Transcript Energy Efficiency Economic Incentives, Drivers and

Energy Efficiency in the Global Context:
Role and Opportunities for Enhancing Energy Security
Ashok Sarkar
The World Bank
Consultation Workshop on
“Future Energy Scenarios toward Sustainable
Energy Policies and Practice in Thailand’
Bangkok, Thailand
August 28, 2006
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Outline
• Global Energy Efficiency Outlook and
Potential
• Global Energy Efficiency Roadmap and
Thailand
• Thailand’s Opportunities and Challenges
• Strategies and Policies for Transforming
EE Markets
• Illustrative Examples of Relevance
• Conclusions
2
Global EE Outlook
3
Global Energy Growth Trends
Source: IEA World Energy Outlook, 2004
4
Primary Energy Demand by Region
(Business As Usual)
100%
90%
80%
38%
48%
70%
60%
Developing
countries
10%
50%
9%
40%
30%
55%
52%
20%
7%
43%
38%
2030
2050
Transition
economies
OECD
10%
0%
2003
By 2050 developing countries account for 55% of
global energy demand
Source: IEA Energy Technology Perspectives 2006
5
Global Energy-Environment
Dynamics
Source: IEA World Energy Outlook, 2004
6
Is the Current Energy Growth
Sustainable?
• Business–As–Usual Energy Sector
Expansion is unsustainable…because of:
– Investment constraints on the supply side
– Increased significance in the current regime of high oil
prices; projections for 2006 are that prices are likely
to remain above $70/bbl; Major impact on growth of
net oil-importing countries
– Environmental Implications (Enormous impacts at
local, regional, global levels)
• Business–As–Usual Energy Sector
Expansion would lead to…
– Energy Insecurity
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CO2 Emissions in 2025
Business-As-Usual vs. IEA Scenario
OECD
35,000
Developing
Countries
30,000
+255%
+70%
Mt CO2
25,000
20,000
+65%
15,000
-32%
10,000
5,000
0
2003
Baseline 2050
ACT Map
2050
2003
Baseline 2050
ACT Map
2050
OECD Emissions one-third below 2003 level, while emissions in Developing
Countries are two-thirds higher; Improved energy efficiency saves about 15 Gt
CO2 by 2050 – equivalent to 60% of current emissions
Source: IEA Energy Technology Perspectives 2006
10
Emission Reduction by Technology Area
IEA’s Scenario through 2050
Coal to gas
Nuclear
End-use
efficiency
Power
generation
Fossil fuel generation
efficiency
CCS
Hydropower
Biomass
Biofuels in transport
CCS in fuel
transformation
Fuel mix in buildings
and industry
Other renewables
CCS in industry
Improved energy efficiency most important contributor
to reduced emissions
ource: IEA Energy Technology Perspectives 2006
12
Renewed Global Interest in EE
• World Bank Group:
– Bonn Commitments 2004 for 20% annual RE+EE growth
– Clean Energy Investment Framework: with emphasis on
EE on both supply and demand-side
•
•
•
•
EBRD: Sustainable Energy Initiative (€1.5 b, 3 yrs)
Asian Dev’t Bank: Energy Efficiency Initiative ($1 b)
European Union: Green paper on EE
ASEAN Energy Ministers’ Final Communique
(Laos, August 1, 2006)- priority emphasis on EE
• Countries have started setting up EE targets,
legislations and institutions (China, South Africa,
Morocco, India, Vietnam, Tunisia, Sri Lanka…)
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Global EE Roadmap
Where does Thailand Fit In?
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Gains from Energy Efficiency –
OECD Countries (1973-1998)
Source: IEA
16
Energy Efficiency Roadmap (1)
Energy Intensities have been declining…
Source: Exxon-Mobil (2005). “The Outlook for Energy- A View to 2030”
17
Energy Efficiency Roadmap (2)
Energy and GDP Growth are Decoupling…
• Since 1971 each 1% increase in GDP has
resulted in a 0.64% increase in primary energy
consumption.
