Welcoming Remarks by ADB President Takehiko Nakao at the Asia Clean Energy Forum 2016 on 8 June 2016 in Manila, Philippines.
Introduction
Your Excellencies, distinguished guests, ladies and gentlemen:
On behalf of the Asian Development Bank, I welcome you to the Asia Clean Energy Forum (ACEF) 2016. I would also like to extend a special welcome to our co-organizers, USAID, the Korea Energy Agency, and the World Resources Institute, and to our other partners, including civil society organizations (CSOs), academics, and the private sector.
The theme of ACEF 2016 is “Gearing Up for the Post-COP 21 Era of Implementation: Showcasing Clean Energy Innovations.” With that in mind, I would like to discuss major challenges to deploying clean energy across Asia and the Pacific, and how ADB helps our developing member countries overcome these challenges.
Clean energy in the Asian context
Substantial progress has been made worldwide and across the Asia and Pacific region in developing and using clean energy, including both renewable energy and energy efficiency. The scale of growth in clean energy investments, enabling policies by government, and renewable energy capacity installed has been massive in the region.
Last year, the international community made two important commitments in support of clean energy. The COP21 Paris Agreement and the Sustainable Development Goals are both global accords on climate change and sustainable development. They recognize clean energy as central to climate change mitigation efforts. By joining the Paris Agreement, countries are adopting Intended Nationally Determined Contributions (INDCs)—actions to be taken for climate mitigation and adaptation.
The most important challenge for Asia going forward is to pursue climate change mitigation measures while the region is growing. The Asian economy as a whole is growing at a solid pace of 6% annually. It will expand from a third of world GDP today to about one half by 2050. We must provide electricity to all villages and households, build good transportation systems, and develop livable cities. Continuing on our current course, however, will lead to increased energy consumption and higher greenhouse gas emissions.
Expanding the deployment of clean energy is key to achieving the twin goals of mitigation and development. We must promote an energy transition to decarbonization.
Political commitment to targets, such as at COP21, is important for expanding the use of clean energy, but target setting is only the start. There remain significant challenges to deploying clean energy across Asia and the Pacific, three of which I would like to highlight today.
The first challenge is how to develop consistent energy policy. Countries need clear policies on an appropriate energy supply mix reflecting their COP21 commitments as well as a thorough cost analysis of different energy sources including possible decreasing costs of clean energy over time. We need specific regulations to incentivize clean energy development.
We should reduce fossil fuel subsidies, which encourage the overuse of energy and distort the market by making fossil fuels cheaper. Asia accounts for half of global fossil fuel subsidies. Eliminating them will promote cleaner energy, protect local environments, and reduce the carbon footprint.
The second challenge is technological. Without the use of frontier technologies, the targets set at COP21 will not be achieved. Countries need to invest more in advanced and cleaner technologies. We should make further efforts to improve energy storage and smart grid technologies that integrate clean energy into power systems. To better use coal resources, we must develop carbon capture and storage technologies.
The third challenge is the cost and financing of clean energy. The upfront cost of clean energy, whether renewable or energy efficiency, is still too high. The uncertain and intermittent nature of renewable energy sources, such as solar and wind, adds costs and risks to projects. Therefore, we need to find better and innovative financing solutions for clean energy.
Opportunities for action - ADB
There are many opportunities for ADB actions. We must act in cooperation with our development partners and the private sector. The most important role for ADB in supporting clean energy is to provide loans, grants, and technical assistance to governments and the private sector.
ADB is scaling up its operations in clean energy. Last September, we announced that we will double our annual climate financing to $6 billion by 2020. Of this, $4 billion will support mitigation and $2 billion will be for adaptation. Out of the $4 billion for mitigation, $3 billion annually will go to clean energy projects on renewable energy and energy efficiency, such as solar and wind, and transmission projects with smart grid technology. Another $1 billion will be used on sustainable transport and mitigation efforts in the urban and water sectors.
We will help our member countries develop bankable clean energy projects through trust funds backed by bilateral donors. Such trust funds provide grants for project preparation, capacity building, and viability gap financing. ADB is also partnering with multilateral sources, such as the Green Climate Fund and Climate Investment Funds. In our new partnership with the Asian Infrastructure Investment Bank, we will make combatting climate change a priority.
Together with ADB’s own financing for clean energy, which I just discussed, ADB is helping countries overcome clean energy challenges in the areas of policy, technology, and innovative financing solutions.
