THE DIFFUSION OF RENEWABLE ENERGIES: OPPORTUNITIES AND CHALLENGES FOR THE PARTNERS Corrado Clini Dir

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THE DIFFUSION OF RENEWABLE ENERGIES
OPPORTUNITIES AND CHALLENGES FOR THE PARTNERS
Corrado CliniDirector General Italian
Ministry for the Environment and Territory
World Energy Technology Summit, 10-11
February 2004 Paris
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REFERENCE SCENARIO, ENERGY-RELATED C02
EMISSIONSCO2 EMISSIONS BY REGION
Source World Energy, Technology and Climate
Policy Outlook, 2003
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THE FUTURE UNDER THE REFERENCE SCENARIO IS
UNDESIRABLE

• The total energy demand will increase more than
  50 between 2000 and 2030, and the related CO2
  emissions will increase more than 60 compared to
  current levels. Industrialized countries are
  projected to account for 42 of global emissions,
  while China, India and other developing countries
  for about 50.
• The trends of CO2 emissions
• will not allow industrialized countries to
  achieve the Kyoto targets by 2008-2012
• are not consistent with the IPCC long-term
  scenario of stabilization of CO2 concentration
  (550ppm) and the related global emissions
  reduction target of around 50-60.

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ALTERNATIVE SCENARIO, REDUCING MARGINAL ABATEMENT
COSTS THROUGH TECHNOLOGICAL DEVELOPMENT

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The accelerated development in the zero/low
carbon emissions technologies can have
considerable impact in reducing marginal
abatement costs The potential of new renewable
technologies in costs reduction is relevant in
the medium-term. The impact of renewables will be
higher in the new industrialized countries and
the developing countries, than in the EU. The
full use of Kyoto mechanisms, to enhance
renewables in the global market of energy, will
drive the abatement costs.
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RENEWABLE ENERGY A VALUABLE RESOURCE IN THE
WORLDS ENERGY
Along with other energy options, renewable energy
systems are a key part of portfolio energy
solutions. Renewable energy solutions offer many
advantages. Since they use indigenous energy
sources, they contribute to supply security by
reducing reliance on energy import. There are a
variety of national situations in term of needs
and resources, but renewable resources are
largely available in most developing countries
and developed Countries. Renewables form a
relatively small part of the commercial energy
portfolio today, but the costs of developing,
installing and delivering RE to consumers have
been falling due to improvements in system design
and manufacturing techniques. In many
applications, especially in those instances where
gaining access to conventional energy systems is
difficult or costly, the market share of
renewable energy has been growing steadily in
recent years.
Source G8 Task Force Report
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BARRIERS TO THE DIFFUSION OF TECHNOLOGIES

• To secure sustainable commercial success,
  renewables must overcome a number of key
  barriers, including
• Cost, although the costs of renewable energy is
  falling as volumes increase, in most cases it is
  not yet directly competitive with conventional
  alternatives
• Insufficient human institutional
  infrastructure,limited capacity to support
  projects and markets, owing to a lack of
  experience and investment
• High up front costs of renewables and other
  impediments to capital mobilization, leading to
  inadequacies and shortfalls and financing
  programmes
• Weak incentives and inconsistent policies the
  characteristics and benefits of renewables are
  not always adequately and fairly address in
  energy policy frameworks

Source G8 Task Force Report
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ADDRESS THE BARRIERS (1)

• To reduce technology costs by expanding markets
• Governments should
• Align policy with consumers willingness to pay,
  using nationally market mechanisms as portfolio
  quotas and incentives tariffs
• Continue and expand support for RD of renewable
  energy technologies addressing all sectors of the
  energy economy buildings, industry, transport and
  utility energy services
• Help develop and demonstrate renewable energy
  projects where are a least cost option on a life
  cycle basis and achieve protection of local
  and/or global environment at reasonable costs,
• Promote subsidies programmes (Smart
  subsidies),performance based,
• Encourage industry to make voluntary global
  commitments to procure and use renewables based
  energy, recognising that policy frameworks
  encouraging renewables will strengthen such
  commitments

Source G8 Task Force Report
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ADDRESS THE BARRIERS (2)

• To build a strong market environment
• Developed countries and development institutions
  should establish a higher level of expertise in
  their development agencies and/or country offices
  on the role that energy policy choices can play
  in development
• Countries should provide support to renewable
  energy industries for the creation of joint
  ventures and other manufacturing assembly and
  distribution/installation capabilities in
  developing countries
• Countries should expand the scope, visibility,
  and funding of innovative approaches that are
  currently assisting developing countries to
  develop renewable market. Many approaches by the
  GEF and associated development agencies, the
  World Bank/UNDP ESMAP programme and many
  bilateral donors and private firms should be
  supported.
• Institutional capacity should be strengthened in
  developing countries to support the development
  of comprehensive national renewable energy
  strategies with complementary private sector
  investment programmes within national planning
  processes for sustainable development

Source G8 Task Force Report
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ADDRESS THE BARRIERS (3)

• Mobilize financing
• Recognising the importance of energy and
  sustainable development and poverty eradication,
  OECD should include renewables in the context of
  the international development targets. ODA,
  bilateral and multilateral agencies should
  explicitly consider renewables for development
  projects and choose them when they are the least
  cost options on a life cycle basis
• Modern energy access and environmental
  considerations should be integrated into the IFIs
  energy sectors dialogue and investments
  programmes. Current instruments and agency
  programmes should be adapted to provide increased
  support for renewable energy projects which,
  although economically attractive, may be small
  and have long pay-back period. Guarantee funds,
  refinancing schemes for local banks, ad hoc long
  facilities to local small private operators,
  should be considered in this respects
• Countries should identify criteria to assess
  environmental impacts of ECA-financed projects,
  and establish minimum standards of energy
  efficiency or carbon intensity for these
  projects, developing a common reporting
  methodology for ECAs to permit assessment of
  their local and global environmental impacts
• Mobilise patient capital from industry and
  financiers through appropriate tax and other
  support schemes
• Countries should support access to renewables by
  the rural poor such as through strengthening
  micro-finance organizations and competitive rural
  concessions.