• Between now and 2030, World GDP is expected
to grow by an average of about 3% per year,
• While primary energy demand is projected to
increase only by 1.7% per year reaching 15.3
billion tons of oil equivalent (toe) by 2030
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Where does Thailand Fit into
this Global EE Roadmap?
Energy Intensity - Selected Countries
1,200
Russian Federation
Energy Intensity (kgoe/'000$ GDP)
• Many EE Actions:
– Standards/Labels
– Utility DSM
– EE Funds
• Impacts Insignificant:
– Energy-GDP Elasticity
very high ~ 1.4
– Energy Intensity Still on
the Higher Side
1,000
Ghana
Sub-Saharan Africa
Low-Income Countries
India
800
China
Indonesia
Middle-Income Countries
600
South Africa
Thailand
400
Brazil
World
200
Canada
Mexico
Australia
USA
Germany
Japan
30,000
40,000
Ireland
-
10,000
20,000
50,000
GDP per capita (US$)
THREE KEY QUESTIONS
WHY (SO)?
WHAT (NOW)?
HOW (TO)?
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EE Opportunities and
Challenges for Thailand
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Why So?
• Hard to answer in absence of systematic energy
efficiency indicators.
• The energy efficiency indicators are designed to
monitor levels and changes in energy efficiency
for two primary purposes:
– To allow comparisons between countries of their
relative energy efficiency situations, at national as
well as sub-regional levels and by fuels type and
sectors.
– To understand and communicate the impact of energy
efficiency policies, legislation and institutional
development, in terms of how these are turned into
actions on ground and how they are implemented.
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The Need for
Energy Efficiency Indicators
• The methodology for analyzing energy-use trends
distinguishes among three main components affecting
energy use:
– activity levels;
– structure (the mix of activities within a sector); and
– energy intensities (energy use per unit of sectoral activity).
• The separation of impacts on energy use from changes
in activity, structure and intensity is critical for policy
analysis as most energy-related policies target energy
intensities and efficiencies, often promoting new
technologies.
• Accurately tracking changes in intensities helps measure
the effects of these new technologies.
• Factoral decomposition where changes in energy use in
sector are analyzed in terms of sectoral activity, sectoral
structure, and energy intensity of each sub-sectors
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• OECD/IEA – recent experience with EE indicators.
What now? Targets & Directions
• National Policy Targets are Ambitious:
– Reduce total energy consumption by 20% by 2009
– Reduce energy: GDP Elasticity from 1.4 to 1.0 by
2011
– Reduce oil use for transportation by 25% by 2009
– Reduce energy consumption in industrial sector by
25% by 2008
– Reduce energy consumption in public offices and
buildings by 10-15% immediately
• The directions are right but the question is how
to achieve these targets
Data Source: DEDP and Peter du Pont, 2006
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How? “Hypothesis”
• Building Up on Existing Successes:
– Scale up the DSM momentum – at 1.3 cents/kWh and $63/kW it
is cost effective. Even though exceeded target, potential much
more than 1306 MW savings in 15 yrs – raise standards, make
them mandatory, and go beyond Lights, ACs, and Refrigerators –
to motors, pumps, compressors “Systems” approach
– Expand beyond ENCON Fund ($50M is still small)- Phase 2
(focusing on banks leverage) real test
– Energy Audit program – Link to actions / implementation
– Buildings EE – Expand beyond Public/Commercial buildings,
Improve codes
• Open Up New Avenues:
– Focus on oil and on transportation – 55% share of the annual
~61 mtoe final energy consumption is of oil of which 70% goes
into transportation
– Create enabling environment for ESCOs and financiers
Data Source: DEDE
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Strategies and Policies for
Transforming EE Markets
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Transforming EE Markets
Experiences from the Developed World
Risks
Transactions
Market Perfection-----
Private
Capital
PublicPrivate
Partnerships
Public
Policies,
Finance
Finance ----------
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EE Implementation Strategies
Menu of Options to Overcome Barriers
Vietnam, Indonesia,…
India, China, Thailand,…
Publicly-supported,
Incentive-Based,
Regulatory
Command & Control
Policy Strategies
Market “Push”
&
Market “Pull”
OPTIONS
•Mandatory En. Audits
•Min En. Perf. Standards
•Building EE Codes
•Utility DSM (EPP)
Japan, US, Europe,…
OPTIONS
•Appliance EE Labels
•Energy Service Cos./
•Performance Contracts
•Innovative
Financing Mechanisms
Market-Driven
&
Sustainable
Mechanisms
TIME
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EE Standards and Labeling
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Energy Efficiency Standards
(Appliance/Equipment)
The Ratcheting Effect:
Standards promote innovation and technology development
Source: Weil & McMohan, 2001
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Impact of Energy
Efficiency Standards
Estimated Impact of Ballast Energy Efficiency Standards by USDOE 2000
Source: Energy Information Administration, 2001; Weil & McMohan, 2001
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Energy Efficiency Labels
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Adding New Equipment and
Adopting a Systems Approach
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Motor Systems Energy Consumption
(~ 50% of Industry Energy Cons.)
