Flexible regulatory frameworks and improvements in the electricity grid infrastructure are key to building a sustainable and secure energy future, according to a report compiled jointly by the World Economic Forum and financial services group PricewaterhouseCoopers (PwC).
Released on Thursday, the report, titled “Developing Renewable Energy Capacity”, argues that scaling up renewables requires much more than public and private finance.
Driven by economic development and associated increasing demand for energy, 2009 saw more than US$150 billion invested in renewables. This amount increased to more than US$240 billion in 2010 with the US and Europe adding more renewable than conventional power capacity.
“Simply spending more government and multilateral money will not transform renewable energy from a niche player to a dominant market technology in a particular country unless early regulatory and infrastructure challenges are addressed first,” said Busba Wongnapapisan, the head of renewable energy industry at the World Economic Forum and co-author of the report.
She said institutional and regulatory frameworks must facilitate private renewable energy activity. “Yet they often hinder it - particularly in emerging markets.”
The report stated that the grid infrastructure needed appropriate capacity and resilience to cope with the intermittent nature of renewable energy sources.
The Developing Renewable Energy Capacity report draws on the study of five countries: SA, Indonesia, Jordan, Mexico and Morocco. The study aims to provide key lessons and increase understanding of regulatory and infrastructure issues in emerging markets.
An example stated in the report is in SA, where businesses have organised themselves into the National Energy Association and Alternative Energy Association, conducting workshops and working closely with the government and stakeholders to support the design and development of renewable energy feed-in tariff programmes.
Jordan was highlighted for an electricity law that requires its state-owned utility to purchase electricity from independent power producers at full retail price.
“The removal of regulatory and infrastructure barriers is pivotal to support the further development of renewables in many of these emerging countries,” said Gus Schellekens, director for sustainability and climate change at PwC in the UK, and adviser to the project. “Unless governments are able to address these barriers, there is the risk that market development will be fundamentally constrained,” he added.
The report identifies five key factors that impede deployment of renewables in emerging markets:
- the absence of long-term planning, with specific implementation plans for renewable energy capacity targets, creates uncertainty and undermines government credibility
- the government and regulatory bodies do not always communicate effectively with each other, causing confusion among developers and delays in project approval
- many government bodies and regulators face shortages of experienced staff familiar with the renewable energy industry; this has led to a high level of risk aversion and slow processing of permit applications
- the structure of electricity markets: one dominant player prevents private developers from conducting business on a level playing field
- limited grid infrastructure in the areas where renewable resources are most abundant presents a current and future barrier to increased generation
The report stated that a common feature is that all of these factors impact the early phases of the project life cycle, ie before construction even starts.
It recommends actions and partnership required by stakeholder groups to overcome the challenges. Successful best practices to address the challenges are also featured in the report, including examples from India, Morocco, Portugal and the European Union. - I-Net Bridge