Cutting Energy Waste in China, India, Brazil Could Avert Climate Change

PARIS, France, May 30, 2006 (ENS) - The hot economies of China, India and Brazil will more than double their energy use and greenhouse gas emissions within a generation with major impacts on global energy markets and the global climate, unless energy efficiency efforts are successful, according to new research published Monday.

But retrofits such as high efficiency lighting, air conditioners, boilers and waste heat recovery systems for commercial and public buildings, and industrial plants will keep costs down and provide profits while averting further global warming, the four year long study found.

"Improving energy efficiency for existing buildings and other infrastructure could cut current energy consumption by 25 percent or more in India, China and Brazil, amounting to millions of tons in reduced greenhouse gas emissions and hundreds of millions of dollars in energy savings," says Robert Taylor, a World Bank energy specialist and leader of the 3 Country Energy Efficiency Project (3CEE).

Conclusions from the project were recorded at a conference in Paris May 19 and 20 involving the project's public and private sector partners. An executive summary of those conclusions was published online Monday.

Initiated in 2001, the 3CEE Project has worked to promote energy efficiency projects in China, India, Brazil by easing typical investment requirements of financial institutions.

The project is a joint initiative of the World Bank, the UN Environment Programme's Risoe Centre, based in Denmark, and partners in Brazil, China and India.

The UN Foundation and the World Bank Energy Sector Management Assistance Program provided financial support, with complementary activities supported by the Asia Alternative Energy Program and the UK Department for International Development.

Geothermal heat pumps have been installed for heating and cooling the Beijing Concordia International Apartment Building. Dedicated in September 2001, this demonstration project was part of the U.S.-China Protocol for Cooperation in the Field of Energy Efficiency and Renewable Energy. (Photo by Ku Jean courtesy National Renewable Energy Lab (NREL))

Energy experts on the program estimate that cost-effective retrofits could reduce the three countries' energy use today by at least 25 percent.

Advanced technologies could reduce their energy use growth projected through 2030 by at least 10 percent and reduce projected carbon dioxide (CO2) emission growth by 16 percent.

Unlocking these potential savings requires simple, highly cost-effective renovation projects to identify and eliminate energy waste, the project analysts found.

The keys are fostering corporate awareness, supporting catalyst energy efficiency practitioners and enlightening commercial banks to ease access to local financing for such projects, they said.

"Many energy efficiency projects quickly pay for themselves, with typical returns on investment of 20 - 40 percent," says Chandra Govindarajalu, a senior World Bank environmental specialist.

"Despite the demonstrated benefits, though, companies often cite other, more immediate investment and borrowing priorities," Govindarajalu said. "Meanwhile, commercial banks in these countries are generally unfamiliar with financing projects designed to achieve cost savings, rather than develop new product lines or other tangible assets."

Despite the huge potential for energy savings, it has been difficult to achieve investments on the ground so far, the project summary concludes. Analysts found that roadblocks within companies include lack of awareness of and experience with newer energy efficient technologies.

High transaction costs for smaller sized projects, high perceived risk by decision makers; and a lack of combined technical and financial skills at finance institutions, prevent accurate appraisal and structuring of potential efficiency projects, according to project analysts.

Oscillating combustion technology can produce significant fuel savings, reduce NOx emissions, and can be installed a a simple retrofit, requiring no burner or furnace modification. (Photo by John Wagner courtesy NREL)

"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," he said.

He says the reluctance of companies to undertake energy retrofits is parallel to the resistance of millions of people worldwide who fail to buy energy efficient light bulbs for homes, despite proof that they save enough in utility bills to more than pay for themselves.

"Even people who know the financial and environmental benefits of the bulbs may not buy and install them – it seems like such a small thing, why take the trouble? But from a national or global point of view," said Taylor, "the potential savings add up to the electricity and pollution produced by many large power plants."

"Imagine, however," he said, "if I offered to install the efficient bulbs and guaranteed they would pay for themselves in six months or your money refunded. Perhaps then you might then buy a package."

