Interview with Daniel Kammen, new World Bank Clean-energy czar

Tuesday, September 14, 2010

Getting to a Green Energy Future

Daniel Kammen has just been appointed "clean energy czar" at the World Bank – a first for the bank. Currently a Professor at UC Berkeley, Dan has shared his time in the Energy and Resources Group (ERG), the Goldman School of Public Policy and the Department of Nuclear Engineering. He is also the founding Director of the Renewable and Appropriate Energy Laboratory (RAEL), and is a member of the Intergovernmental Panel on Climate Change. We interviewed him on a variety of energy-related topics in June 2010. Here are a few excerpts.

International Rivers: How has the energy playing field changed in the last couple of years?

Daniel Kammen:
When I look at the changes in the field of energy over the last five years, the biggest difference is there is so much more attention to it. Which means with more government spending there's much more basic research. There's lots more technical expert groups doing basic research. In terms of translating that into the field there is still a real gap. So what I see is lots of interest, lots of ramped-up technologies, but the path from laboratory to market—that is still very rare.

The importance of policy change in getting a clean energy portfolio

IR: How has the advancement of mega-projects changed in relation to smaller to decentralized energy projects?

DK: The bias is still is very much toward large projects. Not necessarily because there is someone thinking malevolent thoughts about small projects, but because if you want to move lots of money, big projects are easier. That said, there have been significant changes in many of the national development groups in giving more attention not necessarily more dollars to small-scale projects. Lots more money goes into smaller decentralized projects than 10 years ago. That still means though that there is a lot of money going into big projects. Whether it's big coal projects or big hydro, that is still where the lion's share of dollars go. But in terms of thinking about energy and development, no question, there's much more a broad playing field and understanding of what's going on. But the very basic fact is that even in developed countries there's still not much clarity on what decentralized generation really means.

The benefits of energy diversification

IR: What role do you see renewables playing in the reduction of energy poverty in the Global South?

The degree to which energy access actually means less energy poverty and less economic poverty is one where I would say the verdict is still out. There are lots of interesting examples where solar or micro-hydro has really changed some local experiences. But it's still hard to find lots of and lots of cases that not just show that we can do it but that there are economic models. I currently serve as one of the coordinating lead authors for the Intergovernmental Panel on Climate Change's renewable energy special report, which is going to come out sometime next year. And even with lots of attention in this area, it was still remarkably hard for us to find peer-reviewed materials that highlight distributed renewable energy in real live applications where you can go from the technology, to what was the mechanism of dissemination, to what was the actual cost in the market.

On African overreliance on hydropower

IR: Can you name some good role models in the Global South for advancing clean energy or energy efficiency?

DK: Solar in East Africa, micro-hydro in India and Nepal and Bhutan, small scale biomass in India and parts of Southeast Asia – all are examples of things that are going well. They don't add up yet to a huge global portfolio in the sense that they don't equal 10 or 20 percent of the energy in any given country yet. But compared to 10 years ago there's a lot more experience, and you can find those cases if you look. We need to make it so you don't have to go look for them. So we still have a long way to go to make this clean decentralized model on an equal playing field in terms of this being something that will be adopted.

The importance of energy efficiency for developing countries

IR: Why is policy change so important for getting a cleaner, smarter energy portfolio? And why does it seem to be so hard to get these policy changes adopted?

DK: There's no question that if you think about clean energy implementation, policy is a key driver. And it's not just because a lot of the technologies were or in some cases still are more expensive than the fossil fuel cases. They often were more expensive because the economics were designed around thinking about old-scale centralized systems. If you look at solar in East Africa, even though solar on average worldwide is more expensive than power from the grid, solar in East Africa was often not only cheaper but was often the only option in which energy was readily available. So there are cases where even the economics are in favor of renewables. That said, most of the thinking about energy systems is still very neoclassical. So policy is really the key thing to level that playing field until the technologies catch up.

There have been some interesting advances that have really changed things. The feed-in tariff process in Europe is one that has made renewables much more cost-effective. There are really important large-scale projects to think about ways that feed-in tariffs could be useful in developing countries. Policy innovation done by national governments, multinationals, or private banks could really help change the playing field.

