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close this bookRural Energy and Development: Improving Energy Supply for Two Billion People (WB, 1996, 132 p.)
close this folderChapter five - Innovations in renewable energy
View the document(introduction...)
View the documentTechnical progress in using the solar resource
View the documentPolicies toward new renewable energy sources in rural areas
View the documentProgram development
View the documentPrices
View the documentCredit
View the documentTaxes and subsidies


Recent developments in renewable energy technologies have greatly added to the options available for improving rural energy supplies. The main technologies suited to rural areas are micro-hydro. biogas. wind generators. wind pumps. solar heaters for hot water and sustainable ways to provide wood supplies. All these are important sources of energy anti can be developed further. as illustrated by the examples of China (box 5.1) and Pura in India (box 3.2).). A more recent development has been the use of photovoltaic (PV) systems to provide electricity supplies for such small-scale applications as electric lights; and domestic appliances. refrigeration for clinics. village water pumps, street lighting. and health clinics and schools. For small-scale applications in rural areas, PVs are often less expensive and more reliable than grid supplies or diesel motors. The encouraging feature of the Kenya example discussed in box 4.4 was that it was financed on a purely private basis (van der Plas 1994). Solar thermal electric systems using parabolic dishes are also showing much promise for small-scale supplies (Ahmed 1993).

Aside from their environmental appeal, new renewable energy technologies are attracting professional interest for several reasons. namely: the abundance of the solar resource. from which most forms of renewable energy are derived: technical progress and cost reductions: and the modularity of the technologies. The rest of this chapter will focus on technological progress and on the supporting policies needed if renewable energy is to be widely used in rural areas.

Technical progress in using the solar resource

Each year. the earth receives energy from the sun equal to 10.000 times the world's commercial energy consumption and more than 100 times the world's proven coal. gas. and oil reserves. Modern solar electric schemes. such as PV systems and solar-thermal power stations, can currently convert 7 to 15 percent of the incident energy into a form useful for consumption. and in theory would need less than I percent of the world's land area to meet all its energy needs. Solar energy is an abundant and infinitely renewable resource.

Insolations are about 2,000 to 2,500 kilowatt hours (kWh) per square meter per year in many areas of developing countries, which means that a PV scheme of square meter can supply 100 to 300 kWh. depending on the type of cell used, which is sufficient for lighting. radio. television, and ironing, while a 5 square meter panel set is sufficient to meet the water pumping needs of a village or to provide for irrigation on a small farm.

Technical developments have been impressive, and reductions in the costs of all major solar energy technologies. including derived forms of solar energy such as wind. have been substantial (Ahmed 1993: Johansson and others 1993). As figure 5.1 shows. in the early 1970s PV modules cost several huncired thousand dollars per peak kilowatt and applications were largely confined to aerospace and other specialized uses. By 1990 costs had fallen to US$16,000 per peak kilowatt and PVs had become commercially viable for a wide range of small-scale uses: costs have declined by another 20 to 30 percent since. An estimated 100,000 to '-00.000 systems are installed in developing countries. including 40,01)0 in Mexico, 20,000 in Kenya. 16,000 in Indonesia. 15,000 in China. 10,000 in Brazil. and 4.000 in Sri Lanka.


China has long promoted renewable energy technologies for its large rural population. Nearly 800 of China's 2,166 counties depend on small-scale hydro for electricity, and some 5.5 million households use biogas systems that process animal manure, kitchen wastes, and night soil into biogas for cooking. Many small-scale wind machines are in household use - 120,000 in Inner Mongolia alone. The Ministry of Agriculture estimates that private artisans have assembled more than 4 million square meters of solar heaters using devices designed by

China's Solar Energy Research Institute. This is equivalent to the heat that several hundred megawatts of electricity generating capacity could deliver. Demand has grown by 50 percent in each of the past two years, stimulated by a rise in farm incomes. Until recently, the PV program had reached a modest 4,500 households. However, an active research program is under way, and in Qinghai Province alone, where insolations are good, plans call for PV electrification of 100,000 households in the next twenty-five years.

