FEATURE - Renewable energy relegated to niche play in Asia

In a region where millions of people have no access to electricity, experts say renewables will not be used for large-scale generation in the foreseeable future unless governments introduce subsidies and legislation to support them. But solar, wind, geothermal or biomass might find a niche in electrifying Asia\'s many scattered rural communities. \"Progress in alternative energy in Asia is not going as fast as we want but it is not static,\" said Athena Ballesteros, campaign director for Greenpeace Southeast Asia. \"In rural areas, it is advancing well but not widely commercially. There\'s a perception that renewables are small, like a toy, and only feasible on a decentralised basis, like on islands or in the countryside.\" The Paris-based International Energy Agency (IEA) reckons that as of 2000, 40.8 percent of people in South Asia had access to electricity, while in Southeast Asia and north Asia, excluding Japan, the rate was more than double at 86.9 percent. That translates into more than one billion people without access to power, largely in rural communities, in 2000. \"The renewable resource potential in Asia is large. However, compared to OECD countries, the lack of market support programmes in Asia translates into weak growth,\" said a spokeswoman for Royal Dutch/Shell Group. Even in developed economies, renewable energy has yet to gain commercial appeal although these countries can better afford to subsidise green energy. In the United States, renewable energy accounted for six percent of total consumption in 2001. FUNDING CHALLENGE Many Asian countries are struggling to upgrade inefficient and dilapidated transmission grids and fossil fuel plants. Funding for new power projects fell after the 1997 financial crisis when many international players pulled out of the region and banks closed their doors to high-risk investments. Getting financing for renewable plants, which have yet to prove profitable, is proving a challenge. Environmental lobby group Greenpeace has urged governments globally to increase the share of renewable energy to 10 percent of total consumption from two percent now and to shift 20 percent of all energy investment to renewable sources. \"Affordability is linked to investment and trade incentives. If investments are switched and the playing field is levelled, then we have a chance,\" said Ballesteros. Commercial banks have largely shunned renewable projects but development banks have proved friendlier. The World Bank\'s lending to energy efficiency and renewable schemes made up about 64 percent of total energy financing in 2001 and 2002, up from 16 percent in the 1990s. \"It\'s not a core function because we\'re not an environmental agency, we\'re a development agency. But we want countries to grow economically in an environmentally sound way,\" said Kristalina Georgieva, the World Bank\'s environmental director. The Asian Development Bank (ADB) in October approved a $33.1 million loan to develop biomass power generation in rural China and also has funded projects in India and Indonesia. \"In this (latest China) case, it was a way to develop the rural sector to improve living standards and alleviate poverty,\" said Yuen Loh Yee, ADB agriculture sector economist. RENEWABLES TOO COSTLY Shell, which has committed up to $1.5 billion to renewable programmes by 2006, estimates power generated by biomass - agricultural waste - costs about 1.5 times more than from coal, gas or oil, while solar energy costs four times more. But the company said costs were declining, which should boost development. It estimated solar power costs would fall by 20 percent every three years. Richard Powis, chief executive at Australia\'s Integral Energy, said wind generation costs nearly three times that of black coal, one of the cheapest fuels. Sea wave technology, which harnesses the power of ocean waves, costs more than four times as much as coal, he said. \"The problem is that you have a low cost base load of electricity while renewables are high cost. So if you don\'t have the government doing something to encourage renewables you won\'t see it done voluntarily,\" Powis said. The Australian government has mandated that two percent of power sold by retailers must be from renewable sources other than hydro-electricity by 2010, up from today\'s one percent. Malaysia offers financial bonuses for renewable projects, while Indonesia ensures that small hydro-electricity plants are able to sell power to the distribution system. The Philippines leads the region with new power reform laws that give renewable power priority on the distribution grid. A bill offering subsidies for renewable sources is in the works. Geothermal energy makes up 27 percent of the daily power mix in the Philippines. While developers doubt renewable energy can compete with traditional fuels, they see opportunities in localised, or off-grid, environments. On-grid generation is plugged into a distribution network and competes on price with other sources, while off-grid capacity supplies a specific site or community, often a remote location. \"Although a small biomass plant may produce power at a higher cost than the average on-grid gas plant, the cost of connecting a remote village to the grid still makes renewables attractive,\" said Mohammad Farhandi, the World Bank\'s East Asia energy expert. Some renewable sources, such as geothermal and hydro, are suitable for regular on-grid generation, although critics say hydro dams are too environmentally and socially disruptive to be considered a good renewable option. Story by Cameron Dueck REUTERS NEWS SERVICE