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  PlanetArk 14 Jun 07
Weak Asia Policies Curb Green Power Growth - Experts

SINGAPORE - Weak government policies, high start-up costs and misguided short-term incentives are hampering the growth of renewable energy in Asia, industry experts say, stressing the need for clear long-term rules.

At a renewable energy finance conference in Singapore, investors, officials and analysts pointed to burgeoning global interest to invest in clean energy in Asia but lamented that many of the projects were small.

This was in part because of ad hoc government policies, country risk and risk of the technology itself, much of which is relatively new, rapidly evolving and expensive.

"In my view, it's because of policy. If you look at any of the markets that have got significant amounts of renewable energy, those markets have stable and really well thought through policy which is going to give investors the return they require," said Shane Bush of Standard Chartered Bank.

"If you have got a weaker policy, then the amount of money that anyone wants to invest is going to be lower, so you end up with smaller projects," Bush, head of the bank's renewable energy project and export finance group, told Reuters on the sidelines of the conference.

An exception in Asia was South Korea, he said. "They don't have any indigenous energy supply. So they have looked around the world and seen who's been successful and they've taken quite a Germany approach to it with a feed-in tariff," Bush said.

"In South Korea you get a 15-year fixed price. And the country risk is very acceptable."

The country is building the world's largest solar power plant, a 20 megawatt complex southwest of Seoul, in a joint venture between a South Korean and German firm.

Elsewhere, longer-term policies were crucial, delegates said. Amy Kean, of the Renewable Energy and Energy Efficiency Partnership, told the conference incentives such as one-year tax breaks were not enough.

"Short-term sweeteners are detrimental to the market. We need that long-term commitment."

RISKS

Ken Cheung, a lawyer based in Singapore, said there were numerous challenges facing financiers and operators in Asia.

"They all recognise that we're dealing with smaller investments in the region. There are technology risks, there are the policy risks all associated with these projects," Cheung, a partner with Watson, Farley and Williams, told the conference.

He pointed to the risk that investors lured to fund a project by certain incentives might find those sweeteners vanish with the change of government.

Negotiating your way through layers of government was also an issue, China-based lawyer Nicolas Groffman told Reuters.

"In all cases in China there's a certain vagueness that arises from the fact that you need to negotiate with local governments anyway. So whatever the regulations say at central level, in the end you need to get provincial-level approval."

But Groffman, senior solicitor for Mallesons Stephen Jaques in Beijing, also pointed to the rapid evolution of laws governing renewable energy in China, although the issue of tariffs had not been completely resolved for clean energy investors.

China has been the most aggressive backer of renewable energy in Asia, as it seeks to meet booming power demand and limit surging greenhouse gas emissions.

The world's second-largest energy consumer wants renewable power to cover around 10 percent of its needs by 2010, and aims to have 30 gigawatts (GW) of installed wind power capacity by 2020, versus 1.26 GW in 2005.

Jasper Inventor, Southeast Asian campaigner for climate change for Greenpeace, criticised some governments for their unwilliness to change.

"There is still a very big preference towards the use of fossil fuels," he told the conference. "It's the easy way out. There's still laziness or still a lack of political will to tackle these issues."
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