|Case for Solar Energy Investments (World Bank, 1996)|
Solar energy technologies - photovoltaics, solar-thermal, wind, and biomass - are being used successfully in small-scale applications on a commercial basis and for some larger-scale power generation projects. For developing countries in particular, solar energy is an abundant and environmentally attractive resource, with enormous economic promise. Some solar projects, mainly for small-scale applications, have already been financed in developing countries - some-times with the support of bilateral and multilateral development agencies and the Global Environment Facility (GEF) in its pilot phase, and often through independent public and private initiatives. In the last 10 years in particular, the industrial countries have gained significant operational experience with solar technologies that is relevant for developing countries.
Following a brief discussion of the extent of the solar resource and the costs and performance of the technologies, this paper outlines a two-part initiative to accelerate the commercialization of solar energy technologies in developing countries.
The first part of the initiative involves the development of a "pipeline" of projects suitable for finance for commercial and near-commercial applications using conventional and GEF resources. This would require the efforts of several parties, most of all the energy community in developing countries, to survey the solar resource; identify potential applications and market opportunities; perform technical, economic, and financial feasibility studies; and, more generally, undertake project preparation such that good projects - capable of meeting the investment criteria of the GEF and conventional finance, depending on the financial resource being applied for - can be financed. So that existing technologies are not "frozen" through such programs, some research, developmental, and demonstration projects using advanced solar energy concepts should be included in the pipeline.
The second part of the initiative concerns the need for scaling up of investment in R&D and demonstration projects in both industrial and developing countries to promote advances in solar energy concepts for large- and small-scale commercial applications. Inevitably, some R&D will be associated with the "pipeline" of projects noted above, but for a successful program, national and international R&D programs merit expansion. It may appear that solar technologies have attained a momentum of their own: many new approaches are being developed and tested; unit costs have declined and technical performance improved impressively; the lead times for R&D are short relative to those in most other energy sectors, as are the lead times for operating investments, such that there is prompt feedback of results and experience and learning-by-doing is facilitated; private manufacturers and financial institutions have shown much interest in the solar resource; and the field is fertile for R&D. Yet commercial applications of the technologies are barely a decade old, and solar R&D is now approaching a crisis, as public support in the majority of OECD countries has waned precisely when the technologies are emerging on the scene. On both environmental and commercial grounds, then, there is an excellent case for strengthening national R&D programs and - bearing in mind the promising applications in developing countries - for fostering international collaboration.
Thanks to the establishment of the GEF, work has begun already on the first part of the initiative, developing a project pipeline. For the second part, defining the appropriate R&D policies, the process is just beginning.