Download Energy in a Megacity Future

Energy in a Megacity
Future:
Role of Financing
Dr. Mark Bernstein
Managing Director
USC Energy Institute
University of Southern California
Outline
 Setting the stage
 Technology Options
 Policy Options
 A focus on green financing
 A green bank?
USC
Energy
Institute
Mega is in the eye of the
beholder….
 From the standpoint of energy – a megacity could
depend more on it’s relative population rather than
absolute numbers
 For example – a city of 1 million in a small country faces
the same problems as a city of 10 million in a large
country
 Governments in the small country may have a more
difficult time solving the same problems
 A quarter of the world urban population live in cities that
have 1 – 5 million people; 10% live in cities larger than half
a million; and less than a million
 There are a lot of opportunities to help these cities as well
USC
Energy
Institute
Some key facts help to set
the stage
 In cities
 Two-thirds of global energy is consumed
 70% of CO2 emissions are emitted
 In OECD countries energy use in cities is more
efficient than non-city use
 In developing countries it is the opposite for
commercial energy
 In India – 87% of electricity is used in cities
 In China urban residents use 40% more commercial
energy than non-urban residents
 In China over 85% of coal is consumed for urban energy
requirements
USC
Energy
Institute
Some more key facts in
developing country cities
 Electricity losses are considerably higher in urban areas
 Lighting consumes 20% of total electricity use
 Water heating also takes a large share
 Air conditioning loads are rising
 In China 40% of summer electricity in urban settings is air
conditioning
 Energy embodied in goods and services are higher in
cities
 Air pollution in cities continue to grow
 NOx is expected to grow by more than 20% by 2030
 Particulate matter is expected to grow more than 10% by 2020
before beginning to decline
USC
Energy
Institute
So what can we do about this?
Build better buildings
Reduce energy use
Use renewable
technologies
Encourage
public transit
Improve
land use
Policy and regulatory
options abound
 Regulations:
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codes and standards
minimum efficiency requirements
inspections
zoning and use restrictions
 Taxes and incentives:
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user fees and taxes
credits
subsidies
loans
 Government purchasing
 Outreach and education
USC
Energy
Institute
Green financing has an
important role in the future
of energy use
• Green financing products
 Mortgages, retrofits, short and long-term
• Leasing opportunities
 Green financing should offer more attractive
products
 Easier access to loans
 Simpler qualification process
 Lower interest rate
 Longer fixed term period
USC
Energy
Institute
There are different roles for
green financing depending
on income levels
Middle/
Upper
Revolving Fund
Microfinance, Leasing,
Cooperatives, Municipalities
Poor
Dedicated
government programs
USC
Energy
Institute
Commercial Banks can
provide green finance
opportunities
Near poor
Utilities, development
banks Cooperatives,
Municipalities
Extremely
poor
EERE loans ARE different
from other types of loans
 Investments lead to lower costs which is distinct
from other financial products
 Efficient buildings offer unique benefits to the
lender
 Reduced costs gives borrower more disposable
income
 This can reduce the risk of defaults
 More energy efficiency can lower future tariffs
thereby:
 Reducing risks of defaults for all residents and
 Benefiting the whole economy
USC
Energy
Institute
Microfinance can be used
for efficiency
 Micro-financing may be appropriate for energy
efficiency
 Compact fluorescents,
 Heater blankets,
 Home insulation and more efficient appliances
 Solar water heating
 Should be different from existing micro-loans
 Could be financed through ESCO or energy
shops
USC
Energy
Institute
Public sector support will be
needed
 Perhaps short term support to create a robust
financial market
 Government or other institution loan guarantee
 Short-term subsidized credit facility
 Interest rate subsidy
 Tax credit
 VAT exemptions
 Building Codes
 Public benefit fund
 Others?
USC
Energy
Institute
The ESCO Model can be an
important contributor
 Energy Service Companies

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Are certified venders
Make money the more energy they save
Helps to aggregate demand
Reduce banks paperwork
Ensures long-term viability
 ESCO makes investment in efficiency or renewables
 Customer pays a monthly fee based on expected savings
and needs of ESCO to re-pay financing
 ESCO shares the risk with the Banks
 Utilities and energy shops can be involved with this model
USC
Energy
Institute
A local ‘Green Bank’ may
help
USC
Energy
Institute
 Dedicated to making loans that reduce energy
use, use more renewable energy or reduce
greenhouse gas emissions
 Can aggregate resources and demand
 Can have a different risk profile
 Can be more flexible
 Can have a ‘micro-finance’ piece
The key to this:
Energy policies need to include lending institutions