The Moment for Renewable Energy Has Arrived

2014 was an excellent year for investments in renewable energy globally, especially for developing countries. According to the United Nation’s Environment Program’s (UNEP) last report, after two straight years of falling investment in renewables, it recovered in 2014 and increased by 17% reaching 270 billion USD. In fact, renewable energy currently makes up 9.1% of the energy produced globally, as opposed to 8.5% in 2013. This investment in renewable energy includes technologies sensitive to socioenvironmental indicators, like solar, wind, geothermal, and biomass energy and leaves out investment in energy sources like large hydroelectric dams, given that they have the potential to have negative socioenvironmental outcomes in certain countries.

In particular I would like to highlight the fact that developing countries have considerably increased investment in renewable energy. In 2014, said investment increased by 36% to 131.1 billion USD, an amount comparable to that invested by developed economies, 138.9 billion USD, with a much smaller increase of 3%. Among developing countries, China (83.3 billion), Brazil (7.6 billion), India (7.4 billion), South Africa (5.5 billion) have made the largest investments, while other countries like Indonesia, Mexico, Turkey, Kenya, and Chile have all invested more than a billion USD in renewable energy.

At USD$65 the barrel, crude oil is at its lowest levels in five years. Source: Macrotrends.

One development that could curb this recent spike in renewable energy investments in developing countries is the current prices of traditional energy sources. Given that in the past year the prices of conventional energy sources like oil and coal have fallen 42% and 15% respectively, one could expect governments to take the “easy” path of preserving conventional energy at the expense of renewables. However, governments should consider the long-term benefits and positive effects they would garner from using green energy, which would improve environmental quality, increase access to energy at a lower cost, and reduce issues of environmental justice.

As I have mentioned previously, investment in renewable energy can significantly help developing countries by substituting conventional energy production with alternative methods like solar panels, wind energy, biomass, among others. Currently developing countries have troubling environmental indicators in comparison with developed countries. Looking at the Global Justice Atlas, coordinated by the Environmental Science and Technology Institute (ICTA by its name in Spanish) of the Autonomous University of Barcelona, we can see that the countries that rank highest in cases of environmental conflicts are all developing countries. In descending order, the list ranks India (199 cases), Colombia (99 cases), Nigeria (69 cases), and Brazil (64 cases), with most of these conflicts related to hydrocarbon extractive industries.

Similarly, some indicators like the Environmental Performance Index created by Yale University shows that developing countries rank middle-to-low in the table among 178 countries. This index takes into account environmental factors such as: air quality, water usage, and health, environment, and energy impacts, topics in which developing countries distinguish themselves for their poor performance. However, if these countries continue to invest in greener energy sources, risks for possible environmental conflicts with extractive industries for oil, coal, and natural gas decrease, while simultaneously improving environmental conditions and decreasing health risks.

Moreover, renewable energy investment in developing countries can also help to ensure greater access by affording lower prices in the future to marginalized urban and rural consumers. In the last decade, costs associated with renewable energy production have significantly decreased. While in 2000 the cost of generating a megawatt of solar energy could cost more than USD$600, today research and development have reduced this to less than USD$200, a lower than producing the same amount of energy with oil. Furthermore, experts predict that by 2025 the cost will have decreased by 90% relative to its price in 2000. Falling costs in the long run will also be reflected in how much consumers pay for energy. For example, some U.S. think tanks estimate that energy bills in cities like New York City will fall from an average of $357 to $258 by 2030.

Even more importantly, renewable energy, especially solar, allows governments to create decentralized energy delivery systems, which can give access to low-income people in peripheral areas to energy without needing all the infrastructure that some developing countries struggle to provide. For example, Bangladesh used decentralized solar energy to increase electrification by 40% and give access to 600 thousand people.

Examples like the previous one show that developing countries would be making a serious mistake if they let falling prices of conventional energy to curb investment in renewable energy. With renewable energy governments can not only reduce environmental damage and the probability of environmental conflicts, but can also provide greater access to clean and cheaper energy both to marginalized and non-marginalized people.