Empowering Development, the New Energy Equation [Lenssen]

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WORLDWATCH INSTITUTE

Empowering Development: The New Energy Equation by Nicholas Lenssen

worldwatch@igc.apc.org

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NEW ENERGY STRATEGY NEEDED TO BOOST THIRD WORLD ECONOMIES

The developing countries' current energy path is driving them more deeply into debt and worsening the quality of life for millions. Economic development will be increasingly elusive without extensive reforms that encourage investment in greater energy efficiency.

Plans for massive expansion of conventional energy use are projected to cost more than $4 trillion over the next thirty-five years- -triple the current Third World debt of $1.35 trillion.

EMPOWERING DEVELOPMENT: THE NEW ENERGY EQUATION proposes a new strategy: by investing in more efficient factories, appliances, and transportation, and in new energy supplies, developing nations can save hundreds of billions of dollars, reduce pollution, and make their economies more competitive.

Each $1 invested in improving energy efficiency leads to average savings of $5 in energy supply. Such efficiency savings would free up money desperately needed for education, health care, and water treatment plants.

New supply sources--natural gas and renewable energy technologies-- are also key to a new energy strategy. Photovoltaics are now the least expensive way to supply electricity in many rural areas.

Energy has long been recognized as a key to development. But development planners have rarely questioned the assumption that an ever- expanding energy supply is necessary to build industries, provide jobs, and raise standards of living in the developing world.

Since 1960, developing countries have more than quadrupled their energy use. In sub-Saharan Africa, nearly a third of hard currency earnings are spent on petroleum imports. One fourth of Third World government debt payments in the eighties went to finance energy projects.

Yet poor countries remain plagued by frequent fuel shortages and unreliable electricity--along with severe pollution that saps human health, degrades forests and croplands, and contributes to climate change.

By emphasizing energy services, rather than simply increasing supplies of oil, coal, or electricity, developing countries can help solve the economic and environmental problems in the energy sector, and revitalize stalled development efforts throughout much of the world.

Tremendous efficiency improvements are now within reach in industry, agriculture, buildings, and transportation. And by "leapfrogging" to advanced technologies being commercialized in industrial countries today, developing countries can avoid hundreds of billions of dollars of misdirected investments in economically and environmentally obsolete infrastructure of older energy technologies.

Over 35 years, $350 billion invested in efficiency improvements could eliminate the need for $1.75 trillion worth of power plants, oil refineries, and other energy infrastructure.

The techniques are already available and in use. In 1980, China launched an ambitious efficiency program to improve energy use in major industries. Efficiency gains were found to be one third less expensive than comparable investments in coal supplies. Had the nation failed to make such progress, energy consumption in 1990 would have been 50 percent higher than it actually was--or, more likely, economic output would have declined.

In Brazil, the National Electricity Conservation Program invested $20 million in improving efficiency. That relatively small investment reduced the nation's need for new power plants and transmission lines by roughly $1 billion in the late eighties.

But even with massive improvements in efficiency, increased energy supplies will still be needed. The report outlines some of the available alternatives to costly oil and polluting coal:

*** Natural gas. Some 50 developing countries possess extensive, unexploited stores of natural gas. In some countries, natural gas is considered a waste product of petroleum production and flared into the open air. In Nigeria, the 21 billion cubic meters of gas flared in 1990 could have furnished enough energy to meet all the country's current commercial energy use--plus those of neighboring Benin, Cameroon, Ghana, Niger, and Togo.

*** Solar and wind energy. Virtually all developing countries have abundant supplies of solar, wind, biomass, or geothermal energy resources. Already, it is cheaper for utilities to provide hot water with solar energy than with electricity from coal or oil plants.

During the past decade, the cost of solar and wind electricity systems have fallen 66-90 percent; they are emerging as the least expensive route to electricity in some developing countries. Already, more than 60,000 households in developing nations have installed photovoltaic lighting units. The market for photovoltaic electrification is huge: 2.1 billion people remain without electricity.

*** Biomass. Biomass resources also have enormous potential. If sugar mills burned all their residues using advanced gas turbine technology--now being commercialized in Brazil--they would meet more than a third of the total current electricity use in developing countries.

Some countries have taken steps toward such a new energy strategy. Thailand, for example, has decided to invest $183 million in electricity efficiency over the next five years, and has just levied a tax on petroleum to provide some $50-60 million a year for investments in efficiency and renewables.

Broad international support for such measures is needed. Yet, of the $67 billion that the World Bank and other development banks loaned for energy between 1980 and 1990, less than 1 percent was aimed at improving end-use energy efficiency. Private banks, which provide the bulk of loans, typically follow the lead of the multilateral lending institutions.

World Bank staff had no plans to change direction before 1995. However, the Bank's directors have begun to call for reform: In July, they refused to approve a new policy paper until it was rewritten to encourage energy efficiency. Nevertheless, even the final document failed to integrate energy policy with broader development goals.

If developing countries are to achieve the hoped-for gains in living standards for all their citizens, they need to meet their energy needs in a way that allows them to close the gap between North and South instead of falling further behind.

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