#SmartGov and #SmartCities have the same ecological footprint (P1)

This expert panel discussion on the ecological footprint of cities looks at the need for a new model. It focuses on electricity supply and how administrative and regulatory conditions impact on energy efficiency and network innovation for Smart City proposals.

Introduction

Cities play a key role in the economic life of a nation. Poor planning and governance lock cities into dysfunctional forms that are difficult to rectify as the ‘Built Environment’ reaches critical infrastructure mass. We know that a city’s ecological footprint is a function of its energy, transportation and waste management efficiency, divided by its population density and the effectiveness of natural capital and built environmental standards applied at the local and regional government level. We also know that planet earth will have to cope with 44 megacities by 2050 and that urban slums, homelessness, and embedded poverty will double by 2030 (UN-Habitat: State of the World Cities Report for 2006-07).

The data analytics included as background information in this paper reference reports published by the UN Food and Agriculture Organization (FAO), the International Energy Agency (IEA), the UN Statistics Division (Un Commodity Trade Statistics Database- UN Comtrade and the Intergovernmental Panel on Climate Change (IPCC) as well as several peer reviewed science journals and thematic collections. Embedded hyperlinks in this document are intended as a reference guide only and do not reflect the total number of references used in compiling this paper.

The limitations of the ecological footprint model

The William E. Rees and Mathis Wackernagel 1996 ecological footprint model (EF) is not perfect.  The model is an excellent start to a global climate solutions conversation. It is up to the reader to familiarize him/ herself with the theoretical, quantitative and qualitative analytical work that underpin statistical comparative data sets of equivalency factors used to calculate net primary productivity for land and ocean use. ( See Global EF Network  )

From these data sets, it becomes clear that EF ( Ecological Footprint ) modeling can deliver significant improvements in both qualitative and quantitative data analysis when we overlay the Universal Development Matrix (UDM). We understand that significant data gaps exist which the UDM model aims to address. The UDM goes well beyond documenting the renewable natural capital resources a population consumes and the waste it generates and processes using current technology. It includes the Human Development Index (HDI) under the Social Capital (SC) umbrella as well as the Knowledge and Social Value Capital (KSC). The HDI index is an index of the average education knowledge and skill penetration in society. It includes social safety nets such as taxpayer funded welfare, aged, child and health care, superannuation and insurance provisions. The HDI index also includes corporate initiatives for work and family cover and equal opportunity legislation.

The KSC index is important for driving economic change, bio-capacity adaptation as well as industrial, social and technical innovation determining adaptive change . Under optimum administrative conditions relevant to effective decentralization for both democratic and command type political structures the KSC index is a useful measure for local government training and skill based effectiveness.  Information transparency and community inclusiveness are assumed essential in local government capacity building and responsiveness when coping with increasing urban densities, built environment infrastructure retrofits, climate adaptation as well as waste and pollution related challenges. Information privacy, as well as personal data ownership and data protection, are considered primary in the cities of the future where big data management by government and private enterprise intrude on personal rights and challenge UN Human Rights conventions. Technology does not create a ‘Smart City’. Good government does.

The need for a better model

The earth’s population exceeded its biological capacity to regenerate its productive capacity per hectare without preserving flora and fauna species bio-diversity during the early 1980’s. The Universal Development Matrix (UDM) allows us to calculate the relationship between the economic footprint and its bio-capacity using existing technology within the current governance framework under current institutional decision-making constraints. It does this by overlaying onto the EF urban ecosystem model a HDI analysis and energy efficiency sustainable development model that includes bureaucratic decision-making frameworks under green finance risk scenarios.

A distinction between localized electricity generation and consumption efficiency for built and industrial infrastructure is made in this expert discussion panel conversation. Built environment energy efficiency is not to be confused with energy use for transportation during a period of technological overlap with hybrid and EV technologies. Urban GHG emission profiles caused by transport related factors are included in this paper. In this paper, GHG profiles are included in the UDM model as an ecological impact driver of urban ecological footprints only.  We discuss transport energy efficiency in a subsequent paper. See figure below.

Comparing the two models

The UDM covers society’s social, cultural, knowledge, financial and industrial capital and their interaction with the institutional, legal and regulatory decision-making frameworks that govern standards, compliance and enforcement intervention for the maintenance of effective, transparent and accountable decentralized government. As such, it teases out the effectiveness of individual administrative decision making structures and their efficiency in addressing critical problem areas such as urban poverty, energy efficiency, built environment infrastructure, waste, transport and pollution, and other problems as they relate to increasing urban densities, food and water security and so on. The UDM is a more realistic model than the EF model because administrative decision- making practices reflect good governance at the national, regional and local municipal level. Poor administrative practices can impede standards, compliance, and enforcement of legislation and regulatory functions. Bureaucracies can and do interpret legislative and regulatory intent to suit current government priorities. Sometimes government departments go out of their way to hide and mislead the public about internal issues that can harm a minister, the department or a government.

