Risk Governance of Energy Transition Nadejda Komendantova

1. Risk Governance of Energy
Transition
Nadejda Komendantova
R
International Conference
Renewable Energy Applications for a
Sustainable Agriculture
December 2-4, 2014, Tunis

2. Potentials of renewables for energy
transition (globally)
Cho, Science, 2010

3. Source: IPCC WGIII AR5
Allocation of GHG emissions across sectors and
country income groups

4. Sources: International Energy Agency, German Aerospace Centre
TWh/year
Solar potentials in Europe and North Africa

5. Benefits for MENA from developing renewables
• Supply for local demand
• Diversification of energy
sources
• Technology transfer
• Impulses for socio-
economic development
• Export revenues from
energy trade (Europe,
Asia and Sub-Saharan
Africa)

6. Incentives to deploy solar energy in North
Africa
Public
MSP, Transgreen
North African
national and
regional targets and
incentives
Private
DII, Sahara Solar
Forest, join ventures,
small scale
There are several
on-going public,
private and local
incentives to
deploy solar
energy in North
Africa.
What are the
impacts from
these incentives?
What are the
risks for their
realization?

7. On-going efforts to deploy renewable energies in the region.
What are impacts and risks from their realization?
International
Regional
public
Regional
private
National
private and
public
Top-down
Bottom-up
Existing institutions do not sum up to a coordinated
governance approach (Fritzsche et al., 2011)

8. Risks and uncertainties
Climate and
energy security
Socio-
economic
security
Environment
security
Risks for security of energy supply
Public acceptance of new energy
technologies
Impacts on costs of energy
Multiplier effects
from investment
on local
economy
Employment
creation in solar
industries
Water use and
water scarcity
Land use and
property rights
Impacts from
desalination

9. We need
holistic and
interdiscip-
linary
approach to
governance
to bring
different goals
together

10. Energy transition
in MENA region
requires not only
technical and
economic capabilities
But
also understanding of
governance of the
transition process,
including decision-
making, institutional
structure,
uncertainties,
acceptance and risks
perceptions of
different stakeholders

11. Transformation of energy systems
Local solutions and
practices based on
best cases
POLITICAL WILL
Energy sector:
drivers and barriers
SCIENTIFIC
EVIDENCE
Costs of energy
system
transformation
ECONOMIC & CIVIL
SOCIETY
PARTICIPATION
Who:
Government, investors,
civil society Action: Including
stakeholders
feedback
Policy options: addressing
social, economic and
environment concerns
Key Influence:
climate, energy and
socio-economic
security
Problem:
Transformation of
energy system and
addressing lock-ins
Focus:
Participatory
governance

12. Government
Policy
Investment &
Finance
Infrastructure
& Planning
Market
Structure
Supply
Chains
Generation
Capacity
Grid
Capacity
Demand
Enabling
Areas
Delivery
Areas
R&D
Energy transition and need for governance

13. But we also need to understand expectations of
different stakeholders to make governance policies
robust and sustainable
Expectations on
renewable energy
projects
Private sector
Perceived risks for
investment
Public sector
Drivers for growth
such as multiplier
effects from
investment and jobs
Inhabitants
Public acceptance and
awareness issues

14. Operationalizing research on governance is more than
communicating scientific results to policy-makers and
analyzing how these results are perceived and implemented

15. But it is also
• working with stakeholders to
co-generate actionable
knowledge
• analysis of how governance
structures shape decisions
and outcomes
• research on decision-making
processes, public
acceptance, risk perceptions,
cognitive biases and cultural
perspectives
Actions, processes
and institutions to
implement
decisions (IRGC,
2011)
Principles of
cooperation,
participation
and effective
risk
management
(Renn, 2008)
Systemic
approach to
positions of
stakeholders
(Thompson,
2006)

16. • Why is it important to
understand
perceptions of risks,
expectations and
concerns of
stakeholders?
• They can be a barrier
for deployment of
RES
• Make it more
expensive
• Can impact
implementation of
RES deployment
strategies
• Successfully
addressed can be a
driver for stability and
growth in the region
Few examples are following

17. Cost of energy is influenced not only by availability of
resource but also by weighted costs of capital
Effect of GHI on LCOE per country (US$2011/kWh):
Source: Ondraczek, Komendantova and Patt, FNU Working Paper, 2013

18. Effect of WACC on LCOE per country (US$2011/kWh):
Source: Ondraczek, Komendantova and Patt, FNU Working Paper, 2013

19. 0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
Europe Algeria Egypt Morocco Tunisia
environmental
operating
construction
financial
force majeure
technical
revenue
political
regulatory
Euro area rate
The financing cost gap
The weighted average cost of capital (WACC) for CSP
investment in North Africa compared to the Euro area WACC
+4.3 pp
+5.0 pp
Source: Schinko and Komendantova 2014

