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.

Read the rest of this entry

Caribbean, Central America, developing countries, energy, energy efficiency, energy security, finance, renewable energy, renewable energy finance, sustainable development

On March 15, Suntech Power Holdings Co., one of China’s largest solar photovoltaic (PV) manufacturers, failed to pay its US$541 million convertible debt, causing its stock price to bottom out. (See Figure 1.) Three days later, eight Chinese banks filed a petition asking for the company’s main operating subsidiary, Wuxi Suntech, to be declared insolvent and proceed to restructuring. With Wuxi Suntech owing the banks 7.1 billion RMB (US$1.14 billion), the company was forced to declare bankruptcy on March 20.

Figure 1: Stock price of Suntech Power Holdings Co. (Unit: USD) (Source: Google Finance)

There was discussion about whether the Chinese central government would rescue the former star of China’s solar sector, but the National Development and Reform Commission (NDRC), abiding with its new policies for renewable energy, said the government “wouldn’t and shouldn’t intervene.”

This put the municipal government of Wuxi, in China’s Jiangsu Province, in a dilemma. On the one hand, Suntech had become a model enterprise showcasing Wuxi’s sustainable development success; it would be extremely difficult for the local government to let it go. In 2012, a proposal from Suntech Power to shut down Wuxi Suntech had distressed the local government so much that the municipality made an effort to save the company, securing an additional 200 million RMB ($32.2 million) loan from the Bank of China.

But this time around, having lost the creditworthiness to receive strong support from state banks, government bailout options were limited. Wuxi Guolian Development Group, a financial company controlled by the municipal government, was expected to take over Wuxi Suntech. On March 20, a former senior executive of Guolian was assigned to be the new president of Suntech Power. This marked the official entry of local government into the restructuring process for the suffering Chinese solar company.

Read the rest of this entry

China, finance, green economy, manufacturing, photovoltaics, renewable energy, solar industry, solar power, Suntech

Renewable energy technologies are quickly cementing themselves as a key pillar of energy sector development and as an economic powerhouse in their own right. In 2011, a number of forces contributed to impressive growth in renewable energy markets around the world. The most recent installment of Worldwatch’s Vital Signs Online series analyzes the investment growth witnessed across the sector in 2011.

2011 saw total new investment in renewable power and fuel (excluding large hydropower) jump 17 percent over the previous all time high set the year before, setting a new single year record with US$257.5 billion invested in the sector. Net investments in new renewable power capacity outpaced that of fossil fuel capacity over the same period, further displaying the critical importance renewables now play in the global energy mix.

Distributed geographically, both industrialized and developing countries witnessed positive growth over investment totals in the previous year. Industrialized countries accounted for 65 percent of all global investment in 2011, attracting $168 billion overall. Of the 35 percent share invested in developing countries, nearly 80 percent was channeled to renewables in China, India, and Brazil.

Read the rest of this entry

energy, finance, renewable energy, renewable energy finance, renewable energy investment

As we described last week, there is a growing consensus that the time is right for a global shift to sustainable energy solutions. The Worldwatch Institute, in partnership with the International Renewable Energy Agency (IRENA), is taking a leading role in facilitating this shift through the creation of the Renewable Development Index.

Countries enacting renewable energy support policies or targets as of 2011 (source: IPCC SRREN, 2011)

Countries worldwide are recognizing the significant role that renewable energy can play in their national development. As of early 2011, nearly 100 countries had set targets for wind, solar, biomass, and other renewable energy sources. Governments aim to utilize these technologies to meet a host of development priorities, including reducing carbon emissions, expanding energy access, enhancing energy security, and creating new jobs and industry opportunities. At both the national and sub-national levels, they are using a variety of policies and measures to support centralized and decentralized renewable energy installations and to work toward achieving wider national development goals.

Despite the many forces working in favor of renewables, growth within the sector remains constrained. Although renewable energy technologies accounted for roughly half of the newly installed power generation capacity during 2010, they were responsible for only 16 percent of global final energy consumption and close to 20 percent of electricity generation that year. Government support policies, adopted by 118 countries as of early 2011, continue to be one of the most significant forces driving renewable energy deployment.

To more efficiently harness the potential of renewables to meet national goals, decision makers must have a better understanding of the effectiveness of support policies in overcoming existing barriers. Countries continue to face challenges in the renewables sector, including gaining public acceptance and buy-in, mobilizing financing, attracting investment, building local capacity, and facilitating collaboration between the public and private sectors.

Worldwatch is partnering with IRENA to help governments develop policies aimed at best utilizing their renewable energy potential as a way to meet national growth and development goals. As a first step, the project seeks to identify barriers constraining renewable energy deployment. It will then develop strategies that can help policymakers overcome those hurdles. Finally, the project aims to develop a set of renewable energy indicators, with the goal of helping countries assess the effectiveness and efficiency of renewable support programs. Because there is no one-size-fits-all policy for promoting renewable energy, fully inclusive indicators can help to inform the policy community in a more objective manner.