The standard procedure for calculating a city’s EF generally includes the following:

Table 1

Number of inhabitants

Total city’s area

Consumption of energy by origin

Consumption of natural gas

Consumption of petrol

Number of vehicles

Number of miles driven

Sort, age and number of housing units by type

Recycling and waste management by type and distance from source

Pollution and contamination / Noise + degradation of Soil, Air, water ways and wetlands

Bio-capacity (area of various landscape types and their uses )

Food consumption

Purchase of goods

Services used

Drinking water quality and water other personal water use and distance from source

Water conservation, capture, storage (from impermeable surfaces) and re-use

Methodology limitations of the EF model

Cities draw significant resources from its immediate hinterland as well as the rest of the country and other parts of the world.  The EF of modern cities exists beyond the limits of the bio-capacity of their own territory. This makes EF modeling for cities and sub-regions difficult. The European common indicators project (ECIP) looked at the problem of developing sub-national level (SGA) frameworks in 2001-2003. The model set the equivalence factor for built-up territory to a value of one (1).  The SGA framework has many uses, but accuracy is not one of its strong points. The same is true for other models using a variety of survey and population questionnaire tools. Findings are inconclusive but the propensity for cities, sub-national regions, and countries for exporting their pollution and waste management problems beyond their territorial boundaries has long been recognized. During the 1970s economist called for the need to include pollution and waste management to be counted in a nations GDP. The idea remains ignored as we ponder the IPCC functions as a diplomatic work around to the problem of accountability.

The urgency of the problem

By 2030 60% of the world population is projected to live in cities. Cities consume approximately 70% of the global energy supply. During the mid-1990’s many cities in the developed world began addressing their Green House Gas (GHG) emissions reduction goals through a variety of climate action plans (CAP’s ). GHG models and EF ( Ecological Footprint) models are not the same. Both approaches use different methodologies and modeling assumptions even though the impact of GHG emissions has a measurable risk impact on the bio-capacity of the planet and its regenerative capacity. The GHG and EF models converge under the UDM model providing better data analytics and a more coherent methodological approach. The UDM is particularly useful for urban infrastructure where higher population density and infrastructure management challenges compare against local institutional capacity , administrative transparency and community inclusivity best practice demands.

What is a Smart City?

Umbrella labels such as ‘sustainability,’ ‘environment’, and ‘resilience’ categorize international, national and city-wide decision making around the globe. These words are used as aspirational marketing tools in describing among other things; the desirable creation of ‘Smart Cities’ . Whether a ‘Smart City’ is also a ‘Liveable City’ is assumed but not verified by conclusive data sets. The assumption is that net zero waste generating cities harness positive and liveable built environmental infrastructure in low EF and high energy efficiency communities of the future. The purpose-built city of Masdar in the United Arab Emirates is perhaps the most prominent example. Planning professionals regard Masdar as little more than a Greenfield laboratory exercise.

During the last 30 years, there have been many prominent experiments in community energy ownership, waste management, Virtual Power Stations ( VPS ), distributed electricity generation, embedded mini-grids, grid embedded electricity storage, and transportation management. In the last 15 years, we have witnessed the rise of AI, smart sensors, and personalized smartphone software to modify community behaviors. Whether the use of these technologies classifies a city as smart is debatable. Automated management using predictive software does not make a city smart nor does it lower its ecological footprint. The software does not reduce poverty or pollution. The fact is that a city’s overall energy use under increasing population density pressures increases irrespective of the software solution used. Finding a way for every building to generate more electricity than it uses under full occupancy does not require AI software. It requires good design practices, excellent inter-governmental coordination as well as better urban master-planning and pro-active planning and building codes.

Key aspects of smart city infrastructure are lost in the marketing hype, ‘Tech-cowboys’ focus on selling solutions. We all tend to get a little misty-eyed about the prospect of a software solution designed to improve our lives and solve our urban and regional planning problems. We are after all born to shop and easily manipulated by social media, TV and peer pressure. Planning and policy professionals remain skeptical about software consumerism. There is a nasty propensity to make promises based on confusing research that reach inevitably self-serving conclusions.

The administration of energy legislation and regulation

The IEA publishes the most recent energy legislation as well as changes to renewable energy acts for most countries in the world. We counted over 250 thousand PH.D. studies and academic research papers ( and growing ) on energy efficiency and urban infrastructure planning and smart cities for this paper. A survey of these peer-reviewed research papers reveals that only a small minority reference energy legislation. Even fewer analyze the connection between a nation’s energy legislation and its GHG commitments with respect to Grid Codes and IEEE Standard 1547.

How these and other standards relate to the development of Smart / Solar Cities by demonstrating the administrative functions between the legislative and policy intent and the technical reality of a nation’s actual electricity infrastructure is almost exclusively ignored. Politicians and public servants who like to appear pro-active readily adopt standards and renewable energy policies. Administering and enforcing these in respect to existing electricity infrastructure conditions requires an honest risk appraisal of current capacity, network resilience, and stakeholder involvement. This is particularly important when you read about India’s intention to build 14 smart solar cities by 2050. In a country with a relatively low HDI index, the training requirements for statutory planning and building professionals, and the financial solvency of local government is perhaps a more urgent priority.

Jurisdictional control and administrative overlap

At this point, it is worthwhile to mention that city planners remain constrained by jurisdictional control categorized by intra-governmental authority and bureaucratic overlap at the regional and national government level. Many aspects that impact community wide energy use, transportation, land-use planning, and building codes fall under local governments while others such as waste, sewage, water, and energy supply are controlled by regional and national governments. This makes city climate action plans hard to quantify in terms of both statistical methodology and verifiable outcomes. The evidence suggests that countries with clearly articulated GHG emissions reductions policies at national and regional state government level demonstrate more cohesive renewable portfolio standards (RPS) at the local government level.

This generalization does not always reflect the local city and community action, or the administrative and regulatory arrangements between stakeholders. City planners, municipal associations and welfare groups are rarely participants in energy supply and price discussions between electric utilities and state/ national governments. Sometimes they are token observers for political publicity.