Source: Terrado and Cabraal, staff memorandum (1996).

Engineering and economic data show that further progress is likely on two fronts:

· Scale and production economies. World output grew from I megawatt per year fifteen years ago to around 70 megawatts today. a growth rate of more than 30 percent per year. Markets are still small. but the technologies are modular, and economies of scale and the technical possibilities for batch production have barely been exploited.

· Cell. module, and systems design along with improvements in conversion efficiencies. Improved materials. multifunction devices and novel cell designs to capture more of the solar spectrum, and concentrator (Fresnel) lenses to focus sunlight onto high-efficiency cells are further areas of rapid development.

Figure 5.1 Actual (1970-92) and Projected (1993-2015) Costs of PV Module

The technologies are now at the point where they are competitive for oft: grid supplies, and are therefore of special interest to rural areas. Box 5.2 on Indonesia's experience with PVs provides a good example of the respective economics of grid and PVs for supplying rural areas. At high load densities the grid is clearly preferable. at lower load densities PVs are a more cost-effective option.

Good progress has also been made with small- and large-scale thermal solar schemes and with derived forms of solar energy, such as wind and biomass resources for power generation. In China and Middle Eastern countries solar-thermal collectors are a popular heat source for domestic hot water, and promising experiments with solar cookers are afoot in Asia and Africa. Another promising solar-thermal technology is the parabolic dish for small scale power generation. and when scaled up. for grid supplies Studies by the U S. Department of Energy have indicated that the costs of 25-kilowatt modular units vary from US¢12 to US¢20 per kWh (Ahmed 1993) In the case of wind for power generation on a larger scale, costs have declined from around US¢ 15 to US¢25 per kWh to US¢4 to US¢8 per kWh in favorable locations For small-scale applications the costs are US¢20 per kWh. but can be competitive for off-:grid supplies.

Of all renewable energy sources. biomass (ligneous and herbaceous crops and agricultural and municipal wastes) is the largest, most diverse, and most readily exploitable Biomass residues are often available in large quantities as agro-industrial wastes Recuperation, more efficient production, and more rational use of biomass residues and forest resources could make many agro-industries energy self-sufficient as well as provide additional energy to the economy in general. This requires the conversion of biomass into cleaner and more convenient fuels (gases, electricity. briquettes).

Developing-country agro-industries (saw mills, sugar mills, and palm oil mills) already use biomass residues to generate power and heat for the industry own use. On-site utilization is currently limited to raising process heat and power. but its use could be expanded to heat for drying and product treatment Also, co-generation of electricity for a mini-grid can he economically beneficial. Off-site utilization of residues includes direct utilization of residues in industrial oil, wood-. and coal-fired combustion systems

Biomass conversion technology may find application in situations where petroleum fuels are either unavailable or where the cost of power from engines fueled by producer gas is lower than from diesel or gasoline engines. Classification combined with the use of gas in an internal combustion engine or turbine is an efficient way to convert solid fuels into shaft power or electricity on a small scale, and more advanced processes for larger scale gasification are under development Heat gasifiers are technically reliable and economically attractive compared with conventional alternatives Apart from use in the rural agro-industry (for example, for tea drying), non-agro-industrial applications are also viable (for instance. brick and ceramic kilns). Consequently. this technology is already in large use in developing countries.

