Energy in Asia and the Pacific: Your Questions Answered
Priyantha Wijayatunga, Chief of ADB’s Energy Sector Group, discusses energy challenges in developing Asia and how ADB is helping through financing and knowledge sharing.
What role has ADB played over the decades in the electrification of Asia and the Pacific?
From 2008 to 2021, ADB invested approximately $12 billion in energy access projects providing energy to more than 45 million households in the region. However, there is much more to do. About 150 million people in Asia and the Pacific still have no access to electricity. In addition, there are still about 940 million people in the region experiencing frequent power interruptions and about 350 million people without an adequate energy supply.
What are ADB’s four priority areas in energy?
ADB is facilitating the transition to sustainable, lower-carbon, and resilient energy systems by assisting our developing member countries in:
- Accelerating the deployment of renewable energy and energy efficiency.
- Pursuing strategic decarbonization and the phase-out of coal.
- Increasing the climate resilience of energy infrastructure.
- Ensuring a just transition to clean energy, ensuring everyone benefits.
Most economies in Asia and the Pacific are driven by fossil fuels, what’s ADB’s policy on financing and supporting carbon-based energy projects?
Under ADB’s Energy Policy 2021, ADB will not support coal mining, processing, storage, and transportation, nor any new coal-fired power generation. ADB will also not support any natural gas exploration or drilling. The bank will be selective in its support for midstream and downstream natural gas initiatives.
ADB recognizes that natural gas has a role to play as a transitional fuel that can support power system flexibility under specific circumstances. Therefore, ADB will finance natural gas projects subject to strict criteria. ADB will support limited downstream oil projects where necessary but will not support upstream or midstream oil projects.
ADB recognizes the need to accelerate early retirement of coal-based power plants in the region. ADB is supporting the Energy Transition Mechanism (ETM) in its promotion of a market-based approach to accelerating the transition from fossil fuels to clean energy.
Public and private investment will finance country specific ETM funds to retire coal power assets on an earlier schedule than if they remained with their current owners. We are first piloting this initiative in Indonesia, the Philippines and Viet Nam, but hoping to extend it to other countries in the near future.
How central is the private sector to enabling the energy transition in the region?
According to the International Energy Agency (IEA), from 2020 to 2040 the region will require cumulative investment in renewable energy of about $6 billion and in electricity networks of approximately $6.4 billion. Governments and MDBs cannot finance this energy transition in such a short period of time. Therefore, we need to attract substantial private sector investment, including institutional investors and philanthropy.
ADB plays an important role by increasing project viability through project financing, public-private partnerships, technical assistance, and finance blended with concessional funds to bring in private capital from the market.
ADB also helps structure sustainable energy projects to ensure optimal risk sharing, and provide risk management services through guarantees, interest rate hedging instruments, and credit insurance. Financial risk management instruments can help engage the commercial finance sector in early-stage markets and can be key to achieving investments in first-of-a-kind projects.
Around 150 million people in Asia and the Pacific lack access to electricity, while many more cook using unhealthy, polluting fuels, stunting economic growth and social development.
The adverse impact of climate change requires an urgent just transition to clean energy.
Can you provide some examples of successful ADB clean energy projects?
In 2009, India established Energy Efficiency Services Limited (EESL) to save energy and promote large-scale energy efficiency. ADB approved a $200 million loan to EESL in 2016 for the Demand Side Energy Efficiency Sector Project, focusing on energy efficient lighting and appliances and electric vehicles. ADB approved a second loan of $250 million, along with $46 million from the Clean Technology Fund in 2019 and grant assistance from the Global Environment Facility.
ADB supports Cambodia’s 100 MW solar park that was developed in two phases: 60 MW in 2019 and 40 MW in 2021. Both phases resulted in the lowest ever tariff in ASEAN for grid-connected solar power. The bank helps the state-owned utility to provide land and transmission access, while the private sector is to develop solar power generation supported by ADB’s Private Sector Operations Department. ADB’s Office of Public-Private Partnership led the de-risking measures.
How does lack of electricity and other energy sources limit economic and social development?
Energy is a key input in social and economic activities in a country. Access to reliable energy supplies provides, among others, increased opportunities for income generation, along with better health care and education and thus improved living standards.
Adequate energy leads to increased economic activity at all levels and spurs economic growth. When these energy requirements are met by clean energy sources, the adverse environmental impact can be mitigated and energy security improved, helping to maintain sustainable economic growth.
Can you point to any ADB successes in fostering regional energy security?
ADB has been proactive in regional cooperation in the energy sector in several regions, in particular through its regional programs such as Central Asia Regional Economic Cooperation (CAREC), Greater Mekong Subregion (GMS) economic cooperation, and South Asia Subregional Economic Cooperation (SASEC). ADB has been supporting studies to develop cross-border connectivity followed up by investments, under these programs.
For SASEC, ADB supported the first grid-to-grid interconnection in South Asia, a 500 MW grid connection between Bangladesh and India. This was later expanded to 1000 MW. This project increased energy security for Bangladesh. Bangladesh has also approached hydropower investors in Bhutan and Nepal seeking hydropower imports from those countries. ADB is developing connectivity between India and Nepal and India and Sri Lanka. These initiatives lead to improved energy security for the South Asia region.