Rarely do these energy supply discussions correlate policy initiatives that include financially prudent city-wide retrofit renewable portfolio standards (RPS). Articulated energy efficient standards that focus on national net zero EF planning and building codes for new buildings, alterations, and additions to existing structures do not fall under Grid Code and IEEE standard 1547 compliance issues. These are the preserve of Electricity Utilities and State Regulators. When city governments focus their attention on peer-to-peer electricity cluster connections, community-owned mini-grids, municipal energy storage the energy companies become defensive. Grid codes and IEEE standard 1547 become electricity company tools to stall innovation, slow urban energy efficiency initiatives and undermine government transparency and inclusivity principles for good government.  In all cases, jurisdictional control, bureaucratic cooperation, policy cohesiveness, and funding consistency remain significant obstacles. This is true whether we are dealing with a developed or a developing nation.

This raises considerable doubt about the assertion that countries with clearly articulated national GHG emission policies and rigorous CAP targets display a greater propensity for RPS framework development at the local city level. At issue is the question of whether national GHG emission policies are translated effectively to provincial/state and local governments. Is there sufficient intra-government cooperation to ensure consistency of policy for the formulation of coherent policies and the consistent funding of uniform action plans? Do these action plans trickle down to city planners and local government authorities that will assist in the formulation of renewable portfolio standards for meaningful national energy efficiency statistical analysis? Do city administrators have the support of state and national government to enforce localized renewable energy self-generation and storage programs. To what extent are localized self-generation and storage solutions supported by state legislation and regulatory compliance measures? The Australian experience confirms that without a national renewable energy plan, state governments are struggling to initiate urban energy self-generation and storage programs at the local municipal level. Local government will invariably have to do the heavy lifting on building energy efficiency and self-generation. Without an urban energy efficiency building retrofit plan neither urban GHG nor a cities ecological footprint is likely to see any improvement in the short term. Leaving local government chronically underfunded and battling with the energy monopoly in their jurisdiction is simply not good government.

Towards an inclusive approach

For cities, RPS framework development can include direct energy generation and electricity storage as well as indirect CAP activities that are unrelated to the electricity industry. These types of energy efficiency activities cities engage in revolve around social engineering, local environment, waste management, and amenities improvements.  Decisions to improve and expand bicycle and walking paths, plant trees and start car sharing programs are desirable community objectives. They are also hard to evaluate in terms of core urban energy efficiency improvements.

In terms of energy self-generation, storage planning and building code compliance attention to IEEE standards, building materials code standards, as well as uniform fire regulations and thermal efficiency standards require closer attention. The idea of ‘Energy Star’ rating systems for buildings might have some currency with the real estate industry, but the practice has little scientific credibility in the real world. The reality is that in Australia any building must self-generate approximately 2.5 times its own daily average energy consumption in order to achieve a net zero billing impact. Energy storage of not less than 1.2 times a building’s own daily average energy consumption is needed to achieve a net positive impact on the city’s electricity distribution grid. Both self-generation and self-storage are required to lower a city’s ecological footprint and its electricity related GHG emissions profile.

The value of ratepayer money spent

It is important to understand that not all local government initiatives have a quantifiable impact on GHG emissions. Some GHG emission related activities are hard to quantify in terms of both city CAP expenditure and RPS framework effectiveness. They are hard to quantify because there is often no baseline comparison data available and continuous data collection is funding dependent. What is perhaps even more perplexing is that many of these municipal government initiatives are hard to evaluate in terms of their ecological footprint impact. The consequence of some of these initiatives might very well be an increase in electricity use for public lighting, higher car emissions due to traffic management changes as municipal waste is stockpiled in warehouses because of state funding related recycling practices. Shifting problems at greater cost to the community is not smart government. It does not instill confidence in the idea of a smart city.

Does Net-metering stifle network innovation

MIT research has found that under current US Grid Code compliance conditions, 25% of rooftop solar penetration would not affect transmission and distribution grid costs in US cities. Upgrading the distribution grid in urban population centers to include two-way transmission is more than offset by lower costs in transmission network upgrades and reduced reliance on traditional sources of generation such as coal and gas. In several northern European countries, 35% of urban rooftop solar grid penetration has no grid costs impact. This is due to higher Grid Code compliance standards, different network technical standards and a higher prevalence of underground cabling infrastructure.

No Australian city, let alone any city in SE Asia and the Indo-Pacific region can claim a 25% urban solar rooftop penetration by available rooftop area or supply capacity rating. Despite this, the Australian Electricity Utilities (AEMC Report) and State governments frequently blame annual retail price hikes on distribution network upgrades. Other unsubstantiated justifications for the annual electricity price increases include the rapid expansion of solar and wind farm developments and the need to keep aging coal plants operating for network reliability and energy security reasons. The only conclusion we can reach about these annual retail price justification is that Australian Grid Code compliance and enforcement standards do not compare to the actual technical condition of the east coast grid. This conclusion is confirmed by the recent addition of grid embedded battery storage in both South Australia and Victoria.

If we look at the federal government and the Victorian government websites, we find further anomalies. The federal liberal government claims that consumers can reduce their energy bills by switching electricity retailers. The federal government website does not explain how consumers change their electricity distributor. The distribution company passes a large percentage of daily connection fees and charges onto consumers. ( From 88 cents to $1.50 or more depending on the  distribution region and whether the customer is a solar or non-solar customer.)