Economists believe that the costs of new renewable energy technologies will decline further because of scale economies and the stimulus that market growth will give to further research and development and innovation Japanese and American studies of the reaming curves for PV technologies have found that for each doubling of the cumulative volume of production during the past fifteen years. costs have declined by 20 percent (Ahmed 1993: Anderson and Williams 1994) Renewable energy technologies are fertile ground for innovation; the possibilities for further development and cost reductions are far from being exhausted

Policies toward new renewable energy sources in rural areas

New renewable energy technologies still account for less than 2 percent of the primary energy supplies of developing countries. but in light of their promise. with good economic and environmental policies and with the development of the necessary support systems for installation and maintenance. their market shares should expand Investments will also be required to acquaint energy engineers and managers with the technologies and to educate and train engineers and skilled workers As with all new and innovative technologies. developing the best approaches will take a good deal of effort (and some trial and error).

A recent review of PV programs in the Pacific islands (Liebenthal. Mathur, and Wade 1994), for example. found that many PV systems tailed after installation, and it was only when supporting services were introduced that the programs began to succeed. These services included training technicians. ensuring timely maintenance. collecting tees on a regular basis, providing proper oversight to prevent the diversion of revenues to other projects, and obtaining prompt feedback on needs from local user communities and passing the information on to the supplying utility Similarly, a program in India introduced PVs in several states for domestic and street lighting, community televisions, water pumping, and other purposes during 1986-93 Yet out of more than 5,000 street lights. more than half in some states all were not working a short while later, and the other applications exhibited similar failure rates The findings were particularly disturbing because PVs are durable, are relatively simple to install. and require little maintenance. As in the Pacific Islands. the problem turned out to be the lack of supporting services


Solar home systems using PV technologies have the potential to provide electricity to a large number of rural households. In Indonesia 3,000 solar home units were installed during 1988-92. A recent evaluation found that the units are working as planned Today, more than 16,000 units have been installed through public programs and by commercial dealers.

In a typical 50-watt-peak system, a solar PV panel is installed on the roof of a rural home or shop The panel charges an automobile-type battery that is used at night to run up to four energy-efficient light bulbs and a black and-white TV or a radio for four to five hours a day - approximately equivalent to consumption of 0.5 kWh of grid electricity per day Systems ranging from 20-watt-peak (for lighting alone) to 200-watt-peak (for schools, meeting halls. or higher-consumption households) have also been used successfully.

Solar home system units offer a fast and least-cost means of providing decentralized rural electrification in two "niche" markets: (a) where the grid may be nearby, but consumers are dispersed and the load density is low, making grid extension to individual consumers expensive; and (b) where the grid is more distant and is not expected to be extended soon (see the figure) In these two markets combined, the economic potential for solar home systems in Indonesia is estimated at more than 5 million of the approximately 30 million rural households that lack grid supply.

Solar home systems also offer (a) superior quality and quantity of light, compared with kerosene lamps, along with absence of indoor fumes, pollution. and fire hazard associated with such lamps; (b) no need to haul battery to a central charging facility; and (c) environmental benefits One environmental problem that must be dealt with in all solar home projects involves ensuring proper disposal or recycling of batteries

Source: Arun Sanghvi, internal communication

Grid Extension and Solar PV Switchover Values Outside Java Grid 3 Kilometer Medium-Voltage Extension

Successful programs require two main ingredients: (a) paying proper attention to program development. for example. initiating surveys of renewable energy resources. carrying out project identification and preparation, and investing in education and training: and (b) creating good enabling conditions through economically efficient pricing. credit. and tax policies

Program development

Establishing a program involves significant effort. The first task is to survey solar and wind resources. Such surveys have long been carried out for hydro programs, as geological and engineering investigations have usually been carried out for many potential sites. and data on river flows have been collected for several decades. but they are rarely available for solar or wind energy In addition. a program of field tests of equipment with a fairly substantial number of consumers (often several thousand households) will be necessary not only to justify the investment in the equipment. but to establish supporting maintenance services and to monitor progress.

