4 July 2012

Africa: Mobilising Energy Access

"Energy access for all" was high on the agenda for world leaders at Rio+20. And rightly so. In the 21st century, hundreds of millions of households across Africa and Asia still lack access to modern electricity. Even more rely on wood, coal, charcoal, or animal waste for cooking and heating.

Fortunately, the timing is right for the world to turn its attention to universal energy access. After decades as the industry Cinderella, clean energy is becoming a realistic competitor to coal and natural gas. Thanks to technology improvements, the cost of wind turbines and solar panels is tumbling, bringing electricity prices down with them.

For developing countries, renewable energy now offers a viable, decentralised alternative to building the expensive infrastructure needed to connect remote villages to national electricity grids. For instance, wind and rooftop solar power can also provide a clean and increasingly affordable substitute for diesel, used in many inaccessible regions and small island states.

These trends are already having an impact both globally, and in Africa and Asia, where most people without access to energy live. During 2010, according to Bloomberg New Energy Finance, global investment in renewable energy (including hydropower) topped those in new fossil fuel plants. In 2011, renewable investment in India rose by 25 percent to almost $4bn, and in the Middle East and Africa by 104 percent to $5bn. Ministers and donors should prioritise international policies and financing to help stimulate the emerging clean energy economy across the developing world.

But creating a renewable energy revolution is first and foremost about national policy. Since wind and solar power remain fledgling industries, creating the conditions for them to flourish is essential. Unless governments put the right incentives and regulations in place, project developers often won't embrace wind and solar projects, and investors won't back them.

Analysis by the World Resources Institute suggests that developing countries can scale up renewables by embracing five key policy elements. Based on our research in 12 countries in Asia, Africa and Latin America experimenting with clean energy policies, we believe governments should consider the following measures.

Firstly, develop a comprehensive strategy, including official renewable energy targets and long-term planning to enable national scale-up. India, Indonesia, the Philippines, Morocco and South Africa are among countries with such targets. India aims to generate 15 percent of electricity from renewables by 2020; Indonesia to generate 5 percent from geothermal energy, 5 percent from biofuels, and 5 percent from other renewables by 2025.

Second, they should aim to design incentives to attract private investment that reward actual electricity production from renewables rather than plant construction. At least 18 developing countries including India, Indonesia, the Philippines, Kenya, and Thailand employ feed-in-tariffs as a "generation-based" incentive. These work by governments guaranteeing power producers a set rate for every kilowatt hour of renewable energy fed into the grid. Another approach is to competitively auction large-scale renewable projects to developers. In Brazil, successful wind power auctions last year undercut the price per kilowatt of natural gas.

Third, they should pursue policies and build institutions that spur renewable energy deployment. A key example is reforming power sector rules to make it a legal requirement to connect new renewable energy projects to the national electricity supply network. Tanzania's government set such rules, helping small renewable energy power producers to gain a foothold.

Governments can also provide preferential financing to reduce investors' risks and developers' high capital costs. The Indian Renewable Development Agency provides long-term low-interest credit covering up to 80 percent of renewable project costs. Finally, governments must build the specialist technical expertise needed to develop install, operate, and maintain renewable energy projects.

Encouragingly, renewable energy already accounts for a higher percentage of electricity generation in non-OECD nations (21 percent) than in industrialised countries (17 percent).

With developing countries expected to add around 80 percent of all new electric generation capacity worldwide in the next two decades, the world has a timely and significant opportunity to implement policies that will help usher in cleaner energy, while providing energy.

Manish Bapna is acting president of the World Resources Institute

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