10.3.2 Stakeholders and pathways for energy supply technology transfer

Efficiency improvement
The actors involved in the four sectors listed under efficiency improvements in Table 10.2 are diverse and require different approaches for purposes of technology transfer policy. Yet problems of energy efficiency improvement in developing and transitional economies share some basic characteristics with efficiency improvements in other areas of resource use. Few technologies are operated at design specifications right from the start, and their performance generally tends to diminish as time goes by. This observation is particularly relevant for advanced technology with low operational tolerance levels. The reasons have to do with system-wide deficiencies such as inadequate maintenance discipline and lack of spare parts. They are not unique for certain technologies. A brief outline of the actors and pathways involved in the four areas of potential efficiency gain follows:

• The oil and gas sector is a mature, globally oriented industry involving not only the large multinationals, but also a complex network of specialised suppliers of equipment and services. In many developing and transitional economies local companies are tied into this network. The preferred pathway for technology transfer is clearly through private sector contracts in many forms, from licensing to foreign direct investment. The government role is primarily limited to enabling actions having to do with establishing a stable and competitive economic climate. Given the huge investments in oil and gas production, refineries and pipelines, geopolitical considerations play a major role and the risks of not recovering investments is potentially high. Major gains in efficiency improvement are possible given the right incentive structure for private firms.
• In contrast to the oil and gas industry, coal industries, with some notable exceptions, are more nationally oriented even in Europe, and technology transfer flows primarily through government driven pathways. The industry also has a long historical record in some key developing countries, particularly in India and China. Indeed, where the lack of vested interests may hamper efficiency improvement in the oil and gas sector, the opposite may be the case where coal is concerned. The position of domestic firms in emerging economies is strong, but investments in conversion efficiency improvements and technological innovation are insufficient to reach internationally accepted standards of performance. In those economies large efficiency gains throughout the chain from mining and bulk transportation to steam and power generation are potentially available. Sector restructuring is in many cases necessary to create competitive conditions and improve performance. Incentives for domestic mining companies and equipment manufacturers to actively seek cooperation with foreign firms are needed. Local coal R&D activities form a necessary component of technology transfer policies. Stimulation of joint ventures and foreign direct investment would involve better protection of proprietary information, support for licensing agreements, removal of import restrictions, and adequate enforcement of environmental standards.
• Like the coal industry, power generation has been an almost exclusively domestic affair in most countries for a long time. The past decade has seen a major change in the orientation of this sector because of a global wave of liberalisation and privatisation. At the same time electricity demand growth in the OECD has been slow (Price et al., 1998). These factors have led to an increasing international orientation of the major players in the industry, ranging from equipment suppliers to former public utilities. On the other hand, electricity supply (both in terms of total load and reliability) in most developing countries cannot keep up with demand, and this is becoming a major constraint on economic development. The gradual decoupling of public policies and political interests from utility regulation and electricity markets will have a profound impact on the future performance of the sector. The initial drive in this process must come from the government. Restructured national utilities whether in private or public hands can then involve the private sector through independent power producers or other forms of partnerships in efforts to improve efficiencies in generation, transport and distribution.
• Cogeneration (combined heat and power application) has had a major impact on energy efficiency improvements in many OECD countries (IEA, 1997). Without a proper regulatory framework and special tariff constructions, cogeneration will be difficult to implement in many cases. Although cogeneration projects are based on private sector initiatives and pathways, the public sector has to play a major enabling role.

Switching to low-carbon fuels
The major option for switching to low-carbon fuels is replacing coal or oil with natural gas. The natural gas sector is dominated by the oil and gas multinationals, global pipeline construction companies and major gas equipment manufacturers. It is a mature industry characterised by gradual technological innovation in the last decade primarily on the production and conversion ends of the resource flow (off-shore operations and gas turbine technology). Core technologies in this chain are typically R&D intensive and logistically complex, and thus not easily transferred to domestic firms. There are, however, substantial opportunities for peripheral supplies during construction, and once installed operation and maintenance can be transferred relatively easily. The projects involved are politically highly visible and of the front page news type. This makes a stable gas market regime essential for attracting capital at reasonable conditions. Besides technical skills of construction and operation such projects require entrepreneurial and bargaining skills at the recipient end to balance interests competently. Natural gas markets and applications are a relatively new phenomenon in most developing countries, and thus need considerable policy attention when it comes to building up required skills and supplier industries. Regional cooperation is an essential element of success in transnational gas ventures, because a large part of the supply costs are in infrastructural investments with high risks of recovery.

