Why Don’T Poor Countries Use Renewable Energy?

Renewable energy refers to energy generated from natural resources that are naturally replenished like sunlight, wind, rain, tides and geothermal heat. Access to affordable, reliable and sustainable energy is essential for economic development and poverty alleviation. However, there is an ongoing debate around why renewable energy has not been widely adopted in poor and developing countries despite the potential benefits.

The International Renewable Energy Agency (IRENA) highlights that renewables have a key role to play in expanding energy access and supporting sustainable development globally, especially in developing counties. However, barriers remain that have prevented wider adoption of renewable energy in these contexts.

High Upfront Costs

Renewable energy like solar, wind, and geothermal often require significant upfront investments compared to fossil fuels before energy generation can begin. According to the World Bank, the high capital costs of renewable projects present a major barrier for developing countries trying to transition to clean energy [1]. Building solar farms, wind turbines, hydroelectric dams, and other renewable infrastructure can cost billions of dollars upfront. Developing countries struggle to secure financing for these massive initial costs when cheaper fossil fuel options are available.

For example, a new natural gas power plant may cost around $1 million per megawatt of capacity, while a solar farm costs over $3 million per megawatt. Geothermal plants are even more capital intensive at $5-8 million per megawatt [2]. With limited financial resources and urgent energy needs, many developing countries opt for cheaper fossil fuels despite their pollution and climate impacts.

The high upfront expense of renewables is a major barrier, especially when paired with competition from subsidized fossil fuels. Creative financing solutions and global climate funds may help developing nations overcome these initial cost hurdles on the path to clean energy.

Intermittency Issues

Many renewable energy sources like solar and wind are intermittent, meaning their energy generation fluctuates based on environmental conditions. The intermittency of renewables can make integrating them into the electric grid challenging. According to Scientific American, intermittent renewables disrupt conventional methods for planning daily grid operations because supply is variable and not perfectly predictable (source).

The fluctuations in renewable generation create difficulties balancing electricity supply and demand. Renewables require storage capabilities to capture excess energy when generation is high and dispatch it when generation is low. As noted in a report from UNC Kenan-Flagler Business School, developing storage is crucial for areas with high renewables saturation to address intermittency issues (source). The intermittency challenges need to be overcome to allow renewable penetration to increase while maintaining grid reliability.

Lack of Infrastructure

Many developing countries lack the electricity transmission infrastructure necessary to support widespread adoption of renewable energy. Renewable sources like solar, wind, and hydropower often require building new power lines to connect generation sites with population centers.

For example, large solar and wind farms may be located in remote areas far from cities and towns. Transmitting the electricity they produce requires investing in high-voltage transmission lines and substations that a developing country may not be able to afford.

Hydropower also requires substantial infrastructure like dams, reservoirs, and tunnels to deliver energy. Constructing new hydroelectric facilities is extremely capital-intensive and challenging for developing nations.

Upgrading old electricity grids or building new transmission networks to handle intermittent renewables represents a major infrastructure investment many poor countries cannot make on their own. Lack of reliable connectivity hampers renewable energy growth in developing regions.

Absence of Policy Support

Many developing countries lack strong policy incentives and regulations to support the adoption of renewable energy. Unlike wealthier nations, poorer countries often do not have mandated renewable energy targets, feed-in tariffs, tax incentives, or other mechanisms to encourage investment in clean energy (Imports in the EU’s renewable energy policy).

The absence of clear renewable energy policies creates uncertainty for investors and companies. Without incentives or regulations spurring the market, there is little impetus for developing large-scale renewable energy projects. Developing countries also tend to have energy subsidies focused on fossil fuels rather than renewables. All of these factors result in minimal growth for renewable energy in poorer nations (India not to take any obligation on cutting emissions, says Manmohan Singh).

To increase renewable energy adoption, developing countries need to implement more supportive policies and phase out fossil fuel subsidies. Government incentives and mandates can help catalyze private investment in clean energy.

