Technology Transfer in Emerging Economies: Role of Business

Preeti Malhotra, Power & Environmental Policies, Alstom

Agenda
About Alstom Conditions for business investment & collaboration Tech transfer: enabling policies & funding Tech transfer: UN mechanism Role of business: working models of Tech transfer

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Alstom Group

N1 worldwide in high & very high speed

N2 in urban transport (metros & trams) N1 worldwide integrated power plants hydro power* air quality control systems

services for electricity utilities

* through Alstom Hydro, a 50/50 joint venture between Alstom and Bouygues set up in 2006

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ALSTOM 2009. All rights reserved. Information contained in this document is provided without liability for information purposes only and is subject to change without notice. No representation or warranty is given or to be implied as to the completeness of information or fitness for any particular purpose. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.

Alstom CO2 strategy

Alstom is the world leader in clean integrated solutions
Emissions CO2 (Gt/y)

N1 hydro
Technology Mix Efficiency CCS

Wind, solar and geothermal N1 nuclear (conventional islands) & biomass Efficiency: Plant optimisation & retrofit

2005

Ref 2030 1000 ppm +6oC

Stabilize Needed emissions path 550 ppm 450ppm +30C +20C max

First CO2 capture demo plant in the world

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Scale of funds
IEA (Blue Map scenario 2010) estimates additional global investment of $46 trillion will be needed by 2050 in order to keep within 450 ppm scenario. Indias Solar mission of 20 GW by 2020 at estimated cost of ~950 million USD.

Massive levels of funding will be needed

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Role of Business: Conditions for investment

Understanding of what technologies might be needed in individual country/regional circumstances Absorptive capacity in the country/region

Existence of free markets (e.g. no imposition of perverse subsidies or trade tariffs) Protection for intellectual property Carbon markets help to meet some of these conditions

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Drivers for collaboration (e.g. R&D)

For Alstom: To perform world-class R&D To drive innovation To identify and secure the recruitment pipeline For universities: perform real, industrially relevant research Easier access to government funding Route to secure employment for their graduates Income

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Policies: National
Capacity building & skills development Carbon markets-Cap and trade Targets and product standards Infrastructure development Regulations requiring use of BAT Feed-in tariffs Portfolio standards IPR protection
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Policies: National
Govt. funding demonstration projects Public-private partnerships to share RD&D risk e.g. CoEs Govt. sponsored RD&D Tax credits to invest in RD&D Needs assessment e.g. The Expert Group on Low Carbon
strategies for Inclusive Growth (Interim report, May 2011)

Govt of India to fund the countrys first 700 degree C 800 MW steam plant

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Carbon market-a policy option for enabling Tech transfer & investments
Help create demand Provide long term price signal Facilitate the appropriate regulatory environment e.g.
Amendments to Indias Energy Conservation Act, 2001 to accommodate ESCerts

Give boost to innovative financial instruments (e.g. Venture

capital, Partial risk guarantee)-e.g. Indias ESCerts

Facilitate Public-Private Partnerships Need to expand global carbon markets by linking regional cap & trade systems

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Putting a price on carbon

Options: taxes or emission trading Carbon taxes likely to operate nationally Emission trading systems can be applied nationally & globally Strict GHG reduction targets required Trading periods should be long enough
A strong, stable and predictable carbon price is the best way of attracting low carbon investment

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Pricing carbon-Indias recent market initiatives

Levy on coal ESCerts under NMEE RECs

All developments post March 2010

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Indias Carbon tax

levy on domestic and imported coal $1 per tonne NCEF (National Clean Energy Fund) Announced in Annual budget 2010-11 In operation since July 2010 To support innovation in low carbon technologies Guidelines announced in April 11

Generated ~500 million USD in Year 1

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REC
Only grid connected 2 Types: solar & non-solar Value of 1 REC = 1 MW hour of RE electricity Price band determined by CERC To be traded at Power Exchanges National Load Dispatch Centre (NLDC) to issue certificates Enable states with less RE commit to higher RPOs Others (with social obligations) allowed to purchase

Estimated market size < 1600 million Euros

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NMEE
Framework for Energy-Efficient Economic Development (FEED) Providing comfort to lenders by provision of Risk Guarantee for performance contract-Partial Risk Guarantee Fund (PRGF) Venture Capital Fund for EE Initial seed capital from Government Performance, Achieve & Trade (PAT) Create market for EE through Specific energy consumption (SEC) reduction targets for industrial units (fixed % reduction of current SEC within sect oral bandwidth) ESCerts can be traded and used for compliance purposes 1 ESCert = 1 Metric tonne of oil equivalent (MTOE)

Total saving objective = 10mMTOE

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Sources of funding
Direct fiscal transfers from governments and through multilateral financing routes Expansion of carbon markets and the flexible mechanisms Domestic investment by developing country governments The private sector, through Foreign Direct Investment

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Funding options
Government: Research grants, Grants for pilots (Technology centre of excellence/innovation centre), Feed-in tariffs and other market measures to favour cleaner technologies Multilateral lenders: Higher risk funds to support pilots, Loans/finance to developing countries for large scale deployment Carbon markets: CDM; international offsets to fund clean energy projects in emerging/developing countries (for large scale deployment) Commercial finance: Equity; Debt

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Public funding for near commercial techsCarbon Capture and Storage

/ tonne CO2
90 80 70 60 50
Source: McKinsey & Company CCS assessing the economics for the cost numbers; policy implications drawn by ZEP

Public funding

Es tim CC ated co S

sts

of

40 30 20 10 0 Demo phase Early commercial phase Mature commercial phase

Indias answer: NCEF

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Policy uncertainty (e.g. Indias national solar programme)

Lack of clarity in policy beyond 2013 PPAs structure-? States setting lower FiTs than Centre Cap on project size End customers (distribution utilities) dis-engaged Limited ground meteorological data (DNI, no. of cloudy days) High interest rates for long term debt No non-recourse based project financing
Limited interest from big players Off setting some risk: ADB guarantee, GoIs Payment Security Fund

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Tech transfer & UN Tech mechs

Operating principles: Build endogenous capacity of developing countries by linking govt, business & research Enable communities to develop their own solutions Take practical approach

Outputs: Help set right regulatory and market framework Assistance in planning & delivery of clean infrastructure Facilitation of PPPs
Risk sharing (valley of death issues for new techs) Access to multinationals expertise Help local firms compete in consortia Development of key supporting mechs (MRV, liability frameworks, training etc)

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What we can do
Bring tech expertise (to help with needs assessments) International business and management experience in 70 countries worldwide Experience of building presence in new markets and developing regional manufacturing and export hubs Bring an expert policy team well-versed in policy-making as well as business Give feedback to governments on what works for business and what doesn't-risks, incentives, market sentiment
Business will provide the vast majority of the financial & human resources needed to deliver clean energy
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Alstoms Business Models in India

Partnership with Bharat Heavy Electricals Ltd (BHEL) - The partnership is based on a license and business co-operation agreement to provide BHEL with super-critical boiler technology, engineering expertise and components.

Joint Venture with Bharat Forge Ltd (BFL) - The JV involves setting up two companies to design, engineer, manufacture and deliver turbine and generator islands and their auxiliary equipment. Alstom Global Technology Centre for hydroelectricity, Vadodara The Technology centre established in 2008 at an existing Alstom manufacturing site, this centre will develop highly innovative hydro products and technologies, focused on the Indian market

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preeti.malhotra@power.alstom.com