Wavelength: Greening the Commonwealth - Policy Instruments

Karen Persad CAPAM Knowledge Exchange AdvisorKaren Persad, CAPAM Knowledge Exchange Advisor

‘Wavelength’ is part of an ongoing series dedicated towards CAPAM contributors exploring ideas about issues and opportunities associated with public administration.

Many countries around the world are pressing forward to mainstream renewable energy (RE) and provide alternative energy sources in an expanding number of areas and industries; from aviation and automotive to business modelling (start-ups), primary healthcare, green cities, energy storage1 and many more. In fact, a large number of countries in the Commonwealth are responding to climate volatility, natural disaster hazard risks, and the simple desire to implement and use affordable, cleaner energies that are renewable. As described in the following paragraphs, such countries in the Commonwealth stand to benefit greatly from government actions to optimise progressive environmental outcomes as a region. The first steps entail suitable national policies that also contribute to the wider global agenda for protecting the environment, specifically in relation to the Sustainable Development Goals (SDGs) 5, 7, and 13, which consider gender equality, affordable and clean energy, and climate action, respectively.

The African continent looms large with pay-as-you-go solar electricity while formal alliances of corporate giants are sprouting up to increase renewable energy (RE) supply and uptake. Added to this is Dubai’s record-breaking low-cost solar power, India’s massive monetary commitments and investments to push its solar development and capacities in creative ways, and other initiatives around the world. One can ask “what are other countries in the Commonwealth up to?” A brief sampling of countries demonstrates promising strides and wicked challenges.

Research from GlobalData2 found that the European Union’s total power generation capacity added in 2014 was approximately 40%. For countries in Europe, the concentration of their RE and energy efficiency industry still leans towards the usual suspects: cost-reduction policies, public investments, power sector restructuring policies and market facilitation, as well as investment schemes. These approaches are promoted to a lesser degree than in other regions because Europe has natural endowments in terms of geographic scale, markets, capacity, economic growth and development factors. The use of targets is still considered a crucial policy instrument, for instance; the European Union mandates individual member states to ramp up consumption of renewables to 20% by 2020. 

The use of quantity forcing policies is demonstrated specifically in the region’s National Renewable Energy Action Plan, which targets a 10% share of gross energy consumption in transport to be renewables, by 2020. As well, Feed in Tariffs (FiTs) seem to be a popular and highly effective way of promoting renewables in solar and wind power in Austria, France, Germany, Italy, Spain, the Netherlands, the UK and Turkey. However, in other countries of the region, the mix of promotional instruments fall generally under three categories: price-setting and quantity forcing policies via quota obligations, green certificates, and premium tariffs; cost-reduction policies via tax incentives; market facilitation tactics via investment support through public funds; and distributed generation policies via net metering. 

In spite of its resource-rich context, the African region has its challenges of being underpowered, particularly in the Commonwealth countries of Sub-Saharan Africa, including Sierra Leone, Mali, Kenya and rural areas of many more countries. The benefits of going greener are undeniable not only to repress carbon emissions and save on fossil fuel-generated costs in the long term, but the more serious impetus is increasingly erratic climate variability in the region and its negative spin-off effects on overall economic growth, employment, livelihoods, and quality of life. However, the relatively high costs of alternative energy sources, imperfect knowledge and information asymmetry, infrastructural and regulatory requirements, unforgiving pricing rules and many other hurdles have not phased efforts in this region to increase energy access to all. Like the European Union and the United States, the governments of Ghana and South Africa, for example, have taken steps via policy frameworks to set targets to be achieved by 2020.3  

Further, the Africa Renewable Energy Initiative (2016 to 2020+)4 is said to be “a transformative, Africa-owned and Africa-led inclusive effort to accelerate and scale up the harnessing of the continent’s huge RE potential. Under the mandate of the African Union and endorsed by African Heads of State and Government on Climate Change (CAHOSCC) the Initiative is set to achieve at least 10 GW of new and additional RE generation capacity by 2020, and at least 300 GW by 2030.” This multi-donor initiative will tackle other dependencies and solutions, namely to strengthen the corresponding needs within the legal and institutional environment, creative partnerships, leveraging suitable climate finance instruments and so on.

Turning to the Asia-Pacific region, countries in transition understandably have different national priorities to developing contexts; going beyond access to include fostering a more competitive energy market that can attract sustainable investments. For instance, Singapore maintains a priority on research and development similar to New Zealand. However, renewables are powering over 75% of New Zealand’s electricity needs, especially in hydropower and geothermal sources, making it well-paced towards its 90% target of meeting its electricity needs using RE by 2025.5 

Similar to the African region, maturity and growth of the renewables sector in Asia Pacific is uneven. As noted in the literature6, policy instruments concentrate on incentivising investments that can help to meet targets while other approaches are navigating context that: still has relatively weak generation, transmission and distribution capacity; is intensely reliant on fossil fuel sources, and; experiences sub-optimal economic growth resulting in relatively lower than higher energy consumption levels. 

