Wednesday, January 13, 2010

The Economics of Renewable Energy Systems for Developing Countries

The author examines three projects employing some of the more sophisticated renewable energy technologies: solar pumps in Senegal, biogas plants in India, and solar-electric pumps in Chad. He presents a careful economic analysis and concludes that none of these technologies is now a good investment, nor does any of them appear likely to become a good investment in the next decade.

"Most renewable energy devices now tend to be attractive primarily to people already using costly commercial power. Just as is happening in the United States, for example, some Third World city-dwellers are discovering that solar energy may be cheaper than electricity for heating water ... Such systems will be of greatest use to the wealthy; there is little reason to suppose they will be of comparable interest to the poor."

"Rather than concentrating on devices of the sort described above, organizations concerned with the poor might seek to meet basic energy needs through simpler systems: village woodlots, improved wood stoves, hand or pedal pumps and grinders, hydraulic ram pumps, and so on. Emphasis would be on systems whose benefits were likely to be commensurate with their costs, and whose costs were likely to be within reach of the poor. Given this approach, ways might be found to make energy widely available to people most in need of it."

In addition to pointing out the dubious appeal of the higher cost group of alternative technologies, the methods of economic analysis clearly presented here can be used to help evaluate other renewable energy technologies. This report will also be helpful to people who need to understand the methods and concepts of analysis often used by major aid agencies.

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