In the development arena, well-designed high-level indicators, such as the United Nations Development Programme’s Human Development Index (HDI), have been influential in shifting the discourse away from one based solely on domestic economic growth, providing the basis for a deeper understanding of national progress toward overarching development goals. The Renewables Development Index aims to achieve a similar goal in the energy arena, steering the discourse away from conventional fossil fuel energy usage and toward cost-effective and more environmentally sound approaches to meeting global energy needs.

Worldwatch has actively engaged key actors from leading institutions in the international energy community on this initiative. Through a series of interviews, meetings, and workshops, the Institute’s Climate & Energy team will facilitate the development of this new and influential tool.

When completed, the analysis based on this small and concise set of renewable energy indicators will provide governments with a powerful new instrument to better inform domestic policymaking, implementation, and monitoring processes. The indicators can be used for steering investments, refining policy choices, optimizing the impact of limited financial resources, and understanding the outcome of policy results supporting renewable energy development.

This Renewables Development Index will fill an important void in the landscape of sustainability indicators and will help countries in their important transition to a sustainable energy future.

Evan Musolino is a Climate and Energy Research Associate at the Worldwatch Institute, an international environmental research organization. Alexander Ochs is Director of the Climate and Energy Program at Worldwatch.

Climate Change, emissions reductions, finance, green economy, low-carbon, renewable energy, renewable energy finance, sustainable development

Energy is at the very foundation of modern economies. Since the Industrial Revolution more than 200 years ago, all countries—if at a quite different pace—have developed on the back of the production and burning of fossil fuels. There is no doubt that the comfortable lives many of us live today would not be possible without the fossil-fueled development of the past. But the merits of fossil fuels now seem less and less convincing.

Renewable energy technologies, such as solar PV, offer the potential to benefit countries around the world. (source: Flickr user Magharebia)

First, take subsidies. Currently, we throw about 10–12 times more taxpayer money at fossil fuels than we put into renewables—and those are just direct subsidies. In addition, local air and water pollution and related health consequences cost trillions of dollars worldwide. The U.S. National Research Council estimates the “hidden” costs of fossil fuels in the United States (the real costs to society that are not reflected in the fuels’ market prices) at $120 billion annually. The Chinese government believes pollution and related healthcare costs amount to 10 percent of that country’s GDP.

Then there is the volatility of fossil fuel markets, which has arguably led to enormous economic instability in the recent past. Just to give an idea of what this volatility means to some nations: an increase in the world oil price of just $10 can mean a decrease in the GDP of some small nations of 2–3 percent.

Read the rest of this entry

Climate Change, emissions reductions, finance, low-carbon, renewable energy, renewable energy finance, solar power, sustainable development

The Dow Jones Sustainability Index is the only sustainability index for investors and remains the Oscar of corporate sustainability. But does it employ an effective definition of sustainability? (Photo Source: hms.harvard.edu)

In an age where environmental awareness and climate mitigation are becoming central priorities, it’s encouraging that more than a billion people from 192 countries recently celebrated Earth Day. But what are the most effective steps we can take to reach sustainability, and how can we best track our progress in getting there?

Unfortunately, metrics and best practices for achieving a sustainable planet are failing to develop concretely. So when I discovered a webinar, “Unlocking the Mysteries of the Dow Jones Sustainability Index,” discussing the methodology behind this widely accepted tool for measuring corporate sustainability, I was intrigued to learn how the for-profit world defines and ranks businesses seeking to be more sustainable.

Launched in 1999, the Dow Jones Sustainability Index (DJSI) was the first global benchmark for sustainability. I had assumed that the Index ranked companies based on such variables as their business practices, supply chains, or some other method that would assess which companies are the most environmentally and socially responsible. But instead, the main priority of the DJSI is to rank “sustainability-driven” companies based on how viable of an investment option they are, according to their long-term fiscally sustainable growth.

The DJSI is the only sustainability index for investors, and, according to the webinar, earning a DJSI ranking remains the “Oscar” of corporate sustainability. The index looks at only the largest of the 2,500 companies in the Dow Jones Global Total Stock Market Index. Last year, of the 2,763 companies that were invited to submit an application to be considered in the DJSI, 1,443 were analyzed and approximately 320 were included in the index.

(Photo Source: "Unlocking the Mysteries of DJSI" powerpoint)

On April 10, companies were sent the requisite survey to be considered for the DJSI. Each question has a predetermined score for the answer, a weight for the question, and a weight for the overarching criteria questions are placed into. When filling out the assessment, a company does not know the point value given to different questions and criteria. This allows for every question to be answered as honestly as possible, but it also makes it difficult for companies to focus their resources in specific areas that would make them more sustainable, at least in the eyes of the DJSI.

