of world oil production.