Source: UNIDO
37
Pumping Systems
( Motor + Pump + Valve)
More than 40 psig
drop across the
throttle valve
Source: UNIDO
Package efficiency =
Hydraulic output / Motor input =
2.7 / 14.9 = 0.18, or 18%
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Pump System Optimization
Source: UNIDO
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New Pump System
Source: UNIDO
42
Steam Leaks in Industries
• A “½ inch diameter leak” will release
1,500 lbm/hr of 250 psig steam
• This leak will result in an increased fuel
cost of approximately $18,000 Btu/yr.
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Utility Demand Side
Management
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Utility Demand Side Management
International Success Stories
• United States: Since late 1970s, mandated
through regulation and IRP requirements,
ratepayer supported, 2-3% revenues spent on
DSM (by 1999, 51 GW and 71 TWh peak
reduction). Scenario changing since 1998.
• Sri Lanka: CEB-sponsored lighting DSM
program (started 1996), saved 75 MW & 110
GWh through 1.5 million lamps with net annual
utility benefit of Rs. 176 Million, in year 2000.
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Utility Demand Side Management
International Success Stories
• Brazil: Government Electricity Company
spent $20 million by 1991 on 150 projects,
ranging from consumer education to
motor and lighting replacements, saving
$1 billion
• Mexico: The national utility spent $24
million (with World Bank and other donor
support) on residential CFL program in
major cities.
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Regulatory “Pressure” for DSM:
International Experiences
• Six Country Case Study (US, UK, Norway,
New Zealand, Argentina, Chile): As reforms
occur, and prices decrease, utilities offer energy
efficiency services only to the extent required by
regulations
• Korea: Rational Energy Utilization Act of
1995/97, Article 12- DSM Investment Plan and
results to the Minister of Trade, Industry and
Energy
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Regulatory “Pressure” for DSM:
International Experiences
• New Zealand: Law requires publicly-owned
utilities to offer Energy Efficiency.
• Norway: In 1980s, were mandated to perform
IRP and DSM (>200 DISCOMs). Efforts have
waned since restructuring.
• United Kingdom: Regulator responsible for
DISCOM Energy Efficiency activities, and
small tax to fund government-administered
activities.
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Creating an Enabling Environment
for End Users and ESCOs
52
EE Implementation through the
ESCO Shared Savings Model
Customer
Savings Guarantee
ESCO
Fixed
Repayment
Lender
Schedule
PERFORMANCE RISK
+
CREDIT RISK
53
EE Implementation through
ESCO Guaranteed Savings Model
CREDIT RISK
Customer
Savings Guarantee
ESCO
Fixed Repayment
Schedule
Lender
PERFORMANCE RISK
54
ESCO Survey Results: Barriers
Barriers to Commercialization of EE in Asia
Is a significant Barrier
Is somewhat a Barrier
Is not a Barrier
Number of respondents
25
20
15
10
5
0
Energy &
environmental
policies
Source: ADB, 2004
Low energy
prices
Lack of
awareness
Access to
funds
High business
risks
Access high
quality EE
products
High costs of
EE products
Low market
potential
Low potential Lack of ESCOfor ESCO
personnel skills
profits
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Three Country EE Project
• UNEP, World Bank, ESMAP multi-year TA
• Brazil, China, India
• To generate innovative ideas and approaches for EE
financing schemes
• South-south capacity building and exchange amongst
financing and EE development communities/ practitoners
• Major conclusion: Customized solutions (vs.
