Benefits of Renewable Energy

Energy services are fundamental for human welfare and an important precondition for economic and social development.  However, over 1.5 billion people, mostly in rural areas of developing countries, have no access to reliable, affordable and environmentally sound energy services, which limits their development opportunities and ability to rise out of poverty.

Traditional energy delivery options are highly dependent on fossil fuels, which are by far the largest source of anthropogenic greenhouse gas emissions, contributing to global climate change with potentially vast adverse social, environmental and economic consequences.  Air pollution from fossil energy use generates major health and environmental damages, which result in significant economic costs.  For counties without significant fossil fuel resources, fuel imports represent a major drain on foreign currency reserves and a growing threat to their energy supply security.

Renewable energy technologies provide many benefits that can contribute to addressing these country-specific and global economic, environmental and sustainable development challenges.   For many developing countries, the use of locally available renewable energy resources can reduce reliance on energy imports, diversify energy supply mixes, and contribute to energy security.    Because they emit no or very low levels of greenhouse gases, renewable energy technologies help mitigate global climate change impacts.  Finally, modern renewable energy technologies help to reduce negative health and environmental impacts of air pollution from both conventional power plants and traditional biomass cook stoves.

For many remote areas, renewable energy technologies are economically cost-effective supply options, and can contribute the provision of modern energy services to unserved rural populations in the developing world.   Renewable energy systems can support decentralized markets and contribute to local economic development by creating employment, introducing new capital and innovation, and developing new revenue sources for local communities.

Category

Barriers

Economic

Conventional fuels receive large public subsidies while renewables may not.

Renewables have high initial capital costs but lower operating costs, making them more dependent on financing and the cost of capital.

It is difficult to quantify future fuel-price risks for fossil fuels and incorporate monetary values for those risks into economic decision-making.

Transaction costs are often higher for small, decentralized renewable energy facilities than for large centralized facilities.

The real economic costs of environmental damages from fossil fuels (on human health, infrastructure, and ecosystems) are rarely priced into fuel costs.

Legal and regulatory

Independent power producers (IPPs) may be unable to sell into common power grids in the absence of adequate legal frameworks.

Transmission access and pricing rules may penalize smaller and/or intermittent renewable energy sources.

Permitting requirements and siting restrictions may be excessive.

Utilities may set burdensome interconnection requirements that are inappropriate or unnecessary for small power producers.

Requirements for liability insurance may be excessive.

Financial and Institutional

Consumers or investors may lack access to the credit required for capital-intensive renewable energy investments.

Financiers, developers, and consumers may unfairly judge technology performance risks.

Market participants may lack sufficient technical, geographical, and/or commercial information to make otherwise sound economic decisions.