Background document for the consideration of the

Background document for the consideration of the
2016 Policy Dialogue on Energy for Sustainable Development
in Asia and the Pacific
25-27 April 2016, Bangkok
Session 1: Emerging and Persistent Issues on Energy Security and the Sustainable
Use of Energy
Session 2: Transboundary Power Trade and Inteconnection
Session 3: Access to Energy Services: Institutional Framework and Financing
Mechanism
1. Introduction
The Regional Trends Report on Energy for Sustainable Development in Asia and the Pacific is an
annual publication that feeds into the Policy Dialogue to serve as an input to hold discussions in
identifying potential policy solutions through regional cooperation to the challenges identified
and analyzed. The Regional Trends Report together with the Asia Pacific Energy Portal and the
Policy Dialogue are the three components that the secretariat is providing in facilitating
member States to implement the outcomes of the first Asian and the Pacific Forum.
The Regional Trends Report 2015 covered three main areas: (a) Asia-Pacific Energy scene; (b)
Integration of Renewable Energy in Electricity system; and (c) Promotion of High-Efficiency,
Low-Emissions Coal Technologies in Electricity Generation. The draft Regional Trends Report
2015 was made available for the discussion during the Policy Dialogue in 2014 and it was
published during the Commission session in 2015.
The Regional Trends Report 2016 captured emerging energy issues that impact Asia and the
Pacific, and focused on two key challenges: (a) Transboundary power trade for increasing
power sector sustainability and regional connectivity; and (b) Developing effective policies for
widening access to energy services. In addition, the Regional Trends Report 2016 also provided
a preview of the Asian and Pacific Energy Forum’s Plan of Action Mid-Term Review.
The Regional Trends Report 2017 will build upon the 2015 and 2016 reports to further discuss
emerging issues in the Asia and Pacific region. The objectives of the report are to facilitate
regional communications and knowledge sharing of energy issues; to identify barriers,
challenges and opportunities for regional and subregional cooperation, and to work towards
policy initiatives on energy security and the sustainable use of energy in the Asia and the Pacific
region. Proposed topics for Regional Trends Report 2017 include: (a). Strengthening policy
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framework to promote renewable energy; (b) Mainstreaming energy efficiency strategies and
actions into national energy development plans. The secretariat welcomes comments on
Regional Trends Report 2016 and guidance to the proposed topics for Regional Trends Report
2017.
2. Review of Regional Trends Report 2016
2.1 Emerging Regional Trends
Significant changes have taken place in the global economy and the international energy
market in 2015. The global as well as regional economies face declined growth rate. The Asian
Pacific region grew by 4.5% in 2015, the lowest rate since 2010, and only a modest rebound to
5 percent forecasted for 20161. The slowdown is a major factor influencing prospects and
energy. In this background, Chapter 1 of the Regional Trends Report 2016 reviews major
emerging and persistent issues that affect energy security and the sustainable use of energy in
Asia and the Pacific. Session 1 of the Policy Dialogue will focus on this Chapter.
Fossil fuels have been and will continue to be the primary energy sources in the region,
accounting for 80.0% of TPES in 2000 and 85.6% in 2013, with oil decreased from 30.0% to
23.6%, natural gas kept the same percentage and coal increased from 32% to 44%, nuclear
reduced from 4.0% to 1.9%, hydro increased from 1.7% to 2.1% and renewable energy (exclude
hydro) decreased from 14.2% to 10.4%2. It is estimated that fossil fuels will dominate the region,
with Asia the final destination for 80% of regionally traded coal, 75% of oil and 60% of natural
gas in 20403.
The prevailing low oil prices present both opportunities and challenges for countries in Asia
and the Pacific. Brent spot price dropped from US$111.8 per barrel in June 2014 to US$47.8 per
barrel in January 2015, rebounded slightly in early 2015, further lowered to US$30.7 per barrel
for January 2016, and then increased to $32.18 per barrel in February4. The falling oil prices will
support activity and reduce inflationary, external and fiscal pressures in oil-importing countries,
but affect oil-exporting countries adversely by weakening fiscal and external positions and
reducing economic activity5. Countries such as India, Indonesia, Malaysia and Thailand are
taking the opportunity of lower oil prices to diminish fossil-fuel subsidies, cutting the incentive
1
ESCAP, 2016. Economic and Social Survey of Asia and the Pacific 2015: Year-end update.
http://www.unescap.org/sites/default/files/2015%20Year-End%20Update_0.pdf
2
Asian Pacific Energy Portal.
3
IEA, 2016. World Energy Outlook 2015.
4
EIA, 2016. Spot Prices: petroleum & other liquids. Retrieved at:
http://www.eia.gov/dnav/pet/pet_pri_spt_s1_m.htm
5
The World Bank, 2015. East Asia Pacific Update, April 2015: Adjusting to a Changing World. Press Release No:
2015/384/EAP.
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for wasteful consumption6. However, the challenge is to sustain the policy in case the oil prices
rebounded, and the redistribution of savings are beneficial for national economy 7. On the other
hand, low oil prices will affect oil-exporting countries adversely by weakening fiscal and
external positions and reducing economic activity. For oil exporting countries, growth would be
negatively impacted and government revenues reduced. The World Bank suggested that
sustainable and equitable fiscal policy is the key for both oil importers and exporters 8.
