Aug 29, 2007 - Renewable Energy
Focus
BONN, Germany, August 29, 2007.
Green power should receive a share of the US$148
billion that will be needed by 2030 to reduce GHG
emissions, according to the United Nations Framework
Convention on Climate Change.
The UNFCCC estimates that $200
billion a year is needed by 2030 to return to current
levels of GHG emissions, and $148 billion of the
$432 billion of projected annual investment in power
generation should be channelled to renewables, nuclear,
hydropower and carbon capture and storage, explains
the report, ‘Analysis of existing & potential investment
& financial flows relevant to the development of
effective & appropriate international response to
climate change.’ Industry must invest $36 billion
a year in energy efficiency and $45 billion for
research into new technologies, while $51 billion
a year is needed to make buildings more efficient
and $88 billion to improve transport.
Addressing climate change in the
next 25 years will require significant changes in
the patterns of investment and financial flows,
the study concludes. The additional investment and
financial flows in 2030 will amount to between 1.1
and 1.7% of global investment, and the additional
investment and financial flows of $200 to $210 billion
will be necessary in 2030 to return GHG emissions
to current levels.
The study will be presented to
UNFCCC delegates meeting in Austria for the final
session prior to the COP13 summit in Indonesia this
December.
“The study shows us that a conscious
effort to shift from traditional investment to more
climate-friendly alternatives will require governments
to adopt new policies and change the way they use
their funds,” says UNFCCC executive secretary Yvo
de Boer. “The required shift in future investment
and financial flows needs a combination of actions
by the intergovernmental process under the UNFCCC
and national governments.”
Of 140 mitigation projects proposed
in the energy sector, 103 involve switching to renewables,
25 deal with the efficient conversion of fossil
fuels to electricity and 11 suggest a switch to
lower-carbon fossil fuels. “Solar photovoltaic (grid
and off-grid), windfarms, biomass, and micro and
mini hydro plants were the most frequently mentioned
renewable energy technology needs.”
Increased energy efficiency also
limits the rate of growth of global electricity
demand under the mitigation scenario to 27,983 TWh
in 2030, and the mitigation scenario also assumes
a substantial shift in the global electricity generation
mix in 2030. Coal remains the largest source of
electricity but its share shrinks from 40% in 2004
to 26% in 2030, while gas-fired generation grows
to become the second largest source at 21% while
renewables, nuclear and hydropower each represent
17%.
Of the sources of funding for investment
in renewables and energy efficiency in 2005, private
investment “is by far the largest source” at $28.2
billion. “Since most of the investment occurs in
OECD countries, it is not surprising that ODA funding
for renewable energy is less than 4% of the total.”
Of the $26.8 billion invested in
renewables in 2005, $2.9 billion was provided by
venture capital and private equity investors, $3.8
billion via the public markets and $20.1 billion
was supplied through asset financing. The range
of investment activity reflects the different stages
of development of renewable technologies, with wind
power called the most mature technology and receiving
the highest proportion of asset finance ($18 billion)
while solar power received a high proportion of
public market investment ($2.2 billion) because
solar companies were raising capital to expand their
manufacturing capacity.
In developing countries, financing
for renewables and energy efficiency comes from
domestic sources (public and private) and from joint
ventures between local and foreign companies, reflecting
the higher investment risk of these countries. Multilateral
and bilateral funding is also a significant source
of investment in developing countries.
“Private investment is - and is
likely to remain - the main source of financing
for renewable energy and energy efficiency; consequently,
renewable energy has flourished in countries with
supportive policies such as feed-in tariffs, developed
financial markets and active private investors,”
it explains. “This situation is changing, particularly
in the fast growing emerging markets of China, India
and Brazil, which are attracting increasing flows
from foreign investors.”
Globally, energy subsidies total
$250 to $300 billion per year excluding taxes, with
non-OECD countries receiving the bulk of subsidies
and using them to lower prices for consumers. In
OECD countries, most subsidies are used for production,
usually in the form of direct payments to producers
or support for research.
“Worldwide, fossil fuels are the
most heavily subsidised energy sources; these subsidies
total an estimated $180 to $200 billion per year,”
the report notes. “Support to the deployment of
low-carbon energy sources currently amounts to an
estimated $33 billion each year: $10 billion for
renewables, $16 billion for existing nuclear power
plants and $6 billion for biofuels.”
The UNFCCC is the parent treaty
of the 1997 Kyoto Protocol.