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Addressing Policy & Legal Framework
Selcuk TanatarMENA Sustainable Business Advisory
June 1, 2011
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AGENDA
• IFC’s CLIMATE CHANGE AGENDA
• MENA CLIMATE CHANGE CHALLENGES
• POLICY CHALLENGES AND APPROACH
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We foster sustainable economic growth in developing countries by supporting private sector
development, mobilizing private capital, and providing advisory and risk mitigation services to
businesses and governments.
Member of the World Bank Group
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IFC’s mandate:Helping Businesses Combat Climate Change
• Addressing climate change and environmental and social sustainability is a top priority
• In year 2010, IFC invested more than $1 billion in renewable energy and energy efficiency projects
• IFC climate change mitigation Advisory Services especially useful in middle income countries
Private sector solutions for climate mitigation / adaptation and inclusive development
Climate Business: technology, products and services that
“do more with less”
ENERGY: Low carbon generation, energy efficiency,
storage, smart grids.
TRANSPORTATION: Vehicles, systems, fuels and logistics
WATER: Capture, treatment, conservation, wastewater
treatment
AIR & ENVIRONMENT: Emission control, trading and
offsets
BUILDINGS: Low carbon strategy, energy efficiency,
sustainable materials.
MANUFACTURING: Green chemicals, RE/EE supply chain,
cleaner production.
AGRICULTURE & FORESTRY: Land mgmt, low carbon and
adaptation strategies, biomass.
RECYCLING & WASTE: Recycling and waste treatment services
Climate business will only scale and have impact with significant private sector participation – that is where IFC has an important
role to play
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MENAClimate Change
Challenges
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GHG emissions increased 118% since 1990 while world av. is 20% and Europe is 0%
Energy intensity is the worlds
second highest after Russia and 50% higher than
world average
MENA CLIMATE CHANGE CHALLENGES
Frequent power outages, 4-8
h/day in some countries leads to
prod. and sale losses
All countries under water
scarcity. Jordan and all GCC
countries under severe scarcity
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• Resource Efficiency:
• Facilitate investment in efficient use of energy, water and
materials
• Reduce resource
intensity and support low
carbon growth
• Clean Energy: • Demonstrate
commercial viability and removal of barriers for RE
SO, WHAT WE NEED TO DO IS...
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HOWEVER, IT IS NOT AN EASY JOB!
• Very high fuel and electricity subsidies across MENA
• Only energy scarce countries reflect costs or tax fuel – to a certain degree
High fuel, electricity and water subsidies, combined with lack of adequate regulation, are serious barriers preventing investments in energy efficiency and renewable energy.
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• Resource Efficiency:
• Facilitate investment in efficient use of energy, water and
materials
• Reduce resource
intensity and support low
carbon growth
• Clean Energy: • Demonstrate
commercial viability and removal of barriers for RE
WHERE IT MAKES SENSE?
In energy scarce countries,
• fully or in great part depending on fuel import,
• with declared policies for resource savings
In energy scarce countries,
• who have problems with access to (reliable) energy,
• with political will for renewable energy
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LEBANONPOLICY CHALLENGES
andOPPORTUNITIES
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WE KNOW THE IMPACT OF ENERGY SCARCITY…
• Oil import meets 94 - 96% of total primary energy supply
• Equivalent to US$ 4 billion (~ 15% of GDP)
• Of which great share is lost or costs not recovered
In Lebanon
• Daily black-outs are experienced between 3-8 hours more than 200 days/year
• Countered by the highest level of self-generation capacity in the region
• Leading to estimated,
• $ 400 million loss in profits for the industry, and
• $ 1 – 2 billion burden on the government budget
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AND THE GREAT POTENTIAL AND OPPORTUNITIES…
Solar thermal generating potential of 38,752 TWh/year
300 sunny days/year
Wind electricity generating potential of 6.1 GWh/year
Levelised costs:
Oil based electricity ~ 10 – 17 $c/kWh
Hydro, SWH and Wind ~ 5 – 15 $c/kWh
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POLICY BARRIERS IDENTIFIED GLOBALLY
Beck & Martinot, 2004
Costs and Pricing• Subsidies for
competing fuels
• High initial capital costs
• Difficulty of fuel price risk assessment
• Unfavorable power pricing rules
• Transaction costs
• Environmental externalities
Costs and Pricing Legal and Regulatory
• Lack of legal framework for independent power producers
• Restrictions on siting and construction
• Transmission access
• Utility interconnection requirements
• Liability insurance requirements
• Standards
Legal and Regulatory
Market Performance
• Lack of access to credit.