There are also examples where countries have gotten much more savvy about what are the barriers [to clean energy]. In East Africa, the growth of solar, which initially was hindered by the utilities, is one [in which the government of] Kenya is saying that "we recognize now that solar can be a beachhead for electrification, so we should support it with our utilities and we should maybe even reduce the huge tariffs that exist on imported solar technologies." That's taken place in some countries. So you're starting to see policy find opportunities to make renewables much more viable. And again without that we would have to wait even additional decades to get these technologies widely distributed, and we don't have that time both because of poverty and because of climate change, and the need in this moment where oil prices are high and volatile to get more and more clean technologies into the mix. So policies really do open up the avenue for new routes to build a clean energy economy.

Understanding the true costs of energy

IR: How important is it to fully assess a wide variety of options before settling on a particular energy development path?

DK: I think one of the most interesting recent lessons in energy analysis is the "not one size fits all" piece. We've seen this in a lot of cases – that solar might work well in East Africa, or micro-hydro here, biomass there, so understanding the [overall energy] system ends up being more and more important. So finding out what is not only the best use of resources, what is going to generate the most jobs, what is going to give you the least-cost of energy long-term, that cries out for energy analysts who cross the whole spectrum. Costa Rica is a good example. We have seen this kind of effort in East Africa. We have seen this kind of thinking in parts of Southeast Asia. If you can really look at the energy system and weigh the benefits and costs, you can often make much better decisions – not just because of lower cost, but also because they play to a given regional strength, so that you can find those clean energy solutions that meet local needs both at the community level but also those that will promote job creation at the national and regional level.

Policy tools to get clean energy more quickly

IR: Can the expansion of a grid system into a very large grid system also backfire, and result in less diversity, fewer renewables and more megaprojects?

DK: Some of the renewables that formerly were seen as interesting niche technologies are much larger in importance right now than they were before. In East Africa, for example, hydro was often seen as the backbone, but now that there are many more companies, based in India and China, that are selling low-cost, high-efficiency wind turbines, commercial scale machines, that thinking about wind is that it might not just be 1% but could be 20% of your mix. Biomass, everybody has it, and if you can use it and manage it so that it doesn't compete with food, it can also be a big chunk. So I think the biggest lesson, not that everyone is listening, but the biggest lesson is that larger regional grids allow you to diversify.

Larger regional, grids if managed well, allow individual countries and regions to fight back against the tyranny of one supplier. When natural gas is the major supplier, fluctuations of gas prices have huge impacts on the markets. When there's droughts, largely hydro-reliant systems become very expensive and blackout-prone. So the more you diversify, the more you can keep costs down and keep supply much more uniform. That speaks very strongly to the benefit of diversifying into renewables. And that lesson wasn't possible when wind was less than 1% of energy, even in the most wind intensive countries. Now that we have countries in Europe and some emerging countries where wind could be 20% or more of the share, I think that the lesson that renewables are a niche player is finally breaking down.

IR: Africa is highly dependent on big dams for its electricity. Is there any other part of the world that is as dependent on that one technology? 

DK: Africa is very, very skewed to big hydro largely because lots of the international development dollars saw big hydro as the way to use a local resource that would get base-load generation, and allow them to spend money in billion dollar chunks – that was a very easy way to lend. So Africa unfortunately is not only very hydro dependent but also Africa has the smallest fraction of its potential hydro exploited. So there's still a mindset that not only does Africa have a lot of hydro now but unless one takes these broader lessons about energy diversity and cleaner energy into account, hydro could be even the next build out in Africa as well.

It's not the only part of the world that is so reliant. China is overwhelmingly coal-dominated. Parts of India are as well. It's not the unique feature but the unique feature for Africa is so much of African energy infrastructure is based on international dollars. China and India at least control their own destiny. They may not have so far chosen a clean energy path but if they choose to invest in cleaner technology, as China is doing now, they could diversify very rapidly. Africa is still very much tied to what happens in London and Geneva and Washington, D.C. So getting a change there is going to require education not just in African capitals, but unfortunately in the halls of the banks. So that's a process that absolutely needs to change if Africa is not going to look back on this decade two decades from now and say, "Gee, everyone else diversified but we didn't."

