Towards a green economy

5 Overcoming barriers: enabling conditions

The preceding analysis has explored the results from increased investments in renewable energy, in terms of energy savings, penetration of renewable energy, increased jobs, and reduced GHG emissions. However, as noted in section 3, current levels of investment in renewable energy are still below what is needed to address the challenges facing the energy sector outlined earlier in the chapter. This section discusses the barriers to increasing investments in renewable energy and the measures that are needed to address these barriers.

The major barriers and respective policy responses may be grouped under the following headings: 1) energy policy framework; 2) risks and returns associated with renewable energy investments, including fiscal policy instruments; 3) financing constraints for renewable energy projects; 4) electricity infrastructure and regulations; 5) market failure related to investments in innovation and R&D; 6) technology transfer and skills; and 7) sustainability standards.

5.1 Policy commitment to renewable energy

In general, the growth in investment and deployment of renewable energy technologies, documented above, has been driven by an increasing number and variety of policies (IPCC 2011). These are reviewed below in the subsequent sub-sections. Individual policies to overcome various barriers to renewable energy development and deployment are most effective when they are part of a broad enabling policy framework, which builds on complementarity between a range of measures operating at multiple stages of the chain from research and development, through to deployment and diffusion. An enabling policy framework for renewable energy includes clear commitments to long-term development of the sector. Such commitment can be manifested by targets for investment in additional capacity and penetration rates within the energy mix. When supported by other enabling policies, setting targets to achieve these goals can send a strong signal to potential investors.

Important targets for energy access have been announced at the international level. The AGECC (2010) calls on the UN and its Member States to commit themselves to two achievable goals: universal access to

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modern energy services and a global energy intensity reduction of 40 per cent by 2030. The report highlights that, “Delivering these two goals is key to achieving the [MDGs], improving the quality and sustainability of macroeconomic growth, and helping to reduce carbon emissions over the next 20 years”.

Many countries have already adopted targets for renewable energy. By early 2011, there were national policy targets in 98 countries, including all 27 EU member states (REN21 2011).40

A large number of these targets

concern renewables’ shares of electricity production, and generally fall in the range of 10-30 per cent within the next 1-2 decades. Targets are also set for the share of renewable energy in total primary or final energy supply, installed capacities of various specific technologies, the total amounts of energy production from renewables, or for the share of biofuels in transportation fuels. While earlier many targets were set for the 2010-2012 timeframe, targets set more recently concern the next decade to 2020 or beyond. For example, EU countries have set a target of 20 per cent of their final energy supply to be provided by renewable sources by 2020.

Policy targets for renewable energy have also been established in many developing countries. In fact, more than half of the national targets have been set by developing countries. Between 1997 and 2010, the number of developing countries with national targets doubled from 22 to 45. Developing countries with targets for 2020 or beyond include, among others, Brazil, China, Egypt, India, Kenya, the Philippines and Thailand. Box 2 illustrates the example of Tunisia, which has been encouraging the use of renewable energy since 2004. In addition to such national targets, there are many countries with sub-national targets at the state or provincial level.

The REN21 Global Status Report 2011 (REN21 2011) illustrates that a number of countries had either met their targets for 2011 or were about to do so. Finland and Sweden had already met their targets for 2020. The report also indicates though that some countries have not met their targets, while others have revised their targets downwards. For example, India missed its target for 2 GW of added wind power in 2010. The US reduced its target for

40. The following description and examples of policy targets here are based on information from the REN21 Global Status Report 2011 (REN21 2011).