Sino-Singapore Tianjin Eco-city (SSTEC), China’s latest and largest eco-city project, saw its first residents earlier this year. The city is built on a blend of non-arable saline and alkaline land that was virtually uninhabitable five years ago. While this is an accomplishment in and of itself, SSTEC is trying to go even greener in terms of the energy efficiency of its buildings.

Sino-Singapore Tianjin Eco-city in 2012 (Source: http://www.tianjinecocity.gov.sg/)

SSTEC aims to offer green building certification based on more stringent standards than anywhere else in the country, including the national standards. It has already set up a Green Building Evaluation Committee (GBEC) to supervise building quality.

But in terms of energy efficiency, SSTEC’s GBEC still lacks the clearly defined requirements found in comprehensive international standards like the Leadership in Energy and Environmental Design (LEED) certification. According to a World Bank report, the GBEC provides standards only for the building envelope and central heating, unlike LEED, which covers a broad range of energy systems including lighting, air conditioning, water heating, and appliances. While the ambition in this eco-city project is commendable, the oversights in SSTEC’s efficiency standards reflect a lack of comprehensiveness in green building standards across China, as the GBEC is already the country’s most advanced and comprehensive building standard.

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The European Union (EU) has undoubtedly been one of the global leaders in spurring the advanced development and deployment of renewable energies worldwide. The vision set forth by the Renewable Energy Directive 2009/28/EC – a directive setting continent-wide targets for all EU-27 member states to increase their share of renewable energy in the national energy mix – continues to stand out as the primary example of a coordinated effort to lead a large-scale energy transformation. While renewable energy targets now exist in 118 countries worldwide, few regional commitments to renewable energy deployment exist, though this trend is beginning to change.

In recent years, certain EU member states have gone beyond what is required under the Directive to set even more ambitious national goals. Denmark, for instance, is now targeting 100 percent renewable energy across their entire energy supply by 2050. These efforts should be applauded and their lessons replicated around the world. However, these successes should not obscure the very serious gap that is emerging between current policies and mechanisms and the significant challenges still facing the European renewable energy sector.

A recent European Commission report has outlined the challenging road ahead for member states as they continue down the path towards their 2020 commitments. The Commission’s report sends a mixed message. On one hand, all but 2 countries – Latvia and Malta – met their first interim final energy targets defined under the Directive. In fact, 13 countries even outperformed the target by over 2 percent.

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Starting and running a solar lamp retail business in a developing country like Kenya is no small feat. Kenya lacks strong transportation infrastructure for product distribution, and the bureaucratic red tape is not only tedious but can be opaque to foreigners. Meanwhile, the customers who need and want solar portable lamps most are those who can least afford it.

Solar portable lamp companies, such as Little Sun, must navigate informal economies and limited distribution infrastructure to market and sell their products to customers who benefit from the environmental, social, and health improvements that these lamps can provide. (Source: Little Sun)

But although Kenya’s economy lacks many of the market and political institutions that facilitate business operations in the industrialized world, there is significant potential for businesses to support rapid economic growth and generate social impact. A variety of successful solar portable lamp businesses have reframed Kenya’s lack of institutions (let’s call them institutional voids) as opportunities for economic growth.

In 2010, two Harvard Business School professors published the book Winning in Emerging Markets: A Roadmap for Strategy and Execution, highlighting the opportunities and challenges of operating a business in a developing country. They also released a toolkit for identifying and dealing with a country’s institutional voids, raising the following questions that are pertinent to running a solar portable lamp company in Kenya:

1. Do large retail chains exist in the country? Do they reach all consumers or only wealthy/urban ones?
2. Do consumers use credit cards, or does cash dominate transactions? Can consumers get credit to make purchases?
3. Is there a deep network of suppliers? How strong are the logistics and transportation infrastructures?

Successful solar portable lamp companies in Kenya are using a variety of strategies to address these challenges and to mitigate, avoid, and leverage the institutional voids that would otherwise deter or limit business operations. 

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Having just returned from my second clean energy finance summit this year, I was relieved to find that despite the rumors, the renewable energy industries aren’t dying—indeed they’re booming.

Source: Michael Liebreich BNEF Summit Keynote, 23 April 2013

In 2012, according to Bloomberg New Energy Finance, $269 billion flowed into the clean energy sector worldwide—a big number by any standard.  Total global investment in renewable generating capacity now lags total investment in coal, oil, and gas generation combined by only 25 percent. With that much money you could purchase Google or Microsoft outright.

While clean energy investment in 2012 was down 11 percent from 2011, it is still 44 percent above the 2009 figure and 230 percent higher than it was in 2005.  Moreover, virtually all of the decline stems from the sharply falling prices for solar and wind equipment—a trend that in the long run will accelerate growth. While clean energy growth has understandably slowed from the extraordinary double-digit rates of the past decade, this remains one of the world’s largest and most dynamic industrial sectors.