The Victorian website confirms that Net-metering practices are in force throughout the state. There is a general explanation of how Net-metering applies to solar prosumers and how it differs from Gross-metering practice. The website also mentions how important digital smart meters are in this process. Once again, the website fails to mention that all Australian states use volumetric metering to estimate a solar prosumer’s energy bill. The reason is simple. It all comes down to how rooftop solar prosumers are connected to the grid. 

Under current electricity supply reliability and energy security regulations, two important facts need clarification.

Firstly, it is common regulatory practice in most countries, including Australia, to deal with electricity distribution companies as a monopoly supplier. Under monopoly supply regulatory administration, all assets before the meter, including the meter itself are treated as Utility owned assets. This explains the low interest in energy efficiency innovation by Utilities for urban built environments. It also explains the low concentration of vertically integrated electricity suppliers in Australia. Only six large energy companies service the entire east coast of Australia across five NEM states.  

The second thing to remember is that volumetric metering measures the total amount of energy a building consumes for the retail price agreed between the Electricity Company and the State government.  The digital meter also measures the total amount of solar energy exported to the grid for a fixed price agreed between the same parties. This price is the Feed in Tariff (FIT). There is no real time Net-metering. There is no automated market bidding (real time market participation) for rooftop solar energy prosumers under volumetric billing.

The majority of digital smart meters operate as dumb meters and do not prioritize solar self-consumption except for a few isolated country connections. There are a few isolated examples of supplementary grid connections that prioritize rooftop solar and local battery storage consumption under grid connected backup supply conditions. There are only a few isolated examples of peer to peer demand managed connections as Electricity Utilities fight tooth and nail against prosumers demanding to operate behind the meter. The ownership of billing and localized distribution control is a hotly debate issue in all developed and emerging nations. There are three reasons for this.

Firstly, the Australian grid and many other grids around the world are simply not smart enough. The technical capability and the degree of smart sensor distribution throughout the distribution network in Australian cities are so abysmally poor that Australia has no option other than to use digital smart meters as dumb volumetric meters only. The same is true for many other countries where digital meters exist. This makes ‘Smart / Solar City’ proposals in Australia as well as throughout SE Asia, the Indo-Pacific and Africa highly unlikely in the near future even though it could dramatically improve urban energy efficiency, lower urban poverty as well as the ecological footprint of cities.

Secondly, the Australian Electricity Cartel needs clear federal and state regulatory guidelines that guarantee the survival of the electricity distributors. Behind the meter operations and peer to peer community self-managed mini-grids only require one Utility owned digital meter for a cluster of buildings inside a closed smart grid. Being reduced to a service provider operating under fixed-price maintenance and a capped grid leasing fee is probably not the future business model any electricity distributor wants to contemplate.

Thirdly, the GST is a value added tax. All flat rate value added taxes are compound taxes. The longer the supply chain, the greater the total amount of tax collected by the government. Every Australian state government is very happy to negotiate electricity prices with a small number of private energy companies because it can maximize its GST revenue.

The fourth point concerns the ownership of prosumer purchased assets under volumetric Net-metering with rebate billing arrangements. Volumetric based billing practices are often estimates based on past average daily consumption and future low voltage rooftop generation. Both consumption and rooftop generation are treated as Utility assets. All assets before the meter and including the meter are treated as Utility owned assets, even though the building owner purchased them. Under standard business practices, this places residential prosumer’s under considerable disadvantage since they cannot use their own assets for green finance loans, tax credits, and asset write-offs unless residential prosumers register their building as a business.

Case Study

The case study involves two low GHG energy efficient residential buildings. The two buildings are located in two different electricity distribution regions in Melbourne Victoria. Both Buildings have approximately half the average UK daily energy consumption profile of 4.8Kwh per day. ( E.g. 2.42 and 2.62Kwh’s respectively.) The buildings comply with EU thermal insulation guidelines and require no space cooling.

Both buildings harvest rainwater but do not recycle grey water or process sewage sludge into energy.  Victorian regulations and the costs of these regulations are prohibitive.

Both residential buildings are fitted with a 5KW LV solar system but no battery storage. Both buildings export more than 1370KWH’s of solar energy to the grid annually.

The gross annual billing asset worth for both houses combined is more than $2700 for the electricity distribution companies.

Despite no variation in the gross daily billing consumption estimated by the Utilities for both homes, the two residential dwellings record a net.52KWH average daily net consumption per annum with a net positive daily solar export twice the estimated gross daily consumption.

Drilling down into the daily consumption profile over 4 years reveals that neither of the two dwellings ever consumed more energy than they exported to the grid on any given day in four years of solar operations. Consequently, it is hard to conclude how a net daily billing average consumption of .52KWH’s could be billed for unless the formulas used in the billing estimates contain a deliberate mathematical bias.

The second thing about using estimates to determine net-billing is that the resident of one of the homes is frequently away on business. Despite this, the billing shows no reduction in the estimated average daily consumption. In fact, it shows wild daily fluctuations that can only be explained by wholesale electricity prices variations. These variations in the billing occur even under zero energy usage.

What does this mean?

Firstly, volumetric metering under agreed retail and FIT price conditions between the State government and the electricity companies is not in the solar rooftop prosumer’s best financial interest.