• Perceived technology performance uncertainty and risk
• Lack of technical or commercial skills and information
• Insecurity of the markets vs. long pay-back period
• Lack of awareness and incentives
Market Performance
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HOW MUCH OF THIS IS APPLICABLE TO MENA?
Costs and Pricing• Subsidies for
competing fuels
• High initial capital costs
• Difficulty of fuel price risk assessment
• Unfavorable power pricing rules
• Transaction costs
• Environmental externalities
Costs and Pricing Legal and Regulatory
• Lack of legal framework for independent power producers
• Restrictions on siting and construction
• Transmission access
• Utility interconnection requirements
• Liability insurance requirements
• Standards
Legal and Regulatory
Market Performance
• Lack of access to credit.
• Perceived technology performance uncertainty and risk
• Lack of technical or commercial skills and information
• Insecurity of the markets vs. long pay-back period
• Lack of awareness and incentives
Market Performance√
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THE LIST IS LONG, IT IS HARD WORK TO GET THINGS RIGHT, AND IT WILL TAKE
TIME…Denmark
Grass-rooters build first windmills
despite no regulation and
incentives
Mid 1970’ies 2010
Renewable energy sector meets ~ 29% of energy consumption
First windmill built for a hotel. Policy makers discuss
“who owns the wind”
Late 1980’ies 2023
Government targets to reach 20GW installed
wind power capacity
Turkey2005
Parliament enacts feed-in tariffs for renewable energy
Government starts incentivizing wind energy industry
Late 1980’ies
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FIRM LEVE
L
SECTOR LEVEL
COUNTRY/ REGIONAL
LEVEL
HIGH
LOW
HIGH
LOW
Policy/ Regulation
Need
Long Term Impact
..AS WE KNOW THE BIG IMPACT IS CREATED BY
POLICY AND REGULATION.
AND WORK UPWARDS,
BUT WE SHOULD NOT BE PESSIMISTIC…
WE CAN STILL MAKE
PROGRESS BY STARTING
WHERE IT IS EASIER..
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• Resource Efficiency:
• Facilitate investment in efficient use of energy, water and
materials
• Reduce resource
intensity and support low
carbon growth
• Clean Energy: • Demonstrate
commercial viability and removal of barriers for RE
EXAMPLES OF INITIATIVES
Support and incentivize REff Support auto/co-generation with renewable energy
FIRM LEVEL
Support to extend REff practices to firms in group, supply chains,
clusters, through NGOs, associations, etc.
SECTOR LEVEL
Incentivize REff through lead organizations such as utilities,
FIs, etc.
Improve the investment climate for renewable energy sector
COUNTRY/
REGIONAL
LEVEL
polic
y/r
eg
ula
tion
need
HIGH
LOW
Support off-grid / mini-grid systems based on renewables
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FIRM LEVE
L
SECTOR LEVEL
COUNTRY/ REGIONAL
LEVEL
HIGH
LOW
HIGH
LOW
Policy/ Regulation
Need
Long Term Impact
3. LINK THE DOTS, REMOVE
DISTORTIONS AND ENSURE
COMPETITION.
2. ENABLE EXPANSION THROUGH
“INTEGRATORS” AND SERVICE PROVIDERS
TO SUMMARIZE - WITH POLICY AND REGULATION…
1. EMPOWER AND SUPPORT
FRONT RUNNERS
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THANK YOU
Selcuk Tanatar (stanatar@ifc.org)
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