“Sustainable energy is often the most cost-effective”

Many poor people of the world are using renewable energy sources – wood or dung, for example. However, such biomass is often harvested unsustainably and burned inefficiently. They imply risks to the environment and to human health. Modern technology offers much more attractive options – particularly for areas where a conventional electricity grid will never be built. Such approaches make sense in economic as well as environmental terms.

[ Interview with Klaus Töpfer, UNEP executive director ]

Mr. Töpfer, doesn’t the Kyoto-Protocol stalemate imply that renewable energies are not taking off?
Although the Kyoto-Protocol has not yet come into force, the interest in renewable energy continues to grow. One of the reasons is that fossil fuels create a number of environmental and health problems in addition to climate change, including acid rain and local air pollution, which can increase the incidence of asthma and other respiratory diseases. The focus of late may be on the advantages of renewable energy in terms of reducing greenhouse gas emissions, but these are not the only benefits.

But the systems the rich countries use are not based on them. So it does seem that renewables are only second best solutions.
Modern forms of renewable energy are the fastest growing application in the energy sector. Developed countries are progressing rapidly with the construction and use of sustainable energy systems. The wind energy industry, for example, has grown from a small cottage industry in 1980 to a US$ seven billion industry today employing almost one million people and producing clean energy in more than 30 countries. Denmark currently sources about 15% of its energy from wind. Few people in Denmark believe this is a second best solution. Further, just as many developing countries have found that mobile (or cellular) phones are a cheaper and better alternative than investing in more fixed phone lines, developing countries have the opportunity to leapfrog over dirty and polluting fossil fuels to the cleaner alternatives of renewable energy and energy efficiency.

Nonetheless, it is expensive to invest in renewable technologies. Why should poor countries be doing something about climate change when most of the Rich World is not doing so?
The premise of this question is somewhat misleading. Sustainable energy technologies are often the most cost-effective energy choice, particularly in areas where there is no conventional energy grid or the hope of one anytime soon. Further, conventional choices based on fossil fuels have substantial and growing environmental and social costs (economists refer to these as “external costs” or “externalities”), which are generally not included in the cost of the energy. In this sense, developing countries can invest in sustainable energy as the most cost-effective energy choice and, at the same time, reduce carbon and other polluting emissions. While helping themselves with the cleanest options, they are also leading by example – and this is a powerful message to industrialized countries.

In very general terms, liberalisation and free trade have been the main policy catch words of the past decades. Does “bringing in the market” work in favour of renewables?
In many countries, energy prices are still subsidised. This distorts energy markets and often leads to poorer social and environmental outcomes. Removing these subsidies and making energy prices tell the environmental truth helps renewables. Market approaches can also help by forcing grid access for renewable producers, or by creating new value for projects through tradable renewable energy certificates. However, markets do not always favour renewables, which generally have a higher investment cost and lower operating cost than do fossil fuel alternatives. Following market signals, companies looking for a quick return find it more attractive to construct fossil fuel power plants, particularly in uncertain – meaning more risky – circumstances. Markets often have short time horizon, which is generally not good for renewable energy projects.


Should governments source out energy provision to multinational corporations with international experience and great technological expertise?
There are some energy services that governments can best provide and there are some that may be provided more efficiently by the private sector or some combination of the two. Again there are many models that can work effectively depending on the individual region or government. Public-private partnerships can be very effective tools to increase the market for sustainable energy systems and services, but they must be designed carefully and monitored carefully. Many countries are coming to view access to minimum quantities of energy as a basic human need, so it is ultimately the responsibility of the government to see that these needs are met.

Environment activists from advanced nations like to discuss the benefits of decentralised electricity provision compared to using gigantic national grids. Is that romantic rhetoric or do you see relevant options for infrastructure planning in poor regions?
One of the starkest truths of extending electric lines is that they are expensive and will not soon – if ever – be a reality for many of the 1.5 billion people who have no access to electricity and live on less than one US dollar a day. Even where electric grids have been extended poor people are often unable to pay for the electricity they bring, certainly not in the quantities needed for cooking and heating. For these people, an improved cook stove, access to LPG and a modern light powered by solar energy can improve the quality of life at a fraction of the cost to extend a power grid. And environmentalists are not the only ones who discuss the benefits of decentralised electricity systems. Energy planners in the US, Italy and Scandinavia are discussing ways to improve energy security after blackouts in 2002 and 2003 – and decentralizing power supply through distributed generation, which allows small scale electricity providers to feed power into a grid, is an attractive option, even more so if it is based on renewables. So-called minigrids are also a good way to provide power to small, isolated communities.

Disadvantaged nations only have a small share of the world’s gross domestic product. Can they really make a relevant contribution to fighting the risks of climate change? What about major emerging economies such as China or India?
Although developing countries currently contribute a lower share of greenhouse gases to the atmosphere than do developed countries, their share will increase as they industrialise and their economies grow. As developing countries will most likely bear a disproportionate share of any negative impacts from climate change, any increase in emissions from these countries will exacerbate an already troubling situation. For some countries, such as island states, the effects will be much more severe and immediate. However, the rapid industrialisation of countries such as China and India also present an enormous opportunity to create low carbon economies. Indeed, China has already made substantial progress with carbon emissions decreasing per unit of GDP. Both countries have plans to substantially increase their share of energy obtained from renewable sources. As experience is gained in manufacturing this should bring down prices of renewable energy technologies even further.

