|
|
| Fig. 1: New investment in billions of US dollars placed into renewable energy in developed vs. developing nations. OECD countries excluding Mexico, Chile, and Turkey are considered "developed" while "developing" nations include all other countries. [4] (Courtesy of the Frankfurt School - UNEP Collaborating Centre for Climate and Sustainable Energy Finance.) |
The U.S. Energy Information Administration projects that the developing world (non-OECD countries) will increase their energy consumption by nearly 50 percent in the next two decades and are expected to account for 65% of the world's energy consumption by 2040. [1] Large investments into energy infrastructure are required today in order to keep up with this rapid growth in energy consumption and the extent to which these investments are made in clean, renewable energy will play a crucial role shaping the future of our environment. Developing nations have a choice today to "leapfrog" over heavy investment in dirty forms of energy (i.e. coal and fossil fuels) and instead make large scale investments into renewable forms of energy. Clearly this is a beneficial choice for the environment but the economic advantages of leapfrogging are also considerable, a few of which are discussed below.
The idea of leapfrogging technology in developing nations is not new. A famous example is Africa leapfrogging over expensive landline telephone infrastructure and directly investing in mobile technologies. Without the considerable human and financial capital necessary for heavy investment in R&D they were able to benefit from stable, low- cost telecommunications technology. The same goes for renewable energy. The developed world has invested heavily in advancing renewable energy technology which the developing world can take advantage of, without having contributed to the R&D costs. This frees capital for investment into infrastructure and implementation strategies. Furthermore, the implementation of renewable energy solutions is much quicker than conventional energy. For instance, South Africa added more than 4,000 MW of renewable power to its grid in a span of 4 years whereas coal-fired power stations often take decades to build. [2]
Another advantage of leapfrogging to renewable energy is freedom from artificial distortions in oil and gas markets. While the world oil supply is mostly controlled by a few nations, renewable energy resources are more equally geographically distributed. In particular, solar energy is available in excess in many developing nations. [3] Movement towards self-sufficiency in the energy domain should not be underestimated as it allows developing economies to advance trade agendas that directly benefit their nation without fear of crippling trade relations with oil behemoths.
Investment into renewable sources of energy over dirty energy also fosters job creation. The number of jobs directly created from generating electricity via solar and wind power is ~10-60 jobs/GWh. [3] This is significantly more jobs than are created through investments in conventional energy technology such as coal (0.3 jobs/GWh) and natural gas (0.1 jobs/GWh). [4] This not only addresses the high unemployment rates prevalent in much of the developing world but does so by creating jobs of significantly lower risk than those associated with dirty energy.
With all of the advantages of leapfrogging dirty energy one would expect that developing nations would jump at the opportunity and that seems to be exactly what is happening. Fig. 1 shows how new investment into renewable energy by the developing world has been rising steadily since the start of the millennium and 2015 marked the first year in history where developing nations invested more into renewable energy than the developed world.
It's interesting to note that the developed world is not advancing investment into renewable energy at the same rate as developing nations. In fact, it appears that investment into renewable energy in the developed world has begun to decline as of 2011. This highlights a distinct difference between new energy investment in these two parts of the world. In the developed world, energy demand is relatively stagnant and so any new investments into renewable energy need to compete against existing ventures for a share of the energy demand. On the other hand, developing economies don't have enough infrastructure in place to meet even the current demand, let alone the rapid growth, and thus they provide the perfect opportunity to deploy renewable energy solutions without resistance from existing enterprise. While developed countries may not be investing as heavily in their own clean energy infrastructure, they have pledged to provide 100 billion US dollars yearly to assist developing nations in implementing clean energy through the Green Climate Fund. [5]
The direct economic advantages of leapfrogging dirty energy are substantial and as Fig. 1 shows, the developing world is taking advantage of it. However, the extent to which investments into renewable energy make financial sense depend heavily on the natural resources available to a given country. For instance Venezuela, which sits on 17.5% of the world's oil reserve, may have more of a financial incentive to utilize dirty energy than other nations. [5] Furthermore, while completely leapfrogging dirty energy may seem like an attractive solution, it may not yet be possible to keep up with growing energy demand in developing nations without at least some investment in conventional energy. [6]
© Emil Noordeh. The author warrants that the work is the author's own and that Stanford University provided no input other than typesetting and referencing guidelines. The author grants permission to copy, distribute and display this work in unaltered form, with attribution to the author, for noncommercial purposes only. All other rights, including commercial rights, are reserved to the author.
[1] T. Woody, "Here's Why Developing Countries Will Consume 65% of the World's Energy by 2040," The Atlantic, 3 Dec 13.
[2] "The Leapfrog Continent," The Economist, 6 Jun 15.
[3] D. Holm, "Renewable Energy Future For the Developing World," in Transition to Renewable Energy Systems ed. by D. Stolten, V. Scherer (Wiley-VCH, 2013) p. 137.
[4] "Global Trends in Renewable Energy Investment 2017," Frankfurt School UNEP Collaborating Centre for Climate and Sustainable Energy Finance, 2017.
[5] I. Ahmed, "Energy in Developing Nations," Physics 240, Stanford University, Fall 2015.
[6] B. Sporton, "Developing Economies Need Power From Coal," Financial Times, 20 Aug 15.