Low Carbon Energy & Developing Countries DFID Perspective & Research Priorities

Low Carbon Energy & Developing CountriesDFID Perspective & Research Priorities

Scale of the challenge

Scale of the challenge

• Lack of reliable power is already a critical constraint to growth in many developing countries

• 1.3 billion poor people do not have access to electricity

• Over the next decade the world will be forced to reassess its reliance on cheap fossil fuels, with many countries facing increasingly stiff competition

• Another 3 billion middle class consumers by 2030

• Increasing interdependence of food production with fossil fuels can rapidly transmit price shocks

Opportunities and Risks

Opportunities and risks

• Reducing emissions is much cheaper than costs of climate impacts

• But energy use and GDP growth are highly correlated

• Opportunities: annual clean energy investment overtaking fossil fuels

• Risks: high carbon lock-in could threaten future growth

New opportunities: clean energy is now mainstream


New opportunities: clean energy is now mainstream


New risks: high carbon lock-in


Focus on tackling market failures

Tackling market failures

• Private sector investment is crucial• But market failures and perverse incentives act as a

barrier• Public funding can be used to unlock opportunities,

lever investment, raise awareness and build regulatory capacity

Identifying market failures: low carbon development

People without access to electricity:

Africa = 587m

Asia = 799m

People relying on biomass for cooking:

Africa = 657m

Asia = 1,937m


Investment decisions: private ‘optimum’ is fossil fuels

Exploring market and government failures

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emissionsLow carbon emissions Zero carbon emissions

Lower carbon emissions but higher capital costs = barrier to deployment

Access to capital: real and perceived risks


• Uncertain or restrictive regulatory environment

• Business models are novel

• Technologies are poorly understood

• Servicing and maintenance concerns

• Supply chains undeveloped

• Lack of a (reliable) carbon price


Renewables$66bn Fossil Fuel

$409bn

Perverse incentives: Fossil Fuel subsidies create uneven playing field (2010)

Innovation: valleys of death


Source: Sagar A (2011)

Case study: Results-Based Financing for Renewables

20 Safaricom sites providing power to street lighting, schools, clinics & businesses

20 Safaricom sites providing power to street lighting, schools, clinics & businesses

Charging station for handsets

Charging station for handsets


Case study: LED lighting AMC


Case study: Green Africa Power (GAP)


Case study: Climate Public-Private Partnership (CP3)

Clean and renewable energy assets

Water treatment Land Use

Waste management

Transport

Energy efficiency


Case study: Energy Access Incubator


Knowledge: filling the gap

Opportunities for UK action

http://www.dfid.gov.uk/r4d/index.asp

Focus on DFID’s energy research pipeline…


Research Priorities…?

…and how to best to fill the gaps

Looking to scale up from annual spend of < £1m to ~ £12m per year by 2013/14.

Initial framing of possible energy research priorities…

Energy System Map / Energy Chains

1. (Energy for) Productive Power / Wealth Creation

How to increase clean electrification in SSA

Resource mapping for renewables (esp SSA: wind, geothermal, small hydro, solar)

Futures - Impact on growth, etc. when hit energy resource limits Alternative Biofuels

Growth impact of releasing energy constraint

Efficient conversion

Decentralised power

Business models for market centresUse by informal sector

Economics of Low Carbon Development

Cost effectiveness cf. coal

Barriers to energy efficiency uptake

Impacts of changing price structure

Models to attract PS financing

Implications of Domestic fuel substitution from biofuels

CCS (prob not)

Cleaner coal?

Large hydro in SSA?

Clean energy lending in MDBs

Rise of China

Low carbon opportunities, jobs, etc.

Spacial analysis

2. (Energy for) Households / Domestic use

Specific clean energy product development (with PS)


Who gets connected – industry or poor?

Major barriers to increased use of modern energy services? (sysRQ)

Innovation models – what works at scale?

Willingness to pay

Evidence of development, health, etc. impact

Political economy analysis / drivers of change

Clean cook stoves initiative?

PISCES - Bioenergy

Cooking Biofuels

Going to scale

Charcoal policies – what works?

Linking supply side resource analysis with demand side energy service analysis

Evidence on AMC, challenge funds, etc.

