Opening Remarks at Asia Pacific Energy Forum – Ministerial Segment
Delivered at UNCC in Bangkok, Thailand
Welcome to the Second Asia-Pacific Energy Forum. I wish to thank the Ministry of Energy and the Government of Thailand for its cooperation with ESCAP and co-hosting this meeting. It would also be remiss of me not to recognise the commitment of the leadership of Russia and China and their support for ESCAP. The participation of Ministers and key influencers reflects the centrality of energy to sustainable development and provides a valuable opportunity to develop a regional energy agenda. In my remarks, I will reflect on our region’s progress towards a sustainable energy future and highlight some of the successes we have realized. I will also detail the challenges we foresee in achieving the targets under SDG7, and propose some of the avenues the region can pursue to overcome these.
In the five years since the first Asia-Pacific Energy Forum was convened in Vladivostok. Landmark global agreements in 2015 on sustainable development, finance, climate change have changed the context and narrative for the energy future. There is a growing recognition by governments, the private sector and investors, that a sustainable, low carbon energy future is the only option to safeguard our future. For its part, in line with its restructuring to support sustainable development, ESCAP has established an Energy Division to service the intergovernmental Energy Committee, approved through Resolution 71/1.
Over the past five years, an energy transition has begun, with the Asia-Pacific region leading from the front. Innovation in energy technologies and renewables has developed at an unprecedented rate with the potential to profoundly change the energy mix, improve performance and drive down costs. We are seeing a convergence of energy technologies with frontier areas such big data, the internet of things, artificial intelligence and electric mobility. There is a palpable sense of the enormous opportunities ahead that can transform the energy scene. Renewable energy has become mainstream, with each year new projects edging below previous price benchmarks. The region’s energy intensity has continued to decline but our enormous energy efficiency potential has yet to be fulfilled.
An emerging concern is the speed of transition to renewable energy is not fast enough to meet the SDG7 targets. As of 2014, renewable energy accounted for 18.3 per cent of our region’s final energy consumption. To raise this level, ambitious national targets and more investment are needed. Renewables in the power sector need to be extended to the transport, health, education and heating sectors. Recent successes in rural electrification need to continue if the needs of 420 million people living without electricity are to be met. Shifting the needle on clean cooking fuels is critical too. Two billion people still cook with fuels hazardous to their health. Servicing the needs of this large population requires tailored solutions, backed by public sector funding for initiatives such as improved cook stoves, biogas and LPG supply for remote areas. To bring universal access to clean cooking across the region by 2030, just under $3 billion per annum is required: a cost of only $1.50 for each beneficiary. 1
Differences in access to finance, capacities, technologies and resources has meant uneven progress in sustainable energy development. Progress in ASEAN to enhance power grid interconnection across borders and India’s ambitious long-term policy frameworks for renewable energy, developing its local value chains and driving down costs, augur well for sustainable energy development. China’s integrated approach that leverages its strengths in innovation and manufacturing of new energy technologies is helping support large scale deployment of solar power. Smaller developing economies are lagging behind though opportunities exist but require regional cooperation in finance, grid networks and technology.
We count on you to contextualize these challenges and develop regional strategies to overcome them. The analysis prepared by ESCAP focuses on how to bridge the gaps that have been identified.
Progress towards SDG7 requires us to align long term clean energy strategies to be responsive to climate change, and contribute to carbon neutrality or net zero emissions by the second half of the century to meet the climate goals of the Paris Agreement. The size of the challenge for energy efficiency and renewable is immense. According to the IEA it will involve reducing three-quarters of the emissions reductions by 2060. Efficiency gains and rolling-out renewables rapidly are critical to address the rapid growth in energy consumption, spurred by the region’s dynamic growth. India’s commitment to connecting 175 GW of renewables to its power grid by 2022 will help secure its power supplies and reduce its emissions by 20 per cent. 2 Vietnam is facing complex scenarios. Its share of renewables in the total primary supply was 53 per cent in 2000, and dropped to 24 per cent by 2015, while the share of coal grew from 15 to 35 per cent given its strong energy demand growth. This trend is expected to continue, given the challenge of implementing renewables. Forecasts indicate that by 2035, total final energy demand will be nearly 2.5 times higher than in 2015.
