A Vision for Clean Energy in Asia

There once was a legendary industrialist who was notoriously protective of his privacy. So it came as a shock to a young reporter when he granted her request for an interview – on one condition: she could only ask three questions.

When the day of the interview arrived, she sat down and said: “You are one of the most successful people in the world and your business has redefined industry. What has made you so successful?”

He replied: “Good decisions.” She waited and waited but he said nothing else. She reflected a bit and then asked: “Well, how did you make such good decisions?”

He replied: “Experience.” She was beside herself. Two questions and he had answered with only three words!

So she thought long and hard about her last question: “How did you get this experience?”

The man replied, with a wry smile, “Bad decisions.”

This story captures an important message for me from this conference. Bold goals and big success require the ability to take risks and learn from mistakes. This will be especially true for all of us here committed to working towards a virtually zero-carbon economy.
However, the challenge we face is that we don’t have much time.

  • According to the IPCC, global GHG emissions should peak by 2015 – that is in 5 years—if we want a fighting chance to keep climate change below 2 degrees.

  • According to the International Energy Agency (IEA), investment in clean energy will need to exceed $2.2 trillion dollars over the next 10 years above the reference scenario.

  • We must meet these goals while still addressing major development and energy poverty challenges, including the spiraling energy needs of developing countries.

This conference has been a terrific platform to share what works, what doesn’t and what we can learn from each other. I’d like to offer a few lessons and insights that came through for me – and which I believe are essential if we are to succeed in fostering a clean energy revolution.

1. “Loud, Long and Legal”: The Right Policies for Clean Energy

To meet this challenge, we need clear and ambitious policy to promote clean energy, and we need to be able to learn as we go. The message of the Bonn Conference on Renewables about six years ago showed that policy needs to be loud, long and legal if we are to drive investment in clean energy.

We need processes to allow us to adapt and improve policy over time while providing the necessary level of predictability to investors.

This message is consistent with recent research from WRI and the Peterson Institute for International Economics on the wind and solar sectors. We found that new wind and solar investments were tightly correlated to government support policies. When strong and predictable incentives for clean energy were put in place, investments went up. When incentives expired or were canceled, clean energy investments collapsed.

We know that policy is critical for building clean energy markets. But we also know that we won’t always get policy design right from the start. Spain is a stark reminder of this. In 2007, Spain introduced ambitious feed-in tariffs that stimulated solar investment. But the scale of the subsidy was seen by some as too expensive, and there was pressure to remove it. When the government drastically reduced the tariff and set a rigid annual capacity cap to limit the number of eligible projects, solar investment collapsed. That is why we need processes to allow us to adapt and improve policy over time while providing the necessary level of predictability to investors.

In this regard, one thing that the ADB can do is scale up its efforts to help client countries improve the transparency, inclusiveness and accountability in policy and regulatory processes. This was one of the main conclusions reached at the dialogue on clean energy governance earlier this week.

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