There are a host of governance and accountability gaps related to the energy transition regarding fossil fuel wind down, nature-based solutions, and adapting infrastructure to be climate resilient. However, one of the most crucial areas warranting greater attention is the rapid scale-up of renewable energy. That was the focus of a fascinating session at last month’s Extractive Industries Transparency Initiative (EITI) Global Conference.
Renewable energy is set to account for 95% of the increase in global power capacity by 2026. According to the Climate Policy Initiative and International Renewables Energy Agency landscape review, global investment in renewables (primarily wind and solar) reached half a trillion US dollars last year. Yet, developing and emerging markets accounted for just 15% of that amount. Sub-Saharan Africa received only 1.5% of global renewables investment from 2000 to 2020. Investment in those markets needs to dramatically increase, but that will require careful attention to governance factors within the renewables sector.
What can we learn from the governance of the fossil fuel and related mining sectors that is relevant to renewables? The EITI-hosted discussion revealed no shortage of useful insights and some clarity on what is applicable from extractives governance models and what is not.
As Nick Beattie of Savannah Energy noted, one key difference for governments is that extractive sectors are typically focused on maximizing revenues from production for export. In contrast, in the renewables sector, the key product is energy that tends to be used in country (one potential exception could be the use of renewables to generate green hydrogen for export). The locus of attention is less on revenues and more focused on the question of who gets to access resulting electricity and on what terms.
Another key difference is that it is a different set of players involved, not least on the government side. As Cielo Magno of the Philippines Ministry of Finance highlighted, responsibilities for renewables lie with a different set of agencies compared to extractives. There are also different industry players (although some oil and gas companies are moving into renewables, such as Savannah), and much more nascent civil society organizing.
As investment flows in there will be increased opportunity for rent-seeking. This risks similar dynamics to that long seen in oil, gas, and mining sectors (albeit on a smaller scale). Governments are just as vulnerable to negotiating deals that don’t maximize the public interest, as groups such as PPA Watch have well documents.
As noted by Maja de Vibe of Statkraft, a major renewables firm, there are already issues involving corruption, such as paying bribes for permits, and land rights that will be all too familiar to those working in the extractives sector. (It’s no surprise that renewables firms are rushing to hire community relations experts from extractives firms.)
Above all, we are sadly seeing project-level human rights violations in renewables projects that replicate those seen in extractives projects. As Michael Clements of the Business and Human Rights Resource Center noted, they have now documented up to 500 allegations of rights violations in renewables projects. Many communities are successfully resorting to legal challenges to protect their rights. as in the Turkana wind power case in Kenya. For some this threatens to slow the energy transition, but as Michael clearly argued, “It is human rights abuse that is the impediment to the transition, not the human rights themselves.” We need to challenge the false dichotomy between speed and rights/good governance.
So, what needs to happen?
The EITI conversation could only really begin to scratch the surface of what is needed for renewables governance, but there were already some clear suggestions for future action.
The transparency and resulting multi-stakeholder dialogue enshrined in EITI is also needed in the wind and solar sectors. It will help assure citizens that they are getting a fair deal and understand who is accessing the resulting energy. It will minimize corruption risks and safeguard against abuses.
The model of mapping and addressing governance risks along the value chain is a useful one for the renewables sector to adopt. It can provide a framework for governments, industry, and civil society alike.
There is a capacity gap that we must address – building appreciation of governance risks and solutions within all stakeholders and investing in infrastructure for civil society engagement.
There are renewables projects that are being well designed and managed with benefits for communities in different regions – we need to highlight those and more generally build up guidance for good practice for industry.
To overcome market hesitance, it is development finance that will drive renewables investment in the near future in developing countries and that is an opportunity for international finance institutions to take on a leadership role and insist on good governance practices in projects with supporting technical assistance.
Finally, while there was no consensus in our discussion around whether the EITI model is applicable to the renewables sector, there was agreement that there is a lot of transferable learning from the EITI community. In that regard, the EITI Secretariat has taken the welcome step of creating a working group to outline draft principles on transparency and good governance for the renewables sector. The hope is that stakeholders can commit to upholding these principles and help to assure that the fast-growing renewables investment results in clean energy and broad-based societal benefits.