So what will it take to achieve SDG7 in the Asia-Pacific? There are several elements comprising the solution. Continued investment in innovation is needed to develop the next generation of renewable and low emissions energy, as well as energy storage and smart grid technologies. National regulatory frameworks and financial infrastructure need to be attuned to attract more private capital investment for the energy transition. Many national power utilities need reform to ensure stronger governance for enhancing efficiency, transparency and lowering risk to investors. 3 At the same time we need to rationalize the many fossil fuel subsides that have passed their best by date, which counteract the transition to sustainable energy. National policies that link sustainable energy development to climate change, health and other cross-cutting policy areas are needed to fully capitalize from the move to clean energy. We also need to think outside the box and look at region-wide solutions to energy based on cross-border connectivity, to exploit the region’s vast clean energy potential.
Focusing on just one of these elements - financing - the challenges are huge. Estimates from IRENA suggest that reaching the RE targets contained in the Asia-Pacific NDCs will cost in the order of $1.1 trillion by 2030. Institutional investment will be an important part of financing solutions. Take the example of India. Its renewable energy sector offers an attractive investment opportunity that is well matched with the needs of institutional investors. It shows a strong policy commitment and offers attractive return, risk, and time horizons, but illiquidity and regulatory restrictions remain. The key challenges faced by domestic and foreign institutional investors include: offtaker risk, currency risk, lack of adequate liquidity, low credit rating, and high transaction costs from small investment sizes.
Estimates of required annual investment for renewables, energy efficiency and energy access add up to approximately $560 billion for the Asia-Pacific. 4 Mobilizing this level of finance is not possible without the private sector. Engaging the private sector in the financing challenge requires tailored approaches to mitigate risks and improve the investment climate as well as well-formulated public-private sector partnerships or PPPs. The use of PPPs should not be confined to energy generation projects but should be extended to cross-border transmission infrastructure which have high capital costs and sovereign risks. Data from the first half of last year showed that energy dominated global PPP deals, accounting for three quarters of transactions, but there is still much scope for growth. 5 Three Asia-Pacific countries - Pakistan, China and Indonesia – were among the top 5 countries globally for PPP energy sector transactions, with a total of $13.2 billion in PPP transactions recorded in the first half of 2017 alone. Overall, across the Asia-Pacific, almost 7.3 gigawatts of new generation capacity was developed under $15 billion of PPPs in the first half of 2017, evenly split between fossil fuels and renewables. 6 However, only 10 countries across the Asia-Pacific tapped into PPPs for financing energy projects, which highlights that more work remains to leverage this important modality.
The significance and potential of the Asia-Pacific region in the global energy transition is substantial. It has a growing share of global energy demand and is emerging as a leader and driver of technological progress and adoption. It is also a place where multiple new sources of finance are emerging, along with its private sector innovation capacities and skills to not only contribute to production of new sources of energy, but to transform its production base to be energy efficient. Thus, Asia-Pacific’s tradition and capacity to forge regional cooperation for mutual gain are well known. Our contribution will steer the global progress towards a world that uses energy sustainably.
It is imperative that we take this opportunity of the Second Asian and Pacific Energy Forum to review the progress we have made together and chart a course for the next five years. ESCAP is committed to supporting its members to move to a future based on sustainable energy and for the achievement of SDG7. I wish you every success in your deliberations and I look forward to working with you over the next two days towards a successful declaration.
1The Global Tracking Framework 2017 estimates the global total incremental investment to achieve universal access to clean cooking fuels as $4.4 billion. Asia Pacific has 2.04 billion of the 3.04 billion population without access to clean cooking fuels.
2NREL, Greening the Grid: Pathways to Integrate 175 Gigawatts of Renewable Energy into India’s Electric Grid, https://www.nrel.gov/docs/fy17osti/68720.pdf
3SE4ALL Finance Committee Report, 2015 https://www.seforall.org/sites/default/files/l/2015/09/SE4All-Advisory-Board-Finance-Committee-Report.pdf
4ESCAP, Asia-Pacific GTF 2017 Regional Report
5World Bank, 2017 H1 Public Participation in Infrastructure http://ppi.worldbank.org/~/media/GIAWB/PPI/Documents/Global-Notes/PPI2017_HalfYear_Update