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close this bookCase for Solar Energy Investments (World Bank, 1996)
close this folderA solar initiate
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Open this folder and view contentsPreparation and finance of commercial and near-commercial applications
Open this folder and view contentsResearch and development


Despite its recent progress and its substantial potential, solar technology is not fully commercial, except for small-scale, "off grid" applications, and costs are still higher than those of supplying peak and off-peak power for grid supplies using fossil fuels. Nor is it certain that it will become commercial for large-scale applications, or (given the widespread subsidies for grid-supplied electricity in many countries) that it will be as widely used for small-scale applications as would be economically desirable.

What can be said is that technical progress and reductions in costs have been impressive and that analyses of the possibilities for further progress - in the technologies themselves, and in their manufacture, and of the potential for economies of scale in manufacture - show that the prospects for solar power are very promising, given good economic and environmental policies.

Were it not for concerns about global warming, further progress could be achieved through pursuing moderate increases in R&D funding, removing deformities in energy prices, and otherwise relying on markets to develop autonomously. According to projections by the U.S. Department of Energy, this would probably be sufficient to see more commercial applications emerge gradually over the next two to three decades. Yet given that the global environment is a public concern - as evidenced by the fact that 160 countries have now signed the Climate Change Convention (90 have ratified it, of which 60 are developing countries) - the case is compelling for more active policies to hasten the commercialization of solar energy. In high-insolation areas, solar energy is currently emerging as the most promising option for stabilizing carbon emissions and accumulations, should the need arise (see Box 1).

Whether it is necessary to go further - that is, to embark on a program for stabilizing carbon accumulations, or even to move toward a program for reducing the accumulations - must await the results of more definitive research on long-term climate change. What can be concluded at present is that support for the development and use of solar technologies is a necessary part of any precautionary policy for addressing global warming. This is why the GEF financed several renewable energy projects in its pilot phase and why it is to give priority to such projects in future operations. As it happens, prospects are good that such initiatives may also contain the seeds of a pleasant economic surprise.

Box 1. Carbon Emissions and Solar Scenarios

The top figure shows two scenarios of carbon emissions summarized in the World Development Report 1992. The fossil fuels scenario (dotted line shows) the expected growth of emissions with continuing use of fossil fuels (assuming continued progress in energy production and end-use efficiency). Emissions grow in this scenario because of the growth of energy demands in developing countries, where per capita consumption is only 5 percent of that in the rich countries, and more than 2 billion people are still without access to commercial fuels. The renewable scenario (solid line) makes the same assumptions about energy efficiency but also assumes a gradual substitution of solar energy forms for fossil fuels. The use of renewables would enable stabilization of emissions and accumulations over the long term.

The bottom figure shows the shift in shares of primary energy demand required to stabilize CO2 emissions. Although solar energy will be a small share of the market for some years, substitution of solar energy for fossil fuels, along with economic efficiency in energy production and use, are at present the most promising long-term options for stabilizing carbon emissions and accumulations.

Carbon Emissions, Reliance on Fossil Fuels Versus

Shift Toward Renewables. 1990-2050