Efficiency: Low-hanging Fruit of the Energy Challenge

This is a transcript of a live online chat with ADB's energy experts Anthony J. Jude and Aiming Zhou on energy efficiency in Asia.

Harumi Kodama: Hello and welcome to ADB's live chat "Efficiency: Low-hanging Fruit of the Energy Challenge". I'm Harumi Kodama from ADB's Department of External Relations. I'm joined today by Anthony J. Jude, Senior Advisor in ADB's Regional and Sustainable Development Department (RSDD), and Aiming Zhou, Senior Energy Specialist, also from RSDD.

Amit Bando: End-use energy efficiency (or Demand-Side Energy Efficiency) can indeed work in the Asia-Pacific region. Experience elsewhere suggests that strong government action is needed to create markets at scale. What does the ADB anticipate on: (a) governance, (b) capacity/institution building, and (c) monitoring, verification, and enforcement?

Anthony Jude: Excellent points, Amit. Some countries already have a governance structure - energy conservation laws and energy efficient (EE) labeling programs - but it is not being enforced. Hence, we are supporting some countries with capacity building, coupled with actual implementation of building and lighting EE programs. Examples are in the Philippines, Indonesia, and Pakistan.

Anthony Jude: ADB is also assisting the People's Republic of China and India with industrial energy efficiency programs but more programs are being prepared to scale EE efforts in the Philippines, Malaysia, Indonesia, and Thailand. Monitoring, verification and evaluation is equally important as we need to know whether or not what was planned is actually being achieved, and if not, we would need to fine tune the programs going forward.

Justin Calderon from Facebook: Are the Philippines' green energy ambitions too lofty considering that incentives are promoting run-of-the-river hydro, a type of facility that generates less capacity than larger embankment dams?

Anthony Jude: Thanks, Justin. Run-off-the-river schemes are beneficial in areas where environment and social impacts are of concern. Yes, they may be of smaller size than larger dams but you can still have run-off-the-rivers schemes of 100 MW to 200 MW depending on site location and hydrology. I think the Philippines is on the right track if these schemes can be developed as it will address greenhouse gas (GHG) reduction.

Verena Streitferdt: From an ADB publication, I read with interest that the bank is planning to provide an upfront financing facility for energy efficiency under the CEFPF. Could you provide some further details on when this Facility will be operational and whether you will focus on certain countries? Will it be accessible only by governments or by the private sector?

Aiming Zhou: The Clean Energy Financing Partnership Facility (CEFPF) was established in 2007 to promote energy security and transition to low-carbon economies through cost-effective investment, especially in technologies that result in GHG mitigations. Energy efficiency is the most cost-effective option for mitigating GHGs. The facility has raised more than $200 million so far, which can be tapped through ADB's project teams. You may find more details on the website: http://www.adb.org/site/funds/funds/clean-energy-financing-partnership-f....

Joseph Kling: What are the "low-hanging fruits" in energy development?

Anthony Jude: Joseph, I suppose you mean low-hanging fruits in energy efficiency. These are lighting programs (CFLs, LEDs), use of higher efficiency air-conditioners, washing machines, refrigerators, etc. Other measures are in motors and chillers that can have quick benefits in commercial buildings.

Alexander Ablaza: Gone are the days when multilateral development banks (MDBs) held the notion that private-sector EE technology providers, especially the global companies, can transform markets by themselves. It is now clearer that MDBs have a role to leverage increased private sector participation in a market wherein technology providers continue to steer away from on-balance sheet exposure risks. How does ADB see its regional role in bringing the private sector more actively in the finance-technology nexus, particularly in the end-use EE front?

Aiming Zhou: Thanks, Alexander. In 2012, ADB provided $2.3 billion investment for renewable energy (59%) and energy efficiency (41%). ADB's investments in projects with a demand-side energy efficiency component from 2005 to 2011 totaled $1.8 billion, accounting for about 28% of total project investment. ADB's rich experience in supporting energy supply-side projects provides some insights into the design of demand-side EE interventions. ADB plans to leverage more money from the private sector for clean energy development.

With this new energy efficiency initiative mentioned in the ADB publication, ADB will create a new Energy Efficiency Technical Support Unit under its Energy Community of Practice to provide technical policy and financial support in accelerating energy efficiency investments in ADB's developing member countries.