Biobriquettes

Models from other sectors (e.g. mobile phones)

Understanding demand for off-grid

Service model linked to mobile masts

Affordable access for poorer people

Priorities

Windows of opportunity (getting on with it)

Other Strategic/Business Cases: Clean Energy Research

Low Carbon Energy Research - Focus

1. Low Carbon Energy for Growth & Wealth Creation

• Solid bank of evidence on what works and what doesn’t in driving increased access to clean energy, a critical constraint to growth for industry and households, especially in Africa. A package of research focussed on catalysing increased investments in clean energy for wealth creation, including energy for transport.

2. Scaling Household Access & Private Sector Innovation

• Package of research programmes that stimulate innovation (focussing on the upstream ideas/invention end of the innovation chain) and strengthen the evidence base of private sector-led models to deliver sustainable domestic access to low carbon energy, at scale.

3. Future Energy Questions

• Stimulate thinking on the future energy for development research agenda - to initiate debate, identify key areas for investigation and prioritise the related research questions. Including our understanding of the impacts and policy/technology options for developing countries in response to energy resource scarcity.

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PISCES

M2M

Access to modern energy services

Bioenergy/biofuels

ESMAP

Low Carbon Energy for Growth & Wealth Creation

Bioenergy & Biofuels for Growth & Trade

• Biofuels/bioenergy reality check; doing first gen biofuels in a more sustainable way; potential muliti-win (food/fuel/fodder/fertiliser); and bioenergy policy/regulatory environment.

Low Carbon Energy for Wealth Creation (Access to Modern Energy Services)

• Focussed on research around off-grid, decentralised mini-grids, but also includes flexibility to pick up a few critical other priority energy research questions.

Scaling Household Energy Access & Private Sector Innovation

Clean cookstoves

• Consider building on evidence base after end of 18 months - if Global Alliance research elements have started well, we could support more critical research through this route..

Innovation

• Contribution to a low carbon innovation prize (focussing on the upstream ideas/invention end of innovation chain) a package of activities or international collaborative innovation facility.

Future Energy Questions

Stimulate thinking on future energy questions (including energy resource scarcity)

Clean Energy Research

DFID’s energy research pipeline…


1. Bioenergy & Biofuels for Growth & Trade

On bioenergy & biofuels…

• How to support a substantial package of research on biofuels and bioenergy for growth and trade, which genuinely informs the debate and avoids getting hijacked by either extreme?

• Overall balance/specific areas to focus for developing countries: e.g. doing first generation biofuels in a more sustainable way vs. third+ generation/algae/etc.; small-scale growers; local market vs export; choices & trade-offs; potential multi-win (food/fuel/fodder/fertiliser); bioenergy policy and regulatory environment; etc…

InputsCrops/Seeds

Land

Fertiliser/Pest./Energy

Climate

Trad Biomass & Forests

Grow it / Sell itLocal Livelihoods

Small/Large Scale

Local Markets

Jobs

Private Sector

Sell it / Use itTransport Fuels

Power

Heat

Other Products

Process it / Refine it

Refining Plant Oils (Biodiesel)

Fermenting Sugar & Starch

(Bioethanol)

Local scale

Move it / Trade itDirect uses of Biomass

Biofuels for

Local/Regional

Markets

Biofuels for

Export/Trade

Distribution

Infrastructure

Bioenergy/Biofuels System Map (for mapping research)

InputsCrops/Seeds

Land


Climate



Small/Large Scale

Local Markets

Jobs

Private Sector


Power

Heat

Other Products




(Bioethanol)

Local scale


Biofuels for

Local/Regional

Markets

Biofuels for

Export/Trade

Distribution

Infrastructure

Choices & Trade-offs / Sustainability (social, environmental, economic) & Impacts (incl. food, GHG, jobs, growth, etc ) …

Improving Efficiencies & Yields / Identifying Potential Resources …

Viewpoint? Export Market / Local Market / Energy Security / Future trends …

Institutions / Policies / Capacity / Who benefits …

Bioenergy/Biofuels System Map (for mapping research)C

ross

C

utt

ing

InputsCrops/Seeds

Land


Climate



Small/Large Scale

Local Markets

Jobs

Private Sector


Power

Heat

Other Products




(Bioethanol)

Local scale


Biofuels for

Local/Regional

Markets

Biofuels for

Export/Trade

Distribution

Infrastructure

~ $15 b ~ $ 90 b ~ $ 30 b

Value Chain Revenue Potential (WEF 2020)






ross

cu

ttin

g< Rich country focus

Poor country focus >

~ $ 10 b Transport Fuel ~ $ 80 b

Power + Heat ~ $ 65 b

Chemicals ~ $ 6 b

InputsCrops/Seeds

2nd & 3rd gen

Algae, etc..