standardized solutions)
• EE Delivery models / Financing schemes:
– Loan Financing, Guarantees, Clustering
– ESCOs, Third Parties
– Utility DSM Programs
Source: Three Country Energy Efficiency Project, Draft Report, World bank, April 2006
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China: ESCO Loan Guarantee
Program (1)
Source: Three Country Energy Efficiency Project, Draft Report, World bank, April 2006
57
China: Full-Service Shared
Savings ESCO Model
ESCO Corporate Shareholders
Financial
Institutions
Loan
finance
Repayment
from project
operations
Equity finance, loan finance
Equipment
performance
warranties
Financing
Repayment and/or dividends
ESCO
Project
design
Equipment
suppliers
and
technicians
Project
management
and oversight
End-user
Client
Repayment
according to
EPS
Repayment
guarantee (if
required)
Repayment
Guarantor
Source: Three Country Energy Efficiency Project, Draft Report, World Bank, April 2006
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Central Maine Power DSM Program:
Utility Purchase of Delivered Energy Savings
• Two revenue streams
to ESCO
Commercial, Industrial,
& Institutional Energy Users
engineering, turnkey
equipment installation
Energy
Services O&M/monitoring
Agreement services
cooperation, access,
payment of portion
of capital costs, early
termination payment DSM Contract
ESCO
(several selected)
Loan Agreement capital for
equipment
installation
Key Features:
• 15 MW implemented
1990-92
delivers verified kw
& kwh savings
CMP
payment/kw & kwh Electric
delivered
utility
loan payments/
assignment of project
revenues and security
Financial
Institution
Source: J. MacLean @ IEEFP, 2006
• Rapid sales process;
ESCO becomes
channel for end-user to
receive utility subsidy
• Utility value per kw
determined based on
value to utility; could
have been lower, based
on level required to
induce end-user project
investment decisions
•Many similar programs
around USA: PG&E,
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PSE&G, etc.
Electricite du France Residential CFL Leasing:
Martinique & Guadeloupe
Retailers
Distribution
of CFLs
Redemption
of coupons
CFL Mfg.s
(Osram)
Advertising
campaign
Bulk
Purchase
E.D.F.
Source: J. MacLean @ IEEFP, 2006
Residential End-users
…
Payments on
electric bill,
per CFL
Key Features:
• Rapid market penetration for CFLs
• 700,000 units distributed 1992-94
• ~ 14 MW peak reduction achieved
• EDF motivated to reduce losses, as
cost of service was > tariff
• Customer paid for CFL via utility bill
over 18 months; strong pmt performance
• Customer breakeven @ ~1000 hrs/yr
• Market development via bulk purchase
& distributors’ role
62
•Many similar programs internationally
Efficient Lighting Program:
Bangalore (India)
• BESCOM (Bangalore City) Objective: to improve reliability,
addresses high system losses, reduce evening peaks
• Focused on residential customers, both CFLs and FTLs
• 1st Demo Phase: ~300,000 lamps in Bangalore Urban District
• 2nd Phase (ongoing): 2.6 million customers targeted; three
lighting suppliers (Philips, Osram, Asian Electronics) selected
through tender to provide lamps with 1 year warranty
• CFL Purchase Options- Branded with Cooperative
Advertisement:
– Direct Purchase: at discounted prices
– Installment Scheme: payment through 9 monthly
installments through electricity bills or salary
– Average savings per CFL > Average installment
• Secondary impact: non-participating CFL suppliers also
dropped prices
• Targeted Reduction: 13.5 MW (pilot), 117 MW (2nd Phase)
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IFC China Utility-based EE Finance Program