Guest: I would like to understand the view of ADB on demand-side management (DSM) initiatives undertaken in India, especially in the electricity distribution sector (where the initiative is to be implemented at the micro level, may be the household level), focusing on low-hanging fruits and the difficulties in monitoring/measuring the outcome of these initiatives. What can be the nature of help extended by ADB to meet these challenges of monitoring and measuring the outcome of DSM initiatives?

Anthony Jude: I am not fully versed with the Indian DSM program on the utility side through end-use households. In the case of the Philippines, where we undertook the replacement of incandescent light bulbs to CFLs, we had each household tagged through their monthly bills to keep track of who has switched to CFL, and we had civil society to follow up on the program. This is expensive and would need to be built into the programs. Other end-use appliances can be energy-efficient household appliances.

Verena Streitferdt: What is the difference of the CEFPF fund now with the new decision from 2012 to focus more on upfront finance for energy efficiency? Are there any particular programs already developed, and if so, where?

Aiming Zhou: With this new energy efficiency initiative, more funds from the Facility will be used in energy efficiency-related projects. Currently, we are talking to ADB's donors to mobilize new money dedicated to energy efficiency. Very soon, there will be an Energy Efficiency Fund established under the Facility together with other existing trust funds.

Anthony Jude: ADB and the IEA will be holding a high-level regional policy workshop in August/September 2013 with policy makers to explore what the barriers to EE are within some countries and how ADB could be of assistance in addressing the barriers to regulation/legal framework, raising awareness, and getting commercial banks involved in financing for EE programs.

Abdul Gayyoom (@gayyoom71 from Twitter): Have you given any fund to the Maldives regarding energy efficiency?

Anthony Jude: Thanks Abdul. Yes, we do have funds for the Maldives for its EE program. At present, ADB is working on the financing of a micro-grid through replacement of diesel generation sets with hybrid solar PV and wind, which will help address the carbon issues in the outer island. ADB continues to have discussions with the Maldives government on EE initiatives.

Dr. Muhammad Pervaz: May I request the experts to address the issue of technology transfer and affordable access to energy-efficient technologies to developing countries of Asia and the Pacific? Now, the technological dependence of oil-importing developing countries will increase and there will be a shift from energy resource dependence to technology dependence. In this situation, can ADB play the role of an honest broker?

Anthony Jude: ADB has recently launched a technical assistance on low-carbon technology transfer market. The name of the project is "Demonstration of An Assisted Broker Model for Transfer of Low Carbon Technologies to Asia and the Pacific". The project aims to provide a venue where we could arrange matchmaking between technology developers and potential partners. We should have a list of potential technologies that could be brought to the region by the end of the year.

Shuwei Wu: About DSM in the People's Republic of China, there are quite a few programs such as '"Roadmap to phase-out the use of incandescent lamps in PR China by 2016" (good news to LED) and some examples of energy contract management in Guangdong public buildings, etc. However, successful business models are still rare. Will ADB be launching something to facilitate this?

Aiming Zhou: Mr. Wu, thanks for joining the live chat. ADB is part of UNEP's enlighten program, and works very closely with UNEP and all participating governments to facilitate the replacement of inefficient incandescent lamps with more efficient lighting in ADB's developing member countries, including the People's Republic of China. ADB provides policy advice and financial and technical support.

Guest: Traffic congestion in big cities like Jakarta and Manila results in high costs - the high cost is not only due to the high consumption on fuel for cars, buses, motor bikes on the streets but also because of vehicles idling their engines for 2 to 3 hours.

Anthony Jude: Yes, traffic congestion is an issue in many countries, and governments' oil import bills are increasing each year. Hence, policies and regulations will need to be enacted to support fuel switching in the transport sector, like converting diesel buses to use liquefied natural gas or using electric cars. This can help reduce oil import bills and improve air quality, thus reducing carbon emissions.

Tom Dreessen: Am trying but not successful in joining the online discussion.

Harumi Kodama: Hi Tom. Feel free to send in your question.

Jasper: Will there be a chance that LED lights surpass the use of CFLs considering the efficiency and environmental impact of CFLs? And in the near future, is it better to use LEDs compared to CFLs in developing countries, particularly here in Southeast Asia?

Anthony Jude: Yes Jasper. This is eventually possible. As prices go down, people will switch to LED lights. We are already seeing this happen in a number of countries where local governments have taken the initiative to switch to LED lights for traffic lights, lighting in public parks, and street lighting. Some new condominiums, and commercial and residential units are now using LEDs but there needs to be a greater shift and this will happen when electricity prices are right. In addition, greater public awareness will need to be built and this is where ADB could be of value to governments.