Demand for natural gas will increase, resulting from continuous economic growth, energy
security concerns, diversification of energy mix, and transition to cleaner energy 9. Japan and
Republic of Korea use natural gas to make up for power lost from their nuclear energy sectors10.
On the production side, the Russian Federation alone accounts for more than one quarter of
global pipeline trade. Malaysia, Indonesia and Australia contribute to three quarters of global
LNG trade and one third of global natural gas trade11.
Pricing structure reform for natural gas is becoming a critical concern of countries in the
region, as buyers in this region are paying higher prices than elsewhere. LNG prices in this
region are linked to crude oil prices (with lag) through a set of complicated formulas. With
declining demand and oil prices, LNG prices are predicted to fall, but still higher than other
regions. While traditional LNG buyers --- Japan and Republic of Korea --- are sufficiently well-off
to pay higher LNG prices for consistent supply and energy security benefits, other countries
include China and India have tried to keep natural gas prices low to boost industry and
economy and engaged in construction of gas pipelines, thus LNG has not been very
competitive12. Many countries have started reform to move towards a regional gas market
indexed price from an oil-indexed system for imported gas13.
The challenge of increasing environmental concerns and continuing reliance on coal requires
a transition to cleaner coal technologies that are of high efficiency and low emissions.
Because of the GHGs emissions and other air pollutants resulted from coal combustion, OECD
countries have reached an agreement to restrict their financial from overseas coal-fired power
stations. But in this region, coal has been playing a critical role in bringing affordable and
reliable electricity to millions of people in developing Asia, due to its availability and low costs.
6
IMF, 2015. How Large are Global Energy Subsidies? WP/15/105.
OECD, 2015. OECD Companion to the Inventory of Support Measures for Fossil Fuels 2015.
8
World Bank, 2015. East Asia Pacific Update, April 2015: Adjusting to a Changing World. Press Release No:
2015/384/EAP.
9
IEA, 2015. Medium-Term Gas Market Report 2015. Market Analysis and Forecasts to 2020. ISBN 978-92-6423523-6.
10
Reuters, 2013. As America Enjoys Cheap Gas, Asia’s Top Buyers to Pay More. Retrieved on:
http://www.reuters.com/article/2013/12/15/asia-gas-idUSL4N0JC1XH20131215
11
U.S. EIA. https://www.eia.gov/todayinenergy/detail.cfm?id=23132. Retrieved on Jan. 10, 2016.
12
The National Bureau of Asian Research, 2011. The Role of Natural Gas in the Asia-Pacific Energy Future.
Retrieved on: http://www.nbr.org/research/activity.aspx?id=118
13
Enerdata, 2014. Natural Gas Trading Hub in Asia-Pacific. Retrieved on:
http://www.enerdata.net/enerdatauk/press-and-publication/energy-news-001/natural-gas-trading-hub-asiapacific_28938.html.
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The year of 2015 marked a new record for global investment in renewable energy, despite
the falls of fossil fuel prices. Investment in renewables excluding large hydro rose 5% to $285.9
billion globally14, of which $160.6 was in Asia and the Pacific, including $102.9 billion in China
and $10.2 billion in India. The $265.8 billion in renewable power capacity was more than double
of the investments into new coal and gas generation15. Overall new renewable power capacity
excluding large hydro of 134 GW made up 53.6% of the additional installed capacity in 2015,
the first time it has represented a majority16. Renewable energy systems have played an
important role in energy access in remote and rural areas. Indigenous renewable energy
development is critical for the Pacific island countries, as they rely heavily on imported fuels.
Energy development needs to take into consideration the social, environmental and
economic aspects as they are the fundamental inputs to sustainable development. The newly
adopted Sustainable Development Goals in which energy is one of the goals as well as crosscutting issues and the Paris Agreement, which is expected to take into effect in 2020, under the
UNFCCC will shape the future of energy development.
Energy connectivity has potential for optimizing the use of all energy resources, including
renewable energy resources, gas and other sources for enhancing energy security and
sustainable use of energy at the regional level. On-going regional and subregional energy
connectivity initiatives will bring opportunities as well as challenges for regional energy
development. Chapter 2 will have a detailed discussion on energy connectivity.
Energy access has remained as the major challenge and the energy poverty is acute in the
region impeding development process and economic growth. Throughout the region, 455
million people lived without electricity access and 2.06 billion people relied on solid fuels for
cooking and heating in 201217. The poor are living without access to affordable, reliable and
modern energy services, which are crucial for livelihood improvement and development, thus
are deprived of such opportunities. Chapter 3 will have a detailed discussion on energy access.
To conclude Session 1 of the Policy Dialogue, the following topics will be forwarded to generate
discussions among participants:
Topic 1: What are the common strategies, actions (short, medium and long term) and/or
economic instruments to ensure implementation of long-term national energy strategies that
will support sustainable development?
Topic 2: How to respond to the changing energy market to ensure energy security and
sustainable use of energy in this region?
14
Frankfurt School – UNEP Center and BNEF, 2016. Global Trends in Renewable Energy Investment 2016.
Frankfurt School – UNEP Center and BNEF, 2016. Global Trends in Renewable Energy Investment 2016.
