A steady growth market must appear, decoupled from the price of oil, to convince investors to lay down cash
Dennis Posadas, Business Times 20 Feb 09;
While climate change and renewable energy has crept into the popular consciousness in Asia, the commitment to it ebbs and flows depending on the price of crude oil. During the 2008 oil crisis which saw the price of crude rise to US$140/barrel, enthusiasm for renewable energy reached an all- time high.
However now that oil prices have dropped significantly, that enthusiasm has tanked. This is simply a repeat of the post '70s Opec oil crisis scenario; in fact, after the Reagan administration took over the White House in the '80s, it had most of the solar panels removed from the roof.
Fortunately, many Asian governments have now started to implement clean energy laws. These laws are similar to those in Europe and the US, and feature incentives for the clean energy sector. Often, these laws feature mandates such as the Renewable Portfolio Standard or the Feed-In-Tariff, which require the power utilities to purchase their power from renewable/clean energy sources in increasing increments per year.
Unfortunately, while these laws are starting to come into place, there is still a lack of a societal commitment to clean energy in Asia, which may undermine the potential success of these laws.
From being an immediate priority at US$140/barrel, it is now again a nice-to-have afterthought. This is not the way to encourage the development of clean energy, and make it affordable for everyone.
Asia actually stands to lose out if clean energy is not adopted fast enough.
Climate change
Former Reagan-era Environmental Protection Agency (EPA) director John Topping Jr, president of the Washington-based Climate Institute, said that climate change threatens countries in Asia with a rise in sea levels that will destroy low-lying coastal areas. It will also introduce changes in the intensities of the various storms that pass through countries like the Philippines annually.
In his book, Sudden and disruptive climate change, Mr Topping said that many responses to climate change are not costly. He said that technologies like cogeneration or harvesting electricity from waste heat from industrial activity can save industry and consumers huge sums while also reducing emissions of greenhouse gases and air pollutants.
Despite the fact that some clean energy sources are cheaper, there are others such as photovoltaic solar that are still at US$3-4 per watt. Although technology is driving costs down, it is not happening fast enough because the market seems to have a love-hate affair that depends on the price of crude oil.
Without a willingness by consumers to make the commitment to clean energy regardless of oil's price, it becomes difficult for utilities to justify large capital investments in clean energy because the calculations simply do not make it competitive even over a period of several years. Thus, the utilities may try to comply with these mandates in a minimal manner instead of going all out.
It also becomes harder for investors to justify funding innovation and R&D in renewable energy technologies if the market demand fluctuates. On the other hand, in some places where the price of electricity is already expensive, it is already a non-argument because clean energy has already reached grid parity.
Another way is to do it through traded credits. In a cap and trade system for example, a cap on emissions set by various governments will penalise those who fail to comply. In turn, these violators are expected to purchase the credits from those who made the investments in clean energy. One potential problem in Asia is if very few entities invest to get the credits; again it works in developed societies like the US and Europe, but we still need to see the results in Asia.
In some Asian countries, a Green Option allows consumers to require that a certain percentage of their electric consumption comes from clean energy sources.
Green Option
This assumes that a significant segment of Asians will be willing to pay a slight premium. Unfortunately, at the moment, most Asians will still default to fossil fuel-generated electricity, because it is the cheapest in many cases.
Unfortunately, unless we want a repeat of history, a steady growth market needs to appear, decoupled from the price of oil in order to convince investors to lay down the cash. Although innovation is going on in clean energy, without a strong steady market, we will not see the combination of economies of scale and innovation similar to what caused the prices of PCs and semiconductors to drop and move forward technology-wise.
Without a large support base of Asians numbering in the millions who are willing to commit to clean energy, these mandates won't realise their true worth. It is time for us as consumers to look beyond cheap fossil fuel power, and give importance to clean power, regardless of how cheap or expensive crude oil is.
Eventually, if we push through on this commitment, clean energy will also be cheap energy.
Dennis Posadas is deputy executive director, Philippine Congressional Commission, on Science, Technology and Engineering. He is also the author of 'Jump Start: A Technopreneurship Fable', to be published by Pearson Education Asia this year.