20. 0.00
0.05
0.10
0.15
0.20
0.25
0.30
0.35
0.40
North Africa
(mean)
Europe North Africa
(mean, with
European
financing costs)
Europe with
North African
financing costs
[USD/kWh]
LCOE for CSP investments in Europe and North
Africa: alternative financing costs
Levelized costs of electricity (LCOE) for CSP electricity generation in the North African region (mean)
and Europe (in USD/kWh): the Status quo (first and second column) and for alternative financing cost
Source: Schinko and Komendantova 2014

21. Can renewable energies (RE) be a driver?
Multiplier effects on economy
and job creation processes

22. Expectations of public sector stakeholders: growth and
jobs
GDP growth (annual %) in
2001-2009
Unemployment, total (% of
total labor force)
0
1
2
3
4
5
6
7
8
9
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Algeria
Egypt
Morocco
Tunisia
0
5
10
15
20
25
30
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Algeria
Egypt
Morocco
Tunisia
Source: World Bank Development Indicators, 2012: African
Development Bank, March 2012

24. Transfer of renewable energy technologies
(RET)
• Transfer of RET to developing countries is one of the most
important objectives to industrialize (Romer, 1990) and to
limit GHG emissions in these countries (UNFCCC and Kyoto
Protocol)
• It is crucial to accelerate the spread of RET in non-OECD
countries (IEA, 2010)
• Several forms of RET transfer possible: joint ventures, foreign
direct investment, governance assistance programmes, direct
purchases, joint research and development programmes,
franchising and sale of turn-key plants (IPCC, 2000)

25. Vertical RET
• New RET are given via investment to a target group
• Transfer of know-how to local manufacturers and
technological spillovers are limited (Jabbour, 2005)
• Example: large multinational corporation sets factories in
developing countries to bring down costs of production
• Managers and technical staff are nationals of developed
countries, general workforce is from developing country

26. Horizontal
• Formation of joint ventures between foreign and local
companies, including technical and business training
• More lengthy process but allows embedding of technology
within local population and economy (Gallagher, 2006)
• More preferable for local economies as skills and knowledge
are transferred but makes it more difficult for foreign
companies to protect their design and to control quality (Pack
and Saggi, 2001)

27. Source: World Bank, 2009; IEA, 2009; SolarPaces, 2003

28. Jobs created from vertical and horizontal
RET
Jobs years per 100 MW 0% 40% 60% 100%
Planning and Construction 74 83 146 151
Materials and Components 126 240 284 463
Total Direct Jobs 200 323 430 614
Induced Jobs 1.520 2.455 3.268 4.666
Source: Komendantova and Patt, Renewable and Sustainable Energy Reviews, 2014

29. Expectations on growth and jobs can be realized but with
deployment of manufacturing RES components industries
0
100
200
300
400
500
600
700
800
900
1000
0% NREL
(California)
100% ESTELA
Direct Jobs
Induced Jobs
Source: Komendantova and Patt, Renewable and Sustainable Energy Reviews, 2014
Thousandsjob-years
Example solar: collector assembly and installation, ground works,
production of mirrors and receivers
Local share of value chain: short term 17%, long term 80% (GIZ, 2011)

30. Impacts from investment into solar projects on
GDP much higher than on income
Type of
Multiplier
Base scenario
(current level of
investment)
Desertec
scenario
Local scenario
GDP 1.62 2.12 1.67
Income 2.15 2.19 2.04
Output 4.04 4.32 4.46
Source: Bakr and Komendantova, Jorurnal of Renewable Energy Research, 2014

31. Public acceptance is already a barrier for
deployment of RES

32. MENA could profit enormously from RES
development
But for this to happen right policies in place are
needed

33. Impacts of renewable energy
development
• Therearenumerousinitiativesto
developrenewablepowerinMENA
countries, forlocaluseandforexport.
Activitytodatehasbeenstrongestin
EgyptandMorocco.
• ETHandIIASAplantoprovidescientific
guidancetoensurethatsuch
developmentprovidesthegreatest
possiblebenefits, particularlytopeople
inMENAcountries.

34. 2016 20172013 2014 2015
Energy security
Human development
Local environmental quality
Outreachworkshop
Outreachworkshop
• Nine narrowly defined one-year research
projects, leading to separate journal articles.
• Scenario specification, data collection in situ
and online, statistical analysis, numerical
modeling, writing.
• Separate and integrated policy
appraisals, to be precisely defined.
• Stakeholder dialogue, numerical and
conceptual modeling, historical case
study evaluation, writing.
Tasks
Objectives

35. Contact Information
Nadejda Komendantova
komendan@iiasa.ac.at