Scaling up efficient cooling needs innovative finance – Ablaza
SINGAPORE, 1 November 2019 – Alexander Ablaza presented here today the urgent need to develop innovative channels of energy efficiency capital to be able to scale up energy-efficient cooling and other energy efficiency projects across Asia. Ablaza’s presentation was part of the deep dive workshop on access to cooling, co-organized by the United Nations Sustainable Energy for All (SEforALL), the Asian Development Bank (ADB) and the Sustainable Energy Association of Singapore (SEAS) as part of the Asia Clean Energy Summit 2019 and the Singapore International Energy Week 2019.
Wearing the hat of co-chair of the Asia-Pacific ESCO Industry Alliance (APEIA), Ablaza is also president of the Philippine Energy Efficiency Alliance (PE2) and principal advisor for energy efficiency finance, investments, policy and market transformation working across Asian and Middle East markets.
Ablaza estimated that some USD 16.5 trillion out of the total USD 24.5 trillion global energy efficiency capital requirement through 2040, will have to be mobilized through off-balance sheet capital flows such as energy service company (ESCO) performance contracting, public-private partnership transactions and large-scale Government-led retrofit programs. ESCO performance contracts have been effective vehicles of off-balance sheet capital for cooling efficiency improvements such as chilled water plant upgrades, chiller optimization measures, district cooling systems, and non-centralized air conditioning system replacements.
Ablaza said that while debt finance has grown modestly in the last decade, off-balance sheet project equity should flow through ESCOs through innovative financial structures and enabling policy and market interventions. For this reason, new equity vehicles and ESCO sectors have to be developed and strengthened across both developed and emerging markets.
The objectives of this deep dive workshop were to: [a] provide a venue for discussing the various issues involved in accelerating access to cooling in the Asia and the Pacific Regions; and, [b] create awareness and appreciation by stakeholders in both government and private sector about the need and value of undertaking country-specific needs assessment and developing a national cooling plan. Ablaza spoke in Session 3, which discussed financing options available from public and private sectors as well as other financing institutions/investors and the roles they have played (different mechanisms and approaches including challenges and lessons learned) in financing sustainable cooling solutions. The session highlighted the risk/reward parameters that each can take and what incentives are needed to encourage investments/financing.
Cooling is an invisible industry essential to our modern society – from the cold chains that safely deliver our food and vaccines, to the air conditioners that make our workplaces and homes comfortable, to cooling servers for our insatiable demand for social media or data.
The “Chilling Prospects” report prepared by SEforALL identified that 1.1 billion people, of which 750 million living in Asia, are facing risks due to lack of access to cooling for basic needs – lack of access to nutritious food, vaccines essential for health, as well as the ability to find respite from temperatures beyond limits for human survival.
‘Chilling Prospects’ has identified nine priority countries taking into account the number of the population at risk. Of these nine countries at greatest risk from lack of access to cooling five are in Asia: Bangladesh, China, India, Indonesia, and Pakistan. India rises to the top five in all three risk categories identified, followed by Bangladesh. and Pakistan that rise to the top five in two. In 2019, China and India passed National Cooling Plans with a focus on efficient energy consumptions for cooling, while in the same year Bangladesh started developing a National Cooling Plan.
Ensuring cooling that is affordable, sustainable, and accessible to all who need it is essential to alleviating poverty and achieving global sustainable development goals (SDGs), specifically SDG 7 on ensuring access to affordable, reliable and sustainable and modern energy for all by 2030. And at the same time providing assistance to countries through the proper implementation of their Nationally Determined Contributions (NDCs) in fulfillment of their commitments to the Paris Agreement.
Country-level measurement and planning are necessary to understand the dimensions of access to cooling risk and develop solutions that are targeted at vulnerable groups and meet their cooling needs. It is also necessary to deliver on the SDGs, the Paris Climate Agreement, and the Kigali Amendment. For a country or community to ensure that the cooling needs of their population are met, they must first understand what those needs are. Through country-specific assessments across human comfort and safety needs, health service needs, and food security and agricultural needs, demand can be measured fully and a roadmap to delivering access to sustainable cooling for all can be developed through a national cooling plan. Such an assessment is crucial to planning and determining the investment required to meet demand, aggregate services, and harness new and renewable technologies that can be harnessed to supply energy for cooling especially in areas that are not accessible to the national grids.
The government has the mandate to provide its citizens their basic needs including access to energy and access to cooling. But government alone cannot deliver on this mandate. The private sector plays a key role in developing technologies and scaling investments to meet the needs of base of the pyramid populations. For the private sector to increase investments, there is a need to create a market environment that allows the adoption of new innovative technologies and business models conducive for investments. Governments, therefore, need to develop the necessary policies to guide and set a direction for private sector investments.