Armand: What will be the direction of ADB's investment in EE? Will ADB create more stand-alone EE projects? Will ADB try to incorporate EE across projects in different sectors implying that all relevant projects will have an EE component? For instance, road projects will have efficient street lighting and schools/hospitals built under the projects will use efficient technologies?

Aiming Zhou: ADB's current Clean Energy Program pursues the goals of improving energy security and mitigating climate change in the region. ADB is also supporting efficiency improvements in the transport, urban, water, health and education sectors. Utilizing energy efficiently to meet the rising energy demand is critical to promote energy security and sustainable development. ADB aims to ramp up energy efficiency investments in the coming years. A transformation of energy efficiency market is needed to unlock Asia's clean energy future.

Gia Ibay: Beyond technological fixes (e.g., lighting programs such as CFLs and LEDs, use of higher efficiency appliances) and financing and policy, what can be done to get the public more engaged in this "low-hanging fruit" in order to increase uptake and shift to energy efficiency? What do you see is ADB's role in this public engagement?

Anthony Jude: Thanks, Gia Ibay. ADB will need to work with governments in raising the awareness of the public on the different low-hanging fruits in EE. In a number of ASEAN countries, lighting programs have taken off because of the quick returns and low costs to households. Other technologies will require governments to enact standards and a stringent labeling program that can ensure the public that the appliances sold are efficient. ADB can be of value to governments in developing these labeling programs and supporting the testing facilities.

Olga: In 2010, ADB raised $244 million through Clean Energy Bonds. Taking into consideration that thematic approach of Responsible Investing becomes more popular among investors, is ADB about to issue more thematic bonds in the near future?

Aiming Zhou: Thanks, Olga. ADB's Treasury Department is in-charge of issuing Clean Energy Bonds. After the successful launching of the 2010 Clean Energy Bonds, ADB in 2012 raised the equivalent of $339 million from its second sale of Clean Energy Bonds to Japanese retail investors. The bonds will support ADB's ongoing renewable energy and energy efficiency projects in Asia and the Pacific.

Verena Streitferdt: One problem that I have heard many times in regards to energy efficiency is the demand. Industry or building owners do not see the economic benefits that they could get by applying energy efficiency. This is true for credit lines and for funds set up by the governments. How does ADB see this problem and what measures do you take to ensure that investment facilitation via sovereign guarantee or support with funds or credit lines will actually be taken up by the private sector?

Anthony Jude: Verena, the key is in building capacity within commercial banks. In the case of Indonesia where we have provided a sovereign loan to EXIM Bank for EE projects, we built the capacity of the bank. In addition, we also helped develop a pipeline of projects, and this generated considerable interest from private companies. EXIM Bank is now discussing with ADB about another similar loan. Similar programs are being considered in Malaysia and the Philippines.

Beni Suryadi/ACE: The transport sector accounted for around 30% of final energy demand in the ASEAN (The 3rd ASEAN Energy Outlook). What can ASEAN do to be more "efficient" in this sector, especially considering that the ASEAN is already a net importer of oil? What does ADB do in promoting vehicle fuel efficiency in the ASEAN?

Anthony Jude: Beni, the ASEAN is already a net importer of oil. We are in discussion with a number of ASEAN countries in promoting electric vehicles, like the electric tricycles in the Philippines as well as looking at other options such as LNG buses. On the vehicle fuel efficiency, USAID has initiated a study and we will take up the outcomes of this study with governments. Governments will need to come up with very clear policies to ban the old inefficient vehicles and this will need to be monitored like in California.

Shuwei Wu: For developing countries (even in developed countries), discussing EE is often a luxury. A good example is Green Buildings. We know the benefits of green buildings but when developers were faced with cost issues, they got scared, especially those who were engaged in residential housing. Between the policy and market, which one is more effective for EE? Can ADB do something to support the EE market directly?

Aiming Zhou: Thanks, Shuwei. Policy and market incentives are the two sides of a coin. You need both to promote energy efficiency. Policy works as a stick to push energy efficiency and market incentives work as a carrot to pull the market.

Harumi Kodama: Thank you very much to all of you who have contributed and participated today. We have gone overtime, so we'd like to invite you to send any further questions to my email or contact us via Facebook or twitter. Until the next chat!