Taylor concludes that China, India and Brazil and other rapidly developing countries need many people and consulting firms to do that same thing at the level of an industrial facility or apartment building - to identify energy efficiencies across the board and exploit large-scale energy use reduction opportunities, and "enlightened banks" to finance them.

Taylor envisions energy service companies (ESCOs), that design and implement energy conservation projects, or participating banks, will share costs and also share profits from a share of utility bill savings.

The Solar Energy Center in New Delhi, India, has installed 20 kilowatts of thin-film solar PV modules made of amorphous silicon, copper indium diselnide, and cadmium telluride to power lights, ceiling fans, computers, water coolers, and air conditioners. The systems supplied by U.S. companies are undergoing tests and data is being collected on all aspects of system operation. (Photo Peter McNutt courtesy NREL)

"It takes time and effort for local businesses, banks, governments and aid organizations to develop energy conservation delivery systems which work and which can be supported by the financial community," said Radka.

China, India and Brazil, already rank among the world's top 10 energy consumers with astonishing economic growth rates nearing 10 percent per year; they are on track to becoming the world's major greenhouse gas emitters.

Although today people in these three countries emit just 10 percent as much greenhouse gas per capita as do people in North America, their national emissions are rising far faster. China's emissions, for instance, are expected to double by 2020, in which case China will surpass the United States as the leading source of climate-altering gases.

"People worldwide have a vital interest in the success of this initiative to harness the power of the private sector to minimize the energy required for these three countries to realize their economic goals," says Jyoti Painuly, senior energy planner at the UNEP Risoe Centre on Energy, Climate and Sustainable Development.

Juan Zak, a project team member at the UNEP RISOE Centre, said, "Accelerated polar ice melting is the latest indication that severe climate change may be upon us. The current 380 parts per million of carbon dioxide in the atmosphere seem already too high. Roughly half of the global consumption of fossil fuels should be avoided if climate is to be stabilized. Using energy much more wisely is one of the very few feasible ways that, combined, would move the world towards this goal without economic disruption."

Brazil is the world's 10th largest energy consumer, yet its fossil fuel CO2 intensity per unit of energy consumed is low due to widespread use of renewable energy from hydropower, ethanol and other biomass power generation. But Brazil's overall energy intensity, measured as energy consumption per dollar of GDP, has been increasing.

The Usina Santa Elisa sugar mill in Sertaozinho, Brazil. Bagasse, a by-product of sugar production, can be burned for energy or made into ethanol. (Photo by Ralph Overend courtesy NREL)

Brazil's ESCO industry is the oldest among the three countries, with a "vibrant" national ESCO association (ABESCO), they said.

Brazil is among the few developing countries to have established a "wire charge," which streams a small portion of power companies' revenues into energy conservation and other public energy benefits.

India's potential energy efficiency market is estimated at more than US $3.1 billion, which would produce a savings of 54 terawatt hours per year. To help realize this potential, the Indian government established a Bureau of Energy Efficiency under its Energy Conservation Act to institutionalize energy efficiency services, enable delivery mechanisms in the country and provide leadership to key players in the energy conservation movement.

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, have developed new energy efficiency lending programs. Though small, the programs are growing and attracting increasing attention.

Indian banks have targeted small and medium enterprises, where energy waste is often particularly high, but knowledge about more efficient options and the financing to implement them is scarce.

"The Indian banks developed a particularly innovative 'cluster' approach for their energy efficiency lending businesses, " says Jeremy Levin, a World Bank consultant and project team member. "A series of template-type loans are being developed quickly for batches of projects using the same types of technical innovations in targeted small industries."

"There is much work to be done before the ESCO concept is widely accepted and practiced in India," says Levin. "One promising idea to help drive the market in India is to develop ESCOs specialized in reducing energy waste in government buildings, including hospitals and schools."

For all developing economies, the 3CEE Project recommends fostering the growth of ESCOs; promoting energy efficiency investments by local utilities; and developing special local bank lending arrangements to provide energy conservation financing.

View the executive summary of the report Energy-Related CO2 Emissions Growth to 2030 online at: http://3countryee.org

Visit the Risoe Center at: http://uneprisoe.org/