Decarbonisation of Fuels or Flue Gases, and CO2 Storage
The actors involved in CO2 removal and storage will first be oil and gas companies and perhaps later electric utilities. Because CO2 becomes available in pure form in some petrochemical complexes (hydrogen, methanol and ammonia production), and because CO2 stripping from natural gas fields is necessary to meet commercial fuel specifications, oil and gas companies are facing just the costs of storage. If, in addition, the injected CO2 improves recovery rates in production from natural gas and coal beds, niche applications can even be attractive when carbon emission taxes are low. Removing CO2 from natural gas (e.g. steam reforming) or from flue gas in power plants is an expensive add-on technology, while new integrated technologies like coal gasification or synfuels with undiluted CO2 flows are not commercial. Technology transfer concerning this option could involve both North-North and North-South partnerships. At the same time large-scale CO2 storage arrangements without commercial benefits will require government-driven technology transfer pathways.

Nuclear power
Nuclear planned capacity additions in the past few years were located primarily in Asia. Moreover, considerations of operational safety and waste management have led to considerable involvement of industrial countries in nuclear power plant upgrading in transitionary economies. From the point of view of technology transfer these developments cannot be ignored. Governmental organisations at the national and international level are the most important stakeholders in this respect, as are the major engineering and construction companies involved in nuclear energy. In general, nuclear power requires an elaborate national regulatory and technical infrastructure, and affects key international political issues. The major pathways for technology transfer in this area are thus strongly government-driven and embedded in international agreements. With respect to operation of existing nuclear power plants, measures to strengthen and improve technology transfer in the areas of plant safety, personnel training, and the nuclear fuel cycle are needed.

Biomass
Biomass technology for energy generation or fuel production is the most complex cluster of the six major options listed in Table 10.2. First of all, biomass technology is still evolving, which makes it difficult to decide what exactly should be transferred in terms of knowledge and techniques. Secondly, biomass technology requires an interconnecting series of difficult technological choices concerning biomass sources and production, biomass handling and transportation, and biomass conversion and end use. These choices are to a large degree area-specific and cannot realistically be addressed on a generic level. Finally, there are a multitude of actors who potentially could become crucial players in global markets. Nevertheless, at least for some developing countries in Latin America, Asia and Africa, biomass energy may become the most important opportunity on a community level for economic development in an environmentally conscious world. The Brazilian alcohol programme (see Case Study 8, Chapter 16) testifies to this observation despite its present economic difficulties (Moreira and Goldemberg, 1999). Biomass technology transfer under current conditions is mostly dependent on government driven pathways, such as active involvement in R&D activities, demonstration projects financed locally or internationally, and government sponsored programmes to determine the resource availability. An example is the joint USA-China effort to develop a biomass resource database (Zhu, 1998). Such efforts are necessary to prepare the ground for large-scale involvement at a later stage⁴ . The development of biomass energy options can also promote incremental carbon sequestration.

Hydroelectricity
Hydroelectricity is the largest source of renewable energy now being used. Technology transfer is occurring as shown by the intensive programme of hydro plant construction in several developing countries. Unfortunately, local impacts due to the use of rivers for other purposes, and the social problems related with population displacement for water storage are making it difficult to justify large-scale hydroelectricity as environmentally sustainable, unless several complementary measures are added to the projects (Liebenthal et al., 1996). Hydroelectricity generation, like most renewable energy technologies, is capital intensive which can be an important financial barrier. The electric sector is, however, now searching for low cost alternatives because of economic pressures due to de-regulation or to privatisation. Run-of-the-river, small-scale hydro and pumped-storage hydros are being considered as more sustainable alternatives to the use of large scale hydroelectricity, despite reducing significantly the available economic potential (Moreira and Poole, 1993).

Small-scale renewables
Small-scale sources for renewable electricity based on wind or PV have been popular items of technology transfer programmes since the early 1970s. Only in recent years have these led to impressive success stories such as the penetration of wind parks in India and Mongolia (see Case Study 3, Chapter 16) or the penetration of solar home systems in Kenya (see Case Study 5, Chapter 16). These technologies are to a large extent dependent on specific niche markets created through government intervention, combined with the entrepreneurial spirit of the involved communities. Yet they hold great potential for the immediate future. In general, the main actors in the world market are equipment manufacturers from industrialised countries, who try to penetrate worldwide through a variety of cooperative agreements with counterparts in developing countries and strong reliance on international aid funds. Their role is increasingly challenged by domestic manufacturers. Because these technologies are generally purchased by end users rather than power producers, arrangements with respect to marketing, financing, and after-sales services on the local community level are just as important as technical performance and manufacturing capability. Without competent intermediaries the chances of successful market penetration are low no matter the origin and performance of the product. The necessary involvement of a large number of people distributed over a large area makes technology transfer for renewable electricity difficult and requires continuous government intervention to increase awareness and institutional commitment, and to stimulate appropriate education and technical facilities.

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