16
Frankfurt School – UNEP Center and BNEF, 2016. Global Trends in Renewable Energy Investment 2016.
17
Asia Pacific Energy Portal, 2016.
15
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2.2 Transboundary power trade and Interconnection
Context
With energy demand in Asia and the Pacific forecast to nearly double from 2010 to 203518,
access to reliable and adequate energy services will remain a focus for the decades to come.
The region is expected to account for over 40 per cent of the US$68 trillion of cumulative
energy investments until 204019. Chapter 2 of the Regional Trends Report 2016 explores the
potential of regional energy connectivity to meet broader energy goals within the framework of
the Sustainable Development Agenda.
Transboundary power trade is an important aspect of energy connectivity and of sustainable
development, as emissions from the combustion of fossil fuels for power generation are the
leading source of global CO2 emissions. From a near-term perspective however, the benefits of
transboundary power trade lay within the scope of increased energy security, including
reliability, adequacy, and flexibility, as well as the economic gains associated with reduced need
for generation reserve margins, and increased generation economies of scale achievable with
access to larger markets.
A separate publication on energy connectivity as a means to promote sustainable development
within Asia and the Pacific, entitled Towards a Sustainable Future: Energy Connectivity in Asia
and the Pacific Region, has been prepared by secretariat and will be made available to Policy
Dialogue participants here. The recommendations in this document are aligned with those in
Chapter 2 of the Regional Trends Report.
Benefits
Through connectivity, countries within the region can exploit the complementarities in resource
endowments and seasonal/daily differences in supply and demand patterns. This would allow
for the enhancement of energy security, increased economic benefits and substantial
environmental benefits. The enhancement of energy security can be seen in several ways: a)
improved access to existing and new generation capacities; b) increased operational efficiency
and quality of transmission and distribution networks; c) reduced vulnerability to localized
disruptions. Main tangible economic benefits resulting from increased regional energy trade
and integration include: a) lower cost of energy supply as a result of optimized use of
existing/potential primary energy resources; b) increased investment in power generation and
transmission capacities facilitated by economies of scale of generation; c) reduced costs of
generation due to shorter reserve margins; d) reduced dependence on expensive oil-generated
power for some oil-importing countries; e) economy-wide productivity gains from improved
electricity access. Regional power integration may also have significant environmental benefits,
including: a) higher utilization of existing hydro and thermal capacities in the short-term
18
19
ADB
IEA, WEO 2015
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through replacement of traditional fuels and oil-based generation; b) establishment of larger
integrated power pools allowing for greater incorporation of intermittent renewables and
larger, more efficient thermal generation.
Energy trading provides flexibility among the trading countries to choose best possible option
for transmission and generation. Asia-Pacific countries have great potential for enhancing
energy connectivity for enhancing energy access, getting benefit from its diverse resources and
creating market for future energy trading.
Barriers
Obstacles to promoting transboundary power trade include, among others: political; technical;
regulatory; and financial barriers. No single barrier is insurmountable; however the
combination often proves difficult to overcome, as evidenced by the lack of regionally
integrated power markets within Asia and the Pacific. While technical, regulatory, and financial
barriers can be overcome through effective policy, they require political will, which can be
challenging due to numerous factors. Energy security concerns have led some countries to
discourage the increase of transboundary trade, i.e. through the introduction of local content
requirements. Fundamentally, a shift in thinking is needed from one based on the idea that
energy security requires self-sufficiency of domestic energy supply toward one based on the
principle that energy security requires diversity and redundancy of domestic energy supply
through both domestic supply maximization and fluid trade with regional suppliers. Stable
policy environments with long-term predictability and favorable investment conditions to
minimize risk are needed to attract international investment with lower return on investment
(ROI) requirements.
Unlike the global production networks that created a positive force for reinforcing the bottomup market integration process, efforts to connect energy sector in the region have not yet been
very successful, excepting some cross-border investments in energy projects. Trade and
investments in regional energy networks remain low despite the fact that there is a high and
growing demand for energy and there are adequate beneficial opportunities waiting to be
realised from regional energy trade. A number of factors are responsible for this disconnect as
listed below.
Energy networks, unlike commodities have special attributes make it difficult to trade easily.
Physical energy networks, such as gas pipelines or transmission grids are capital intensive and
generally subject to economies of scale. Most of these networks require significant upfront
investment but are also of little use until the works are complete and unless they are
maintained in good condition. With large sunk costs, energy networks present major challenges
in financing and maintenance, especially when these traverse multiple countries. These capital
attributes lead to many market and government failures, and private investors may be
reluctant to absorb this risk.
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Unlike normal goods or commodities, most networks are geographically specific: once a
location is set, it cannot be moved. For example, once a gas pipeline is laid, its spatial
dimensions will also impact the value creation for one group of people versus the rest. It is
difficult to put in place compensation mechanisms even when these are within single national
boundary, when these are under different national legal and governance systems, it creates
political risks and aversion.
Balancing the gains with overall costs between different groups of stakeholders requires a
robust institutional mechanism. This in turn requires intervention and leadership by the
participating governments and by technical experts if regional energy connectivity is to proceed.
