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Energy-Hungry Nations Also Most Wasteful
Published on Tuesday, May 30, 2006 by the Inter Press Service
Energy-Hungry Nations Also Most Wasteful
by Stephen Leahy

BROOKLIN, Canada - China, India and Brazil could cut their rapidly rising energy use and greenhouse gas emissions by more than 25 percent using existing energy efficient technologies.

Despite the potential cost savings, conservative bankers are reluctant to loan money to fund improvements in energy efficiency, an international study said Monday.

With a combined population of 2.6 billion people, economic growth rates nearing 10 percent per year and soaring energy use, China, India and Brazil are on track to become the world's largest emitters of greenhouse gases.

China will overtake the United States as the leading source of climate-altering gases before 2020, said the three-nation report led by the World Bank and the U.N. Environment Programme (UNEP), and funded by the U.N. Foundation.

"Cutting energy waste is the cheapest, easiest, fastest way to solve many energy problems, improve the environment and enhance both energy security and economic development," said Robert Taylor, an energy specialist at the World Bank who led the study.

Without significant gains from energy efficiency efforts, these countries will more than double their energy use and greenhouse gas emissions within a single generation (by 2030) with major impacts on global energy markets and climate, Taylor said.

Experts estimate that cost-effective retrofits could reduce energy use today by at least 25 percent and advanced technologies could reduce their energy use growth projected through 2030 by at least 10 percent (and reduce projected carbon dioxide emissions growth by 16 percent), the report noted.

Massive investments are being made in new energy sources like wind power and nuclear plants, but similar investments in energy efficiency are lagging far behind, said Jeremy Levin of the World's Bank's South Asia Environmental and Social Unit.

China's investment in energy supply will require an average 48 gigawatts of new capacity every year, equal to two-thirds of Britain's total installed capacity. But that investment is more than 18 times greater than investment in efficiency, according to an analysis by the Lawrence Berkeley National Laboratory in California.

"Improving energy efficiency doesn't have the same sizzle as building a new power station for most countries, but it's the most important strategy in the medium term," Levin told IPS.

Such improvements involve installing, for example, high efficiency lighting, air conditioners, boilers and waste heat recovery systems for commercial and public buildings, industrial plants and other facilities.

"Local banks lending to the private sector is the key to energy efficiency," he said.

Unfortunately, energy service companies that design and implement energy conservation projects are a relatively new concept in China and India, and bankers won't loan them money, says Mark Radka, head of the UNEP Energy Branch.

"Bankers are very conservative in these countries, and no one wants to be the first to try something new," Radka said in an interview from his Paris office.

Energy efficiency projects quickly pay for themselves, with typical returns on investment of 20-40 percent, and are very common in the industrialised world. However, the business model is unusual in that it is based on the energy service companies (ESCOs) receiving their income as a share of a company's utility bill savings.

To convince reluctant bankers, the Bank and UNEP launched the "3 Country Energy Efficiency Project" (3CEE Project) in 2001 to organise workshops and create pilot projects.

The World Bank and the Global Environment Facility offered Chinese bankers firm loan guarantees to fund three ESCOs. Support included training, educating potential clients, showing senior bank officials how to evaluate ESCOs, and working with state tax officials and auditors.

"We were creating a new way of doing things and it could have easily died if not for the strong support of the central Chinese government," said Taylor.

By 2005 this new industry had rapidly grown to 52 ESCOs putting into place over 300 energy efficiency projects representing an investment of over 200 million dollars. The energy savings were equivalent to 2.46 million tonnes of standard coal and an annual decrease in carbon dioxide emissions of nearly seven million tonnes.

"We were told many times this would never work in China because the concept was too novel," said Taylor in a statement. "However, Chinese entrepreneurs have proved very nimble in adapting the concepts to the Chinese market to both make profits and save energy."

India's energy efficiency market is estimated at more than 3.1 billion dollars, which would produce a savings of 54 terawatt hours per year. Introduced to the energy efficiency business through the 3CEE Project, five of India's largest banks holding 35 percent of the country's total bank assets developed new energy efficiency lending programmes.

Banks are beginning to understand that they can make money working with ESCOs, said Jyoti Painuly, senior energy planner at the UNEP Risoe Centre on Energy, Climate and Sustainable Development in Denmark.

"India cannot meet its present energy demands. Big cities like Delhi are sometimes without power for more than six hours a day," Painuly told IPS.

Still, the ESCO concept has not made much headway yet, despite the benefits of energy savings and even improved air quality, he said. Much of India's energy -- and China's as well -- is generated by badly polluting coal power stations.

One promising idea is to reduce energy waste in government buildings, including hospitals and schools, as has been done in the United States and Canada.

"India's public infrastructure is amongst the most inefficient," Painuly said.

Brazil's ESCO industry is the oldest among the three countries, but it is still very small. The main reason is that Brazil's history of hyperinflation has made banks extremely cautious about making loans to private industry, the report found.

A series of workshops, training, information exchanges between Brazil, India and China and energy and finance experts has recently convinced the Brazilian Development Bank to offer a new guarantee program to assist ESCOs. It will accept 80 percent of loan risks on accepted energy reduction projects.

"People worldwide have a vital interest in the success of this initiative to harness the power of the private sector to minimise the energy required for these three countries to realise their economic goals," said Painuly

"What we must develop further are systems to tap huge potential energy savings through thousands of small projects scattered across China, India, Brazil, as well as smaller developing country economies," concluded Taylor

Copyright © 2006 IPS-Inter Press Service


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