For the larger PICs Fiji, Kiribati, Solomon Islands and V

1

Energy Sustainable Development in Asia the
Pacific Region
Nandita Mongia, Ph.d Regional Energy Program for
Poverty Reduction In Asia the Pacific
(REP-PoR) United Nations Development Program, Reg
ional Centre in Bangkok
64th ESCAP Commission April 27, 2008
2
Regional Centre in Bangkok
3
Supply- Demand Gaps
4
Consumption (Btu) - read from left side
Generating Capacity (GW) read from right side
5
A new era of expensive oil

• Since 2003, crude oil prices have risen from 22
  to over 100 a barrel. Today it is fluctuating
  around 115.
  
• Steep rises in the prices of petroleum products
  used by poor households diesel, kerosene,
  propane, gasoline

Oil products, quarterly prices, 2000-06
6
Oil consumption and human development index in
1995 2004
Poor households will need to increase consumption
of modern energy, including oil
Small increments in energy use can trigg
er a substantial improvement in HDI

Per capita energy use and the human development
index
7
Till now observed macroeconomic impact has been
limited

• Economic growth has continued..( how long?)
• Some increase in inflation

8
Why the small apparent visible macroeconomic
impact? short lived ?

• This time the price rises came in the midst of a
  global economic boom
  
• Rising exports have enabled even some of the
  poorest countries to finance oil import bills
  
• Inflation was lower because governments
  subsidized the prices of oil products.the effect
  is wearing off

The damages have started to appear, with the
future looking unsustainable ecologically
economically - especially if the current high
prices continue
9
Macroeconomic impacts. Visible in the Pacific
already

• Oil-based fuels represent the biggest component
  of merchandise imports for Pacific island
  countries
  
• In 2005, fuel imports as a percentage of total
  merchandise imports ranged from 14 per cent in
  Vanuatu to 30 per cent in Solomon Islands
  
• In Tonga and Samoa, the value of fuel imports was
  more than double the aggregate of all merchandise
  exports in 2005
  
• For the larger PICs - Fiji, Kiribati, Solomon
  Islands and Vanuatu - fuel imports as a
  percentage of merchandise exports ranged from 42
  per cent for Solomon Islands to 85 per cent for
  Kiribati (2005)
• The 250 per cent rise in imported fuel prices
  since 2001 translates to a 250 per cent rise in
  the value of energy imports for the PICs to
  maintain the level of energy consumption of the
  early 2000s

10
Capturing Vulnerability to Energy Market
Volatility
Based on combination of macro variables impacting
both demand and supply issues

• Economic strength ( BOP, Budget Balance, Import
  Cover, Oil import Dependence)
  
• Economic performance ( GDP Per Capita, Oil
  intensity of GDP ,or energy intensity to GDP)
  
• Importance of oil to growth (Real GDP growth
  rate, share of energy in primary energy
  consumption )

Vulnerability Index Low VI - Iran, China, Malays
ia Medium VI - Bhutan, India, Papua New Guinea, I
ndonesia, Thailand, Mongolia, Viet Nam, Myanmar
High VI - Philippines, Afghanistan, Nepal,
Bangladesh, Pakistan, Lao PDR, Fiji, Samoa, Sri
Lanka, Solomon Islands, Cambodia, Vanuatu,
Maldives
11
Capturing vulnerability to Oil prices in
Asia-Pacific Countries

• Of the seven most oil price vulnerable
  Asia-Pacific countries four are PICs
  
• Most vulnerable oil price country is a SIDS
  (i.e. Maldives)
  
• PNG, an exporter, is an exception

12
Policies for reducing vulnerability

• Managing price risk Pricing policies, targeted
  subsidies, financial tools.
  
• Enhancing supply Strengthening oil exploration
  and extraction, building refining capacity,
  diversifying sources of supply, engaging in
  barter.
• Restraining demand Increasing efficiency in
  conversion of primary to secondary energy in
  end uses
  
• Preparing for emergencies Building strategic
  reserves and planning for rationing.
  
• Diversifying fuels In some cases this may mean
  using more coal or gas, but for many countries
  the opportunities will lie in renewable
  resources.

Regional Centre in Bangkok
13
Selection of sub-strategies

• High priority
• Pricing of petroleum products
• Managing oil subsidies
• Rationing
• Financial tools
• Improve public transport
• Strategic reserves ( Coal Oil Ng)

• Medium priority
• Fuel efficiency in transport ( oil coal )
• Fuel efficiency in industry ( Oil ,coal, gas)
• Bio-fuels in transport ( ??)
• Oil substitution in agriculture
• Strengthening oil exploration
• Refining capacity to process sour crudes

• Lower priority
• Better land-use planning
• Fuel substitution in transport
• Fuel efficiency in agriculture
• Diversifying sources of primary energy
• Barter
• Oil substitution in industry