The one dark cloud that hovered over both conferences (the Cleantech Investor Summit in Palm Springs and the Bloomberg New Energy Finance Summit in New York) was the United States, where declining government support and the uncertainty generated by a dysfunctional Congress led to a sharp decline in financing in 2012.  While the falling investment figures do presage a slowdown inU.S. clean energy growth in the next two years, it is still notable that theU.S. added more renewable capacity than any other single country last year.

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Globally, new investment in renewable energy fell 11 percent in 2012. But in Latin America and the Caribbean (not including Brazil), it grew at a remarkable rate of 127 percent, totaling US$4.6 billion. This was the opening context for the 3rd Annual Renewable Energy Finance Forum for Latin America and the Caribbean (REFF-LAC), held this week in Miami, Florida. The yearly event, coordinated by Euromoney Energy Events, the American Council on Renewable Energy (ACORE) and the Latin America and Caribbean Council on Renewable Energy (LAC-CORE), aims to connect developers and investors who can continue fostering the strong investment climate for renewables that is happening in the region.

LAC-CORE president, Carlos St. James, speaking at the 3rd Annual REFF-LAC conference. (Photo credit: Mark Konold)

Presenters included project developers, financiers, and government officials, all of whom had experiences to share about what’s working in the region. In some places, like Chile and Peru, project tendering is working to advance renewable energy deployment. In the Caribbean, mechanisms such as net metering and feed-in tariffs are still the preferred approach to fostering renewables development. Many presenters stressed that the key to continued success in the region is the political will that creates an environment conducive to successful renewable energy investment. They also highlighted how projects become more attractive the less they have to rely on subsidies or other support mechanisms.

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Across the developing world, retailers are selling solar-powered portable lamps that can meet basic lighting demands, reduce dependence on expensive and inefficient kerosene lighting, and contribute to important development goals like energy access and improved literacy rates.

Solar portable lamp companies must find innovative ways of restoring consumer confidence in their products after a flood of cheap, faulty models created a distrust of the technology (Source: OneDegreeSolar).

Small solar portable lamp companies are learning how to navigate the relatively unstructured business environments of developing countries, but a lack of consumer confidence in the unfamiliar technology is a serious deterrent to scalability. Confidence has been eroded further by the presence of low-quality lamps that mimic higher-quality products. To increase sales and improve both the social and environmental impact of solar portable lamps, companies must develop a dependable product and brand that is appealing to customers both familiar and unfamiliar with solar technology.

Gaurav Manchanda, an Indian-born entrepreneur and founder of One Degree Solar, found a new way to restore consumer confidence in a low-cost lamp that meets the standards of the Lighting Africa project. He developed a short messaging service (SMS) technology that both provides customer service and allows the company to monitor the social and environmental impacts of every lamp sold.

The use of mobile phone technology has skyrocketed in East Africa, and Manchanda’s development of a customer service practice that utilizes this unique market characteristic allows his product to penetrate markets previously characterized by uncertainty. Manchanda’s interest in tracking the social and environmental impact is based on his background in development work, but is also reflective of this market as a whole. Companies that operate in the solar portable lamp market are typically social enterprises interested in the triple bottom line of economic profit, social impact, and environmental health.

Manchanda realized that high-quality customer service is a competitive advantage and a way to generate confidence in relatively new and unfamiliar products among customers with very little purchasing power. With the help of an in-country partner, he developed an SMS platform hosted by Safaricom and Airtel that allows his company to send bulk text messages to purchasers of One Degree Solar products.

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In March 2013, the National Energy Administration (NEA) of China issued a Notice to urge development of wind-to-heat projects in northern China. This practice aims to reduce the waste of wind power and cut emissions from the coal-fired central heating system. Experiments have been carried out and the approach is going to be scaled up, but further innovations are needed to really shake the dominance of coal.

The niche for large-scale wind-to-heat

Figure 1. China’s installed wind power generation capacity, and average operation hours of the turbines from different sources (click image to enlarge graph).

According to the Chinese Wind Energy Association (CWEA), China’s total installed capacity of wind power jumped to 75.3 gigawatt (GW) by the end of 2012, while the annual installed capacity was 13 GW, nearly 27percent lower than that of 2011 (See Figure 1). This may reflect bottlenecks, such as growing wind curtailment, faced by the industry.

Since 2010, the operating hours of wind turbines have been decreasing (See Figure 1). Combined with growing generation capacity, wind curtailment in 2012 reached 20,000 gigawatt hours(GWh), nearly doubled the curtailed production of 2011.

Jilin Province is a region with one of the highest curtailment rates. Winter nights see high wind speed but low electricity demand, and the local grid’s flexibility for peak electricity management is limited. As a result, wind farms in Jilin Province, which have a total generation capacity of 3.3 GW, were generating for only 1,420 hours in 2012. This was much lower than the industry-adopted economic minimum of 1,900 hours.

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Germany has seen success with solar power, despite having about the equivalent solar resource of Alaska. The U.S. contains vast solar resources, but could use more federal policies to utilize this renewable resource. Trans-Atlantic collaboration could boost the transition to sustainable energy systems on both sides of the Pond. (Source: German-American Chambers of Commerce)

The U.S. and Germany are obligated, as two of the largest economies and historic emitters of greenhouse gas emissions in the world, to lead the global transition to cleaner power systems. Their success or failure in transforming energy systems has immense global signaling effects. Closer cooperation in this innovative sector could revamp a faltering historic partnership.

