Energy transition in developing countries

By: Amitansu Satpathy, Managing Director, Best Power Equipments (BPE) | Tuesday, 31 January 2023

Amitansu Satpathy, Managing Director, Best Power Equipments (BPE)

Goal 7, as defined by United Nations, is about ensuring access to clean and affordable energy, which is a key ingredient to any economic activities, transportation, social well-being and human welfare. Latest data suggest that the world continues to advance towards sustainable energy targets, but at a much slower pace than expected. The progress is insufficient to achieve Goal 7 by 2030, amidst the disparities across society in terms of access to modern sustainable energy sources.

Rising commodity, energy and shipping prices have increased the cost of producing and transporting solar photovoltaics modules, wind turbines and biofuels worldwide, adding uncertainty to the targeted development trajectory. The strategic energy transition that needs to be implemented will require continued policy support and a massive mobilization of public and private capital for generation and distribution of clean and renewable energy, especially in developing countries.

Importance of Developing Countries in Energy Transition

152 developing countries hosts 85.43 percent of world’s population and this statistics by itself depicts the reason why sustainable practices of these countries will fast forward the energy goal of the world. It will need structural changes of user habits, policy propositions by government, rehaul of manufacturing facilities and even a defined path of actions to attain the estimated goals.

Adopting sustainable energy practices can help these countries get a step closer to building a renewable future, but also solve major energy crises such as oil shortages, fuel depletion, and even poverty challenges. A bigger goal being saving the planet from future crises and save the future generations. As the previous President of America Barack Obama said, “To truly transform our economy, protect our security, and save our planet from the ravages of climate change, we need to ultimately make clean, renewable energy the profitable kind of energy.”

Looking at the facts, as reiterated by UN studies, the world has made progress but are far away from the actual goal.

• The global electricity access rate increased from 83 per cent in 2010 to 91 per cent in 2020. Over this period, the number of people without electricity shrank from 1.2 billion to 733 million.

• From 2018 to 2020, the electricity access rate rose by an average of 0.5 percentage points annually, compared to 0.8 percentage points between 2010 and 2018.

• At the current pace, only 92 per cent of the world’s population would have access to electricity in 2030, leaving 670 million people unserved.

Report Card of Implementation

Access: The tracking of SDG 7 goals saw that most of the countries logging in 98 to 100 percent population accessing electricity, though the quality of power remains a question in many developing countries. In few pockets of Africa, the

percentage of population with access to clean energy is still below 50 percent. Meeting the 2030 target requires increasing the number of new connections to 100 million a year.

Clean Cooking: With respect to access to clean cooking solutions, on a global scale, the number of people gaining access increased significantly. More than 65 countries have already included household energy or clean cooking related goals in their Nationally Determined Contributions (NDCs) in the lead-up to the 2021 UN Climate Change Summit, COP26 (Clean Cooking Alliance 2021). However, as population growth outpaced these improvements, estimates show that 2.1 billion people will still lack access to clean cooking in 2030.

Renewables: Despite continued disruptions in economic activity and supply chains, renewable energy consumption grew through the pandemic, in contrast with other energy sources. Electricity saw record shares of renewables in new capacity additions in 2021. Renewable shares would need to reach well over 30 percent of Total final energy consumption (TFEC) by 2030 to be on track for reaching net-zero energy emissions by 2050. Achieving this milestone would require strengthening policy support in all sectors and implementing effective tools to further mobilize private capital.

Energy efficiency: While focus on renewables has been a big target for all countries, ensuring energy efficiency of the appliances till the source itself is not completely changed is a huge challenge by itself. Technology with artificial intelligence has played a key role in this transition.

Three challenges for Renewable Energy

Traditional fossil-fuel plants operate at a pre-mitigated level, they provide a consistent and predictable amount of electricity for which combining distribution systems are in place. This predictability will not be possible in renewable energy set ups, thus creating a gap in expected operations set up. Thus, creation of high-powered energy storage is a must, with every renewable facility.

Financing of Renewable energy will always be an issue as the goal-posts keep shifting. At COP26, with multiple countries pledging additional climate financing to developing countries, it was estimated that the USD 100 billion per year target could be met by 2023. Driven by the imperative to achieve a better balance between mitigation and adaptation financing, countries also committed to double global adaptation finance by 2025. But today, the annual adaptation costs of developing countries are expected to be in the range of USD 140 billion to USD 300 billion by 2030 (Independent Expert Group on Climate Finance 2020). This exceeds the overall climate financing target, which comprises both mitigation and adaptation support.

A Sustained Policy Structure across developing countries is a must for growth of renewables. Greater efforts are also needed to increase renewable penetration in newer areas like transport and heating, both directly, through the use of biofuels and biogas, and indirectly, through electrification. Despite its large share of final energy consumption, heat receives limited policy attention globally compared with other end-use sectors. The number of countries with national targets for renewable heat is less than one-third those with targets for renewable electricity. Policy support is also critical for transport, particularly in a lower oil and gas price environment.

Focus India

As an Arthur D Little report said, to accelerate India’s power sector growth, private players and governments must synchronise with each other in implementing a holistic transformation. The report further had mentioned that India will need additional investment of around $300 billion to complete the 500-gigawatt renewable energy capacity target by 2030.

With 165 gigawatts (GW) generation capacity already in place, the country is on the right trajectory to meet its goal of having 50% of energy needs through the renewable portfolio. Increased adoption of green energy—particularly green hydrogen with efficient storage solutions and leveraging of new technologies such as carbon capture, smart meters, smart grids with robust data management systems, and enabling efficient price discovery via power exchanges will shape the future of India’s power sector.

The country is in the right track of Energy Transition and the right combination of precision technology to harness the natural form of power, policy to mobilise adaption and targeted investments will ensure that the country achieve its targets and become a leader among all developing nations in imbibing Energy Transition.