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An Institutional Analysis Of the Transition to Renewable Energy
NTRES 431
Environmental Strategies
12.16. 2004
Sinon Bamidaaye, Jim GoetzNora Lovell, Grant MacIntyrePaswell Marenya, Jong O SunIsaiah Sutton
Contents
Introduction
Institutional ActorsNGOsThe MarketThe Government
Conclusion
Contents
Introduction
Institutional ActorsNGOsThe MarketThe Government
Conclusion
Introduction
12% increase in 30 years
320ppm
370ppm
Introduction
Source: IEA
Introduction
Source: IEA
Proved oil reserves (2003)
Source: BP
Proved natural gas reserves (2003)
Source: BP
Proved coal reserves (2003)
Source: BP
Major oil trade movements
Source: BP
Crude oil prices since 1861
Source: BP
Fossil fuel reserves-to-production (R/P) ratios (2003)
Source: BP
Primary energy consumption per capita
Source: BP
Peak Oil Production
Source: BP
Contents
Introduction
Institutional ActorsNGOsThe MarketThe Government
Conclusion
Developed NationsIn the U.S. 6% energy = renewable (IEA 2003)Predominately Nonrenewable Energy(Nuclear, Fossil Fuels)
Centralized distributionCapital IntensiveEnvironmentally Destructive
Shift to Renewable Energy unlikelyExisting infrastructureHigh Initial InvestmentPath dependencyEntrenched capitalism
Developing Nations
2 Billion people live without Electricity(NGO Renewable Energy Initiative)Best Option = Renewable Energy (Wind, hydro, solar, efficient biomass)
Easily DistributableLabor IntensiveNaturally sustainable
Shift to Renewable Energy Sourceslikely with Institutional Reform
Role of NGOsNGO= Organizing Institutional Structure in Developing Nations
Underdeveloped marketsUnrepresentative / Corrupt Governments
The Goal of many NGOs is to improve quality of life via
Infrastructure Human CapitalFinancial CapitalNatural Capital
Case Studies - Togo
Source: CIA
Case Studies - Togo
Mainly use biomass as a energy source
Cut down trees (tragedy of the commons )Great possibility of using RE
Solar, water, wind etc.Government Corruption is main obstacle of shiftNGO can important role
Case Studies - Light Up The World
Source: Light Up The World Foundation
Micro Economic Reform
NGOs promote Renewable Energy Sources via Micro Economic Reform
Lending groups (LUTW)Installment Plans for consumer goods (purchase of cook stoves in Togo)Loans @ reasonable interest ratesIndividual Crediting policies
Macro Economic ReformMacroeconomic Reform as a Result of Renewable Energy
Renewable Energy = Labor IntensiveShift from agriculture to sustainable industryIncreased worker productivityIncrease Gross Domestic Product
90% of export earnings in pay for imported oil (LUTW)less National Debt
renewable energy = economic sovereigntyreduced imports = government funds available for national investment
Education/ infrastructure/ health care
Future of RE in Developing Nations
“Fortune @ the bottom of the Pyramid” (Philips)4 billion people(2/3) of the world populations live with out adequate energy provisionSuccess of NGO = market and profit opportunity
Contents
Introduction
Institutional ActorsNGOsThe MarketThe Government
Conclusion
Shifts for renewable energyIncreasing energy costs and environmental degradation will make conventional energy sources less attractive.
Fossil Fuel scarcityIncreased production costsPollutionDeteriorating healthThe threat of global warmingGeneral environmental destruction
Catalysts for changes in the market
Energy resource scarcityoil gone within a centurygas possibly gone as soon as 2025
New technology
Social and personal priorities
The Future of the Market (1)Will the shift be an orderly sweeping transition or a series of incremental changes over time?What innovative technologies will lead the market?Will incumbent industries lead the transformation or will new market entrants gain consumer favor?How quickly will the market transform as an institution?
The Future of the Market (2)
Where will the pressure to change originate?Will industries shift to renewable energy systems to avoid government regulation?Will profit motives drive corporations to seek new markets?Will consumer demand lead the transition to safer, greener, cleaner, more efficient energy?
Case Studies - Shell
Source: Shell
The Market Incentives for the Shell Group
Governments raising the bar
New more efficient technologies and firms
A global call for sustainability, corporate accountability, and safe energy
The most powerful catalyst will be social and political pressure
Contents
Introduction
Institutional ActorsNGOsThe MarketThe Government
Conclusion
Policy Makers’ ViewBenefits
Source: IEA
Policy Makers’ View
WeaknessStill not competitiveSmall portion of energy mix
“Government Policy” is Important
Source: IEA
Policy InstrumentObject of Policy
Classification Policy Instrument
Reduce Costs R & D, Market Development/ Project support, Feed-in Tariffs
Transition Portfolio Targets, RE Certificates/ Green Power
Market RuleTax Treatment, Environment Programs, Distributed
Generation, Regulatory Reform, Empowering Customer Choice
Policy Process & Outreach Education, Information Program etc.
Policy InstrumentObject of Policy
Classification Policy Instrument
Supply and Capacity Investment Tax Credit, Property Tax Exemptions, Capital Grants, Government Purchases, Third-party Finance
Supply and Generation Bidding Systems, Production Tax Credits, Guaranteed Prices, Feed-in Tariffs, Obligations, Tradable Certificates
Demand and Capacity Customer Grants/Rebates, Tax Credits, Sales Tax Rebates, Third-Party Finance
Demand and Generation Net Metering, Green Pricing, Voluntary Programs, Government Purchases, Exercise Tax Exemption
Etc Regulatory and Administrative Rules, Public Awareness Programs
Evolution of Policy (IEA countries)
Source: IEA
Case Study – Tax ShiftingUnited Kingdom
Exempt Climate Change Levy for RE(2001.4)Netherlands
energy tax exemption, deregulation, and marketing campaigns number of customers: tripled in just one year
Germanycomprehensive ecological tax reform law (1999.3)renewable energies law (2000.2)
Case Study – Obligation & Trading
Portfolio TargetsGuarantee minimum market size & implementation schedule Reduce regulatory uncertainty & attract private sector investment EU: 12% share of overall energy by 2010Australia: mandatory portfolio target coupled with a TRC market
Case Study – Obligation & TradingTradable Renewable Energy Certificates (TRCs)
Liable entities are mandated to generate or use a certain percentage of renewable electricityCertificates are issued by the generators and must be surrendered by liable entities to prove complianceCertificates are traded separately from the electricityReduce technology costs and to increase efficiency in production
Main Factors for Successful Policy
Constant and predictable governmental support
Policies should be developed and applied uniquely Proper combination of policy instruments is needed
Policy assessment based on a full-cost accounting analysis
The Bush Energy Plan
Heavily anchored in market-based incentivesFocused on protecting financial institutions such as corporations and farmsIncrease in funding for renewables of 39 million dollarsTotal spent importing oil each year: 20 billion dollarsDoes not provide sustainable future, more renewable focus is necessary.
Contents
Introduction
Institutional ActorsNGOsThe MarketThe Government
Conclusion
ConclusionsWorldwide need for a shift towards renewable and sustainable energyGovernment policy is the best means to achieve the shift in developed nationsNGOs are institutionally positioned to bring about renewable energy in developing nationsMarket Institutions will adapt to changing social demands
Discussion
