Risk Governance of Energy Transition Nadejda Komendantova
R
International Conference Renewable Energy Applications for a Sustainable Agriculture December 2-4, 2014, Tunis
Potentials of renewables for energy transition (globally)
Cho, Science, 2010
Source: IPCC WGIII AR5
Allocation of GHG emissions across sectors and country income groups
Sources: International Energy Agency, German Aerospace Centre
TWh/
year
Solar potentials in Europe and North Africa
Benefits for MENA from developing renewables
• Supply for local demand • Diversification of energy
sources • Technology transfer • Impulses for socio-
economic development • Export revenues from
energy trade (Europe, Asia and Sub-Saharan Africa)
Incentives to deploy solar energy in North Africa
Public MSP, Transgreen
North African national and
regional targets and incentives
Private DII, Sahara Solar
Forest, join ventures, small scale
There are several on-going public, private and local incentives to deploy solar energy in North Africa. What are the impacts from these incentives? What are the risks for their realization?
On-going efforts to deploy renewable energies in the region. What are impacts and risks from their realization?
International
Regional public
Regional private
National private and
public
Top-down
Bottom-up
Existing institutions do not sum up to a coordinated governance approach (Fritzsche et al., 2011)
Risks and uncertainties
Climate and energy security
Socio-economic security
Environment security
Risks for security of energy supply Public acceptance of new energy technologies Impacts on costs of energy
Multiplier effects from investment on local economy Employment creation in solar industries
Water use and water scarcity Land use and property rights Impacts from desalination
We need holistic and interdiscip-
linary approach to governance
to bring different goals
together
Energy transition in MENA region
requires not only technical and economic capabilities But also understanding of governance of the transition process, including decision-making, institutional structure, uncertainties, acceptance and risks perceptions of different stakeholders
Transformation of energy systems
Local solutions and practices based on best cases
POLITICAL WILL
Energy sector: drivers and barriers
SCIENTIFIC EVIDENCE
Costs of energy system transformation
ECONOMIC & CIVIL SOCIETY
PARTICIPATION
Who:
Government, investors, civil society Action: Including
stakeholders feedback
Policy options: addressing social, economic and environment concerns
Key Influence: climate, energy and
socio-economic security
Problem: Transformation of energy system and addressing lock-ins
Focus:
Participatory governance
Government Policy
Investment & Finance
Infrastructure & Planning
Market Structure
Supply Chains
Generation Capacity
Grid Capacity Demand
Enabling Areas
Delivery Areas R&D
Energy transition and need for governance
But we also need to understand expectations of different stakeholders to make governance policies robust and sustainable
Expectations on renewable energy
projects
Private sector Perceived risks for
investment
Public sector Drivers for growth such as multiplier
effects from investment and jobs
Inhabitants Public acceptance and
awareness issues
Operationalizing research on governance is more than communicating scientific results to policy-makers and analyzing how these results are perceived and implemented
But it is also
• working with stakeholders to co-generate actionable knowledge
• analysis of how governance structures shape decisions and outcomes
• research on decision-making processes, public acceptance, risk perceptions, cognitive biases and cultural perspectives
Actions, processes and institutions to
implement decisions (IRGC,
2011)
Principles of cooperation, participation and effective
risk management (Renn, 2008)
Systemic approach to positions of stakeholders (Thompson,
2006)
• Why is it important to understand perceptions of risks, expectations and concerns of stakeholders?