Secondly, high energy efficient residential homes with a low ecological footprint and a low GHG emissions profile do not pass distribution grid upgrade costs onto other customers. The argument that solar prosumers pass on net costs to none solar consumers is false. The net financial contribution of high efficiency residential buildings to the electricity company exceeds net returns to prosumers under volumetric metering rebated under Net-metering administrative practices.

Thirdly, high energy efficient homes are disadvantaged by Australia’s net-metering practices. These home owners pay proportionally more for their contribution to the EF and the energy efficiency rating of cities then they gain in financial returns for their investment.

What do we conclude?

Net-metering policies do stifle network innovation. They do so because of the way Australian states administer them. Unless we assume that Grid Code compliance and technical maintenance standards in Australia are equal to those of India and other emerging nations; then retail price justifications as a function of urban solar penetration cannot be supported by the evidence. Conversely, Grid Code compliance and technical reliability of distribution and transmission infrastructure in India, for example, place great doubt on the efficacy of Smart / Solar City initiatives proposed. The administration of net-metering by state and national governments have clear detrimental effect on urban energy efficiency and the urban ecological footprint.

This does not however, discount the need to develop peer to peer embedded mini-grids that include storage in order to address the poor electricity infrastructure throughout SE Asia, the Indo-Pacific and Africa. There is ample evidence that carefully planned projects financed under ethical green finance conditions can ensure greater access to electricity at affordable prices for emerging nations. Structuring the administrative and regulatory arrangements to avoid energy poverty traps is not a strong point for any Australian government. The Australian experience should not be emulated by any emerging nation. Energy theft as a function of negotiated billing practices between government and energy suppliers must be carefully managed to avoid socio-economic disruption and aggravated inequality. 

About the Author

Mr. S.E. Angerer M.U.R.PL, M.ED, DIP.ED,B.A,WPT

Mr. Angerer has more than 30 years’ experience as a government adviser and senior consultant covering all aspects of climate policy and context specific solutions for urban and rural development. Mr. Angerer has a multi-disciplinary background in Architecture, Engineering, ICT, GIS & Mapping, Urban & Rural Development, International Development Law, Transport Systems, Environmental Management, Business and Project Management, Risk Analysis, Change Management as well as E-Learning, Education Management and Training. Mr. Angerer has developed the UN compliant E-WASH system with a focus on poverty reduction, food and income security, whilst enabling positive investor returns at the lowest risk for developing nations. Mr. Angerer’s expertise is in strategic government and business policy and business development for all aspects of renewable energy and Blockchain peer to peer VPN managed community owned smart grids for integrated E-WASH grid connected and off grid system. Mr Angerer also has an extensive background in employment and training policies and curriculum design standards at national and international level.

Building capacity Pathways to Energy Efficiency in SE Asia and the Indo-Pacific

Introduction

Most of us should be very familiar with Jeremy Rifkin and the idea of Net Zero Marginal cost. European Bankers and Financiers have mastered how to structure energy projects with Proxy Rebates and Credits utilizing direct PPA finance instruments. This is irrespective of whether these projects are grid connected or off grid. It doesn’t even matter whether the project scope is at community, regional and national level. As a consequence the idea of Net Zero Carbon communities that are self-managed, sustainable and resilient is no longer a mystery. The question is why do so many nations in Africa, SE Asia and the Indo-Pacific region struggle to incorporate the principles of Net Zero Marginal Cost with Net Zero Emissions into their anti-poverty, food security and Climate Change resilience national development policy agenda?

The pathway to energy efficiency is neither a political, nor an economic policy priority for all nation states. In SE Asia and the Indo-Pacific as well as in Africa and Latin America, energy policy is tied to geopolitical, trade , security and soft-diplomacy initiatives. Integrated sustainable development for building resilient communities is often cited as the reasons for development aid.  What integrated solutions look like often escapes the eye of the policy maker. We know that appropriate planning pathways for energy, water, sanitation, health, education, transport and communications infrastructure is best integrated in a holistic anti-poverty and regional growth context. There is little evidence that neither the funding nor the project management expertise follows the expressed development objectives. We see unilateral, bilateral, trilateral and multilateral agreements that are frequently self-serving, poorly co-ordinated and inappropriately structured, planned and executed. We also see international and regional financial institutions; NGO’s and private for profit businesses ignore the very ideals that underpin sustainable development aid finance. These capacity building deficiencies are not confined to the manner in which finance is structured but are found in the very nature of traditional project management principles that underpin the development aid process in a soft-diplomacy context.

Energy efficiency should be a central political economy policy platform instead of being treated as a separate issue from energy generation, transmission and distribution in all developed and developing nations. It should in fact be an integral part for identifying energy priorities in a national and transnational holistic value chain GHG development funding framework. The reality is that it is not. The recent announcement of a tri-lateral energy infrastructure agreement between the Australian, Japanese and US government for the Indo-Pacific demonstrates this. The question is why is there such poorly co-ordinated capacity planning in regions most vulnerable to Climate Change? What indeed are the priorities and why have the assumptions that underpin them so far failed to deliver lower debt and greater local community resilience in a full circle value chain self-managed sustainable development framework. Is it truly a question of how much we spend and what we spend it on, or should it be a question of how we spend what spend in order to achieve economic sustainability and community resilience at the lowest debt to equity ratios. In Australia’s case we find that outsourcing this responsibility to four preferred private contractors neither delivers Australian taxpayer nor long term DFAT value for money.