Project steps
Marketing
Energy Audit
Feasibility Study
Customer Decision
Engineering
Financing
Energy
Installation
Operations Equipment
Projects+
Services
Energy
Equipment
+ Service
Providers
Commercial & Industrial Customers
EE Project
Marketing+
Development
Gas/Electric
Sales
EE Project/
Equipment
Loans
Integrated Utility
+ Loan payment
Utility Gas/Electric Payments
Cooperation
Agreement
w/ qualified
companies
Typical Projects
•Boilers
•Cogeneration/Small Power
•Industrial Process
•Heating & Air Conditioning
•Refrigeration
•Compressors
•Lighting, Motors, Controls
•Engineering firms
•Installation Contractors
•Others…
Utility:
Customer
Service
Center
Loan Program Agreement
Bank
Loss Sharing
Facility
Program
Agreement
IFC
China Ministry of Finance + Government Support
Support from IFC & GEF
•Program Design
•Program Operations Cost Share
•Technical Assistance support:
for preparation of EE Projects
•Loss Sharing Facility
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Sustainable ESCO Financing
in AECo, India (IREDA Model)
Loan
IREDA
(Bank)
ESCO
Equipment
Lease
User
Repayment
Rental
with
Billing
Rental
First
Charge
Escrow
Account
Utility
Rental
Public-Private Partnership
Tripartite Agreement
Source: IREDA
65
U.S. Federal Energy Management Program (FEMP):
Super Energy Performance Contract Program
Qualified ESCOs
.…
Framework RFP
& Contract
Authorizing
U.S. Gov’t legislation
Energy
Conservation
Act 1992
loan or
lease
Individual
project
procurements
Energy
Performance
Contract
FEMP
Key Features:
• Common class of credits; ESCO
responsible for financing, but has
US gov’t pmt obligation
• $1.8 billion in projects
implemented in 18 agencies
• Shows power of pooled
procurements with lead agency
organizing market
.…
F.I.
Turnkey
projects; EPC
payments; w/
“termination for
convenience”
Federal agencies &
Facilities, e.g., Dept of
Defense
67
Source: J. MacLean @ IEEFP,
Catalyzing EE Investments
through Carbon Market
68
Carbon Prices – The Key?
Required price of CO2 to raise IRR by 1%
Source: ADB, 2005
69
Conclusions (1)
• Energy efficiency improvements have become top
priority for global and national decision makers
• EE is the best way to address climate change risks and
energy security concerns
• Thailand has had successes which needs to be scaled
up and diversified
• Substantial Role for Stronger EE Regulation and Policies
• Tracking, Measurement and Evaluation of Impacts is
Critical in EE Policy Development
• CDM incentives could be suitable for marginal EE
projects
70
Conclusions (2)
• Building Up on Existing Successes:
– Scale up the DSM momentum – at 1.3 cents/kWh and $63/kW it
is cost effective. Even though exceeded target, potential much
more than 1306 MW savings in 15 yrs – raise standards, make
them mandatory, and go beyond Lights, ACs, and Refrigerators –
to motors, pumps, compressors “Systems” approach
– Expand beyond ENCON Fund ($50M is still small)- Phase 2
(focusing on banks leverage) real test
– Energy Audit program – Link to actions / implementation
– Buildings EE – Expand beyond Public/Commercial buildings,
Improve codes
• Open Up New Avenues:
– Focus on oil and on transportation- the share of the annual ~61
mtoe final energy consumption is of oil of which 70% goes into
transportation
– Create enabling environment for ESCOs and financiers
71
For more information
on World Bank EE Projects…
http://www.worldbank.org/energy
72
Thank You
Ashok Sarkar, Ph.D.
Senior Energy Specialist
Energy Sector Management Assistance Program (ESMAP)
Energy and Water Division
The World Bank
Washington, DC.
[email protected]
73