• They can be a barrier for deployment of RES
• Make it more expensive
• Can impact implementation of RES deployment strategies
• Successfully addressed can be a driver for stability and growth in the region
Few examples are following
Cost of energy is influenced not only by availability of resource but also by weighted costs of capital
Effect of GHI on LCOE per country (US$2011/kWh):
Source: Ondraczek, Komendantova and Patt, FNU Working Paper, 2013
Effect of WACC on LCOE per country (US$2011/kWh):
Source: Ondraczek, Komendantova and Patt, FNU Working Paper, 2013
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
Europe Algeria Egypt Morocco Tunisia
environmental
operating
construction
financial
force majeure
technical
revenue
political
regulatory
Euro area rate
The financing cost gap
The weighted average cost of capital (WACC) for CSP investment in North Africa compared to the Euro area WACC
+4.3 pp +5.0 pp
Source: Schinko and Komendantova 2014
0.00
0.05
0.10
0.15
0.20
0.25
0.30
0.35
0.40
North Africa(mean)
Europe North Africa(mean, withEuropean
financing costs)
Europe withNorth African
financing costs
[USD
/kW
h]
LCOE for CSP investments in Europe and North Africa: alternative financing costs
Levelized costs of electricity (LCOE) for CSP electricity generation in the North African region (mean) and Europe (in USD/kWh): the Status quo (first and second column) and for alternative financing cost
Source: Schinko and Komendantova 2014
Can renewable energies (RE) be a driver? Multiplier effects on economy and job creation processes
Expectations of public sector stakeholders: growth and jobs
GDP growth (annual %) in 2001-2009
Unemployment, total (% of total labor force)
0
1
2
3
4
5
6
7
8
9
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
AlgeriaEgyptMoroccoTunisia
0
5
10
15
20
25
30
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
AlgeriaEgyptMoroccoTunisia
Source: World Bank Development Indicators, 2012: African Development Bank, March 2012
Transfer of renewable energy technologies (RET) • Transfer of RET to developing countries is one of the most
important objectives to industrialize (Romer, 1990) and to limit GHG emissions in these countries (UNFCCC and Kyoto Protocol)
• It is crucial to accelerate the spread of RET in non-OECD
countries (IEA, 2010) • Several forms of RET transfer possible: joint ventures, foreign
direct investment, governance assistance programmes, direct purchases, joint research and development programmes, franchising and sale of turn-key plants (IPCC, 2000)
Vertical RET • New RET are given via investment to a target group • Transfer of know-how to local manufacturers and
technological spillovers are limited (Jabbour, 2005) • Example: large multinational corporation sets factories in
developing countries to bring down costs of production • Managers and technical staff are nationals of developed
countries, general workforce is from developing country
Horizontal • Formation of joint ventures between foreign and local
companies, including technical and business training • More lengthy process but allows embedding of technology
within local population and economy (Gallagher, 2006) • More preferable for local economies as skills and knowledge
are transferred but makes it more difficult for foreign companies to protect their design and to control quality (Pack and Saggi, 2001)
Source: World Bank, 2009; IEA, 2009; SolarPaces, 2003
Jobs created from vertical and horizontal RET
Jobs years per 100 MW 0% 40% 60% 100%
Planning and Construction 74 83 146 151
Materials and Components 126 240 284 463
Total Direct Jobs 200 323 430 614
Induced Jobs 1.520 2.455 3.268 4.666
Source: Komendantova and Patt, Renewable and Sustainable Energy Reviews, 2014
Expectations on growth and jobs can be realized but with deployment of manufacturing RES components industries
0100200300400500600700800900
1000
0% NREL(California)
100% ESTELA
Direct JobsInduced Jobs
Source: Komendantova and Patt, Renewable and Sustainable Energy Reviews, 2014
Thou
sand
s jo
b-ye
ars
Example solar: collector assembly and installation, ground works, production of mirrors and receivers Local share of value chain: short term 17%, long term 80% (GIZ, 2011)
Impacts from investment into solar projects on GDP much higher than on income
Type of Multiplier
Base scenario (current level of investment)
Desertec scenario
Local scenario
GDP 1.62 2.12 1.67
Income 2.15 2.19 2.04
Output 4.04 4.32 4.46
Source: Bakr and Komendantova, Jorurnal of Renewable Energy Research, 2014
Public acceptance is already a barrier for deployment of RES
MENA could profit enormously from RES development But for this to happen right policies in place are needed
Impacts of renewable energy development
• There are numerous initiatives to develop renewable power in MENA countries, for local use and for export. Activity to date has been strongest in Egypt and Morocco.
• ETH and IIASA plan to provide scientific guidance to ensure that such development provides the greatest possible benefits, particularly to people in MENA countries.
2016 2017 2013 2014 2015 Energy security
Human development
Local environmental quality
Out
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• Nine narrowly defined one-year research projects, leading to separate journal articles.
• Scenario specification, data collection in situ and online, statistical analysis, numerical modeling, writing.
• Separate and integrated policy appraisals, to be precisely defined.
• Stakeholder dialogue, numerical and conceptual modeling, historical case study evaluation, writing.
Tasks
Objectives
Contact Information Nadejda Komendantova [email protected]