This lack of transparency prevents an accurate and effective evaluation of the assessment tool as well. For example, it is widely accepted that one of the most effective ways to reduce energy demand while also mitigating climate change is to improve energy efficiency—yet it’s not clear how the efficiency of, say, a company’s buildings or facilities, plays a role in the DJSI rankings.

One gets a sense of the index’s priorities when looking through the DJSI guidebook. The document lists the many reasons why a company may be removed from the index even after having been awarded a ranking. The first reason is poor business practices (tax fraud, money laundering, antitrust, balance sheet fraud, corruption cases, etc.) followed by human rights abuses (discrimination, forced resettlements, child labor, etc.), layoffs or workforce conflicts, and, lastly, catastrophic events, which include ecological disasters.

Examples of companies being taken off the list are BP, following the Deepwater Horizon oil spill of 2011, and more recently Olympus due to an internal financial scandal. The fact that poor financial conduct—not careless environmental and social behavior—is the very first reason given for why a company may be removed from the DJSI shows just how relative the definition of sustainability is.

It’s been more than 20 years since the Brundtland Commission defined “sustainability” as “meeting the needs of the present without compromising the ability of future generations to meet their own needs.” The fact that, still today, the most widely regarded sustainability metric in existence is a financial investment tool that values economics more than environmental and social impacts shows that we are not yet where we need to be. Investments deemed worthwhile by the DJSI are based on expectations of long-term economic growth and expansion, which, if done irresponsibly, are largely counterproductive to what environmental sustainability is.

Despite the well-intentioned effort of the DJSI, a lack of transparency in how the index’s questions are weighted and a focus on underlying financial priorities that may be contradictory to environmental sustainability make it difficult to determine if a company is truly sustainable and if it is being labeled correctly. For investors attempting to invest intelligently and sustainably, there is a need for a clearer and more all-encompassing definition of sustainability in the DJSI.

 

 

Dow Jones, finance, green economy, Green Investing, Impact Investing, United States

Global fossil fuel subsidies most likely total between US$750 billion and $1 trillion per year—significantly more than the widely publicized estimate of $500 billion, according to Steve Kretzmann, founder and Executive Director of Oil Change International.

Kretzmann, who has been an advocate for environmental, social, and corporate responsibility for 25 years, sat down with Worldwatch last week to discuss fossil fuel subsidy reform efforts in the United States and around the globe. He founded Oil Change International in 2005 to educate the public about the true impacts of fossil fuels, expose troublesome oil industry practices, change patterns of public and private finance around the energy industry, and “separate oil and state.” [Below, watch a brief interview featuring Kretzmann and Worldwatch Climate and Energy Director Alexander Ochs.]

Read the rest of this entry

Climate Change, energy policies, finance, G20, renewable energy finance, subsidies, United States

Earlier this month, the Indian state of Maharashtra announced a US$25 million smart grid program covering electricity distribution networks in eight cities including Mumbai, the country’s financial capital. Maharashtra has commissioned the German company Siemens to install smart grid technologies in the state to tackle issues such as outages and electricity theft. Smart grid technologies will also improve the efficiency of the existing and very inefficient Indian transmission and distribution network. Currently, nearly a quarter of electricity in India (and up to half in some states) is lost while being transported through the grid system (compared to 7 percent in the U.S.), causing economic losses to utility companies and contributing to widespread electricity shortages.

Evidence of an inefficient electricity grid in Hyderabad, India. Image source: Flickr user mckaysavage.

Evidence of an inefficient electricity grid in Hyderabad, India. Image source: Flickr user mckaysavage.

This investment is just one aspect of a recent major push for smart grids by state and central government in India. India ranks third in the world for smart grid investment behind the U.S. and China, and its investment is growing rapidly. A meeting of the Central Electricity Authority on March 5 led to a proposal for nearly US$50 million of funding from the Ministry of Power for smart grid projects across India. State governments are also expected to contribute about half of the funding required for smart grid pilot projects.

The Ministry of Power has established the India Smart Grid Forum – a voluntary consortium of power utilities, implementing agencies, smart grid consultants, research agencies, and nongovernmental organizations, among others – which aims to bring different stakeholders together to ensure a rapid and efficient deployment of smart grid technologies in India. The Forum calls for implementation of smart grid systems in all state capitals and large cities between 2014 and 2017.

The Ministry of Power also established the India Smart Grid Task Force (ISGTF), which serves as a platform for smart grid activities, but also focuses on coordinating initiatives between different government Ministries.