Policy
First, ADB supports governments in strengthening both policies and institutional and regulatory frameworks, and enforcing them effectively.
ADB encourages and assists countries in reducing fossil fuel subsidies. We are happy to see that the People’s Republic of China (PRC), India, and Indonesia have taken advantage of low oil prices to cut fossil fuel subsidies. They are using the resulting fiscal savings to invest in infrastructure including clean energy, as well as expanding targeted subsidies on poor households.
ADB is supporting governments to develop clear strategies to achieve their INDCs through technical assistance. Using policy-based loans, ADB is promoting energy sector reforms to create an enabling environment for clean energy investment.
ADB is assisting governments to establish appropriate regulatory frameworks to accelerate renewable energy development. For example, we are encouraging the introduction of standardized offtake prices paid by distributors to renewable energy producers. These prices should be set initially higher than conventional energy and adjusted regularly to reflect technological advancements and cost reductions.
ADB has been promoting a regional approach to an appropriate energy mix and clean energy deployment. While national actions are required in implementing INDCs, countries can benefit by sharing clean energy among neighboring countries. For instance, ADB has been supporting large-scale hydropower projects in Lao PDR, which exports electricity to Thailand. Likewise, we can promote the sharing of abundant hydro resources in Bhutan and Nepal with neighboring countries in South Asia.
To connect energy-rich Central Asia with energy-deficit South Asia, ADB is providing loans to the Turkmenistan-Uzbekistan-Tajikistan-Afghanistan-Pakistan (TUTAP) transmission interconnection project. Also, ADB is transaction advisor for the natural gas pipeline public-private partnership project connecting Turkmenistan, Afghanistan, Pakistan, and India (TAPI).
Technology
Second, ADB supports innovative and advanced technologies for clean energy development in our member countries.
ADB works with authorities to ensure that more advanced and cleaner technologies are incorporated in its energy projects. For that purpose, we are reviewing our procedures for every stage of our projects, including project design, preparation, and procurement. Projects with advanced technology or green content will be prioritized for ADB financing.
We recently approved $1 billion in loans for a Green Energy Corridor and Grid Strengthening Project in India. When designing this project, ADB helped the government adopt the latest technologies in high voltage direct current transmission to improve efficiency and reduce transmission losses.
ADB has helped the PRC and Indonesia establish centers of excellence to expand their research on technology and related policies for carbon capture and storage.
ADB-wide sector and thematic groups, which we started recently, ensure that innovative knowledge and technologies are built up, shared, and used across departments, including five regional departments and the private sector operations department. Groups for climate change, energy, transport, urban, and water are working together to expand the deployment of clean energy through our projects and knowledge works.
Innovative financing
Third, ADB uses and promotes innovative financing to support clean energy.
In 2015, ADB issued its first green bond to finance ADB’s climate operations. The proceeds from the 10-year green bond, lead managed by private banks, are used to finance climate change projects including renewable energy, energy efficiency, and sustainable transport. The bond was purchased by a wide range of investors, such as central banks, commercial banks, pension funds, and insurance companies from across the world.
We helped guarantee the first climate bond in Asia for a private sector geothermal project in the Philippines. This is the first ever climate bond for a single project in an emerging market.
One innovative transaction by our private sector operations department was equity and loan investment to an Indian private firm, Simpa, to provide solar energy to low-income households in rural areas. In this scheme, households make an initial down payment of 10–30% of the capital cost to install roof-top off-grid solar panels and batteries. Households can then use a mobile phone’s short messaging service to repay the remaining capital cost. Once fully paid, typically in two to three years, the household will own the solar panel and receive its solar energy without further payment.
Conclusion
Asia and the Pacific is critically important to global climate mitigation efforts. The region already accounts for half the world’s population and, as I indicated earlier, it will account for half of global GDP and an even larger share of emissions by 2050.
Deploying clean energy should be an integral part of the growth strategy for Asian countries. ADB is committed to playing an important role in the region. We will join hands with governments and other partners to gear up for the Post-COP 21 era of implementation.
One of the important roles for ADB is to use its convening power as a leading development institution in the region. I believe this Forum will provide an ideal opportunity for knowledge sharing and networking among the wide range of participants. I look forward to active and constructive discussions to showcase clean energy innovations in Asia and the Pacific.
Thank you.
Speaker
