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Trends in Donor Policy on Sustainable Energy
Global Agenda
Since the 1992 Earth Summit in Rio de Janeiro, there has been a remarkable change in the Global Agenda regarding energy demand and environment. Governments, international organisations, and donors now recognise that: The increasing demand for energy services has a negative impact on the environment unless adequate measures are taken to reduce or avoid these impacts; The rising population in most developing countries will result in a rapid growth in the demand for basic energy services such as heating, lighting, and transport; The rising income in developing countries will lead to increased demand for access to services such as electric lighting, radio, television, refrigeration, and telecommunication.
UN and World Bank
The United Nations and the World Bank, as the leading international development organisation and development bank, respectively, have introduced a New Energy Agenda during the 90s. Several documents and new funding schemes show an understanding that a wide range of measures is needed, comprising improved energy efficiency, fuel switching, and increased use of renewable-energy sources. The UNDP has launched the “Initiative on Sustainable Energy”, along with the 1995 report “Energy as an Instrument for Socio-Economic Development” and the 1997 document “Energy after Rio, Prospects and Challenges”. In 1996, the World Bank published “Rural Energy and Development, Improving Energy Supplies for Two Billion People”, and in July, 1997, the Bank presented the draft paper “Energy and the Environment Strategy”.
New Energy Agenda
The New Energy Agenda recognises that biomass for many years will continue to be the energy source used by low-income households. Sustainable use of biomass therefore will be a fundamental measure to ensure a sustainable use of energy in developing countries. The Agenda further recognises that technologies to utilise renewable energy sources now have matured technically as well as commercially.
Market Barriers
However, the market for renewable energy technologies does not emerge easily. There are many barriers to take in mind when new products are introduced. For years, NGOs have been involved in development and dissemination of renewable technologies and improved stoves. Unlike the situation in the developed world renewable technology has its primary target group among poor, rural households. During the 1980s and the first half of the 1990s, the goal was to demonstrate the technical feasibility and to develop reliable, competitive products. Now, the focus is changing towards marketing and operations.
Information Campaigns
There must be an incentive for consumers to procure new technology. There will be a need for information campaigns on renewable energy. Consumers of energy services need to be convinced of the benefits of the new product, i.e., that it is reliable, is cost-saving, and provides greater comfort. Local and national governments need to be convinced that use of renewable-energy technologies will support local and national development objectives.
Co-operation Models
There will be a need for co-operation models to ensure a market large enough to attract suppliers that can guarantee proper maintenance and access to spare parts. Normally, a supplier will extend its market from more profitable urban areas into rural areas. However, the attractive urban market will be supplied with modern energy such as grid-connected electricity or LPG (bottled cooking gas). Rural areas are sparsely populated. One supplier cannot cover a large geographic area with skilled experts on a commercial basis when services are demanded within short times. The result will be insufficient maintenance, unreliable output, dissatisfied customers, and diminishing demand. Co-operation on the local level will be a precondition for the dissemination of renewable-energy technologies and access to modern energy services.
Funding Mechanisms
There will be a need for financial mechanisms to connect financial institutions with private firms and customers. Many households do not have the financial capacity to purchase a product with a higher up-front cost, even though operating costs are lower. Only a few banks have shown interest in renewable technologies. The customers are too small and the loan terms are too long when the annual payments must be supported by household budgets. The risk is high, and there is no collateral valuable to the bank.
NGOs and CBOs as Intermediaries
National governments as well as international development banks and donors are looking for new approaches and intermediaries to demonstrate that renewable-energy services can be disseminated on a commercial basis even in sparsely populated areas when local people co-operate. These intermediaries shall: Prepare and implement awareness-raising and information campaigns. Develop and promote co-operation models to attract suppliers and funds. Collect description of experiences so these co-operation models can be replicated. Non-Governmental Organisations (NGOs) and Community-Based Organisations (CBOs) can function as intermediaries between suppliers and funding institutions on one side, end-users on the other. They represent end-users of energy services and can ensure local participation in the process of planning energy supplies for rural areas. Representing many end-users, the NGOs and CBOs can develop co-operation models for low-cost funding and for reliable maintenance of equipment. Furthermore, most NGOs and CBOs have experience in awareness-raising and information campaigns.
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Sustainable Energy News
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ISSUE #22, Sustainable Energy News (16 pages) (1998-09-01)
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