The Heat Is Online

GEF: Energy Transition Inevitable

Billions in Profits Predicted for Renewable Energies

(ENS) Feb. 12, 2001 - Now, when energy issues top the list on many national agendas, renewable energy markets around the world are set to take off, the Global Environment Facility (GEF) concludes in a new report on clean, green energy technologies.

"Renewable Energy: GEF Partners with Business for a Better World," predicts that developing nations will need as much as five million megawatts of new electrical generating capacity in the next 40 years and are ideally suited to renewable energy applications.

While people in developed countries flip a light switch or turn on a radio without thinking twice, and increasing numbers take access to the Internet equally for granted, two billion people - a third of the world’s population - live without the benefit of electricity or other modern energies. Nearly half a billion people have limited or unreliable access.

These billions of people are a vast untapped market for providers of renewable energies, the GEF report concludes.

The GEF is the major source of multilateral funding for renewable energy in developing countries. GEF is actively seeking private sector partners with which to develop and underwrite clean energy projects - those with few or no carbon emissions - in developing countries. These projects may be stand-alone or initiatives that expand large power projects using traditional fuels.

Renewable energy includes electricity generated from solar, wind, biomass, geothermal, and hydropower resources. Fuels, such as biofuels and hydrogen derived from renewable sources, are also considered renewable energy, and so is heat generated by solar thermal systems and geothermal sources.

A transition to renewable energy is "inevitable," the GEF predicts, not because fossil fuel supplies will run out - large reserves of oil, coal, and gas remain in the world - but because "the costs and risks of using these supplies will continue to increase relative to renewable energy."

Costs will increase as the environmental impacts of fossil fuel use are incorporated into the costs of energy and as the cheapest reserves are depleted, the GEF says.

Risks can increase as fossil fuel prices and availability become more variable due to such factors as privatization, deregulation, and political events. "Renewable energy avoids fuel costs and fuel price risks; thus, as the costs of renewable energy technologies continue to fall, renewable energy is expected to overtake fossil fuels as the lowest cost, least-risk investment," the GEF predicts.

The report comes two weeks after the announcement in Shanghai by the Intergovernmental Panel on Climate Change of new and stronger evidence that greenhouse gases, primarily from the burning of fossil fuels, are changing the global climate, and that most of the warming observed over the last 50 years is attributable to human activities.

The world clearly needs to diversify its sources of energy, a position increasingly recognized by companies, governments, and international agencies, the GEF report says.

Wind energy systems are the fastest growing energy technology in the world. Highly reliable wind turbines provide electricity under five cents per kilowatt at selected sites with good wind resources. The next generation of machines should cut costs further. Total installed capacity worldwide increased by 35 percent from 1998 to 1999, amounting to more than 13,000 megawatts.

While Germany is adding wind power faster than any other nation, India, with more than 1,100 megawatts of installed capacity, leads the developing world in exploiting wind.

A 50-megawatt wind farm in Koudia el Baida, Morocco, is one of a few wind projects in developing countries to be constructed on largely commercial terms. A consortium of three firms, including Électricité de France (EDF), is constructing and operating the farm, financed through a number of commercial and development banks.

Internationally, the solar industry has grown on average more than 17 percent a year since 1992, the GEF has found. More than half a million individual solar home systems already provide lighting, entertainment, and income generation for rural households in developing countries.

Applications in off-grid telecommunications and small industry are growing rapidly.

In the Dominican Republic, the U.S. firm Soluz has been developing a subsidiary, Soluz Dominicana, into a successful fee for service business that targets up to 50 percent of the population in the rural communities it serves and charges $10 to $20 a month for electricity service from solar home systems.

Use of geothermal power is expanding in Indonesia, Philippines, Mexico, Kenya, and Central America. The GEF report points to even greater potential in tapping hot dry rock deep beneath the Earth’s surface. Global electricity generating capacity from geothermal stands at 8,200 megawatts, about half of which is in developing countries.

In its first decade, GEF approved $580 million in grants for 51 renewable energy projects in 30 developing and transition countries. With co-financing and other resources from governments, bilateral and multilateral development agencies, and the private sector, total project costs have exceeded $3 billion.

GEF investments help to remove barriers and reduce long term technology costs, sharing some of the risks of expanding renewable energy markets.

The Global Environment Facility was formally launched in 1994 to forge cooperation and finance actions addressing four critical threats to the global environment: biodiversity loss, climate change, degradation of international waters, and ozone depletion.

During its first decade, GEF allocated $3 billion, supplemented by $8 billion in additional financing, for 700 projects in 150 developing nations and countries with economies in transition. The only new funding source to emerge from the Earth Summit, GEF today counts 166 countries as members.

GEF is the designated financial mechanism for international agreements on biodiversity, climate change, and persistent organic pollutants; GEF also supports the work of global agreements to combat desertification and protect international waters and the ozone layer.

GEF projects are executed by a wide range of public and private partners, and managed by the United Nations Development Programme, the UN Environment Programme, the World Bank, the UN Food and Agricultural Organization, the UN Industrial Development Organization, the African Development Bank, the Asian Development Bank, the European Bank for Reconstruction and Development, and the Inter-American Development Bank.

The full report can be downloaded from the "What's New" section of the GEF's website at: http://www.gefweb.org.