Various existing subregional programs supporting the energy integration process in the region
show a lack of consensus in defining a comprehensive model of integration and satisfying
interests of the whole region, including States and stakeholder groups. To a great extent, this
shows a lack of human and institutional capabilities, political leadership and market
mechanisms.
Human resource capacity is one of the key factors influencing what regional institutions can
achieve. The European Commission— the heart of the European Union (EU) administration—
employs over 23,000 people in total; the two Directorates for Environment and Climate have
staffs of 454 and 137, respectively; the European Environment Agency, which deals mainly with
monitoring and information brokerage, employs around 200, and a number of environmental
research centers are part of the EU administration, adding further expertise and capacity.
Whilst a comparison of EU and Association of Southeast Asian Nations (ASEAN) secretariat
capacity is perhaps unfair given that they have different mandates, it is notable in that ASEAN’s
secretariat employs just over 300 and the department dealing with environmental issues has
less than 10 staff. As a further comparison, the secretariat of the Council for Environmental
Cooperation (the organization set up as part of the NAFTA agreement to facilitate coordination
of environmental protection in the three countries) employs less than 50 people.
Current initiatives
There are several energy connectivity initiatives in the region, but most of these have yet to
move up the integration ladder. The GMS is perhaps the most advanced of all subregional
programs in terms of harmonization of power policies and technical standards. In terms of
subregional market creation, the region is behind Africa or Central America where power pools
and market integration are at an advanced stage, though on a much smaller scale.
Regional cooperation in energy has been evolving mainly through five subregional clusters –
South-East Asia, North and Central Asia, South and South-West Asia, North-East Asia, and the
Pacific. The small island nations in the Pacific have a very different perspective of energy
connectivity; while physical infrastructure is unviable, software for managing energy security
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risks and approaches to integrate renewables into diesel power systems can be better
organized through close cooperation.
Energy and in particular, electricity is an inherently strategic commodity, as its trade faces
additional obstacles compared to other commodities due to energy security concerns. Efforts to
engage in deep integrated energy or electricity trading thus face not only technical, financial
and regulatory issues, but also strong political concerns based on the energy security dilemma.
Establishment of an integrated regional power market should therefore be pursued gradually
and it requires broader commitment to trade and economic cooperation in order to create the
necessary enabling environment. The establishment of bilateral or trilateral trade (through
building transmission interconnectors and negotiating long-term PPAs) has proven to be a
successful basis for existing integrated power pools. Case studies throughout chapter 2 will
illustrate some of these issues.
Issues for consideration by Policy Dialogue 2016 participants
Regional energy connectivity will help implementation of the SDG7 that calls for improved
access and move to cleaner source of energy to meet the region’s future energy demand. The
establishment of the new ESCAP Energy Committee offers an opportunity to institutionalize an
intergovernmental platform, which can consider measures to foster an enabling environment
to promote regional energy connectivity. Discussion could revolve around need to:
Deal with barriers to energy trade through removal of legal, regulatory and technical hurdles
and seek for upfront political authorization. Despite many benefits of energy resource sharing,
a number of countries have explicit and implicit restrictions on exports and imports of energy
goods and services whose removal is critical upfront.
Promote sufficient levels of technical and regulatory standardization for deepening
interconnectivity through development of an integrated power grid eventually.
Promoting competitive energy market structures through rationalization of the state’s role
along with measures to improve investment climate to attract new investments, improve
efficiency, and adopt new technologies.
Develop a regional mechanism to facilitate transboundary power trade through the
streamlining of contracts, increasing the availability of financing, reducing risk, and accelerating
project development through the building of mutual trust among parties and norm-setting. A
broad regional agreement and strong institutional arrangements is critical to monitor and
ensure the achievement of benefits while creating neutral institutions to regulate project
implementation and benefits will also be essential.
Build on the existing political support to promote regional energy connectivity, there is a need
to formalize and consolidate declarations and intensions from the subregional levels in the
shape of Asia-Pacific Energy Charter. This will help to nurture long-term commitment of
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member governments and provide increased comfort and confidence to the private sector and
institutional investors.
While energy connectivity includes sharing and trade of multiple forms of energy, the power
sector presents the greatest opportunities for harnessing the benefits of connectivity. Many of
the challenges can be addressed through regional cooperation. The previous recommendations
are based on, and designed to address, the challenges identified in the 2016 Regional Trends
Report. These have been identified through workshops and expert group meetings organised by
the secretariat to delineate the principal barriers to energy connectivity from a national,
subregional, and regional perspective.
Conclusions
The ESCAP agenda for transboundary power trade and interconnection is built on the premise
that investments in regional connectivity through physical infrastructure and trade facilitation
will lead to lasting development gains if they are accompanied by architecture to expand
opportunities for private sector actors as well. As trade will become a crucial component of
growth, creating an environment conducive for value-added regional value chains will be a
main pathway towards inclusive and sustainable growth. Region needs to strengthen financial
cooperation, both to enlarge the scope of the macrofinancial surveillance to mitigate the
emerging risks and to achieve financial diversification. Meeting the financing requirements of
SDGs calls for continued financial stability but also deepening of financial markets. Although
the pathway to integration will not be easy, requiring the political commitment to remove
entrenched barriers such as bottlenecks in solving territorial claims and disputes around
enclaves, to launch collective endeavors to seamless connectivity etc. ESCAP offers a vital
platform where governments can work together to harmonize policy and regulations and
receive the technical guidance needed to build the industrial capacity to meet the growing
demands of trade partners and compete on an intra-regional scale.
