The challenges posed to the global community and national governments, in terms of energy security, climate change, health impacts, and energy poverty are pressing, making the greening of the energy sector an imperative. The existing challenges are exacerbated by the expected growth in the global demand for energy, as population and incomes rise. Shifting from fossil fuels to renewable energy plays a critical role in greening the energy sector, along with other changes, in particular raising energy efficiency.
The cost effectiveness of renewable energy technologies has
evolved considerably in recent decades. Many
renewable energy technologies are maturing rapidly and their costs becoming competitive with fossil fuel alternatives. Consequently, the investments in deploying renewable energy increased dramatically in the last decade.
These developments have been driven by a range of policies. National targets for renewable energy are spreading. A number of governments have supported innovation to help reduce costs, while many more are increasingly putting in place regulations, fiscal incentives and financing mechanisms that mitigate risks and increase returns to investing in renewable energy. At the international level, the formal creation in 2011 of the International Renewable Energy Agency (IRENA) indicates a willingness of governments to work collaboratively in expanding the role of renewable energy.
Despite encouraging progress, a number of roadblocks still remain on the route towards a green energy sector. Most importantly, the overall incentive framework under which the energy sector operates has not yet been reconfigured to consistently support the development and deployment of renewable energy technologies and a managed phasing-out of emissions from fossil fuel sources. This is due to both vested interests and an energy system, comprised of both hardware, such as electricity infrastructure, and software, in the form of organisations and institutions, that are locked in to supporting conventional energy technologies. Although developing countries may
have fewer cumulative investments
in conventional energy systems, they face financial constraints and also a shortage of institutional and human capacity to acquire and manage new technologies.
To reduce such roadblocks, policymakers need to take an integrated approach that supports various stages of the development and diffusion of renewable energy technologies within an overall strategy that also addresses the rest of the energy system, on both supply and demand sides. In so doing, there is considerable scope for governments to work with market forces to create a level playing-field for the further growth of renewable energy. Phasing out subsidies for fossil fuels and pricing in health and environmental externalities from fossil-fuel combustion can speed up the transformation of the energy sector, though attention needs to be paid to impacts on low-income groups.
Increasing investments in renewable energy, as part of a green economy strategy spanning all major sectors, can contribute to reducing health and environmental impacts from energy production and use, while ensuring the basis for long-term economic growth. Such a strategy is based on the substitution of fossil fuel energy with renewable energy, savings from energy efficiency in manufacturing,
construction, and transport, and behavioural change. Such an integrated strategy can increase national energy security and reduce carbon emissions while providing new employment opportunities that may, in global terms, more than compensate for jobs that disappear. This, however, should not prevent policymakers from recognising that in specific countries, depending on the extent to which fossil-fuel subsidies are phased out and negative externalities addressed, there could be net declines in employment, at least in the short term. The focus should be on specific countries and on practical ways of building capacity and skills to facilitate a transition to a green economy.
In order also to play a role as part of an integrated strategy to reduce energy poverty, specific aspects of renewable energy development needs to be tailored to the circumstances in rural areas where the majority of the poor in developing countries live. Mini-grids and off- grids may provide a cost-effective means of delivering electricity to the poor, while also reducing growth in GHG emissions. This requires additional financing flows, as well as continued development of new financing models.