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.