Sharp spikes in fuel and food prices and the lingering coronavirus disease (COVID-19) pandemic, are weighing on economic recovery and threaten to worsen poverty and energy security across Asia and the Pacific in 2022. These pressures, combined with the climate crisis, are creating large and immediate challenges for policymakers, particularly in low income countries which have borne the brunt of the pandemic.
Speeding and scaling up the decarbonization of economies offers a way to help economies recover from COVID-19, address the climate change threat, and meet the region’s energy needs. A transition to a clean energy future is no easy task. Around 350 million people in Asia and the Pacific are still without adequate supplies of power and with electricity demand in the region projected to double by 2040, governments are under pressure to continue using fossil fuel sources, including coal, to meet their needs. They also have few resources to commit to new energy infrastructure.
“Recent events are a wake-up call that our current patterns of energy production and consumption are no longer sustainable, and we must act now.”
Chief of Energy Sector Group, ADB
“ Achieving a just, inclusive energy transition is a delicate balancing act that requires a mix of supportive government policies, stepped-up clean energy financing for low income economies, and the adoption of new technologies,” said Priyantha Wijayatunga, head of the energy sector group at Asian Development Bank (ADB). “By taking bold actions now to go down the clean energy path, our developing member countries (DMCs) can both drive a green recovery from the pandemic and address the longer term threats from climate change.”
Helping DMCs accelerate the shift from fossil fuels to cleaner energy sources is the focus of a new Asia Clean Energy Forum, which ADB is hosting from 14 to 17 June 2022. It will provide a platform for energy industry experts in the public and private sectors, along with others in development organizations, academe and nongovernment organizations to share and explore ideas on how Paris Agreement-aligned financing, low carbon technologies, and policy reforms can be used to speed up the adoption of clean power as the dominant energy source for the region.
Clean energy commitments from ADB
Reducing a reliance on coal as a major energy source is one of the most critical shifts needed, and in 2021 ADB adopted a new Energy Transition Mechanism that will help its developing member countries (DMCs) do just that. The Energy Transition Mechanism (ETM), which is being rolled out under a pilot partnership agreement between ADB, Indonesia and the Philippines, seeks to financially incentivize the accelerated retirement of coal-fired power plants. It aims to replace them with clean power infrastructure, tapping both public and private investment, and once scaled up the ETM has the potential to become the largest carbon reduction program in the world. The updated 2021 energy policy, which supports universal access to reliable and affordable energy services, while promoting the shift to clean energy, has formalized ADB’s current practice of not funding new coal-fired power generation.
At the operational level, ADB is engaged in wide ranging assistance to increase the use of clean power, improve energy efficiency, and expand access to electricity. In India, for example, it is scaling up support to deploy smart meters, distributed solar photovoltaic systems and e-vehicles. In Sri Lanka, a $50 million credit line from ADB, provided to multiple local banks for financing rooftop solar power systems, has been so successful that a second tranche is being considered. In Pakistan, ADB has committed $300 million to finance the construction of a 300-megawatt hydropower plant in Balakot, Khyber Pakhtunkhwa province, which is expected to add more than 1,100 gigawatts of clean energy a year.
“ADB stands ready to help its developing member countries take the steps they need to achieve a cleaner energy future that will be just and beneficial to all.”
In the Pacific, assistance has been given to deploy climate-adaptive floating solar technology, while ADB is working with the National Development Bank of Palau to set up a clean energy financing facility, initially focused on poor and female-headed households. In East Asia, ADB is supporting the government of Shandong Province to develop a $1.5 billion Shandong Green Fund for low-carbon and climate resilient infrastructure, and in Mongolia where coal provides over 90% of the fuel used for power generation, an ADB loan of $100 million will help install the country’s first ever large-scale advanced battery energy storage system. This will allow Mongolia to substantially scale up the use of renewable energy sources such as solar and wind.
In Viet Nam, a first ever ADB investment in wind power development, which has drawn substantial cofinancing support, will boost the country’s wind power capacity by nearly 30% and avoid annual carbon dioxide emissions of more than 162,000 tons, while in Thailand, ADB assistance is helping to establish a first large scale electric vehicle charging network.
Financing a clean energy future
Successfully decarbonizing economies requires vast resources. The International Renewable Energy Agency estimates that Asia and the Pacific needs to invest between $825 billion and $1.2 trillion a year on renewable energy development and energy efficiency.1 Financing these enormous sums is something developing countries cannot do on their own, particularly at a time when government resources have been severely strained by COVID-19, the surge in fuel and food prices, and rising borrowing costs.
To help DMCs fund their energy needs, ADB provides assistance both from its own resources and through the mobilization of cofinancing from partners. In the face of the worsening climate change crisis, ADB has raised its ambition to deliver $100 billion in climate financing, including for clean energy development, from 2019 to 2030, up from the $80 billion outlined in its Strategy 2030.
“Achieving a just, inclusive energy transition is a delicate balancing act that requires a mix of supportive government policies, stepped-up clean energy financing for low income economies, and the adoption of new technologies.”
Chief of Energy Sector Group, ADB
ADB is helping DMCs develop pandemic recovery plans, which unite economic priorities with climate and environmental goals, through the creation of the ASEAN Green Recovery Platform. This aims to mobilize up to $7 billion for low-carbon and climate resilient infrastructure. Alongside this initiative, ADB entered into a partnership with the Rockefeller Foundation to support ETM and expand access to clean energy, with the foundation’s $100 million planned commitment to ADB over the next 5 years set to be the largest ever from a philanthropic foundation.
To de-risk and incentivize private support for green projects, ADB and its partners have been working on innovative solutions like the ASEAN Catalytic Green Finance Facility, which supports green infrastructure investments in Southeast Asia.
ADB serves as a knowledge hub on clean energy for Asia and the Pacific, sharing emerging practices, innovations, and green technologies, while working to promote regional cooperation and integration in the sector. This helps to cut costs, lower greenhouse gas emissions, and improve the security of energy networks.
Collectively, this mix of financial assistance, knowledge and policy support provided by ADB and its partners, allows DMCs with limited resources, to expand their use of renewable power, which in turn helps create high value jobs, boosts economies, and strengthens energy security.
“Recent events are a wake-up call that our current patterns of energy production and consumption are no longer sustainable, and we must act now,” said Mr. Wijayatunga. “ADB stands ready to help its developing member countries take the steps they need to achieve a cleaner energy future that will be just and beneficial to all.”
1 Pg. 34 - Financing Clean Energy in Developing Asia