The energy sector is changing, but is ADB’s energy department?

Solar panels installed to provide electricity in Sumba Island, Indonesia. Photo by: Asian Development Bank / CC BY-NC-ND

MANILA — Yongping Zhai’s desk at the Asian Development Bank headquarters is barely visible beneath stacks of papers. Most of the sheets are project proposals, the chief of the bank’s energy sector group said, and all are under review to ensure they include new technology.

The energy sector is evolving, and ADB is determined to be at the forefront of supporting what works for communities today, such as mini-grids enabled by energy storage, said Zhai. Energy makes up nearly 25 percent of the bank’s portfolio, he said.

Asia and the Pacific are at the heart of the renewables boom and access to electricity has increased over the past 25 years, although nearly 500 million people in the region still live without.

Progress still remains slow in increased access to clean cooking and nearly 2.1 billion people in the region lack access to clean fuels and technology for cooking, according to a 2017 United Nations Economic and Social Commission for Asia and the Pacific report.

“For us, the ‘business as usual,’ conventional technologies are not able to meet these requirements,” Zhai said.

“For example, in remote areas, grid extension is not possible or too expensive. Technologies are there for us to meet the requirements of the last miles of electrification and the last miles of access to clean energy.”

Questions of relevance

But those present at ADB’s 51st annual meetings, being held this week in Manila, are worried that the institution’s near 10-year-old energy policy no longer speaks to today’s energy requirements, and that the bank isn’t pivoting fast enough.

Sreedhar Ramamurthi, managing trustee for nonprofit research and community development organization, Environics Trust, pointed to the bank’s affinity for “creating energy infrastructure without knowing what is required” using the example of India’s stranded and unused coal-fired power plants, which don’t have power purchase agreements with state power distribution utilities.

“When we’re talking about meeting Paris goals, does the bank’s old energy policy ... [from] 2009 ... meet the kind of requirements that the world has? To us it doesn’t, it needs serious rethinking,” Ramamurthi said.

Some of the ADB’s projects associated with coal, such as coal washeries and the idea of carbon capture, can no longer pass as long-term solutions considering the risks of climate change as well as community needs, he added.

But Zhai is confident the bank’s 2009 policy remains “very relevant to SDG and Paris Agreement,” considering it prioritizes energy access, renewable energy, and energy efficiency. As the bank continues to discuss its Strategy 2030, which has identified seven operational priorities, Zhai added that “we will prepare energy sector action plan so to contribute effectively to Strategy 2030.”

ADB’s current energy policy still states that the bank will consider coal projects in exceptional cases, “but in the last four years we haven’t had any [coal projects],” Zhai said, adding that there are none in the pipeline.

It’s a stark difference from decades past, when ADB was the third largest public international financier of coal-fired power plants, investing over $3 billion.

In Mongolia, the bank recently approved a policy-based loan, not for a coal-fired power plant, but for supporting access to space heating with processed coal.

“But that’s part of our exceptional case,” Zhai responded. “In Mongolia, solar energy is not ready, and using electricity is not yet a solution for heating. Instead of burning real coal, we have them use processed coal, which is 90 percent cleaner.”

Keeping up

The bank is in the process of making changes to stay up-to-date and meet the needs of local ecosystems, according to Zhai. But that’s another aspect of its operations where Ramamurthi sees major room for improvement.

“We need a more decentralized strategy,” Ramamurthi said. “It’s not just privatizing renewable power, which seems to be the mantra for them.

“For instance in India, a lot of large-scale solar has also ended up being land grabbing, to the extent that people in Rajasthan and other places have gone to break down the solar plants. So we need distributed renewables, which are relevant to that local ecosystem.”

Zhai’s energy department has hired three industry experts — two with backgrounds in utilities and one with waste-to-energy expertise. Soon, a gas expert will join the group in supporting ADB’s five geographic energy divisions to review and gauge proposals. Projects are now smaller to meet the needs of communities, Zhai said, a trend that will continue but also make operations and management more complicated.

“When we deal with one utility, say, the power grid of India, they borrow $1 billion, that’s one-fifth, of what we do every year, so it’s easier,” Zhai said. “If you are dealing with village level, you tend to do smaller projects, maybe half a million, and that’s challenging,” he finished.

The trend has led his group to provide training to staff on how to juggle multiple smaller projects, Zhai said.

In 2017, ADB also launched a High-Level Technology Fund supported by Japan, which allows the energy group to access grant money to conduct feasibility studies and fund viability gaps if there’s a new tech “that costs a little more,” Zhai said.

With his growing team of experts, Zhai feels certain ADB will continue to push new technology, although he acknowledges the warranted critique that the bank’s process can stretch years.

“We are known as having a process, which can be slow,” Zhai said. “We are still slow. Very often when we have approved a grant or loan, it takes us a year or two before we reach next level procurement, implementation. That process we need to continue to improve.”

For his part, Ramamurthi is looking for a more responsive, forward-thinking energy department communicated through the bank’s Strategy 2030, to be finalized this year.

“Currently, almost all the banks seem to be looking for private sector to come up with ideas, but that is not a very robust mechanism to find out what is required. There’s a fundamental rethink required.”

About the author

  • Kelli Rogers

    Kelli Rogers is an Associate Editor for Devex. Based on the U.S. West Coast, she works with Devex's team of correspondents and editors around the world, with a particular focus on gender. She previously worked as Devex’s Southeast Asia correspondent based in Bangkok, covering disaster and crisis response, resilience, women’s rights, and climate change throughout the region. Prior to that, she reported on social and environmental issues from Nairobi, Kenya. Kelli holds a bachelor’s degree in journalism from the University of Missouri, and has since reported from more than 20 countries.