Food + Fuel crops

Best suited local crops

Land

R

LUC + ILUC

Map resource potential

‘Marginal’ land?


GHG balance

P

Climate

R

Trends/Resilience/Water


Forestry wastes

Deforestation

Firewood & Charcoal

Wastes (manure & crop)


Diversification

Livelihood Assets

+

Livelihood Strategies

Small/Large Scale

R

P

P

Local Markets

R

P

Jobs

R

P

Private Sector

R

P


Vehicles: Biodiesel

Vehicles: Bioethanol

Aviation

Shipping

Blending

FF price shocks

P

Power

RR

P

Heat

Industrial heating

P

Domestic Cooking

Biogas

Other Products

Chemicals, etc.

P



R

P


(Bioethanol)

Improving Effic.

P

Local scale

R

Local processing cap for bioD/bioE

Biogas digester


Bulky biomass for power generation

Biomass for local markets

P

Biofuels for

Local/Regional

Markets

R

P

P

Biofuels for

Export/Trade

R

Exports

P

Distribution

Infrastructure

R

P

~ $15 b ~ $ 90 b ~ $ 30 b

Value Chain Revenue Potential (WEF 2020)






ross

C

utt

ing

< Rich country focus

Poor country focus >

~ $ 10 b Transport Fuel ~ $ 80 b

Power + Heat ~ $ 65 b

Chemicals ~ $ 6 b



2. Low Carbon Energy for Wealth Creation ‘Access to Modern Energy Services’

Low Carbon Energy for Wealth Creation ‘Access to Modern Energy Services’

Systematic Review: Barriers to increased use of modern energy services?

a) What are the major barriers?

b) Are interventions to overcome these effective?

- Economic

- Technical

- Political & Institutional

- Cultural & Social

Low Carbon Energy for Wealth Creation ‘Access to Modern Energy Services’

Households & Communities

Urban & National

On Solar…

• Major investors’ interest in large scale solar in developing countries - what research is needed to maximise the development impact from these investments?

• Implications of the falling cost of PV? How can Africa benefit; and do so quickly and at scale?

• What role could UK research play in a major UK ‘solar initiative’ for Africa?



3. Clean Cookstoves



4. Stimulating Innovation

What is climate technology innovation?

• DFID & Innovation (SoS, PSD, Innovation Hub, DPC, etc.)

–DPC (Nov 2011): “Successful innovation is the creation and implementation of new or improved processes, products, services, methods of delivery or other aspects of the business model that result in significant improvements in impact, outcomes, efficiency, effectiveness or quality.”

–SoS (Beyond Aid, Nov 2011): “…we’re spearheading innovation in clean energy and in developing the technology that will allow poorer countries to adapt to floods, droughts and other climatic events.”

What is climate technology innovation (2)?

Who is innovating out there? What?

–New, breakthrough technologies with global benefits;

–Develop and deploy new technologies for developing country needs (with no obvious need in developed countries);

–Local capacity to adapt and modify currently available technologies for local markets.

What is DFID’s response?

• Climate Innovation Centres:–India, Kenya, Ethiopia, Vietnam, South Africa, Ghana

• Global, collaborative R&D:–Linking developed and developing country private sector

and academics/researchers

• Innovation Prizes:–Do they work? VFM?

–@ Large scale (e.g. X Prize, Grand Challenges, etc.)

–@ Smaller scale: Incremental + local/national competitions

Innovation prizes

• Upstream R&D, idea generation…

• …through to deployment and diffusion of ideas.

• Country office experience: DFID-Caribbean

Innovation


Prizes Prizes

Research need: deployment models (social/ financial) RESEARCH CALLS

Research need: tech R&D

Flexible fund: to scale/support local innovation already happening - find and finance

RED Climate Technology & Innovation Support Package

a. Innovation prizes – to focus on both upstream idea / technology generation and downstream technology deployment.

b. Flexible innovation fund – to ‘find’ innovators (not via competitions/prizes, but through networks, interest groups) and fund interesting, risky ideas.

c. Research grants – for various specific research questions on innovation (both the development of new technologies and the deployment models for available technologies) to be addressed.

d. Humanitarian Response Technologies: Innovation Challenges – £5m to proactively catalyse innovative technologies for non food items (NFIs) in humanitarian responses (including WASH technologies).

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Documents

Low Carbon Energy & Developing Countries DFID Perspective & Research Priorities