Policy Dialogue participants may wish to consider the analysis and recommendations contained
in this document and provide comments and guidance to further facilitate discussion
throughout the Policy Dialogue.
Discussion topics for Session 2: Transboundary Power Trade and Interconnection include the
following:
Topic 1: What are the main drivers for and challenges to the enhancement of transboundary
power trade and interconnection?
Topic 2: Do the challenges and recommendations discussed here fit with what you’ve seen at
the national level?
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What actions need to be taken at the (a) national; (b) subregional; (c) regional levels to
address some of the obstacles to further promote subregional initiatives?
Topic 3: How can regional cooperation accelerate subregional and regional initiatives? In
promoting such a vision, what are the strategic issues that require further studies and analysis
to present to the Government and why?
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2.3 Enhancing Energy Access
Energy access is one of the biggest challenge that needs policy intervenes and financial
assistance in this region. By 2012, 455 million populations live without access to basic
electricity services that are mostly concentrated in India, Bangladesh, Pakistan, Afghanistan,
Myanmar, Indonesia, Cambodia, Philippines, and DPR Korea. Additionally, 2.06 billion people in
the region rely on solid fuels for cooking and heating. To achieve the Sustainable Development
Goal 7 of “ensuring access to affordable, reliable, sustainable and modern energy for all”,
targeted support is needed in many high impact countries. Chapter 3 reviews status of energy
access in Asia and the Pacific; discusses issues and challenges including social, environmental,
and economic implications as well as institutional, technical, financial and human resources
barriers; investigates on policies and effective institutional framework for successful program
on energy access, and strategies to mobilize financing that engage various stakeholders; and
formulates policy recommendations. Session 3 of the Policy Dialogue will focus on this Chapter.
Timely and accurate tracking forms the foundation of understanding and acting on energy
access. However, current indicators of tracking “population with access to electricity” and
“population with access to non-solid fuels” did not capture quantity and quality of delivered
energy services, thus ignoring the productive uses and development opportunities enabled by
accessing to affordable, reliable, sustainable and modern energy services. At global level, a
multi-tiered framework has been piloted in a few locations, and plans are under way to launch
a global access survey that will allow such data to be available in a standardized way for many
countries20.
Transiting to non-solid fuel has been slow, while reliance on solid fuels has severe socioeconomic and environmental impacts for the poor, particularly for women and children. Out
of the 4.3 million deaths worldwide attributed to indoor air pollution in 2012, 80% were in Asia
and the Pacific (ADB, 2015). Women, because of their central role in food preparation, have
more exposure to indoor to air pollutants. Children, who often assist their mothers in their
household role, also bear some of the disease burden. Gathering cooking fuel requires huge
amount of time and effort, thus deprives women and children of the chance to rest, get an
education, or engage in entrepreneurial ventures that could increase the family’s income and
purchasing power.
Ensuring affordability, reliability and sustainability is a key for achieving SDG 7 and other
energy-relevant SDGs. Affordability refers to the ability of energy-poor households to pay for
needed energy services. It can be measured in terms of the share of a household’s energy and
20
World Bank and SE4All, 2015. GTF 2015 Report.
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energy-related expenditure in its total expenditure or income. Reliability is often a major
concern for off-grid systems, referring to the adequacy and quality of delivered energy services.
Sustainability is a long term perspective for continuous access to modern energy services.
Provision of ensuring affordable, reliable, sustainable and modern energy services is essential
in breaking the energy poverty trap. Lack of access to modern energy sources is both the result
and a cause of poverty, as numerous inequalities interact and reinforce each other. The poor
are less likely to have access to electricity and clean cooking fuels, due to various factors such
as small and dispersed consumptions, inconvenient geographical locations, and costly grid
extensions, and they end up paying more for the same amount of energy than other income
groups. The persistent challenge is how to electrify the poor who are currently deprived, and
more importantly, how to help them strengthen livelihoods and escape poverty, which will be
critical to achieving SE4All and SDGs.
Effective Policies and Institutional Framework for Energy Access
Energy access is a development issue therefore a sector-wide approach is needed. Modern
energy when available and of good quality, brings environmental, social and economic benefits.
Energy access facilitates the provision of adequate food, shelter, clothing, water, sanitation,
medical care, education, and access to information. In reality, access to energy is not enough to
trigger productive uses, which depend on a number of other enabling factors, such as financial
situation of businesses; appliance/equipment ownership; pre-existing productive activities;
skills to identify the new business opportunities, to use electrical equipment efficiently and to
access new markets to absorb additional production etc. Moreover, a successful policy
considers not only the appropriateness of the technology diffused for the needs of the target
communities, but also how these needs will change and grow over time, and transit to larger
capacity or different technologies21.
