1. Markets, Barriers and Opportunities for Renewable Energy in APEC Economies Lydia La Ferla Energy & Security Group May 14, 2004

2. OVERVIEW  Market: Demand, Supply, Benefits  Barriers: Technological, pricing, policy, market  Incentives: mandatory, cost/pricing,  Recommendations

3. The Market: APEC 1990-2020 Rapid Regional Economic Growth: 3.5% pa -$12.5- $32 trillion Expected Economic Growth:  N. America 3.2%pa  S.E. Asia 4.9% pa  Latin America – driven by strong investments in Europe & US

4. The Market: Energy Demand  Total Energy Demand Expected increase from 3.6 to 6 Btoe  Main Drivers for total energy : population growth and increases in living standards  Main Drivers for RE: emission reductions, cost reductions, performance improvements, policy and regulatory incentive programs, and energy security

5. The Market: Energy Supply  RE - 1.2% (exc. Hydro) - 1.2% (exc. Hydro)1999;  Fossil Fuel –36% oil –27% coal –22% natural gas APEC Primary Energy Supply (1990-2020)

6. Benefits of Renewable Energy  Recouped RE Investment  Localized Employment/Income  Enhanced Country Prosperity  National/Global Environmental Benefits  Increased Access in Rural Areas  Reduced Need for Grid Capacity

7. The Barriers What are the Barriers?  Costs and Pricing of RE  Policy and Regulatory Climate  Market and Investment Climate

8. The Barriers: Costs/Pricing of RE  High up-front development and capital costs  Continued subsidies for fossil fuels  Need for long amortization periods on loans  Small scale  Inadequate valuation of environmental externalities and input/electricity costs

9. The Barriers: Policy and Regulatory Climate  Harmonization of policies  Incentives that reflect stages of RE technology development  Complex government approval processes  Lack of national/local policy coordination  Pricing incentives

10. The Barriers: Market/Investment Climate  Lack of in-country capacity  Lack of awareness of costs, benefits, and applications of RE  Investor reluctance and risk perception  Lack of stimulus for private sector participation  Lack of information on and access to financing

11. The Barriers  Use of “smart” subsidies  Pool/share risks  Support credit needs of consumer  Manage and operate funds locally in local currency  Encourage public/private partnerships  Work with IFIs to leverage RE investments  Support productive uses of RE  Tailor policy and regulatory measures to specific market  Use mix of policies to design RE promotion strategies How to Mitigate the Barriers to Financing ?

12. The Opportunities Public Intervention to Scale-Up RE Financing  Successful Policy Incentives -reduce costs and provide regulatory certainty -promote voluntary investments -encourage IPPs -promote public investment/market conditioning -develop rural electrification -support of entrepreneurship

13. Draft Recommendations  Adoption of policy and regulatory reforms  Development of Financial Mechanisms  Capacity-building & Info. sharing

14. Draft Recommendations  Adoption of Policy and Regulatory Reforms –-Structure incentives for market sustainability –Tailor policies to various stages of RE technology development –Develop new cost assessment methods –Harmonize technical standards –Ensure consistency of existing/future policies –Adopt procedures to evaluate programs to reflect “best/good practice”

15. Draft Recommendations  Development of Financial Mechanisms Work with multilateral/bilateral organizations to increase lending in RE to: 1.Establish standardized procedures for project assessment and review 2. Integrate RE lending with agricultural, health, education, housing lending 3. Include environmental/social costs in program design 4. Encourage to continue to provide seed funding and technical assistance 5. Design risk sharing and mitigation instruments

16. Draft Recommendations  Capacity-Building & Information Sharing –Produce and disseminate info. Database on “best practices” –Establish market facilitation network to promote RE investments –Work with local financial institutions to establish consumer/microcredit facilities and training –Increase awareness of costs, benefits and applications of RE