IR: Years ago I heard the energy efficiency expert Art Rosenfeld say he believed the world only needed half as much energy as we thought it did. What is the role of energy efficiency and planning, especially in the Global South? Have we made any progress into getting to that goal?

DK: Sadly, one of the areas where we have done far less than we could is energy efficiency. We now know from Germany and California and Japan and Scandinavia it is really a huge resource – not just to trim a few percent off your electricity bill at the commercial or residential level, but actually for the whole sector. It can be a huge resource. Energy efficiency is still a minor player in lots of developing countries. It's important already in the sense that people are poor so they tend to buy more energy efficient appliances when they are available. Frequently they are not available. Lots of the better lighting technologies also not available. But when they are they do get used.

That doesn't mean there's a policy of support. In Japan and California and Scandinavia energy efficiency was seen as a resource and was supported. And it was a whole suite of things. From better lighting to water heaters, to heat pumps, to better windows. All of those technologies, which are taken for granted as available in lots of industrialized nations, are simply not available in the South. Making those available right off has to be part of the equation. And unfortunately national governments that have focused largely on industrial customers and lots of international lending organizations that have focused on hardware have not looked at efficiency as a broader system. So it needs to be supported far more widely if it's to have the role we know it can. Because as useful as efficiency is in affluent countries, since it saves you right upfront with a much shorter return on your investment, efficiency is a much larger opportunity for developing countries in terms of getting people out of poverty, and in terms of allowing development to go on that doesn't require so much of the capital intensive big technologies. But there's a huge gap right now between that intellectual understanding and putting that into practice.

IR: Has the global recession set back the advancement of renewables very much?

DK: There's no question that the economic recession has hurt the renewable field exactly at the wrong time. We saw the ramp-up very dramatically of solar wind and biomass in the last few years before we saw this economic meltdown. That has removed lots and lots of capital from companies right at the time when they were ready to scale up. In some countries stimulus packages, in parts of Europe the United States and China, have stepped in, but most of those funds have expiration dates. So we don't know if these public sector funds are going to step in and help fill the gap. By most assessments they probably won't. Without that, in coming years  very promising companies won't have capital available to do the kinds of expansions we'd like to see. Renewables aren't going to go away by any means, but this period was a spot in time when fossil prices were high, when there was a real interest in this area. So we're going to need to see some source of funds, public or private, step in if we're going to avoid a kind of big trail-off to a very promising start.

IR: How much longer do you think the costs of wind and solar will be a barrier to wide-spread adoption in the Global South?

The cost question for renewables is a really complicated one because by many forms of analysis these are already cheaper than fossil fuels today. Wind power as we've seen is, at a utility scale, cheaper than natural gas and some cases even coal, depending where you are, so siting is very important. But also having the grid to go where the resources are means a lot. So by that narrow estimate, wind, if you pick right, is cost competitive today. But few places assess the cost of the grid that is needed to go to the right location as part of the story. Europe had a fairly dense grid so where there was wind there was generally grid as well. North America is a case where there is some fabulous wind resources but the grid doesn't go there. So finding the money and also the political clout to get it extended is part of the story.

Solar on the other hand is one of the most expensive renewables, but yet even for that it's often more inexpensive than some of the fossil fuels. In parts of East Africa where charging cell phones in rural areas or having power for little hotels can often be a dollar per kilowatt hour of the generator, photovoltaics can be cheaper today. But just because they are cheaper today if you find exactly the right market doesn't mean they are cheaper overall. And cheaper often means do we do we understand politically how to value their benefits. Because often their benefits are health and quality of life, things that you don't capture by traditional economic analysis. So part of what's needed is understanding what the real economics of renewables with or without a global greenhouse impact, with or without a quality of life impact, with or without a security impact fit into the overall equation. Few energy planners in the North or South take all those benefits of renewables into account. Hence they often look more expensive than they are. What that means is that even if an analyst can say this form of renewables is on par or cheaper than fossil fuel, that doesn't mean that that comparison will work up the chain so that ministers and others see that as an opportunity. So there's a huge education problem.