Appropriate institutional arrangements are necessary for planning, coordinating and
implementing energy access policies and programs, expanding policy dialogue, sharing
knowledge, engaging relevant partners, and mobilizing financing to ensure universal energy
access. A sector-wide development approach on energy access will lead to longstanding and
substantial engagement of governmental agencies and development donors. Sound
institutional framework, timely and effective intergovernmental coordination become
prerequisites for channeling donor funding, planning development strategies, cooperating with
neighbor States on cross-border power trade, as well as regulating efforts toward long-term
sustainable development. A competent and responsive national institution accountable for
delivering results in terms of reliability, quality, and timeliness is required. Strengthening
institutional capacity involves reviewing the mandates of relevant government sectors, identify
their constraints as well as technical and financial capacities; streamlining the government
sectors to promote cooperation and coordination; promoting collaboration between
21
Sovacool, Benjamin, 2013. ADB Economics Working Paper Series. Energy Access and Energy Security in
Asia and the Pacific. No. 383 December 2013
11
governments in planning and implementing; ensuring appropriate legislative frameworks;
establishing an appropriate regulatory framework; developing a legal and institutional
framework; and formulating policy framework22.
Engaging relevant stakeholders to build partnerships is critical as there are multiple roles to
play and each stakeholder/partner must be responsible for the task they have a comparative
advantage on. Government plays a central role in planning, regulating, measuring, policy
making and implementation, but the private sector or public institutions also balance the costs
and revenues at affordable levels and ensure long term operation of systems. Engaging local
stakeholders do offer viable solutions to reach poor, difficult to reach communities with
modern energy and offer opportunities for scale up. Building partnerships with the private
sector and local communities ensures appropriate energy services, promotes community
ownership and responsibility, increases contributions of labor, time and other resources, and
encourages participation in decision making, planning and implementation.
Capacity building is necessary to enhance the capability of relevant stakeholders for energy
access. At the regional level, ESCAP supports the establishment of an enabling policy
environment and facilitate institutional management. ESCAP launched an Asian Pacific Energy
Portal, which is an innovative energy platform combining nearly 200 statistical indicators and
over 2,000 policy documents for ESCAP member States, offering a comprehensive view of the
region’s energy dynamics. Similar information is needed at the national and local level, to
provide stakeholders an accurate, easily accessible and update information about the status,
technology and progress of energy access, as well as existing policies and measurements.
Consumer education and awareness plays an important role in transition to electricity access
and cleaner fuels like LPG. Involving women in capacity building, as well as in lobbying for
better regulation and enforcement, can empower women with knowledge and control of
cleaner fuels. Effective capacity building also include strengthening the technical or managerial
capacity of private and public firms, and educating villagers and communities about productive
energy uses23. Technical failures is an often complained problem with off-grid systems as it
becomes a challenge to retain experienced and trained staff on regular system operation and
maintenance. Undertaking capacity building initiatives, with the particular focus on the
operation and maintenance ensure reliable energy supply. Involving utilities in assessing grid
stability issues in order to better understand the constraints and identify solutions that can
ensure utility system stability.
Strategies to mobilize financing that engage various stakeholders
Significant level of financial resources will be needed to address the energy access challenges
in Asia and the Pacific. The focus of these investments will need to be in South Asia and the
22
ADB, 2015. Sustainable Energy for All – Tracking Progress in Asia and the Pacific: A summary report.
http://www.se4all.org/sites/default/files/se4all-tracking-progress.pdf
23
Sovacool, Benjamin, 2013. ADB Economics Working Paper Series. Energy Access and Energy Security in Asia and
the Pacific. No. 383 December 2013
12
Pacific where energy access challenges are particularly severe24. Annual global investment of
$49.4 billion is required to ensure universal energy access, a $40.3 billion increase over current
annual spending level. Of the global investment, $45 billion per year is required for access to
electricity, and $4.4 billion per year is needed for access to non-solid fuels.
Government resources augmented by, borrowings, carbon finance and development
assistance will not be able to meet such high levels of investment and there is a role for
private finance to play. Due to the high initial investments and low-returns associated with
energy access investments, Asia-Pacific governments have either directly financed energy
access efforts or have used regulatory instruments and incentive frameworks to encourage
energy access investments by energy utilities. International development agencies such as the
World Bank, ADB, UN agencies, NGOs, philanthropic and impact financing have all contributed
in varying degrees to increasing energy access in Asia. Required scale of financial resources
needs to be augmented by private sources of finance to provide universal electricity access and
thermal energy from non-solid fuel sources. To engage the private sector, Asia-Pacific countries
need to have strong financing institutions and an ecosystem that can develop and implement
energy access projects; national finance architecture that consist of national development
banks, commercial banks, capital markets as well as structures to de risk the investments; and
policy and regulatory frameworks that is progressive and encouraging private sector
participation and investment.
There is a need to improve governance, regulation and management of the electricity sector
to increase the level of financing. Investments in expanding existing electrical grids in AsiaPacific will likely involve governments and energy utilities playing a central role. A critical factor
in the financing would be the creditworthiness of the electric utilities. Adequate capacity of
government and regulatory agencies in Asia-Pacific is important to ensure that policy and
regulatory frameworks ensure financial viability of electricity utilities thereby enhancing the
creditworthiness of the utilities and associated stakeholders.