Fossil Fuel Subsidies

Many developing countries provide substantial subsidies for fossil fuels like oil, coal, and natural gas. These subsidies make fossil fuels artificially inexpensive for consumers and energy producers. According to a 2018 study, fossil fuel subsidies in developing countries totaled $251 billion in 2015. Subsidies take different forms including direct budgetary transfers, tax breaks, credit support, and more.

These large subsidies for fossil fuels make renewable energy sources less competitive in developing countries. Renewable energy usually has higher upfront capital costs compared to fossil fuel plants. But renewables become cost competitive over time because the fuel itself is free (e.g. the sun and wind). However, subsidies tip the playing field in favor of fossil fuels by reducing their operational costs. This distorts the true cost comparisons between renewables and fossil fuels (Whitley, 2015). As a result, energy producers have less incentive to invest in renewable power plants when subsidized fossil fuels remain artificially inexpensive.

Climate Financing

Lack of financing poses significant barriers for developing countries seeking to adopt renewable energy and mitigate climate change. Rich countries have pledged to mobilize $100 billion per year in climate financing for developing nations by 2020, but this goal has not yet been met. According to McKinsey, only around 20% of needed climate finance was actually delivered to developing countries in 2019.

Developing countries face a climate financing gap of trillions of dollars that severely hinders their ability to transition to renewable energy and adapt to climate impacts. The UN notes developing countries require at least $6 trillion in climate finance between 2020-2030. While total climate finance from developed to developing nations reached $89.6 billion in 2021, this remains well below pledged amounts and developing country needs.

Limited access to international public climate funds like the Green Climate Fund also constrain renewable energy adoption in poor nations. Closing the immense climate financing gap is crucial for enabling developing countries to reduce emissions and build climate resilience.

Corruption and Governance

Corruption is a major obstacle to effective energy policymaking and adoption of renewable energy in developing countries. According to a UNODC report, corruption risks are present at all stages of the renewable energy project cycle, from planning to procurement to construction and operation. Forms of corruption include bribery, embezzlement, fraud, and nepotism.

Corruption diverts public resources away from renewable energy projects and into the pockets of government officials and private interests. It distorts policymaking and regulations around energy to favor conventional fossil fuels. Lack of transparency and accountability enables corruption to flourish unchecked. This leads to inefficient and inequitable outcomes that hamper energy access and sustainability goals.

Tackling corruption requires strengthening institutions, increasing transparency in contracting and procurement, implementing rigorous monitoring processes, and empowering oversight bodies. Anti-corruption measures tailored to the renewable energy sector can help ensure investments translate to positive impact for citizens.

Opportunities

Despite the challenges, opportunities for increased renewable energy adoption are emerging in developing countries. Falling technology costs are making renewables more affordable than ever before. As per the United Nations, between 2010 and 2019, the levelized cost of electricity (LCOE) from solar photovoltaics (PV) decreased 82%, onshore wind by 39% and offshore wind by 29%. Costs are projected to continue falling, which would help make renewable energy economically viable.

Innovative financing models like pay-as-you-go solar home systems are also expanding renewable energy access. These systems allow low-income households to pay small, affordable installments over time rather than a large upfront cost. According to RTI International, pay-as-you-go programs have enabled over 15 million people to access clean energy. Partnerships between governments, development banks and private companies could further scale such initiatives.

Overall, with costs coming down and new business models emerging, developing countries have growing opportunities to transition to renewable energy and unlock its economic and environmental benefits.

Conclusion

In summary, developing nations face a confluence of barriers in adopting renewable energy sources, from high upfront costs and intermittency challenges to lack of infrastructure and policy support. The continued subsidization of fossil fuels further entrenches existing energy systems. However, with targeted climate financing, localized solutions, and improved governance, renewable energy can represent a viable path forward, bringing access and sustainability to underserved populations. The transition will require political will, external support, and patience to find the right balance between people’s immediate energy needs and long-term environmental goals. With the proper investments of time, money and ingenuity, renewable energy can empower and elevate those most impacted by energy poverty and climate change.