Micro-finance and Renewable Energy

This year the Nobel Peace prize went to a guy called Mohammed Yunus ; the self confessed "Banker to the Poor". See www.grameenfoundation.org/
As a trained Economist it seems to be a fairly good model to disseminate credit amongst poorer societies. Basically Mr Yunus's Grameen Bank began issuing very small amounts of money to poor Bangladeshis (often women) to invest in crops/small enterprises etc at reasonably high interest rates and short repayement terms. This proved to be very successful as this group had time, spare productive capacity, incentive to invest and little or no access to capital ; and more importantly the women who borrowed the money has a strong moral and cultural imperative (mainly community pressure as any debts would be socialised amongst the village) to repay. This model has worked reasonably well in South Asian ; but just as the Nobel judges have recognised the founder of this movement - it is starting to founder. The main problem seems to be that once there is a defaulter amongst a group of borrowers - the incentive to repay effectively vanishes (ie once you have been shamed its difficult to rehabilitate yourself). Sometimes the debt is rolled over into a new loan multiplying the debt and making it impossibe to repay, ending in a situation where the debt is sold on to a third party "debt collector" whose methods for collection can sometimes be questionable. In Africa the model seems not to work for other reasons, some cultural and some due to the lack of microinvestment opportunities for poorer people in these nations. As this article points out www.greenleft.org.au/2006/689/35791. However, these problems are not a reason to throw out this model. Safeguards and openness are required - and a degree of flexibility. Not everyone is an entrepreneur and a certain amount of any banks loan portfolio turns "bad" in normal circumstances. It is only when the bad loans outweigh the successful ones that the bank needs worry - and the success of the Grameen bank shows that this has not been the case - yet.
One area not addressed by this style of finance is the structural gaps that exist in developing countries. It is quite easy to provide some money to a farmer - who then might upgrade their farm equipment and become more productive; or buys a means of transport to reach a new market ; buy a phone and charge villagers a few cents a call etc. But these success stories can easily burden infrastructure available - especially electrcity and water supplies. In the past these issues have usually been in the scope of the World Bank and regional banks such as the Asia Development Bank. But large projects (such as dams and hydroelectricity plants) have tended to lend themselves to dodgy deals, corruption and poor outcomes for those most in need.
What I would like to see is a Micro-Renewable Energy Fund (Energy Bank) set up for projects in developing countries. In the same way as small amounts of money can tap in to latent productivity small amounts of energy (or even just a greater degree of reliability) can find productive places in villages and towns in poorer parts of the world. Anyone who has lived or travelled in third world nations knows that the supply of electricity is one of the major problems facing developing nations.
Some early thoughts on how this might work:

• Surveys of countries where low electricity supply and reliability levels exist (probably already done)
• Of these areas - an assessment of places where there is the greatest opportunities to supply moderate cost micro-renewable energy (such as Mini-Hydro/ Wind Farm/ Solar Thermal/ Landfill or Sewage Gas Electricity Generation)
• Research on the amount of money needed for infrastucure to make sure electricity can be reliably supplied to villages surrounding these plants
• Modelling of the lending of small energy parcels to poor people in these villages - determine appropriate interest rates; perhaps look at parcelling the energy and a microfinance loan together ; what price the energy - would people be able to afford it?
• Environmental safeguards - if for example loans are expected to go to farmers who pump water from deep aquifers - then these should be limited as far as is possible ; or to small entreprenuers who build polluting enterprises etc.
• Find donors for original funding (perhaps tradional lenders such as World Bank) and determine the appropriate ownership structures for the Electricity Generation assets once capital costs have been repaid by repayment of energy loans.
• As this is renewable energy find out how this would fit into a future global carbon or renewables market

On this last one - it is expected that developing nations will receive some carbon allocation for future development in any future carbon trading scheme. Probably the best way to encourage this is to institute an international Mandatory Renewable Energy Target - where a worldwide target of say 30% of all energy comes from renewable energy sources - with developed countries subsidising the cost of this to developing countries.

Just got a little carried away on that one...time to buy some Chrissy presents.

Bushfires

Today in Melbourne we woke to the smokey haze of an Asian metropolis. The sun was a gold hazy disc hanging in the sky. The smell of woodsmoke, usually such a comforting smell, seeped into our houses and our offices. As I look out the window I can see clearly for 20ms - usually my view extends all the way into Port Phillip Bay and on to the horizon. This is due to the fact that so much of the high country and East Gippsland is burning and the smoke has made its way down to us. Perhaps to remind Melbournians how dry and hot conditions in our state are this year. In 2003 a drought and bushfire combination burnt it's way through Victoria and NSW - this year (only 3 years on!) its worse. Our company operates a hydroelectric plant near Mt Beauty - a few hours north of Melbourne. The guys up there were perilously close to being burnt by the fires on the weekend just gone. One of the guys has sent us some photos he took when the fires were closing in. If you look to the right you can see some of the houses of the township. The helicopter in the photo is called Elvis.

Meredith and Emissions Trading

The last four days have been pretty crazy. Saturday and Sunday were spent in the heated crazy atmosphere on the Meredith Music Festival. Which was excellent - I have met some new bands and reacquainted myself with old friends - in music and people that you just bump into when you go to these festivals. Although the 42 C temperature on the Sunday - accompanied with strong winds - made the atmosphere at Meredith almost unbearable. Dancing around in the dirt on Saturday afternoon and later that night is some of the most fun I have had in ages. Meredith really just has a great vibe - no fights everyone just there to have a good time - and I did along with my companions.
Though I paid for it onthe 6 am flight I took to Sydney on Monday morning, slightly silly really, but that is the way life goes sometimes. I have just spent the last two days at the National Emissions Trading conference. This ironically co-incided with John Howard announcing his taskforce which is set to investigate Australia's entry into a global emissions trading system. Of the twelve he chose - amongst them are representatives of the 2 largest coal exporters in Australia, the owner of the dirtiest coal fired power station, the chairwoman of Australia's largest transport emitter (Qantas) and a whole bunch of bureauecrats. At the conference I attended there were representatives of a whole bunch of companies who have done work on the ramifications of climate change on Australia, including the head of a taskforce that has designed an emissions trading regime for the states. Not one chosen to help the PM work out what to do about carbon trading. Peter Garret - the shadow minister for climate change - really has the ability to make the PM look silly on this issue as almost everyone (apart from the small group of people the PM has chosen to surround himself with on this issue) want change and want carbon trading. I just hope Johnny's run is over......