LONDON — Renewable energy has undergone a dramatic transformation in the past eight years. Starting out as nascent and pricey technology, it has become an ever-cheaper, clean, and flexible solution to stemming climate change while spreading energy access.
“We are witnessing a quiet revolution in terms of energy access, principally driven by renewable energy solutions.”— Adnan Amin, director-general, IRENA
Adnan Amin has watched the shift over that period, as the first director-general of the International Renewable Energy Agency in Abu Dhabi, United Arab Emirates. The organization represents more than 170 member states and promotes the use of renewables for sustainable development, new energy access, and low-carbon economic growth.
The cost of solar energy has dropped by around 70 percent over the past seven or eight years, and the cost of wind turbines by 30 percent, according to Amin. Meanwhile, investment in renewable power generation over the past five years has exceeded all conventional sources, with a record 158 gigawatts of capacity installed last year.
“We are facing the most important COP since Paris,” said Jens Mattias Clausen, climate change adviser at Greenpeace Nordic.
The Paris Agreement on climate change could help push the growth in renewables even further — depending on the outcome of negotiations over the next two weeks in Katowice, Poland, as stakeholders meet again for this year’s Conference of the Parties. The goal for the United Nations’ COP24 climate summit is to finalize a complex set of rules to make sure countries follow their pledges under the Paris deal, and begin work to raise those pledges by 2020.
Devex spoke to Amin, whose term at IRENA ends in April, about the potential for renewables to bring energy to rural and unconnected regions and how to scale up investment.
The conversation has been edited for length and clarity.
What results would you like to see from COP24?
The conclusion of the discussion on the “rulebook” will be extremely important to provide clarity in terms of direction. With the new [Intergovernmental Panel on Climate Change] special report [on 1.5 degrees Celsius of global warming], we have a new, very clear understanding of the risks we are facing, and that renewable energy now presents a very compelling pathway for decarbonization.
To what extent can renewable and off-grid technology bring energy to rural, unconnected regions?
We are witnessing a quiet revolution in terms of energy access, principally driven by renewable energy solutions. We have had a very intensive process of innovation, in terms of renewable technologies, but also business models, provision of renewable electricity in rural areas at very low cost, using pay-as-you-go systems, providing new types of appliances that are able to run on solar, and really revolutionizing the way access is happening.
“For the first time in history, we’ve gone below 1 billion people without access [to energy]. Our projection is that 600 million more people can gain access by 2030.”—
In the last six or seven years, 133 million new people have gained energy access, a large number of them primarily through standalone solutions for lighting, but increasingly a larger number were able to access productive uses through renewables. That includes solar water pumping solutions, development of new efficient refrigeration, efficient appliances that can run off solar and batteries such as agroprocessing equipment, and even welding equipment.
For the first time in history, we’ve gone below 1 billion people without access [to energy]. Our projection is that 600 million more people can gain access by 2030 on the basis of the falling cost of technology and the penetration of the renewable model in more and more countries.
Is it hard to attract investors to these rural regions?
The investment you need for utility-scale power generation, and the structuring of financing for grid-connected, utility-scale renewables, presents specific challenges. Those are being overcome, slowly.
But the financing of off-grid solutions has less challenges because you need less capital and you’re competing with very expensive sources of energy. For example, for the Philippines government last year, we studied the application of mini-grids on remote islands in the Philippines’ archipelago, and the business case was compelling. Each and every time, it beat diesel generation.
Where is the investment interest coming from?
We’ve been working with a lot of small-scale entrepreneurs, SMEs [small- and medium-sized enterprises] and social entrepreneurs … What they’re finding is that, for example, [according to a recent case study on social entrepreneurship and the role of women in Indonesia], when you provide solar lighting to replace kerosene, you not only have a dramatic impact on health … but you reduce the cost of energy for poor consumers by almost half.
“As economic growth comes to rural areas in developing countries, they need to make choices on energy. And those choices need to be on the basis of renewable energy.”—
What we really need is the scale. The business case already exists. We need to understand that as economic growth comes to rural areas in developing countries, they need to make choices on energy. And those choices need to be on the basis of renewable energy, rather than polluting sources, so that we can address the mitigation [of climate change].
How do you get that scale?
With governments, there is really an understanding that rural electrification with renewables is now a massive opportunity. We have just signed a memorandum of understanding with the ASEAN energy ministers that incorporates that into a strategy over the next 10 years. In Africa, this is being prioritized by more and more governments.
The big corporations don’t invest that much in energy access, but they often have foundations which are working on it. I think the most exciting and dynamic part is the companies that are emerging — like M-KOPA in Kenya or Mobisol in Germany — which are now able to provide very competitive off-grid solutions that include productive uses and that are growing exponentially.
But what we need is a better understanding of how companies that are making this difference can access financing at a larger scale.
How should governments be helping and backing investment in rural regions?
The real energy for investment is going to come from the private sector, because the private sector is going to see that the business case for renewables is extremely strong. But what they need is a very clear, very transparent and long-term policy environment that gives confidence to investors.
“The business case for renewables is extremely strong.”—
It’s extremely important for renewables, because when you structure renewable financing, your capex [capital expenditure] or your capital investment is almost 100 percent upfront.
Renewables don’t have any fuel cost over the lifetime of that plant, so all the investment comes upfront. If we are able to reduce the cost of investment through tools like risk mitigation, then we can really begin to scale up investment in grid-scale.
At COP24, lower-income countries want strong rules to encourage the transfer of technology. To what extent should technology be shared, and do trade barriers or tariffs pose concerns?
Technology is not a good, per se, that is in the gift of anyone to hand out like a present.
Technology is a function of policy and of investment. Technology that is applicable to specific settings takes place as a result of investment, and investment takes place as a result of the perception of return to investment.
The return to investment on renewables is compelling in more and more markets … and the technology for most of the types of applications we see is available. A lot of countries are investing in trying to add value with local supply chains into this equipment.
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