More than 1.4 billion people in the world are currently living devoid of any access to electricity. Only 31 percent of the population in Sub-Saharan Africa has access to modern electricity services while 16.5 million people in Nepal are electricity deprived. Many low-income household groups cannot afford to pay the upfront connections fees while the private sector lack appropriate incentives to render service to the less profitable (or rather unprofitable) and low-usage customers even though the rural community may be willing and able to pay commercial prices for their electricity usage. Renewable technology offer suitable opportunity to electrify rural areas as the technology is capable of making better use of locally available resources, such as sunlight, biomass, wind and hydro power. However, developing decentralized electricity systems from renewable energy sources can be too costly for poor rural population to afford in the absence of any access to credit while any possibilities of cost reductions from economies of scale vanishes due to small-scale of the plants.
Renewable energy, which comes from different sources (primarily hydro, photovoltaic, wind, geothermal, tidal, waste to energy), has a common characteristic of having large sunk costs and almost negligible variable cost. Waste-to-energy (WtE) technologies, in particular, have negative fuel cost as plants usually receive some gates fees (at least in the UK) for accepting delivery of waste while waste is usually free. These technologies require significant capital expenditure before producing any energy with no added fuel cost unlike other conventional fossil-based technologies that incurs significant fuel costs.
The average costs of renewable technologies are very much dependent on the output levels or scale with marginal cost being very low. The high upfront capital cost requirement for renewable technologies raises the levelized cost of electricity (lcoe), which is the constant price at which electricity is sold for the facility to break even over its lifetime as compared to other fossil-fuelled power stations.
However, from a policy making perspective, it is desirable that the costs comparison be based upon levelized social costs of electricity. The levelized cost of electricity includes the negative externalities (external costs) such as the costs of greenhouse gas emitted. While levelized social costs provide a level-playing field for costs comparison; a potentially complicating factor would be the right price of carbon that tends to vary across studies. Nonetheless, the increased deployment of renewable sources as a means to improve the electricity access rate in less developing economies can largely hinge upon their ability to identify innovative mechanisms to attract both domestic and foreign capital and increase financing given high initial capital costs.
Increased investment in renewable energy from international sources in the form of well monitored long-term loans and grants coupled with timely technology transfer are essential to extend electricity services among rural and urban-based communities in less-developed economies like Nepal.
Nepal has significant potential to economically harness renewable energy using small-hydro, photovoltaic (PV) and wind, reducing our dependence on traditional energy sources. However, several domestic and international factors are responsible to address the associated demand- and supply-side constraints and contribute toward the spread of green technologies in the country. At the domestic level, it is necessary to design cautious subsidies and tax incentive schemes capable enough to create a balance between ‘economic efficiency’ and ‘social equity’. Equally important factors are the need to improve the access to credit, creating proper institutional settings, encouraging the private sector and extending adequate entrepreneurial support for all players involved.
The need to support socially-oriented organizations such as cooperatives can be pivotal in the Nepali context in utilizing the available green energy sources. Similarly, increased investment in renewable energy from international sources in the form of well monitored long-term loans and grants coupled with timely technology transfer are essential to extend electricity services among rural and urban-based communities in less-developed economies like Nepal.
The larger adoption of renewable energy technology signals a technological shift from centralized energy production and transmission toward a decentralized structure. The switch toward a decentralized production structure implies that there is no need to engage in costly grid expansion and avoid the network energy losses. It also indicates a shift in preferences toward small-scale facilities from large-scale traditional power plants in less developed economies. ‘Going green’ is indeed a long-term solution toward mitigating the impacts of on-going energy troubles in Nepal.
rabindra.nepal@googlemail.com
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