Identifying the barriers

We understand and recognize that traditional pathways to energy security, access and affordability remain barriers to entry for intelligent and innovative decentralized off-grid Mini-grids and grid connected closed Smart-grids in developing countries. We also recognize that integrated E-WASH-E-T-C (Energy, Water, Sanitation, Health, Education, Transport & Communications) solutions are not independent of each other in a 21^st knowledge and skill based economy. Applying contextually appropriate infrastructure solutions in societies with a relatively low level of knowledge and skill social capital remains a key capacity building requirement for these societies. Inheriting institutional infrastructure and value sets that govern them can often lead to perverse outcomes. The PNG education system is a case in point. Built in a mirror image of the Australian education system it copies all the problems and issues Australia struggles with when it comes to education standards, compliance and enforcement. It is not surprising that these issues are multiplied many times in a developing country such as PNG.

The 2014 Country Report into financing the PNG TVET sector illustrates several points in this regard. We don’t have to go past page 10 of the report to find out why overlaying an Australian education structure onto PNG and other Pacific economies poses recurrent structural issues at governance, institutional and national economic development level. The red circle ( see Image below) demonstrates the structural and functional problems at the national, provincial, district and local government level all the way down to the school management level in PNG.

Just as there is a fundamental disconnect between the department of Labour, Industry Relations and Industry Training with the department of Education in the Australian Federal system we find the same in PNG. The inheritance of the Australian Education and Industry / Industrial Relations governance structure and bureaucratic value system by SE Asia and Indo-Pacific nations display remarkably similar problems. These problems manifest at the functional and structural governance level in the form of similar methods of corruption and bureaucratic mismanagement. This manifests itself at the political level as fundamental policy disconnectedness to the knowledge, research, skill and training needs of industry and the country as a whole. Whether or not these dysfunctional departmental and inter-departmental relations are exploited at some political ideological level is not at issue here. What is pertinent is the manner in which senior public servants exacerbate these dysfunctional relations throughout the various bureaucratic layers down to the individual local institutions.

Australia did not achieve its status as the 13^th most corrupt nation of all OECD member countries for no reason at all. For an anti-institutional corruption campaigner like me, this revelation is not news. What is important to understand in the context of PNG development is that its education infrastructure is not fit for purpose to support the development needs of the nation as a whole. The primary reason for this is that the PNG department of Labour and Industrial Relations and Industry Training cannot deliver any creditable workforce analysis without a national industry policy. It therefore cannot enable a creditable national workforce education and training policy let alone engage in specific industry sector analytics. As a consequence, specific industry staffing requirements are ignored and industry organizes its own training programs independent of the formal education and training sector. This affects not only staff skill levels but it makes any pathways and credit point recognition and transfer program impossible to assess, measure and compare to any meaningful base line data set. What is perhaps more perverse is that DFAT has not recognized this fundamental problem. DFAT continues to fund its four preferred development aid contractors to deliver Australian education capacity building support without comprehending that its entire Indo-Pacific education aid program will not achieve self-management let alone self-funding status under current spending priority conditions for many years to come.

Breaking the strategic policy disconnect

The Indo-Pacific, SE Asia and many parts of Africa are exceptionally well suited to decentralized energy, water and sanitation models that minimize the cost of building expensive new infrastructure. Little strategic policy planning that integrates these essential infrastructure requirements with higher order knowledge and skill transfer programs, let alone viable and workable knowledge and skill capital retention practices are evident across all aid recipients under nearly all development aid programs in the region. Continued spending on poorly articulated education capacity building projects remain priorities for all development agencies, NGO’s, the UN and regional development banks even though Net Zero Marginal cost economies that can take full advantage of the Net Zero Emission technologies require targeted education, research and TVET skills at the local level.

There are of course a plethora of specific purpose development aid programs receiving funding. Many have been funded for years without any visible signs that any of these programs are nearing completion or are becoming self-funding and economically sustainable for the host nation. Naturally we hear that by necessity all development aid is long term. Any solutions to complex cultural, social and institutional governance issues have no quick fixes. We call this argument the development readiness paradox. Others simply call it the parachute paradigm. You simply take what works and superimpose the solution on the host nation irrespective of development readiness, context or value sets.

This condescending assumption by donor nations, NGO’s and institutions are the reason many small nations in the Indo-Pacific have appalling debt to GDP ratios. Even China’s argument that it does not interfere in the governance and institutional arrangements of Indo-Pacific and SE Asian countries has a hollow ring. China’s development loan structures are geared towards loan default for a direct strategic foothold in the region. The Belt and Road initiative (BRI) of the Chinese government leaves little doubt. It is just as short sighted as the capacity funding by the EU, Australia, US and Japan! At the heart of the problem is that all donor nations struggle to comprehend that capacity building is not about influence but a matter of trust. Without a properly trained and skilled local workforce debt dependence in the Indo-Pacific, SE Asia and Africa will continue to rise. At the social level the impact of Chinese workers and their influence on traditional community values continues to cause tensions in many African, SE Asian and Indo-Pacific societies as local job opportunities go unrealized.

The Knowledge Economy is part of the Full circle Value Chain

Without the knowledge, skills and expertise to understand the opportunities full circle value chain deployment of low GHG emissions alternatives in terms of self-funding sustainable development solutions SE Asia / Pacific nations struggle with all aspects of governance, standards, compliance and enforcement. Once again we notice the contradiction! Do these countries struggle because they don’t have the necessary levels of institutional knowledge, skill and expertise to maintain acceptable standards of governance, compliance and enforcement? Is the consequence weak and poorly informed decision making practices, gullibility and corruption?  Perhaps the issue isn’t any of it but a cause of development aid. Perhaps it is a simple matter of getting the advice assigned by the donor nation / institution at a cost the recipient country agrees to repay.