A particular challenge in many Asia-Pacific LDCs and SIDS would be development of robust
pipeline of projects and to syndicate local and external financial resources to support
universal energy access. Countries where domestic financial resources are inadequate may
need to attract external development assistance or external borrowings. This could pose a
challenge for a number of countries in Asia-Pacific that are not considered investment grade
and is particularly unfavourable to Least Developing Countries (LDCs) and Small Island
Developing States (SIDS). Generally many Asia-Pacific LDCs and SIDS tend to have less
developed project development and implementation ecosystem, limited national finance
architecture and institutions as well as energy and financial policy and regulatory frameworks
Many countries will need to establish enabling investment environments to attract financing
for expanding energy access. While many Asia-Pacific countries are considered investment24
SE4All and World Bank. GTF 2015 Report
13
grade and many others are not attractive for investments. Levels of financial market
development and business sophistication vary as well as the ease of doing business and levels
of transparency, which are important factors in countries being able to attract investments. In
addition to the enabling environment, energy access programmes and projects will need to be
conceived and developed and enterprises will need to be strengthened or even developed to
develop electrification and non-solid fuel based thermal energy access solutions.
More effort is needed on business models and financing structures for a transition to nonsolid fuels for thermal energy. The financing challenge is likely to be significant in this space
due to limited government policies and absence of limited models and track-record in this
segment.
Inclusion of productive use opportunities while considering investments and taking a regional
and programmatic approach could result in better utilization of energy for sustainability and
rural and local area development. Business and financial management skills are often limited in
areas without energy access and many newly introduced economic opportunities fail for these
reasons. While financing productive use opportunities along with energy access programmes,
emphasis is needed for the role of entrepreneurs and enterprises. Financing for supporting
productivity increases and expansion of existing economic and social development
opportunities could be included as part of the energy access programmes in Asia-Pacific.
Potential Financing Mechanism:
Reallocation of the public finance in Asia-Pacific is one means to provide financial resources for
energy access. Current government expenditure on energy subsidies primarily supports
consumption and production of fossil fuels. In 2014 total annual global expenditure on fossil
fuel subsidies was $ 510 million of which the share of Asia was $ 120 billion, only 8% of which
reach the poorest 20% population in these countries. Streamlining institutional capacity among
government agencies is one big challenge for reallocating current subsidies on fossil fuels to
energy access include
Labelling domestic or international debt as ‘green bonds’ in mature financial markets could be
an option for resource mobilization for energy access in LDCs and SIDS. Asia and the Pacific
have a large local currency denominated bond market of US$ 8.6 trillion in the second quarter
of 2015. There are energy utilities and renewable energy companies using local currency bonds
and in 2014 the total bond issuance by renewable energy companies was $18.3 billion. The
green bonds are a segment of the larger bond market and much more volumes of bonds are
issued in Asia that can be classified as ‘green’ which are not actually labelled. The early green
bond issuances in Asia seem to be targeting renewable energy than energy access, although the
market is at a nascent stage.
14
Climate finance from GCF offers a new source for energy access in Asia-Pacific especially for
LDCs and SIDS. However accreditation by strong national organizations from Asia-Pacific and
development of strong project pipelines is needed to take advantage of this opportunity.
Crowdfunding could turn out to be a financial resource. It is estimated that global crowdfunding
volumes in 2015 were $ 16 billion of which the share of renewable energy was $ 170 million
supporting more than 300 projects25. Increasingly crowdfunding platforms are supporting clean
energy and energy access issues, many of the platforms are based in Europe and the United
States. There are sites like SunFunder which focuses on off-grid solar covering renewable
energy and have raised $ 7 million investment in 58 loans supporting 368,000 people 26. While
the crowdfunding platforms are growing as an alternate means of finance for projects and
initiatives which may not be supported by commercial banks, share of energy access projects so
far have been quite small. The role of crowdfunding will be determined by private sector
entrepreneurs and public sector agencies. If integrated into the policy and institutional
frameworks for energy access, crowdfunding could provide significant supplementary resources
to support universal energy access in Asia-Pacific.
Remittances from Asia-Pacific diaspora offers a steady and significant finance stream that is
very relevant to Asia-Pacific infrastructure and energy access investments. A number of
countries in Asia-Pacific receive high levels of remittances as a share of GDP such as Tajikistan
(42%), Kyrgyz Republic (30%), Nepal (29.9), Bangladesh (8.6%), Pakistan (6.9%) as well as
Philippines, Vietnam, Indonesia, Cambodia, Kiribati, Samoa, Timor-Leste etc27. The scale and
predictability of the remittances offers an opportunity to supplement public and private
resources to finance energy access investments. Even if a small share of these remittances can
be used to support energy access it could make a significant resource. In many Asia-Pacific
countries a significant share of migrants are from locations without energy access and could be
encouraged to contribute to providing electrification and non-solid fuel supplies in their home
towns and villages. The $50 million UNDP project in Afghanistan – Afghanistan Sustainable
Energy for Rural Development (ASERD) aimed at capturing these remittances to support rural
energy access in Afghanistan. In 2012, remittances to Afghanistan were estimated to be $445
million28. The ASERD project will be implemented between 2016 and 2019, piloting a rural
energy model using public funding and remittances in one of the migrant corridor villages in
Afghanistan.
