World demand for electricity is growing more rapidly than for any other end use, and – at an average growth rate of 2.8 per cent a year – it will almost double over the 1997-2020 period. Growth will be particularly high in developing countries, and is projected to be 4.6 per cent annually, compared to 1.6 per cent in the OECD. Nevertheless, per capita electricity consumption in the developing world will still be only one sixth of the OECD level.

A ‘business as usual scenario’ – based on energy policies in place in mid-2000 and consistent with the World Energy Outlook 2000 reference scenario – suggests that during the period 1997-2020:

• Dependency on fossil fuels will grow, and carbon dioxide emissions from energy use will increase by a projected 60 per cent – over two thirds of this in developing countries.

• Renewables will be the fastest growing of all types of energy. However, because they are starting from only a small base, their share will only increase from 2 to 3 per cent of the world energy portfolio by 2020.

• Nearly 2 billion people – up to 30 per cent of the world’s population, and all in developing countries – will continue to have no access to electricity. Improved energy services are unlikely to reach those who at present lack them.

This scenario will not result in a sustainable energy future. Poverty cannot be eradicated without adequate energy supplies in the developing world. Commercial energy services would allow a better quality of life for the poor, better education opportunities, better health conditions, better information, the dissemination of telecommunications and digital technologies, local industrial development and higher productivity. Traditional energy systems based on fossil fuels cannot meet the growing demand for electricity and increasing needs for access to modern energy services in the developing world without greatly increasing pressure on the environment, natural resources, public health and international relations.

Renewables are widely expected to play an increasingly important role in the world’s energy portfolio – along with greater emphasis on energy efficiency – as it moves towards a sustainable energy supply.

With this in mind, the 2000 G8 Summit in Okinawa called for the formation of a multi-stakeholder Task Force to assess the barriers to the use of renewables in developing countries and to recommend actions to better encourage it. Mark Moody Stuart, then chairman of the Royal Dutch/Shell Group of Companies, and I were appointed as its co-Chairs.

The Task Force was formed by the representatives of G8 governments and members from 12 other countries (Antigua and Barbuda, Bangladesh, Brazil, China, Denmark, Egypt, India, Malaysia, Morocco, Republic of South Africa, Sweden, Thailand). The private sector, the multilateral financial institutions, and non-governmental organizations with experience in micro-credit all provided input on financial thinking.

The principal finding of the Final Report was:

‘Renewable energy resources can now sharply reduce local, regional, and global environmental impacts as well as energy security risks, and they can, in some circumstances, lower costs for consumers’.

In developing countries, the new technologies of wind power, biomass energy, geothermal energy and small-scale hydro are often the lowest cost option to supply electricity to places unconnected to the grid, and are increasingly competitive in certain conditions on the grid. Meanwhile new solar technologies – photovoltaics, thermal power and heating – can play more than a niche role in many circumstances. In developed countries, the risk of supply interruptions – due to oil crises or to the insecurity of the electricity system – has increased over the last years, bringing new and additional costs. Renewables embedded in the grid can address this by being targeted to distribution system locations to alleviate load stresses more cheaply than by installing new generation and distribution assets.

The cost of renewable energy has fallen over the last decade, but in most cases it is not yet directly competitive with conventional alternatives. This is due to a number of key barriers, including:

• Insufficient human and institutional infrastructure.

• The high up-front costs of renewables, and other impediments to mobilizing capital.

• Weak incentives and inconsistent policies in comparison with the subsidies that encourage conventional energy.

In order to address these barriers, the Final Report recommends:

• Reducing technology costs by expanding markets: developed countries should implement existing and proposed national plans to expand domestic renewable energy markets in order to drive down costs and underpin the development of markets in developing countries. Working with both public and private sector participants, OECD countries should develop renewable energy projects where (i) renewables are a least-cost option on a life-cycle basis and/or (ii) renewables achieve protection of the local and/or global environment at a reasonable cost.

• Building a strong market environment: renewables should be adequately considered as part of energy policy in assessing the development priorities of countries participating in poverty reduction programmes.

• Renewable energy industries should be supported for the creation of joint ventures and other manufacturing, assembly and distribution/installation capabilities in developing countries.

• Mobilizing financing: official development assistance, bilateral and multilateral agencies should explicitly consider renewables for development projects and choose them when they are the least-cost option on a life-cycle basis.

• Encouraging market-based mechanisms: the OECD should develop national and international renewable certificate trading schemes, take steps to remove incentives and other supports for environmentally harmful energy technologies, and develop and implement market-based mechanisms that address externalities, enabling renewable energy technologies to compete in the market on a more equal and fairer basis. If we did all of these things, what might the result be? We could have an aspirational target of serving up to an additional billion people with renewable energy in the next decade.

Broken down, the aspirational target of a billion people includes:

• 200 million through improved biomass-efficient burning stoves.

• 300 million through rural electrification, corresponding to 15 terawatt hours/year: a very challenging target.

• 300 million grid-connected in the developing world, corresponding to 180 terawatt hours/year.

• 200 million grid-connected in the OECD, corresponding to 600 terawatt hours/year; the size of the market in OECD countries will drive down the cost of the renewables globally.

These targets are consistent with the Genoa 2001 G8 Summit conclusions, to:

• Ensure that renewable energy sources are adequately considered in our national plans and encourage others to do likewise.

• Encourage continuing research and investment.

• Help developing countries strengthen institutional capacity and market-oriented national strategies that can attract private sector investment in renewable energy.

• Call on multilateral development banks and national development assistance agencies to adopt an innovative approach and to develop market-based financing mechanisms for renewable energy.

• Urge the Global Environment Facility to continue supporting environmental protection on a global scale and fostering good practices to promote efficient energy use and the development of renewable energy sources in the developing world