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ADDRESS THE BARRIERS (4)

• Encourage market-based mechanisms
• Governments should
• identify and analyse policies and measures
  related to renewables competitiveness in the
  context of economic and societal costs and
  benefits of all energy options, monitor the
  deployment of renewables and make such
  information available
• design and develop Renewable Certificates
  Trading (TRECs) schemes at national and
  international level, and promote the full use of
  CDM potential (CERs)
• reduce incentives and other supports for
  environmentally harmful energy technologies, and
  develop and implement market-based mechanisms
  addressing externalities, enabling renewable
  energies technologies to compete in the market on
  a more equal and fairer basis.

Source G8 Task Force Report
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THE MEDITERRANEAN RENEWABLE ENERGY INITIATIVE
(MEDREP)
Italy launched in 2002, during the WSSD in
Johannesburg, the MEDREP, a Type II Initiative
MEDREP is a partnership initiative, in
cooperation with United Nations Environmental
Program (UNEP), World Bank (WB), International
Energy Agency (IEA), Organization Mediterranee
de lEnergie (OME), UNESCO, Association
Méditerranée des Agences Nationaux de Maîtrise de
lÉnergie (MEDENER), REC. The program aims at
tailoring and developing financial instruments
and mechanisms, using TRECs and CERs,
straightening of policy frameworks and building a
strong private sector infrastructure in order to
implement renewable energy projects in the
Mediterranean region
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MEDREP PROJECTS

• The renewable energy projects, implemented
  in the framework of bilateral agreements between
  Italy and Algeria, Egypt, Morocco and Tunisia,
  will be part of MEDREP.
• The projects aim at
• training, information dissemination, networking
  and projects design (MEDREP Tunis centre)
• delivering electricity to isolated rural
  populations, based on village-scale mini-grids
• desalinating sea water, to increase drinking
  water supply and water availability for
  irrigation
• increasing agricultural water pumping by solar,
  wind and biomass
• disseminating cooling systems for the food
  conservation, powered by renewable, in farms and
  fisheries
• addressing, in the grid-connected urban and
  tourist areas, the household and the community
  demand for lighting, food and drugs cooling,
  access to the communication networks, using solar
  home systems, small wind turbines, biogas and
  biomass power technologies
• creating joint ventures and other manufacturing,
  assembly and distribution/installation
  capabilities in developing countries, so that
  they gain the maximum economic benefit from the
  Initiative.

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• Italy has already allocated for the
  implementation of these projects 8 millions .
• The projects will be supported also through the
  Italian Carbon Fund and the Community Development
  Carbon Fund (Italy is
• the major donor), established within the World
  Bank.
• The tradable renewable certificates scheme (
  green certificates ) introduced in the Italian
  energy market, in the framework of the new
  national legislation establishing mandatory
  targets for the electricity generation by
  renewables ,
• The implementation of CDM in the Mediterranean
  Region will drive the private investments in the
  MEDREP Initiative.

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ANNUAL REPORT
MEDREP FINANCE  
January December 2003      
MEDREP Finance is supported by the Italian
Ministry for the Environment and Territory
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• Market Analysis
• Baseline surveys were completed for each targeted
  country presenting a technical-economic overview
  of Renewable Energy (RE) potential, an analysis
  of existing financing facilities and the
  regulatory environment of the banking sector, and
  the policy framework review for the RE sector.  
• Financial Support Mechanisms Three main RE
  financial support mechanisms were chosen as the
  most promising tools for influencing RE sector
  investment.
• The Loan Guarantee mechanism would involve the
  capitalization of a guarantee facility to be
  administered by a selected bank that would
  provide partial-parity guarantees for qualifying
  loans. This mechanism shall mainly target the
  area of Photovoltaic (PV) Solar Home Systems
  (SHS) in Morocco.
• The Interest Rate Subsidy mechanism is intended
  to help local FIs build loan portfolios in the RE
  area by subsidizing a determined percentage of
  the interest rate loans for RE technologies
  Providing an Interest Rate Subsidy Facility for
  Solar Water Heating systems (SWH) in Tunisia
  would allow partner banks to offer loans to
  customers at concessional interest rate and build
  confidence to expand retail lending to RE sector.
  
• The RE Mezzanine Fund mechanism would involve
  support for the development of an investment
  fund, structured as a public private partnership
  led by a Mediterranean financial institution.
  This fund would invest in existing RE
  enterprises or possibly start-ups or projects, on
  commercial or concessional basis.
• Carbon - Green Certificates Finance
• Where possible, MEDREP projects will be
  structured as carbon finance or green certificate
  transactions under the auspices of the Clean
  Development Mechanism or green certificate
  trading regimes.

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take joint actions and improve efforts to work
together at all levels to improve access to
reliable and affordable energy services for
sustainable developmentbearing in mind that
access to energy facilitates the eradication of
poverty. This would include actions at all levels
toimprove access to reliable, affordable
economically viable, socially by acceptable and
environmentally sound energy services and
resources WSSD Plan of Implementation, Point
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