Clean-energy future requires more than wind, sun

A new World Economic Forum report argues that scaling up renewables takes more more than public and private infrastructure: it also requires a more flexible regulatory framework and improvements in the electricity grid.

“Developing Renewable Energy Capacity” was launched ahead of the coming World Economic Forum on Africa in Cape Town from 4-6 May.

The report asserts that the most important time in a project life cycle is during the preliminary stages before construction begins. This is the crucial point at which projects fall down easiest and also the one stage in which regulation and policy can influence the greatest response.

Renewable power capacity has rapidly grown over the past decade, predominantly driven by economic development and an increase in demand for energy. The US in 2009 saw more than $150 billion invested in renewables; in 2010, that figure rose to $240 billion. Europe has also seen rapid growth, adding more renewable than conventional power capacity in the past year.

“Simply spending more government and multilateral money will not transform renewable energy from a niche player to a dominant market technology in a particular country unless early regulatory and infrastructure challenges are addressed first,” said Busba Wongnapapisan, head of renewable energy industry at the World Economic Forum and co-author of the report.

Although renewable energy development needs to see rapid growth, the foundation — an electricity grid able to handle a variable power input — must be built first. This is where a smarter grid can help, by managing every aspect of energy generation, transmission, distribution and consumption more efficiently.

The World Economic Forum report draws on the experiences of five countries, all of them rapidly developing: South Africa, Indonesia, Jordan, Mexico and Morocco. It outlines key lessons to increase understanding of regulatory and infrastructure issues in these emerging markets.

Many developing countries still subsidise non-renewable energy sources to keep basic utility services affordable for the population. However, this hinders growth in renewable energies, which could be cheaper in some regions.

Five key factors that impede deployment of renewables in emerging markets are:

• The absence of long-term planning, with specific implementation plans for renewable energy capacity targets, creates uncertainty and undermines government credibility;
• Government and regulatory bodies do not always communicate effectively with one another, causing confusion among developers and delays in project approval;
• Many government bodies and regulators face shortages of experienced staff familiar with the renewable energy industry; this has led to a high level of risk aversion and slow processing of permit applications;
• The structure of electricity markets: one dominant player prevents private developers from conducting business on a level playing field;
• Limited grid infrastructure in the areas where renewable resources are most abundant presents a current and future barrier to increased generation.

All of these factors impact the critical early phases of the project life cycle. To overcome these challenges, the report recommends actions and partnerships for stakeholder groups.

To have the most cost-effective uptake, emerging economies need to learn from the mistakes made by countries in the EU and elsewhere, where renewables are further developed. Although the necessary regulations can be difficult to implement and maintain in developing countries, the long-term ramifications of not doing so are far more severe.