Is there a particular technology that you would promote – or does every country have to consider its geographical, economic and other conditions individually?
Every country – and often every region within a country – has its own sustainable energy resources and its own set of economic conditions. This means a “one size fits all” approach will not work, with perhaps one exception – energy efficiency. Increasing the energy efficiency of both the supply and demand of energy is an approach that can be useful everywhere. Using the most efficient appliances and processes enables cost-effective use of renewable energy technologies. A solar home system using compact fluorescent bulbs is a much more effective and economical energy service delivery system than is one using incandescent bulbs.

Does it make sense to rely on small scale, “appropriate” technologies in rural areas and, in the mean time, speed up the modernisation of urban agglomerations according to the examples of OECD nations?
This gets back to the idea that there is no single approach to providing access to clean energy services that will work everywhere. In rural areas of developing countries the main needs are for better mechanical and thermal energy, that is energy that relieves people – particularly women and children – from the drudgery of hauling water, pounding grains, and gathering firewood for cooking. The poor, because they are poor, also need energy that can help them raise their incomes. In these settings robust technologies using locally available materials and produced in small shops are what you’ve called “appropriate”. In cities, the needs of the poor may be similar, but the concentration of people makes different approaches possible. For example, distribution systems for LPG cooking gas as an alternative to firewood become more feasible as population density increases.

Wouldn’t it be better to wait until innovative technologies to store renewable energy – such as fuel cells perhaps – become universally available? One could then set up an up-to-date infrastructure once their time has come.
Computers continue to advance and reduce in price, but that doesn’t stop us from buying them now. This is because they provide a service we need. The same applies to sustainable energy technologies. They continue to decline in price and increase in efficiency – the cost of solar cells has declined by 25 times in the past 20 years – but a 50 watt solar home system can provide cost-effective light and communication to a poor rural family now. Further, unlike a large coal-fired power plant, sustainable energy systems, such as modern wind generators, are modular, which means a community can build some capacity now and expand later as demand increases.

A review commissioned by the World Bank recently suggested backing away from fossil fuels. Will this appeal have consequences?
Yes, but these consequences will be mostly positive if the shift of the world’s economies from fossil fuels to sustainable energy choices is done in a measured and progressive manner. Change always harms some groups and the goal should be to reduce this to the extent possible consistent with some larger societal goal. If we look at the issue the other way, continuing the “business as usual” fossil fuel mindset will mean that billions of dollars invested in energy infrastructure each year end up continue causing substantial harm to the environment and human health. This is why we must act now to ensure that, where possible, our investments are made in the cleanest options of energy efficiency and renewable energy.

Is enough being done in terms of technology transfer? Basically, the rich countries have promised to help developing countries – but there does not seem to be much progress.
It must be said that developed countries can and should do more to promote the transfer of clean technologies – if only out of self interest. Expanding the use of modern, safe and clean energy technologies will increase global energy security while reducing environmental impacts. Let’s not forget that pollution does not need a passport to cross national boundaries.

So the picture is bleak.
Well, there has been substantial progress but many barriers remain. From UNEP’s perspective, one of the most significant barriers to the wider use of sustainable energy is access to affordable finance. Poorer households often spend a high proportion of their income on inefficient and polluting energy forms, but cannot get a loan to purchase a more efficient stove or small PV solar home system because the local bank does not understand the technology or deems the investment too risky. At the other end of the spectrum, it is often easier to obtain funding to construct a coal fired power plant than a wind farm.

What can be done to make capital more easily available?
There is now substantial progress internationally to address this barrier. At UNEP, for example, the Sustainable Energy Finance Initiative – or SEFI for short – is helping financiers scale up investment in the sustainable energy sectors. The overall strategy of SEFI is to convene financiers, engage them to do jointly what they may have been reluctant to do individually, and to catalyse public-private partnerships that together share the costs and lower the barriers to sustainable energy investment. UNEP’s Indian Solar Loan Programme is a good example of such a partnership. Working with the Indian banking groups Canara Bank and Syndicate Bank, this initiative has established loan programmes that use UN Foundation and Shell Foundation money to buy down the initial financing costs of lending to solar PV customers. In effect the customer only pays five percent interest for a solar loan that commercially would be 12 percent. Interest rate softening helps these Indian banks build solar financing portfolios without distorting the credit risk or the existing cash market for solar home systems.

Questions by Hans Dembowski and Norbert Glaser

Websites recommended by Klaus Töpfer:

Rural Energy Development Initiatives of UNEP and UN Foundation
– for Africa: http://www.areed.org
– for Brazil: http://www.b-reed.org
– for China: http://www.c-reed.org
UNEP’s Sustainable Energy Finance Initiative: http://www.sefi.unep.org
UNEP’s Solar and Wind Energy Assessment: http://swera.unep.net/swera/index.php
UNEP’s publication list: http://www.uneptie.org/energy/publications
Software developed by Canadian Government with UNEP involvement for finding cost-effective renewable energy solutions: http://www.retscreen.net