To conclude Session 1 of the Policy Dialogue, the following topics will be forwarded to generate
discussions among participants:
Topic 1: What are the effective strategies and means for enhancing energy access?
25
Versteeg, K. 2015. Tracking Renewable Energy Crowdfunding. Solarplaza.
26
SunFunder, 2016. accessed February 2016. www.sunfunder.com.
27
World Bank, 2015. Migration and Development Brief 25.
Parthan, B, 2015. Afghanistan Sustainable Energy for Rural Development: UNDP Project Document.
28
15
Topic 2: What are the strategies for mobilizing financial resources for energy access?
Topic 3: What are the potential financing mechanisms for energy access?
2.4 APEF Follow-up Mechanism
Under the Asian and Pacific Energy Forum outcome documents and Commission Resolution
70/9, member States requested the secretariat to review and assess the implementation of the
APEF Plan of Action on Regional Cooperation for Enhanced Energy Security and the Sustainable
Use of Energy in Asia and the Pacific. The Plan identifies 15 areas for action that support the
common vision of a sustainable energy future.
The content presented in this chapter offers snapshots of national and regional trends and
efforts under the 15 APEF areas for action. The data and policy information presented is in large
part drawn from the recently launched Asia Pacific Energy Portal, an online knowledge platform
aggregating energy statistics and policies for the region. This chapter acts as a preview of the
approach to the upcoming APEF Mid-Term Review, which will be completed in 2016 in
cooperation with member States. This review will further expand upon the ongoing national
and regional efforts under each of the areas for action, and support identification of key focus
areas leading up to the next Asian and Pacific Energy Forum, to be held in 2018.
3. Proposed topics for Regional Trends Report 2017
3.1 Strengthening policy framework to promote renewable energy
Indicator 7.2 of the Sustainable Development Goal 7 calls to increase substantially the share of
renewable energy in the global energy mix by 2030.
The year of 2015 marked a new record for global investment in renewable energy, despite the
falls of fossil fuel prices. Investment in renewables excluding large hydro rose 5% to 285.9
billion globally29. The $265.8 billion in renewable power capacity was more than double of the
investments into new coal and gas generation 30. Overall new renewable power capacity
excluding large hydro made up 53.6% of the additional installed capacity in 2015, the first time
it has represented a majority31. In the Asia and the Pacific region, renewable energy share in
power generation has significantly increased in the region. In 2012, 100% of Bhutan’s electricity
was generated from renewable energy. Tajikistan, Nepal, Lao PDR and Kyrgyz Republic all have
more than 90% of electricity generated by renewable energy32. However, due to even higher
increase of overall energy demand, the share of renewable energy in total final energy
consumption is declining between 1990 and 201333.
29
Frankfurt School – UNEP Center and BNEF, 2016. Global Trends in Renewable Energy Investment 2016.
Frankfurt School – UNEP Center and BNEF, 2016. Global Trends in Renewable Energy Investment 2016.
31 31
Frankfurt School – UNEP Center and BNEF, 2016. Global Trends in Renewable Energy Investment 2016.
32
GTF 2015 Report.
33
Asia Pacific Energy Portal.
30
16
In the long term, policy support for renewables remain important to ensure countries are not
fall back on fossil fuel capacities if the current low prices last. Member States across Asia and
the Pacific have adopted policy instruments such as legislative regulations, loans and grants, tax
incentives, feed-in tariffs, renewable portfolio standards and targets for promoting renewable
energy development. RTR 2017 aims at analyzing renewable energy policies and institutional
frameworks across Asia and the Pacific, exploring how these policies were implemented and
evaluated, and investigating how national goals and targets could be align with the SDG goals.
The study will study barriers and difficulties for renewable energy deployment and formulate
policy recommendations for strengthening policy framework to promote renewable energy.
3.2 Mainstreaming energy efficiency strategies and actions into national
energy development plans
Indicator 7.3 of the Sustainable Development Goal 7 aims at doubling the global rate of
improvement in energy efficiency by 2030.
Most countries in Asia and the Pacific have improved energy efficiency: twenty of them
performed better than the world average of reducing energy intensity of more than 1.7% a year
over 2010-2012. Between 1990 and 2012, the following countries have at least halved their
primary energy intensity: Armenia, Azerbaijan, Bhutan, China, Georgia, Kyrgyzstan, Mongolia,
Myanmar, and Tajikistan34. In terms of cumulative avoided energy consumption in this period,
China managed to save 867,487 petajoules (about 20.7 billion toe35), and India saved 92,518
petajoues (about 2.2 billion toe) due to energy efficiency improvement. Despite the declining
trends, energy intensity in Asia and the Pacific is still 14.3% higher than the world average in
2013.
Many policy instruments and strategies are set up for improving energy efficiency, i.e.
standards and labeling, demand-side management, performance contracting, and financial
incentives. RTR 2017 aims at analyzing energy efficiency policies and institutional frameworks
across Asia and the Pacific, exploring how these policies were implemented and evaluated, and
investigating how national goals and targets could be align with the SDG goals. The study will
study barriers and difficulties for energy efficiency and formulate policy recommendations for
mainstreaming energy efficiency strategies and actions into national energy development plans.
34
35
GTF 2015. Progress Toward Sustainable Energy 2015.
Toe: tonne of oil equivalent.
17