At the heart of these problems is the structural dysfunction of governance and institutional inter- relationships across the board. Levels of development entry, that include knowledge and skill base lines as well as legislative, regulatory and bureaucratic obstacles continue to slow progress. They do so because there is little work being done in the area of ‘appropriate’ development and how this relates to development ‘readiness’. Whether the preconditions for orderly development progress are either ignored or purposefully manipulated to service an ideological transition that serve established interests and social elites, remains part of the institutional and legal framework each country adopts into its governance structure. This can result in aid requests for building capacity in areas secondary to a national industry development priority, or contrary to it.

Financial institutions and structured project finance practices are part of the growing debt levels in the developing world

Whereas much of this defies traditional development banking higher order thinking (HOT) in a global and regional development context, we find that financial institutions labour to minimize their exposure to future debt and stranded assets risk whilst balancing the influence of their primary partners. This includes their long term energy sector investments. A narrow development finance focus is often the root cause of unequal regional development. Institutional capacity building options favour soft diplomacy priorities of the lead donor nation. This can lead to greater aid dependence, high debt to GDP ratios and stagnating economic productivity in the SE Asia Indo-Pacific region. Recipient nations are often unaware that institutional and governance structures recommended by external consultants and specialist aid development companies / NGO’s rarely have the multi-disciplinary skill and knowledge to offer full circle sustainable value chain solutions that are long term debt neutral, culturally appropriate and socially responsible. In many SE Asia Indo-Pacific countries unequal regional development remains fundamental to issues of inequality, income distribution and poverty despite phenomenal GDP figures. Australia is not immune from these concerns.

There are two inherent problems. The first is that clean energy project planning assumes a distributive decentralized solution that is framed in a fully integrated E-WASH-E anti-poverty and climate solutions policy agenda. Much has been said about sustainable cities and resilient communities! Little has been said about how to deliver an integrated masterplan that delivers E-WASH-E-T & C solutions that meet national and local community needs at the lowest infrastructure and long term debt recovery cost for local communities. Defining such a comprehensive political and economic agenda at a national and sub-national level continues to drag industry, social and economic agendas for many SE Asia Indo-Pacific nations including Australia. Even though such a policy is often vocalized as the most urgent international problem, this urgency is not reflected in the political and economic agendas of the ruling political elite and key industry sectors of many countries. This disconnect between what is said and what is done on the ground is often so great that many communities feel marginalized from the economic benefits of growth and excluded from the political decision making process.

The same rhetoric is reflected in the international finance community who express their desirable aims and objectives in convoluted terms. At the heart of the problem is that the actual distributed decentralized funding models compare equally unfavourably to ‘managed’ integrated funding approaches. The problem is often a subtle distinction of diplomatic language and interpreted meaning within a specific sector framework.  In soft diplomacy terms the dichotomy between the various approaches is best described as the difference between unilateral, bilateral and multilateral agreements between host and recipient nations. What is clearly at odds here is the meaning and understanding of the words, ‘distributed decentralized funding’ and ‘managed integrated funding’ and how these words apply to all aspects of soft-diplomacy in an international development aid context.

Both approaches to development funding often ignore the developing nations entry level needs in favour of predetermined capacity building approaches that bind the host nation to an identified framework of soft-diplomacy influence at the institutional, social, cultural and industrial level. The idea of building a developing/ emerging nation in one’s own image has a long standing history going back to pre-colonial days. The inheritance of the structural and functional problems of the donor nation at the governance and institutional level is therefore a calculated trade-off for the recipient nation. The underlying aid argument boils down to two things.

1.)   If you are going to accept my money then you buy the conditions of sale plus interest.

2.)   If you accept the conditions of sale plus interest then it is incumbent to spend that money in the spirit of a negotiated long standing commitment of friendship and reciprocity to which the binding agreement commits you.

What is clear is that the inheritance of structural and functional problems from the donor nation poses a set of contextual problems for donor countries and their finance partners that can aggravate existing development problems. These can slow development progress and cause both debt dependence and loan default issues. The second issue is the effect this has on local institutions, through unwanted dysfunctional influences and dependencies. These issues often stifle innovation, resilience and sustainability goals long term. Whether this is through the unintentional stagnation of local investment and secondary value chains in Clean Energy, Water, Sanitation, Health, Education and other knowledge based workforce skilling opportunities, or the loss of locally owned business prospects; remains a matter for concern to both donor and recipient alike. Ignoring this unwanted influence donor countries have on institutional and governance capacity building remains at the core of bureaucratic corruption and other unwanted side effects irrespective of whether the donor nation is China, the US or Australia. Invariably this leads to further specific aid funding to address unequal capacity issues that are either newly created due to unforeseen consequences or due to specific purpose aid funding narrowly applied. Thus, requiring more aid money to address the unbalance created by the aid money previously received! This is what we call aid dependency even though the goal may have been for lower long term debt and managed sustainable development.

