59-05-032 Proceeding

33 Proceedings of the Princess Maha Chakri Sirindhorn Congress • terrain (e.g., hydroelectric power demands water sources at higher altitudes and would not be appropriate for low-lying city-states, such as Singapore.) The tougher challenges for renewable energy are present-day costs (relative to ROIs for other investments) and the lack of policies, in some countries, which encourage the use of low- carbon systems. The reality is that different countries, given the country-specific features and landscapes, should develop their own energy strategies, and these are dealt with in our last section on Renewable Energy with a focus on selected Country Energy Policy Landscapes. Energy Efficiency (EE) Energy efficiency essentially reduces the demand for all forms of energy (including carbon- based sources) by extracting more energy service for every unit of energy consumption. It is the least costly among carbon reduction measures as it does not require fundamental changes in energy sources, but incremental technology or process changes for more efficient cars, industrial equipment, better insulated buildings, etc. and can be deployed across multiple sectors. The EE market is primarily driven by high energy prices, and according to IEA’s Energy EfficiencyMarket Report (2014), the market attracted investments of between USD 310 billion and USD 360 billion globally (EEMR, 2014).There are several observations fromwesternmarkets over the last 30 years that could guide the extent and possible growth of the EE market in developing Asia. Onone hand, despite future cost savings, there is an energy-efficiency gap between the actual and optimal energy use. One market barrier that influences investor decisions is the uncertainty over future energy price. In economic terms, future energy cost savings from energy-efficient technologies at discounted present value should exceed the additional installation costs of efficient measures to justify investments. Therefore, persistently increasing energy prices will be a key driver for the EE market, whereas the volatility of energy prices may affect EE adoptions. Another market barrier is related to the lack of information (information is not always free) or asymmetric information that result in principle/agent problems (failure to convey the benefit for tenants while property owners pay for installation), or the cost of learning and implementing integration of EE measures in existing systems. Current markets also fail to account for environmental externalities to reflect the true environmental cost for energy users. In addition, global trade on fossil fuels also poses energy security concerns, especially for net importing countries. This ‘insurance’ challenge has yet to be translated successfully as a cost to end users. The actual energy use is also affected by the consumers’ bounded rationality whenmaking a decision under risk. i.e., the consumer usually places more emphasis on installation costs and is risk-averse. Quantifying the energy-efficiency gap is difficult yet important for formulation of any government intervention measure to tackle market barriers, failures and consumer behavior, such as the level of subsidies and carbon tax, in order to achieve optimal energy use. On the other hand, actual emission reduction potential of EE measures may be eroded by the “rebound effects”, whereby energy demand increases in response to EE-induced declines