Currently, many developing nations are reforming their electricity power sectors. Electricity sector reform may be a once-in-a-generation opportunity to create a level playing field for renewable energy versus fossil fuels such as coal. With renewables, utilities affordably can serve more people, especially in areas not connected to the electricity grid. As energy consumption increases and local air quality worsens, renewables are crucial for sustainable economic growth. And as the world seeks broad participation for the efficient reduction of greenhouse gases, electric power reform in developing nations can support low-pollution energy technologies, benefiting developing and developed nations alike.

To help ensure that electric power reform in developing nations encourages renewable energy use, we believe the following must happen:

* Local non-government organizations (NGOs), governments, bilateral donors, and multilateral donors must inform the public about the connection between conventional energy, such as coal and nuclear, and local environmental degradation.

* Governments must create open policymaking processes that allow the public to voice their opinion on electric power reform and local energy planning. Top-down decisionmaking can cede the public's voice to interests, such as state-owned utilities and local and foreign private investors, that have traditionally discriminated against renewable energy.

* Rural customers must pay for the full cost of grid extension in rural areas. If rural consumer subsidies must continue, they should be channeled pro-renewables activities such as revolving microcredit funds and limited financial support for emerging renewable energy manufacturing, distribution and service businesses.

* Governments should create standard power purchase agreements that allow independent power producers relying on renewable energy to recover their capital costs through fixed payments early in the contract period. This recognizes that the life-cycle cost of renewable energy compares to that of conventional thermal energy, and deserves similar private financing opportunities.

* Bilateral and multilateral donors, with the input of local proponents of renewable energy, should urge recipient governments to support renewable energy options as a part of electricity power reform. Such legislation should be a requirement for receiving aid in the energy sector. As a result, individual renewable energy projects will be more cost-effective and successful.

* Bilateral and multilateral donors should favor clean energy technologies. Unfortunately, this has not been the case. One multilateral institution - the World Bank - has spent 100 times more on fossil fuel development than the Global Environment Facility spends on cutting greenhouse gas emissions.

Renewable energy is a key tool for cost-effective electricity service, economic growth, and local empowerment. Countries reforming their electric power sector must seize the opportunity to reach these goals, while meeting growing environmental challenges, through renewable energy use.

Virinder Singh, Research Associate

Adam Serchuk, Research Director and Executive Editor of REPP's Research Report Series

Roby Roberts, Executive Director

March 12, 1998

Index Executive Summary Article