World Environment Day: Championing clean energy post COVID-19
Combating climate change and ensuring clean air for all is an interdependent effort. As developing country governments electrify their populations, renewable energy offers a range of clean ways of doing so. The recent plunge in energy demand and oil prices, which threatens to reverse recent gains in renewables, should not act as a barrier to transitions towards clean energy generation. I outline three actions developing country government can take during this season, to encourage continued clean energy sources.
Clean energy for electrification
Economic growth requires households and firms to have access to affordable, reliable, sustainable, and modern energy services (UN Sustainable Development Goal 7). However, approximately one billion people, mainly located in South Asia and sub-Saharan Africa, do not have access to electricity in their homes. Many developing countries are making significant efforts to connect their population to energy supplies. Sub-Saharan Africa and South Asia have an immensely favourable environment for renewables. For example, sub-Saharan Africa is estimated to have 474 gigawatts of potential hydropower, wind, and geothermal capacity, and 11 terawatts of potential solar capacity (McKinsey 2015).
Despite this advantage and some modest progress, there are still political, technical, and economic barriers preventing renewables from contributing a substantial share of energy supply relative to fossil fuels. This leaves many countries dependent on fossil fuels to generate energy and meet growing demand, which causes air pollution and threatens the health and wellbeing of their people. Air pollution is responsible for approximately seven million premature deaths every year. The WHO estimates nine out of ten people worldwide breathe air containing levels of pollutants above recommended standards, with low- and middle-income developing countries suffering from the highest exposures. Renewable energy generation is necessary to continue transitions away from dependence on fossil fuels and improve the health and wellbeing of all.
Remain committed to transition
The International Energy Agency estimates this year will be the first in 20 years where there is a decline in the number of new renewable-power installations worldwide. This is because of a delay in construction activities driven by COVID-19 containment measures. Global demand for oil has also decreased by almost 5% in the first quarter of 2020. This has led to crude oil prices falling by 39.6% in March and a further 34.8% in April month on month, to $21 per barrel. The decline in oil prices are temporary and will bounce back as global economic activity picks up. Governments should therefore resist the temptation of delaying the transition away from dependence on fossil fuels.
Moreover, inclusive of social costs, the additional burden incurred from energy generation through fossil fuels, even with low oil prices, far exceeds costs of renewables. Therefore, remaining loyal to commitments to take cleaner roads to energy consumption is both beneficial and efficient. Long-sighted governments will use this window of opportunity for reform, such as fuel subsidy removal, to release immediate resources and redistribute funds to investments that maximise benefits, such as renewables.
Invest to attract investment
The COVID-19 lockdowns led to a reduction in toxic air pollutants by approximately a third to half in major cities and 10-20% in other cities. This sensitised many people about the need to maintain clean air, including existing and perspective investors in renewables, especially in relation to fast growing developing countries, which will account for most of upcoming growth in energy demand and consumption. Governments that signal a commitment to renewables provide confidence to investors that their country hosts an enabling environment, which encourages inflows of resources into the sector. This requires governments to include renewables as an important part of energy policy and create a regulatory framework to absorb foreign direct investment in the sector. Pricing and taxing negative effects associated with fossil fuels, such as CO2 emissions, will also make renewables competitively favourable and attract investment.
In addition to this, governments should invest domestically to enable electrification using a broad range of products and methods. Electrification through renewables can take on many forms from large-scale solar farms to off-grid solar home systems. Conducting the necessary research and feasibility studies to understand the nature of demand for energy amongst their population, provides a platform for investment and competition. For example, Burgess et al. (2019) show that poorer unelectrified households in Bihar, India, value off-grid solar systems, but are very sensitive to price changes. Knowing this at a domestic level allows for investment to be targeted.
Promote regional energy market integration
Many developing countries have a domestically centred view of electrification. For example, only 5% of energy is traded across borders in Africa (Africa Progress Panel 2015). However, regional market integration and trade in energy, especially in developing countries, increases the value of renewable energy and offers significant benefits. This requires dialogue and buy-in at a regional level between countries. Allowing renewable energy to be traded across borders buffers the risk of unexpected supply shocks from intermittency. It also increases energy capacity at a regional scale enabling individual countries to meet growing energy demand from their populations. In addition, it leads to cleaner air quality across the region and builds resilience amongst households and firms through effective pricing and decreased power shortages, necessary for long-term recovery from the COVID-19 pandemic.
Overall, there is necessity to continue transition towards generating clean energy through renewables. This will decrease the negative effects on the climate and health of people. Efforts have already been made by developing countries over recent years to transition towards clean energy, and the recent crisis should not be a barrier in continuing to do so. The COVID-19 pandemic has caused a reduction in demand for energy and low oil prices worldwide. Governments cannot afford to delay commitments to clean electrification. Instead, developing country governments should remain committed to the transition, invest to attract further investment, and promote regional energy market integration, which will enable continued clean energy.
Disclaimer: The views expressed in this post are those of the authors based on their experience and prior research and do not necessarily reflect the views of the IGC.