If a coal plant is one-fifth the cost of a renewable plant upfront, but has a long stream of costs to buy the coal and other environmental damages, even if that renewable technology is cheaper over its lifetime, that upfront cost number can often can be the most seductive. And right now we don't have enough people in the planning offices around the world who are savvy to the differences between what's the upfront cost versus what's the life-cycle cost. So a big part of the story is not just in terms of economic analysis, but there's a political analysis to get the broader value and cost equation in people's minds. That's a huge barrier to widespread use of clean energy.

IR: Should citizens be more involved in energy planning? What steps would people take to get more involved?

DK: There's a real unfortunate disconnect I see between conventional thinking about energy and its wider impact. There are education campaigns that school kids in Europe and North America that have made energy and climate more central to what kids learn. What kids learn and what managers of utilities and central bankers see is hugely disconnected in a lot of ways. Current energy planners need to get more savvy about the real economics, the lifecycle impacts of their choices, but it also means that energy and environment, which has always been kind of a niche area, has to get much more centrally broadened into the equation. In democratic nations, this can happen through the ballot box. There have been efforts in Europe where we have seen the Green parties do very well, for example, but that has not been the case widely in the United States.

There are a few but not that many developing countries where this has happened. Costa Rica always comes up, because Costa Rica has had a national program to zero out carbons and we have seen elected officials make a big deal about that in their platform. So there are examples here and there, but broadly there's still a large divide between what we teach people in schools and what we see in terms of decisions made by utilities on a day to day basis. So education has to go on. The other feature though is that there is a need right now to connect what individual citizens want and what they themselves are willing to pay for. We know that no matter how good a greener energy system is that there are costs in the transition. By some analyses there are costs in the short-term and benefits in the long-term. By other analyses there are costs in the short-term and maybe continuing costs in the long term to really green the mix. But the benefits of that may be worth it and so there's a debate around that. 

IR: How quickly we can accelerate the transition to clean energy? 

DK: There's no question that innovative financing models can make many of these clean energy systems much more viable. Feed-in tariffs look like right now as one of the big candidates because it has proven to a very efficient method to bring renewables into place. And if the way that you support renewables through a feed-in tariff is by paying for that incremental cost, that's something where if they choose to do so, development agencies nationally and the multinational banks could put money into paying for that extra cost. So beyond what's the regular tariff, there could be efforts globally to put in these feed-in tariffs around the world. That's certainly an opportunity that exists and would be a big lynch pin, because we've seen in countries that have really taken feed-in tariffs seriously, it has had a big positive impact.

Another one where there's a real opportunity is finding ways to finance projects over their lifetime. So we've seen an effort largely in the United States to bring the so-called property assessed clean energy program – PACE financing – as a mechanism, so that you pay for efficiency or renewables over 20 years and not have lump-sum payments. That's equally applicable in developed and developing countries, and that's certainly a big opportunity. And on the whole hardware side, an innovation that could really bring this forward is recognizing that building regional grids could be much more effective. For a long time we heard, well it's going to take two or three or four decades to get the grid to extend out from a number of major metropolitan cities often major national capitals, in sub-Saharan Africa, in Latin America and Southeast Asia. Now we are starting to see that the electronics to do smart regional grids has progressed enough that you can think about a grid based around a saw mill or a brewery or connecting in a small wind farm to a regional economy. The more we take advantage of those technologies through national or international support dollars, the more we can build out a real diversity of models. That's another opportunity to really move things forward. So those three areas are certainly opportunities.

The long term one is, of course, that we are going to need see a price on carbon. Even if it only takes place in the north to start, that would change the orientation of a lot of companies to diversify the technologies they invest in. And the more there is research and marketing dollars behind clean tech options, they are going to appear more and more in developing nations. So there's a range of things that could really change our perspective. None of those are really moving at light speed right now in the North or the South, but they are all there and they are all at play. So the more those things get promoted the more we can push this low-carbon economy in the developing world as well.

More information: 

Read a New York Times interview with Dan on his new World Bank appointment

...and an interview with him in Grist