If we regard this dichotomy as a temporary anomaly in a country’s development progress, the current energy infrastructure, knowledge and skill status remain important considerations when charting a path for energy efficiency, security, access and affordability. This is true for all integrated E-WASH-E-T &C Climate Solutions scenarios whether these are applied to a developed or a developing nation. In all cases the evaluation of where a country is; with respect to its energy infrastructure and how it intends to develop it in relation to its socio-economic agenda, demands a coherent national policy framework. This framework must necessarily address all aspects of poverty, equity, access and opportunity. The alternative is continued dependence on overseas aid and rising debt to GDP ratios. Future stagnation in local business innovation shackling the knowledge capital demands of the 21^st century is clearly no longer an option for international aid and development financing. It is not an option for maintaining productivity and global competitiveness for any developed or developing nation going forward.

The theoretical hurdle of government policy versus the econo-babble of self interest

The problem with much of the energy debate is that we think about energy in terms of a specific purpose commodity. We fail to understand the ubiquitous nature of what energy is in the context of everything we know about it. We even project this level of narrow minded understanding into the phrase ‘Energy Efficiency’. Implied are such things as conservation, anticipatory capacity, reduction, adaptive systems capacity, absorptive systems adaptability and the reliability of transformative technology and its alternative use.

The scientific and very human reality is that the human race has always been transforming energy from one form to another. We need to power ourselves and the myriad of labour saving and convenience devices we consider of value in our quest for civilization. Knowledge in the pursuit of profit though methods of conflict and co-operative trade have been at the heart of every civilization from the Indus valley, China, Egypt, Persia and Rome for thousands of years. We wouldn’t even have the Climate Solutions and Energy Transitions debate if we had our own micro-wave oven size fusion reactor installed in our home. As a consequence we labour over the disconnected and narrow minded thinking that ignores the energy value chain solutions created throughout a national economy by not addressing the issues directly at local and regional community level. We ignore that fact that the fossil fuel economy has never achieved more than a 20% national productivity level for any nation since the day the car was invented. Despite this we struggle to transform our stagnating economies into Net Zero Emission economies using Net Zero Marginal Cost principles for social goods such as housing, energy, water, sanitation, transport, health, communications and education. These social goods are ideally suited for the 21^st century Net Marginal Cost economics of the sharing economy.

Allowing a small minority to control access and supply to a social commodity is only one of the many issues in this debate. We ignore avoidable consequences in both the short to medium term by concentrating distributive finance mechanism in the unequal and unfair distribution of capital. As human beings we are ill prepared, from an evolutionary stand point, of thinking about anything that extends beyond our own immediate needs. Every major institution and government in any country on spaceship earth reflects this conundrum. Despite this we find that the Indus valley civilization was apparently founded on a distributed collaborative model without centralized control and ownership of services. It was based instead on an agreed collective master planning model for the cooperative ownership of water, sewage and other social infrastructure that supported cities and regional village live 4000 years ago without the need for a centralized government. Jeremy Rifkin may indeed blame the concentrated financial power of the fossil fuel barons and herald the emergence of the internet tycoons who brought about the sharing economy as the basis for the Third Industrial age. I do not believe that technology and the concentration of macro data sets in the hands of a few global companies is the answer.

I agree that there is a monumental change a foot! Convincing institutional bankers and politicians to think about finance as a total value chain solution remains a problem when national governments are not prepared to define their energy infrastructure in a national development context. Financial institutions are prepared to exploit this situation by funding projects that offer a secure return of investment. The fact that the owners of energy capital seek to concentrate their control and ownership of any national energy market will remain a fact of life. What is at issue is how, where and to what extent a government ignores the necessary regulatory and legislative market governance standards, compliance and enforcement mechanism. This is especially true when current (HOT) finance thinking favours ‘Proxy rebate plus credit finance options within the context of a specific regional PPA supply agreement. The same type of financing options are available for Water, sewage, transport, communications, social housing and any other local infrastructure and food security issue facing SE Asian and Indo-Pacific nations. Applying these finance options in an international and a regional banking finance package remains the challenge.

What we know is that the Net Zero Build Environment Emission model  ( Fig 2.) is fully compliant with Jeremy Rifkin’s Net Zero Marginal cost model. This is especially true if we consider a Proxy Rebate and Credit PPA finance mechanism as the means to lower debt levels in SE Asia and the Indo-Pacific that will promote sustainable and resilient communities at both local and national level. Despite this we witness the AsiaDevelopment Bank and the African Development Bank Climate Change and Finance department struggling to comprehend the basic concepts upon which these solutions rest. Recent IMF funding of precisely such an energy model for the Marshall Islands provides us with a glimmer of hope and a new pathway to building Energy Efficiency capacity in the SE Asia and Indo-Pacific region. Whether it translates into the rest of the Indo-Pacific in the wake of President Trump’s recent trilateral energy funding announcement remains to be seen.

Author Biography

Mr. Angerer has more than 30 years’ experience as a government adviser and senior consultant covering all aspects of Climate policy and context specific solutions for urban and rural development. Mr. Angerer has a multi-disciplinary background in Architecture, Engineering, ICT, GIS & Mapping, Urban and Rural Development, International Development Law, Transport Systems, Environmental Management, Business and Project Management, Risk Analysis, Change Management as well as E-Learning, Education Management and Training. Mr. Angerer has developed the UN compliant E-WASH system with a focus on poverty reduction, food and income security, whilst enabling positive investor returns at the lowest risk for developing nations. Mr. Angerer’s expertise is in strategic government and business policy and business development for all aspects of renewable energy and Blockchain peer to peer VPN managed community owned smart grids for integrated E-WASH grid connected and off grid system. Mr Angerer also has an extensive background in employment and training policies and curriculum design standards at national and international level.