No climate change yet for renewable energy financing

By Terry Lacey

(October 12, Jakarta, Sri Lanka Guardian) Agus Purnomo, head of the Indonesian climate change delegation said the Asian preparatory climate change conference in Bangkok achieved little, with rich countries avoiding final positions on larger emissions cuts. Duncan Marsh of the NGO Nature Conservancy said the Copenhagen summit would fail unless political leaders could agree on stronger reduction targets and substantial financing to back the transfer of clean technology (The Jakarta Post 12.10.09).

European Commission President Jose Manuel Baroso warned the upcoming December summit “Is dangerously close to deadlock” and he demanded developing countries (in Asia, Latin America and Africa) take more responsibilities and not just blame developed countries.

Kornelius Purba at a meeting for 300 newspaper editors in Copenhagen heard George Soros announce he would put US$1 billion into clean energy and set up the Climate Policy Initiative (CPI) into which he would inject $10 million per year for ten years.
Thomas Hellner who will head up the San Francisco-based CPI said “It will be part advisory service, part policy developer and part watchdog”. The group will focus on US, EU, China, India and Brazil. The CPI is really a political initiative and Soros sees the launching of climate change responses as a political issue, not a technical one.

“The problem of global warming is primarily a political problem at this point” he said.
The Soros initiative echoes a similar one announced in July when the Abu Dhabi Development Fund (ADDF) confirmed it would commit $50 million a year for seven years to the newly formed International Renewable Energy Agency (ARENA).

ARENA Director General Helena Pelosse emphasized ARENA will not be a funding agency, focusing instead on “capacity building and policy advice”. (Khaleej Times 10.07.09).
Aside from some limited support for advocacy, capacity building and technical support the trend is strongly away from traditional and smaller grants to promotional agencies including smaller players, with bigger grants to bigger and more specialist agencies becoming the norm.

So advocacy, awareness, capacity building and support to change regulatory frameworks may be on the table via philanthropic and sovereign funds ahead of the aid agencies expected Copenhagen trickle down, but meanwhile how can life be made a little easier for renewable energy and energy efficiency project developers ?

So despite increased support for renewable energy and energy efficiency at high level from Asian political leaders like Indonesian President Susilo Bambang Yudhoyono just starting his second term, the underlying problems and barriers remain in most Asian and ASEAN countries.

Fossil fuel energy and electricity are still subsidized, while pricing structures for on-grid renewable energy are not yet realistic enough. Banks remain more sympathetic to larger power projects, but most renewable energy and energy efficiency projects are smaller. Standard due diligence and loan requirements still knock out many of the under-capitalized wannabees who are needed to make many new small renewable energy and energy efficiency projects work in Asia.

To he that hath he shall have in abundance, and to he that hath not, even that which he hath will be taken away from him. At least that´s how it feels to the smaller players.
The hardest job is to finish feasibility studies up to bankability. The fundamental problem is lack of networking capacity to complete technological and financing packages, but how to address this effectively ?

The emerging financing model is based on export credits, local state and commercial banks, sovereign funds, Islamic banks, new specialist green agencies, some private investors and possibly some help from multilateral or bilateral funds, but the latter are generally slower.

What we need is a new generation of connectors, a bit like travel plug adaptors, that can plug into technology suppliers, banks and investors so they can connect to projects without charging the earth or taking over the projects, to liberate the energies of thousands of new small companies that can make this new market take off in Asia and developing countries generally.

Or will this be a game that only big boys and girls can play?

Terry Lacey is a development economist who writes from Jakarta on modernization in the Muslim world, investment and trade relations with the EU and Islamic banking.

-Sri Lanka Guardian