Recent weeks have seen smart grid projects moving forward in other Indian states as well. Puducherry was selected by ISGTF as one of eight pilot cities for smart grid technologies, and it recently signed a Memorandum of Understanding with the Power Grid Corporation of India to install smart meters on 87,000 homes over four months this year. The new advanced metering infrastructure will allow customers to view their electricity billing in real-time and better manage their consumption. Smart meters will also enable the Puducherry Electricity Board to detect electricity theft, which costs India billions of dollars each year, much more easily. The city of Bangalore also launched a program this month that aims to install one million smart meters over the next year.

Read the rest of this entry

energy efficiency, finance, Green Investment, India, renewable energy, renewable energy finance, smart grid

In 2010, for the first time ever, countries that did not industrialize first have invested more money in renewable energy than those countries that were first to industrialize, according to Bloomberg New Energy Finance. Yet within many middle-to-low income countries, large portions of the population continue to have limited or no access to electricity and other energy services. In some parts of sub-Saharan Africa, such as Uganda and Malawi, as much as 90 percent of the population is without electricity. And while there is no single standard for how energy development should take place, addressing the needs of populations with minimal or no access to energy and related services is a critical part of sustainable development. Fortunately, many regions and communities are implementing decentralized and distributed approaches to renewable energy in sustainable ways, including through locally self-determined initiatives and by engaging in international collaboration.

Wind power can be tied to large centralized grid systems or to municipal micro-grids (Source: Reuters)

 

Decentralized renewable energy

Still today, the bulk of energy financing goes to centralized, grid-connected power plants. In 2010, for example, an estimated $40–45 billion was invested in large-scale hydropower, compared to only $2 billion for small hydropower projects. One reason for this disproportionate focus is that international efforts and funds typically emphasize policy change at the national level and through capital-intensive, industrial markets. But while implementing change at these levels is important and necessary, it is not the only way.

Indeed, numerous studies and examples indicate that policies oriented solely toward centralized production and distribution of electricity are inadequate to meet the needs of marginalized people and communities. In contrast, renewable energy technologies provide the opportunity for a development path that is more culturally self-determined, giving individuals and communities control over their own energy sources. Distributed renewable energy technologies constitute an important, community-driven alternative to centralized projects that are often driven by national politics and that can be largely removed from community interests.

Read the rest of this entry

Central America, distributed generation, finance, renew, renewable energy finance, rural electrification, solar power, wind power

Last month, Farooq Abdullah, India’s Union Minister for New and Renewable Energy, announced that the planned Delhi-Mumbai Industrial Corridor (DMIC) would be “totally green”. The corridor is aimed at strengthening the region’s infrastructure to attract foreign and real estate investment and jump-start local commerce. Minister Abdullah’s commitment to making the project environmentally sustainable is a positive sign for India’s development path given the potential boom in industry, commercial activity, and power production if the corridor is successful.

source: MNRE

Wind turbines in Gujarat

The DMIC is a US$90 billion infrastructure project funded by the governments of India and Japan to connect the political and financial capitals of India through freight rail, roads, and new power facilities. Plans to implement the massive DMIC project have been underway since a 2006 Memorandum of Understanding between India and Japan, but progress to date has been slow. Recent large infrastructure projects have a mixed record in the country, with bureaucratic roadblocks, multiple permitting requirements, and in some cases corruption and bribery, sometimes blocking plans.

Many of the barriers to general infrastructure development are the same barriers that stand in the way of renewable energy projects, despite a strong demonstrated political will to promote investment in renewables. Just this October, reports emerged that one of India’s largest solar power projects, the 125 megawatt (MW) Shivajinagar Sakri solar plant being implemented by the Maharashtra State Power Generation Company, has been blocked by the Forest Department of Maharashtra, which has laid claim to 180 of the total 350 hectares set aside for the project. This major administrative hurdle demonstrates the lack of coordination between agencies responsible for approving renewable energy projects, especially at this late stage of project development when major certifications and loans for the project have already been granted.

The future of renewable energy in India, including its role in the DMIC, will depend largely on the ability of the country’s policy and regulatory infrastructure to streamline administrative procedures and create a welcoming environment for new investments. India’s federal government and several state governments have established a multitude of laws and regulations to promote renewable energy, including feed-in tariffs (FiTs), renewable purchase obligations (RPOs), generation-based incentives, capital subsidies, accelerated depreciation, and tax incentives. Renewable energy capacity in India has grown rapidly in recent years, due in part to these measures. India ranks fifth in the world in installed wind capacity, with around 15 GW of wind capacity in August 2011. Installed solar capacity is growing rapidly and is expected to reach 200 MW by the beginning of 2012, with an ambitious national target of 20 GW of solar capacity by 2022.

Read the rest of this entry

energy infrastructure, feed-in tariff, finance, India, renewable energy finance, renewable energy investment, renewable energy policy