As with any new area of investment. issues arise in connection with risks and uncertainties In the field of renewable energy. some of the questions raised are at a quite elementary level For example. some projects designers may not even have assessed the level of solar. wind. and biomass resources. while potential consumers are often not up-to-date on technical developments. costs, and how similar projects elsewhere have performed The predisposition of institutions to resist change is also a factor that widely impedes new investment and initiative

Another major task is to familiarize professionals in the electricity industry engineers. managers. financiers, regulators with the new possibilities Expanded education and training, including visits to operating projects. may help to change negative perceptions and aid the development of investment programs Beyond this. the facilities and curriculums of universities and technical colleges may need to be developed to provide appropriate education and training

The financial requirements needed to develop programs. identify and prepare divestments, and provide education and training are generally small in relation to the costs and benefits of the investments that eventually emerge As with the development of programs using more traditional renewable energy forms, such as micro-hydro schemes. biogasifiers, and sustainable ways of using wood-fuels. the participation of nongovernmental organizations in project development can be beneficial. Bilateral aid organizations and nongovernmental organizations. often working in collaboration. have also been influential in establishing pilot schemes and offering education and training to engineers and technicians from developing countries The many applications of PVs in developing countries owe much to such efforts.


As discussed in chapter 4. for rural areas both peak and average costs are sometimes twice the marginal costs of electricity supplies in a typical urban situation. If new renewable energy technologies are to succeed as an economic alternative to conventional power plants and to grid electrification in rural areas, then as chapter 4 emphasized. the electricity industry must adopt cost-reflecting price policies. Such pricing policies include time-of-day and seasonal, as well as regional, variations in prices.

Given the high costs of meeting peak demand and the declining cost of PVs, several European countries, Japan, and the United States are now conducting trials on the use of PVs to supplement peak loads These trials include " net metering" arrangements such that small users can sell surplus power to the grid Aside from the cost advantages. the relevance for rural areas and towns is that decentralized generation reduces line losses and voltage drops and provides a backup source of supplies in the event of line failures.


As with some other forms of rural energy. the initial cost of acquiring the equipment constitutes a significant barrier to the widespread adoption of renewable energy sources The development of innovative financing schemes. including supplier credits and leasing arrangements. is thus a critical element of any renewable energy program Those who have studied the credit problem closely have concluded that subsidies are not needed, at least for small-scale applications for which renewables are competitive (Cabraal and Cosgrove Davies 1995)

Taxes and subsidies

In recognition of their positive externalities (of innovation) and their environmental advantages, one can make a good case for exempting renewable energy technologies from or at least substantially lowering taxes and duties. while at the same time taxing conventional energy industries' supplies in accordance with standard principles of tax policy. Experts have also long argued in favor of imposing corporate and sales taxes on electricity on the grounds that it is a fairly price inelastic product In practice. however. governments have typically pursued the opposite policy, namely. of not only exempting electricity from taxes, but often subsidizing it, and imposing significant taxes on renewable energy equipment (See Cabraal and Cosgrove-Davies 1995. who report that in Sri Lanka, import duties added some 30 percent to the costs of PVs Kenya also has duties and taxes on PVs while subsidizing electricity to encourage local manufactured and assembly).

There is, furthermore, an economic case for providing public financial support for renewable energy technologies in program development, demonstration, education, training. and monitoring. again, in recognition of their positive externalities and environmental advantages This is the rationale behind the Global Environment Facility's (GEF's) financing of renewable energy: during 1991-94, the GEF financed renewable energy projects in eight countries that included PVs. wind power, and micro-hydro in India and biomass for power generation in Brazil (the CEF quarterly operations reports provide more details) Twenty-five renewable energy projects are currently under review or in venous stage of preparation and appraisal in twenty countries.

At the national level, financial support could come either from public revenues or from user charges or surcharges on the use of fossil fuels The latter has the advantage of making the programs less dependent on public financing A good example is the United Khigdom's "nofto." or non-fossil-fuel obligation program, which applies the revenues from a small surcharge on electricity to support the winners of competitive bids to supply electricity from renewable energy sources. Several similar schemes exist in Europe Japan. and the United States, all of which have active public programs to develop renewables