Germany’s chosen path to a clean energy future is ambitious and unprecedented amongst industrialized countries. The government passed a series of measures in 2011 to simultaneously move away from fossil fuels and phase out nuclear power. Renewable energy is to become the backbone of the country’s energy system – at least 60 percent of the nation’s primary energy consumption and 80 percent of electricity are to come from renewables in 2050. Meanwhile, the last nuclear reactor is to be shut down in 2022. (See the table below for an overview of German energy policy goals).

The country is already a leader in renewable energies. Few countries have a greater installed per capita capacity of renewables, excluding hydropower, than does Germany. Moreover, the government also envisions energy efficiency to be a key component in enabling the clean energy transition. Germany aims to reduce primary energy consumption by 50 percent by 2050 and increase energy productivity, or the GDP produced per unit of energy, by 2.1 percent per year.

The U.S. trails German ambition and lacks a federal clean energy strategy, but is nonetheless one of the most important and dynamic renewable energy markets in the world. As of the end of 2011, the U.S. led the world in installed biomass and geothermal power capacity, ranked second in total installed renewable power as well as wind power capacity, third in hydropower, and fifth in solar photovoltaic (PV) capacity. While total emissions in the U.S. have historically been higher than most other countries, no other country has seen a larger drop in energy-related greenhouse gas emissions over the past five years. Shifts from coal to natural gas in the power sector, as well as fuel efficiency improvements in the transportation sector, are the main reason for this reduction, but growing investments in renewable energies also contributed to this positive trend.

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In the first two months of 2013, there were only 58 requests (according to the United Nations Framework Convention on Climate Change, UNFCCC) to register  Clean Development Mechanism (CDM) projects in the world, compared to 280 requests in January and February 2012. CDM is one of the three flexible mechanisms defined in the Kyoto Protocol that provides for emissions reduction projects with Certified Emission Reduction (CER) units, essentially credits that can be traded in emissions trading schemes. Developed countries can fulfill their commitments to reduce emissions by buying CERs from developing countries, which, in turn, achieve sustainable development by building emissions reduction projects.

The CDM provides a solution for financing low carbon projects in developing countries, as CDM projects can derive revenue from two sources: operational revenue, such as selling electricity or decomposition product, and selling the CERs from the project to Annex I (industrialized) countries under the Kyoto Protocol. For example, a wind power plant can sell its generated electricity to domestic grid companies while gaining extra income from selling CERs after achieving a certain amount of CO₂ emission reductions.

However, as shown by the lack of new CDM projects, the mechanism is failing. Due to oversupply of CERs, the price for each unit is falling rapidly. Two years ago, the CER price was above €12/ton of carbon dioxide equivalent (tCO2e) (US$15.46/tCO2e). At present, it is less than €0.5/tCO2e (US$0.64/tCO2e) (See Figure 1).

China is especially hard hit as it dominates the CDM market with the largest investment of CDM projects in the world ($220 billion, or 61.8 percent of total registered CDM projects globally). These Chinese CDM projects have supplied 738 million CERs, or 61.2 percent of all 1,200 million CERs issued from 2005 to present.

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Sometimes it looks as if the Parties to the UN Framework Convention on Climate Change have bet large amounts of money against themselves on the success of climate negotiations.

"Are we done yet?” Poland has hardly been an enthusiastic actor in UNFCCC negotiations (Source: IISD.ca)

Countries are now engaged in an excruciatingly slow race to reach an agreement by 2015, which would for the first time commit both the developed and the developing world under “a protocol, another legal instrument or an agreed outcome with legal force” (ah, the beauty of UNFCCC language…), in order to meet the goal of 2 degrees warming by the end of the century, the “safe” limit that was agreed upon at the 2009 Copenhagen summit.

Given what’s at stake, and the inefficiencies inherent to the UN process, you’d think that the world’s nations would make sure that not a minute is lost in the talks. And yet, after a Qatari Presidency that left everyone with the vivid memory of conference chairman Abdullah bin Hamad al-Attiyah literally hammering out a last-minute deal, Poland has been designated to host the 19th annual Conference of the Parties (COP19) next October.

It may not be obvious, at first sight, why Poland hosting the climate talks seems like a step backwards. After all, the ambitions around COP19 are not to come up with a global agreement, but rather to make substantial advances on pressing issues in preparation of the Durban Platform deadline, fixed for 2015 (and a very likely French Presidency). But it helps to remember that the last COP on the road to the rather underachieving Copenhagen Conference in 2009 took place in Poznań, which could say something about the capacity of a Polish COP Presidency to pave the way for ambitious deal-making. These fears, of course, are not enough to dismiss Poland as a valuable host. What weighs heavier is that the country does have a history of blocking progress in climate negotiations, particularly at the European Union level.

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