Ladies and gentlemen,
I am so happy to be here and speak to you. Today’s topic combines two of my favourite topics; energy and the business community.
I come from an energy country. Norway built its wealth first on hydropower, later oil and gas. I come from an energy family – several of my close relatives earn their living from the energy sector. I know what energy can do for the development of a country, or a local community.
Energy is key to economic sustainable development. Energy facilitates industry, production and technological innovations. It facilitates transport and access to markets. It makes it possible for small enterprises to survive – with electric sewing machines or improved grind mills. In short – energy is a prerequisite for economic growth and job creation – the essential factor for getting people out of poverty.
Energy is key to social sustainable development. Electric light means kids can do their homework after six o’clock. It means women won’t have to give birth in candlelight. Electric power means vaccines and medicine can be kept at the right temperature and last longer. It means girls and women do not have to spend hours fetching firewood, and that babies do not have to die from respiratory diseases caught from their mothers cooking over open fires.
Energy is the possible key to environmental sustainable development. Access to modern energy will reduce the pressure on deforestation and desertification. But modern energy will have to be just that – modern – in order to be environmentally sustainable. Modern in a way that it gives more efficiency, reduces the CO2 emissions, or even better, is based on renewable resources.
I am minister for development, and my main job is to decide how the Norwegian aid budget is going to be spent. Most Norwegians think my budget is very large, and I tend to agree. It is quite large in the world of aid. But compared to the needs for investments in the energy sector, be it grid, generators, off grid solar power systems or whatever else – aid can never be anything but a small part of the funding. There is simply not enough ODA-money, but even more importantly – as I know very well from my own country – because energy is business in itself. Energy supply is best taken care of when it is run according to professional standards by private or private-public partnerships.
So this is where the business community, my other favourite topic, comes in. And mind you – I am a socialist.
The business community is key to investment in the energy sector, in building the infrastructure, in establishing industry and production that creates jobs – and in developing new technologies so that the new energy is more efficient and low-carbon or renewable.
In 2010 the clean energy sector grew by 30% above 2009 levels to achieve a record 243 billion USD worth of finance and investment. Private investment in clean energy technologies is expected to reach 600 billion USD by 2020.
Yet, this may still be too little, too late: And there is also a concern – that a number of developing countries, many in Africa, are getting by-passed by from the climate financing instrument that are now emerging.
Let me concentrate on how business and aid can work together, so that our combined resources can lead to a more massive investment in energy, taking it to scale.
I believe there are mainly two ways we as donors can be of use in this.
We can put the various projects together, in order to make them big. This is what we do together with our partner countries in many sectors. Together we can present a full sectoral approach, where all elements are integrated, and present them for the various forms for investment or funding. Investors need to have a clear sense of how and where individual projects fit into an overall national strategy. And we can sort out the limited elements that can be funded through aid, and identify what the appropriate channel.
And we can – together with the business community – find means of reducing the risk of investments. Real and perceived risks that are keeping investors out and driving interest rates up, call for new financing models that pool risk more effectively, for instance by public and private mechanisms. Energy security and investor security go hand in hand. Accountability is to public money what the bottom line is to private capital.
CDM may represent a significant source of finance. Public money, private sector and carbon markets may create a new dynamics – engendering a new and more effective way of doing development aid. There are significant opportunities for business in this.
It was in this context that Norway launched the climate and energy-initiative, Energy +, last October at the Oslo Conference on Energy Access for All, co-organised with the IEA.
Through Energy + we are developing a sectoral approach to low carbon energy access through results-based financing and aid (cash on delivery) and phased interventions. We do not make business projects – but shall try and facilitate them.
First we shall assist states in establishing comprehensive energy sector plans and work to strengthen the technical and institutional capacity to support private sector investment in the sector.
Second Energy+ shall work out monitoring and reporting systems, enable transparent and efficient regulatory regimes, and enable the functioning of incentive mechanisms for business and investments.
Third Energy+ shall implement and demonstrate results-based payment systems aligned with strategies on emission reduction or increased energy access relative to the reference level based on agreed-upon country level indicators.
All three phases are relevant for those who seek to invest in clean energy in developing states:
There are considerable market opportunities for those who come up with the right projects. Just consider the figures of energy poverty: There are 1,3 billion people without access to electricity in the world – 600 million only in Africa - and 2,7 billion who depend on unhealthy and ineffective cook stoves.
And bear this in mind – it is expensive to be energy poor. The poor spend as much as 37 billion USD annually on meeting their primary energy needs.
At the same time we know that 48 billion USD are needed annually until 2030 to meet the target of universal access. In a recent report, the International Finance Corporation estimates that 90% of the energy poor already spend so much on kerosene, candles and disposable batteries that they could easily afford better options – such as solar lamps.
At the same time there is a range of traditional market barriers that still needs to be addressed:
- Private sector investment is impeded by a range of regulatory obstacles including inefficient project approval, permits, licensing and land leasing procedures.
- Private sector investment is often impeded by a range of regulatory obstacles including inefficient project approval, permits, licensing and land leasing procedures.
- Real and perceived risks are keeping investors out and driving interest rates up. This calls for new financing models that pool risk more effectively, for instance by public and private mechanisms for de-risked investment schemes.
- Without a robust price on carbon, it is difficult to make renewable energy investments cost competitive compared with fossil fuel. Ideally subsidies for fossil fuels would be reduced or removed.
- Rural communities are often unable to afford the sizable upfront costs of renewable projects and lack access to reliable credit.
I believe we can solve most of these challenges together; the government in question, the business community and the donors. Some of the challenges could be turned into business propositions and new work places in accordance with the green growth strategies. That is necessary if we are to accomplish a transformative change of the energy system.
Energy + is our contribution to the Secretary Generals Sustainable Energy for All-initiative. The Energy+ Partnership counts some 45 states and multilateral donor and finance institutions, including the World Bank and regional banks and the World Business Council for Sustainable Development.
There is a sizeable amount of public funding represented in the Partnership, and significant potential for leveraging capital from the private sector over time.
We believe it will be one of the main pillars of the global task of ensuring energy for all. It can only be done in a close cooperation between the business and aid communities, and led by the governments in each individual country.
Ladies and gentlemen; By 2050 the global population will have increased by 50 %. Global energy demand is expected to increase by 50 %. And we need to reduce greenhouse gas emissions by 50 %. This is the 50-50-50 challenge. It shapes our common energy future.