Each country will choose its own policy mix, but
countries with similar Vulnerability index
rankings may use similar overall policy
combinations. These will also change according to
the fuel price fuel mixes scenarios.
14
Renewable systems versus gasoline gensets costs
for off-grid electricity

• Bars represent petroleum product based
  electricity generation costs for alternate oil
  price scenarios Baseline, SS shock, Peak Oil
  Price Energy security

15
Establishing and strengthening cross-sectoral
linkages for delivering rural energy

• Promising Integrators on the ground are
• Micro Finance Institutions
• Agencies promoting SMEs and micro-enterprises
• NGOs/ CBOs working with a holistic development
  approach
  
• RET vendors
• Community based energy projects
• Local and national government
• Development Banks partners

16
Strategic Recommendations(to increase private
investments into RETs, )

• Substantially increase investments into
  grid-intertied RETs (and increase rural
  electrification, and share benefits with local
  residents,),.
• Increase investments into biofuels, but
  cautiously (and increase employment through
  community production of oil crops and biofuels to
  power multi-functional platforms and local
  transportation as well as for external sales),
• Expand access of the poor to off-grid RETs
  through community-based mini-grid systems and a
  commercialization plus approach for household
  technologies like biogas and solar PV,
• Expand high value applications of RETs in
  education, health, microenterprise, and
  telecommunications to benefit the poor.
  

17
Strategic Recommendations (contd)(to increase
private investments into RETs, )

• Integrate commercially available RETs into a wide
  range of ongoing income generation and
  development activities aimed at reducing poverty
  - being carried out by government, NGOs/CBOs,
  micro-finance institutions, and donor financed
  projects,
• Financing policies to increase access to
  financing so that the poor can afford to access
  commercially available RETs,
  
• Facilitate the development of CDM projects to
  provide carbon financing to renewable energy
  projects with the largest MDG impacts (e.g.,
  community carbon finance initiatives), bundling
  of small projects

18
Policy Recommendations(to increase private
investments into RETs)

• Feeding in renewable electricity to the grid
• Policy and Legislation
• Set national targets and timetables for
  renewables
  
• Put in place Renewable Portfolio Standards,
  establish feed-in tariff, net-metering,
  interconnection agreements, standardized power
  purchase agreements.
• Enact laws for sharing royalty from hydropower,
  wind with local residents for benefit of poor.
  
• Require green IPPs to distribute portion of power
  for rural electrification.
  
• Fiscal and Financial Incentives
• Provide direct investment subsidies, production
  tax credits, income tax holidays for green IPPs.
  
• Reduce import duties, VAT on equipment for green
  IPPs
  
• Public Investments
• Increase awareness of policy makers, utility
  officials,
  
• Technical support and training to investors and
  utility officials
  
• Pilot benefit sharing with local suppliers of
  inputs (e.g. rice husk)

19
Policy Recommendations(to increase private
investments into RETs)

• Sustainable development of biofuels
• Policy and Legislation
• Implement mandates for blending biofuels into
  diesel and petrol,with caution
  
• Set standards for biodiesel
• Make legal provisions for poor and landless to
  grow jatropha and other biofuel crops under
  leasehold forestry
  
• Limit use of food crops for biofuels (e.g.,
  recent China policy)
  
• Fiscal and Financial Incentives
• Provide direct investment subsidies, production
  tax credits, income tax holidays for biofuels
  investors.
  
• Reduce import duties, VAT on equipment for
  biofuels investors.
  
• Public Investments
• Invest in RD to maximize yields
• Examine the potential impacts of large-scale
  biofuels production on land, water, nutrient
  runoff..
  
• Invest in RD of small-scale seed press and
  esterification units for community production of
  biofuels

20
Policy Recommendations(to increase private
investments into RETs)

• Off-grid RETs
• Policy and Legislation
• Announce targets and timetables for universal
  access to electricity and non-electricity
  services (milling, cooking fuels) through
  off-grid RETs complementing rural
  electrification
• Fiscal and Financial Incentives
• Provide direct investment subsidies, production
  tax credits, income tax holidays for
  manufacturers and suppliers of RET equipment
  
• Reduce import duties, VAT on equipment on
  off-grid RETs
  
• Public Investments
• Map renewable resources of the country and
  increase awareness
  
• Invest in public private partnerships for
  market-based supply of off-grid RETs
  
• Standardize equipment, provide training and
  quality control
  
• Provide additional grant support to complement
  commercialization such that the poor, women, and
  marginalized can access RETs

21
Call For Asia-Pacific Compensatory Oil Finance
Facility
Rising oil prices have created balance of
payments problems for the least developed
countries
AP-COIL would

• Help least developed countries overcome balance
  of payments and fiscal deficits linked to energy
  
  
• Finance essential structural changes in their
  energy economies to reduce their dependence on
  volatile global energy market

The bulk of the funds could be mobilized through
bonds issued in regional and international
capital markets.
22
AP-COIL - flow of funds
23
The Time to Act is Now , Thank You
Regional Centre in Bangkok