Affordable energy services are among the essential ingredients of economic development, including eradication of extreme poverty as called for in the United Nations Millennium Development Goals (MDGs). Meeting these energy needs economically and sustainably requires a balanced energy portfolio that is suited to the economic, social and resource conditions of individual countries and regions. Today, the Renewable Energy Policy Network for the 21st Century (REN21) released a report concluding that in many circumstances, renewable energy sources such as wind, solar, hydro, geothermal and bioenergy have an important role to play, alongside fossil fuels, in an energy portfolio that supports achievement of the MDGs.
Roughly 1.6 billion people worldwide do not have access to electricity in their homes, representing slightly more than one quarter of the world population. They often go without refrigeration, radios and even light. The International Energy Agency estimates that if the MDG poverty-reduction target is to be met, modern energy services will need to be provided to an additional 700 million people by 2015.
In recent decades, the energy needs of poor people have been most often met via petroleum-based liquid fuels, and by extension of the electricity grid, which is powered mainly by fossil fuels and hydropower. However, these conventional energy systems are often out of reach for people in remote areas, and even in urban slums, they are sometimes too expensive for the poorest to afford. In addition, in many developing countries, most of the fuel and many of the technologies are imported. Of the 47 poorest countries, 38 are net importers of oil, and 25 import all of their oil.
The economic risk of relying primarily on imported energy has grown in recent years as oil prices have become less stable, doubling in less than two years to more than $60 per barrel. These rising prices have had a disproportionate impact on poor people who depend on kerosene and liquefied petroleum gas (LPG) for their basic cooking and heating. In many poor countries, governments subsidize basic fuels such as kerosene, and the cost of these subsidies has skyrocketed in the past two yearsreducing the funds available to governments to pay for education, health care, clean water and other public investments that are essential for meeting the MDGs.
The rapid recent growth in solar, wind, geothermal and biomass energy in global, coupled with ongoing technology improvements and cost reductions, is making a growing array of renewable energy options available to help achieve the MDGs. Although the strongest renewable energy growth has been in grid-connected power systems and liquid fuels for transportation, several renewable energy technologies are well-suited to providing modern energy services for low-income people, including:
- Biogas for decentralized cooking and electricity
- Small hydro power for local electricity
- Small wind power for water pumping and local electricity
- Solar photovoltaics for local electricity
- Solar collectors for water and space heating
- Ethanol and biodiesel for agriculture and transportation
- Large hydro power for grid electricity
- Large wind power for grid electricity
- Geothermal energy for heat and grid electricity
Renewable energy projects implemented in scores of developing countriesmany with international donor assistancehave demonstrated that renewable energy can contribute to poverty alleviation directly. These projects provide the energy needed for creating businesses and jobsturning locally available resources into productive economic assets.
Renewable energy technologies can also make indirect contributions to alleviating poverty by providing energy for cooking and space heating. Improved biomass stoves and liquid and gaseous fuels derived from locally produced biomass can reduce the drain on household income, while freeing up time for education and income-generating activities. By making light more affordable and reliable, renewable energy technologies also permit schools and businesses to operate after dark.
Renewable energy can contribute to education as well, by providing electricity to schools, improving attendance, retaining teachers and powering educational media. Renewable energy for cooking and heating can reduce the time that children, especially girls, spend out of school collecting fuel. In addition, the displacement of traditional fuels reduces the health problems from indoor air pollution produced by burning those fuels. Renewable energy can also contribute to improved health by providing energy to refrigerate medicine, sterilize medical equipment and incinerate medical waste. And it can provide power for supplying the fresh water and sewer services needed to reduce the burden of infectious disease.
By developing energy sources such as large hydro power, wind power, geothermal power and liquid biofuels, developing countries can reduce their dependence on oil and natural gas, creating energy portfolios that are less vulnerable to price fluctuations. In many circumstances, these investments can be economically justified as less expensive than a narrower, fossil fuel dominated energy system.
Most poor countries have abundant renewable resources, including varying combinations of solar, wind, geothermal, and biomass, as well as the ability to manufacture the relatively labor-intensive systems that harness these. However, only a few developing countries have adopted the policies needed to spur the development of renewable energy technologies and markets, which have been dominated by Europe, Japan, and North America. The exceptions include Brazil, which has built the worlds leading biofuels industry; and China and India, which are leaders in developing decentralized renewable sources such as small hydro, small wind, biogas and solar water heating.
Renewable energy technologies face a number of barriers that have delayed scaling them up their production and use in developing countries. Most renewable energy sources require a significant upfront investment, as has been the case for most of the conventional energy sources that dominate todays energy system. This means that in the early years of deployment, renewable energy options are typically more expensive than the conventional alternative. Government intervention to level the playing field is therefore needed to start the development process. Experience shows that as the scale of use increases, costs decline significantly in the early years.
It is through the combined efforts of governments and the private sector that strong, sustained markets for renewable energy are most likely to develop.