Technology, finance combine to fuel Asian green energy hopes6 min read . Updated: 03 Oct 2007, 11:59 AM IST
Technology, finance combine to fuel Asian green energy hopes
Technology, finance combine to fuel Asian green energy hopes
Hong Kong, 3 October The marriage of innovative technology and financing have led to a spread of energy efficient projects that are improving the quality of life for some of the poorest people across Asia.
From solar energy to hydropower and biogas, sustainable energy projects are transforming lifestyles across the region, with much of the impetus and creativity coming from the grassroots as people tire of waiting for their governments to meet commitments to provide for their burgeoning power needs.
Change has been coming for more than a decade and the results are now clear to see.
While experts say the biggest reductions in carbon emissions are still to be found by cleaning up fossil fuel power plants, it is alternative and sustainable sources of energy that are winning plaudits from the people with the greatest need and the attention of those organisations that can provide financial and technical support.
In 1994 SELCO, then a non-profit volunteer group, set out with the modest target of supplying 100 of the poorest homes in southern India with electricity sourced from small solar energy units.
After little more than a decade, during which it weathered many a financial storm, the Bangalore-based firm is now a fully commercial enterprise that has installed around 80,000 solar systems in rural areas, providing electricity to more than 300,000 people. Its 2006-07 revenue was $3 million.
“We realised that to continue as a voluntary group would be difficult, that going commercial was necessary for us to be sustainable," said Thomas Pullenkav, vice president of SELCO.
Pullenkav says around 70% of his customers are poor farmers with the remainder made up of landless labourers and street hawkers, many living below the poverty line.
The key to SELCO’s success has been developing a model where such groups are able to buy the units on micro finance, an innovative system developed in Bangladesh by Nobel laureate Muhammed Yunus that allows the poorest people access to credit.
“What we do is buy units from manufacturers and tell a farmer to pay us a nominal fee a month. Because it is spread over a period of time, he doesn’t feel the pinch too much. It’s a combination of technology and finance," he said.
This combination has helped SELCO pick up two Ashden awards, dubbed the “green energy Oscars".
Ashden supports projects around the world that both help reduce poverty and energy use, and often have potential for expansion, which experts see as the key to producing a truly sustainable economy.
The awards have recognised projects across Asia ranging from micro-hydropower projects in Pakistan to biogas projects in Nepal.
For Martin Wright, editor of “Green Futures" magazine and an advisor to the awards focusing on Asian schemes, many of the projects have resulted from people in the region simply getting fed up with waiting for governments to provide a reliable supply of electricity.
Small scale projects can counter inefficiency
“It is becoming increasingly apparent that in some areas the centralised distribution model of electricity has been found wanting," he said.
To counter that, small scale projects that use solar energy, hydropower, biogas, and more efficient and cleaner cooking stoves are cropping up across poor areas in Asia and having a dramatic effect on local communities, as well as reducing carbon emissions.
“It is good old fashioned economics. These companies have identified a good business opportunity," Wright added, citing a biogas unit supplier in Nepal, which now has 170,000 schemes across the country and has made a tangible difference to the country’s deforestation problem because people have an alternative to burning wood.
But the change to more energy efficient models in many of these countries would not have been possible without improved financing that focuses on the small-scale rather than landmark projects, traditionally favoured by international lenders.
“Microcredit has made it possible in realising that poor people are not unbankable," Wright added. “If you can have lines of credit, you can overcome the capital cost."
A wider demand for televisions, DVDs and mobile phones was also driving a search for innovative energy supplies, alongside students who can now do their homework at the same time dinner is being cooked because the home has a solar power system rather that a limited kerosene generator, with zero carbon emissions.
“The big, big criteria is it has to be sustainable. There is no point awarding a niche project. We want potential to scale up and scale out. We need the entrepreneurial spirit," he said.
This recognition that the profit motive can go hand-in-hand with sustainable development -- which has often been ignored in the past -- is key in the larger-scale financing of energy-reducing projects.
Andrew Bidden, who runs an Asia clean technology fund for CLSA with around $120 million, says the past year has seen a slew of new funds set up by major investment banks to invest in energy efficiency.
“(The companies we invest in) do not have to be the most environmentally sound practitioners themselves," he said. “If they are producing something tremendously beneficial then we will invest in it.
“This is about return on investment. And as the environment deteriorates and environmental standards become higher, the technology that remediates that cost will see the benefits on the bottom line of the companies that produce it."
China is the elephant in the room
Bidden’s fund focuses on projects that reduce emissions from traditional energy sources, but he added that wind and solar have both made giant strides to being able to compete on price with fossil fuels.
Bidden added that many companies were still ignoring the benefits of simply cutting their own energy use and reducing their carbon footprint.
“The piece in this puzzle which is still frustratingly being ignored, is the energy efficiency story," he added. “It is nearly an instant gain to a company’s bottom line. It is a very low risk. The technology is there, but people are just not using it."
The elephant in the room, as usual, is China, which continues to rely on poorly maintained, inefficient coal-fired power plants.
“At a policy level, China is serious about energy efficiency," said Christine Loh, an expert on China’s environmental record from the Hong Kong-based thinktank Civic Exchange.
“What Chinese policy is trying to do is to assert energy efficiency and saving are essential parts of achieving development. The problem is in implementation in provinces."
The Chinese government has set a five-year goal of reducing energy consumption per unit of gross domestic product by 20% by 2010, but has fallen far short of its goals as the economy roared ahead last year at 10.7%.
The government aims to have 300,000 small wind turbines in towns and villages by 2010, along with 40 million household biogas digesters and 4,700 biogas plants for animal livestock farms, Loh added.
But China’s plentiful supply of cheap coal means it will remain the country’s power source of choice for the forseeable future -- coal-fired power stations accounted for around 65% of China’s energy supply in 2005 according to government figures.
Loh believes the government must focus on retrofits in power plants to slash emissions.
“Currently, Japan is nine times more energy efficient than China -- so if China can be as efficient as Japan, bingo!" she added.