Interestingly, Papua New Guinea’s energy sector strongly relies on renewables based on necessity more than the popular clean energy impetus. The country’s green thumb is enabled as it does not have a coal industry but enjoys wide availability of hydro and geothermal energy sources. Therefore, price setting, quantity forcing, as well as cost-reduction policy instruments do not characterise Papua New Guinea’s renewables space. Like other parts of the Commonwealth and regions of the developing world, the dominant RE policy rests on target setting. For instance, its Strategic Development Plan 2010-30 articulates that installed capacity in that time must jump from 500 MW to 1970 MW. Hydropower is expected to dominate in the energy mix, rising from 215 MW to 1140 MW. To this end, a Bloomberg New Energy Finance study placed PNG in the top 10 for potential renewable resources and like African countries, the future is looking toward global and private sector investors along with creative alliances.

The Caribbean region, like Africa and Pacific countries, is replete with RE resources like geothermal, ocean thermal, solar and others. However, the islands have not been able to harness these natural endowments as it faces wicked challenges like funding for sustainable energy initiatives and the necessary time horizons for results from such investments, indebtedness and poor credit profiles, weak leadership, and the profit-orientation of private companies all do not support an agile responsiveness and uptake of renewables in the Caribbean. International financial institutions and thought leaders continue to promote public-private-partnerships as a viable pathway for funding renewable and energy efficiency projects in the region, although it is well known that immediate profits are not guaranteed for small energy start-ups which are risk-sensitive. 

A notable catalyst for renewable energy in the Caribbean is large multi-financed initiatives. For instance, the US$300 billion dollar Renewable Energy and Energy Efficiency (CORE) programme7, created in 2012, is designed to support energy investments to mitigate climate change impacts in the Caribbean and Central America. The Inter-American Development Bank and the Japan International Cooperation Agency are co-financing this programme, which not only emphasises energy savings infrastructure quality, but is also instrumental in getting the region closer to international agreements and goals emerging from COP21 and the United Nations’ Sustainable Energy for All (SE4All). 

In conclusion, it is clear from the aforementioned that particular RE policy instruments are being used more than others and this varies per region based on economic development variables and scale. Emissions trading and rural electrification policies (rural communities are hotspots for sustainable development); sectoral restructuring policies, which encompass competitive wholesale and retail power markets and privatisation of government-owned and operated utilities; bioenergy mandates and taxes, and comparative line extension analyses are all strategies that when distributed, feature least in the developing countries of the Commonwealth region and slightly more pervasive in more developed counterparts. 

In order to overcome implementation deficits and other bottlenecks to the uptake of various energy technologies, all governments may want to consider more active energy ties with countries both within and beyond the Commonwealth (e.g. India’s efforts with Myanmar). Lessons might also be drawn from the Greater Mekong region whereby Vietnam treats clean technology as key to responding to climate change. As well, ongoing enabling factors for institutional adaptation include: responsive and tailored regulatory systems; symbiotic partnerships to accelerate the development-demonstration-deployment phases of energy efficiency innovations; and more risk-spreading incentives for private companies to join the local clean technology agenda. Collectively, existing energy projects and the aforementioned enablers can be expected to accelerate the pace towards meeting national priorities as well as obligations on international agreements and conventions and the many ambitious targets they inspire.

1    Source: http://www.renewableenergyworld.com/articles/2016/12/top-10-renewable-energy-trends-to-watch-in-2017.html

2    Source: http://energy.globaldata.com/media-center/press-releases/power-and-resources/government-policies-will-remain-key-to-europes-renewable-energy-growth-by-2020-says-globaldata

3     Source: Renewable Energy Policy Network, 2009

4    Source: http://www.arei.org/wp-content/uploads/2016/02/AREI-Framework_ENG.pdf

5    Source: http://www.mbie.govt.nz/info-services/sectors-industries/energy/energy-strategies/documents-image-library/renewable-energy-in-nz.pdf

6    Source: https://www.dlapiper.com/~/media/Files/Insights/Publications/2015/04/Renewable_energy_in_the_Asia_Pac.pdf

7    Source:  http://www.iadb.org/en/news/news-releases/2016-04-09/japan-idb-quality-infrastructure-and-energy-fund,11434.html