the grid lock

Mark Moody-Stuart outlines practical steps to bring renewable energy to a billion people in developed and developing countries by the end of this decade

Renewable technologies must first be used in the developed world, if they are to help bring benefit to the 2 billion people who have no access to modern energy. This was one conclusion of the G8 Renewable Energy Task Force, a multi-stakeholder group with members from government, the private sector, non-governmental organizations (NGOs), the World Bank Global Environment Fund, G8 nations, and non-G8 countries from China through India to Brazil and the Caribbean.

The Task Force’s recommendations can be grouped into four main themes, addressing the questions: How do we bring down costs? How do we create the capacity necessary to install widespread renewables systems? How can we meet the unique financing needs of renewable energy? And, lastly, the issue of policies and subsidies.

The cost issue is fairly straight-forward. The cost of every technology – whether mobile phones, gas turbines or farm technologies – comes down with experience. The more we make, the more ingenuity and creativity finds ways of doing things better with less. This involves developing the market – and the only energy markets big enough for this to be done cost-effectively are in the developed countries. Almost every one of these countries has already set itself targets or aspirations to generate, say, 10 per cent of its energy from renewables by 2010.

Channelling creativity
The creativity of the market has to be channelled to achieve this. There are many examples of how this can be done from all around the world. One is from Texas which, prudently, wanted a small percentage of renewable energy in its electricity supply. Under its system, suppliers can either generate the energy themselves or trade it in – or be fined more than the market clearing price. The low percentage and some federal tax breaks mean this has a negligible impact on costs.
Renewable energy is already very often the most economic means of supply in rural areas
Bringing renewable energy to millions of rural families in the developing world is a massive task. It will require thousands of small businesses capable of installing and maintaining systems. This may be a huge training and capacity-building requirement, but it is also a major source of employment and business creation. The franchise system that can build this kind of capacity is well known from traditional distribution and retailing – the systems which distribute gasoline and diesel in retail outlets or distribute and sell bottled or canned beverages or detergents. We need similar networks for solar home systems.

But increased capacity is not just needed in the developing world. The capacity to do proper integrated economics on the whole energy system before making decisions is needed in export credit agencies and international finance institutions. Renewable energy is already very often the most economic means of supply in rural areas if the costs of generation and of installing grids to villages are taken into account.

Packaging finance
This leads into the question of finance. A consumer buying a solar home system normally has to pay the full cost up front; the savings from avoiding fuel costs only come later. By contrast, a consumer connecting to the grid does not bear a share of the capital cost of either generation or the grid itself. These costs are either borne by governments or are spread over larger consumers elsewhere.

We have to find similar methods of breaking the concessionary finance available in large tranches down into small packages for individual consumers. E+Co have found methods in both Latin America and Africa of combining the financing and capacity-building challenges and are successfully delivering renewable energy systems to thousands of rural households. It can be done, and done commercially, but this requires changes to our usual current approaches. Without them, the default solution will be the well trodden path of conventional energy. Discounted cash flow analyses in the G8 report suggest that, on a global basis, a policy of aggressively supporting renewables could cost a maximum of 3 per cent more initially; this would become cheaper on a running basis after some 15 years, making it, overall, the more economic solution.

Policies and subsidies
The fourth challenge is to address policies and subsidies. Every new energy source has benefited from subsidies. Conventional energy still receives subsidies estimated at around $250 billion a year. Much of the export credit finance goes to conventional energy. Meanwhile fossil fuels for transport are heavily taxed, both at the point of production and, even more heavily, on consumption in many countries; this probably amounts to a trillion dollars a year. It would take only a very small modification of these very large flows to give a major boost to renewable energy.

The G8 report calculates that, if all its recommendations were followed, we could serve an additional billion people – 800 million of them in developing countries – with renewable energy by 2010. This could help address the unacceptable situation where a third of the world’s people have no access to modern energy and are hence barred from a means to development. It would also acknowledge that developed economies must learn to to use renewable energy effectively. Only through this will technology development be accelerated, costs be brought down – and renewable energy become a more natural choice in developing countries, whether on or off grid.

Although the report was prepared at the instigation and request of the G8, the recommendations require action by many different actors – such as in the G8, the OECD, the multilateral agencies and developing countries. This makes it an ideal issue for the World Summit on Sustainable Development. Here all players can come together in partnership to deliver practical renewable energy solutions to the millions who desperately need energy, while simultaneously beginning the long process of changing the developed world’s energy patterns. The Summit can also be used to raise consumer awareness – something already being done in many countries by such programmes as the Body Shop and Greenpeace’s Choose Positive Energy Campaign, which aims at encouraging consumers in the developed world to opt for renewable energy 

Sir Mark Moody-Stuart is the former Chairman of the Royal Dutch/Shell Group of companies and co-chairman of the G8 Task Force on Renewable Energy with Corrado Clini, and is currently the Chairman of Business Action for Sustainable Development.

PHOTOGRAPH: Kuttis Cantiberas/UNEP/Topham

This issue:
Contents | Editorial K. Toepfer | Agenda of hope | Changing the paradigm | Only one Earth | Beyond brackets | African renaissance | Unmissable opportunity | At a glance: GEO-3 | Asking the people | Recapturing momentum | Taking the measure of unsustainability | Breaking the grid lock | Training for transformation | Bring big business to account | Out of the changing room | ‘Dear delegates...’ | We need a dream | Two sides of the same coin: before and after Johannesburg| Quality environmental data for all

Complementary articles in other issues:
Issue on Disasters, 2000
Issue on Energy, 2001
Mark Moody-Stuart: Picking up the gauntlet (Climate and Action) 1998
John Browne: A new partnership to make a difference (Climate Change) 1997

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Population and natural resources

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