Taking Renewable Energy to Scale in Asia
This working paper by Letha Tawney (World Resources Institute) was commissioned for the 2012 Pacific Energy Summit on “Innovation Generation: Powering a Prosperous Asia.”
The paper argues that the renewable energy sector is significant and growing quickly, and that seizing the benefits and opportunities in this trend for economic development will require developing strategies that harness innovation to compete. The Executive Summary is also available in Vietnamese.
Electricity from renewable sources is becoming a mainstream option in the Asia-Pacific for many reasons, ranging from a tremendous growth in energy demand to concerns about energy security, improvements in renewable technologies, and efforts to limit pollution. Although this trend presents opportunities for economic growth, in this fast-moving sector developing and maintaining an internationally competitive domestic industry will require a strong capacity for innovation.
- Successful innovations and market changes are converging in ways that both enhance the economic and environmental benefits of integrating renewables into the grid while lowering the costs of doing so. Moreover, it is now widely expected that solar photovoltaic projects and onshore wind projects will be competitive with fossil-fuel power around the globe by 2016, making the sector increasingly competitive with other traditional fuel sources.
- Efforts to seize the benefits of this growing sector can be assisted by building a market for renewables, which can be done through a mix of support for renewables demand, such as through mandates or feed-in-tariffs, and through promoting fossil-fuel subsidy reform or internalizing the cost of pollution damage in fossil-fuel prices.
- For those seeking to maximize potential gains from entering the renewables sector, even if a country can create a very large domestic market, international markets are still larger. Thus, building an internationally competitive sector is crucial to making the most of economic opportunities.
- Policymakers should focus on developing a renewables industry through building innovative capacity in the segments of the value chain they can compete for rather than through supporting local-content requirements and other infant industry protections. The latter risk creating a domestic sector that cannot compete for the international market and may keep domestic costs high. Building innovative capacity requires creating a healthy innovation system that improves the innovators’ chances of success. That system should do the following: create and share new knowledge, build competence, create collaborative networks, develop infrastructure, provide finance, establish governance and regulatory frameworks, and create markets.
Letha Tawney is a Senior Associate at The World Resources Institute and works on innovation-led economic development in clean technologies.