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p. 28 of 30 BACK | NEXT Introduction Regional Energy Context Energy Policy Issues Structural Reform Energy Efficiency Energy Pricing Energy and Environment Rural Energy Development Introduction Rural Energy Systems Traditional Energy Sources Commercial Energy Options Renewable Energy Systems Regional Cooperation and Energy Development Conclusions and Recommendations

Bank Policy Initiatives for the Energy Sector : Energy Policy Issues : Rural Energy Development

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Renewable Energy Systems

72. A variety of decentralized renewable energy systems exist in the rural areas of the DMCs. The most widely used systems are (I) small-scale hydropower systems for mechanical and electrical energy; (ii) biogas systems for heat and motive power; (iii) solar photovoltaic power systems for domestic lighting, water pumping, medicine refrigeration and voice and data communication; (iv) solar thermal systems for heating purposes; and (v) windmill-based power generation, water pumping and battery charging systems. The extent to which the various systems have been established varies from country to country.

73. Small-scale hydropower systems, when simply designed to suit local circumstances have advantages such as long service life, high operational reliability (given water availability) and minimal environmental impact. The main disadvantages are high capital cost per kW of installed capacity and lack of water during dry seasons particularly in the absence of water storage facilities. The capital cost can be reduced to some extent by accepting lower efficiencies in favour of using standard designs permitting substantial local inputs and simple construction methods. Biomass energy can be produced from almost any organic material, including terrestial and aquatic plants, and agricultural residues. Motive power, and thereby electricity, can be generated from biomass by direct combustion or by converting biomass first into an intermediate fuel for combustion. Despite the many advantages of using biomass, there are some related problems arising from land area constraints, and transportation and storage requirements.

74. Photovoltaic (PV) power generation is based on the conversion of direct and diffuse sunlight into electricity using PV cells which can be combined to form PV modules that currently have energy conversion efficiencies of around 15 per cent. These modules are used in conjunction with power control and storage equipment in typical solar PV power supply systems. Since PV technologies are based on semiconductors, they lend themselves to mass production and their economic potential is substantial. PV modules which now cost about $3.5 per kilowatt of electricity output are expected to come down in price to about $2.0 per kilowatt by the year 2000. Solar thermal systems are used for water heating, cooking, drying of timber and grains, and power generation. Solar thermal electric generating systems, which produce electric power by concentrating sunlight to heat a working fluid and use that fluid to drive a thermal power generating unit, operate most efficiently around the equatorial belt and have no airborne emissions. The resource base for wind energy is very large; however, actual use needs to be limited to preferred areas with special wind characteristics and a form of backup energy storage is needed to get reasonable reliability from stand-alone wind energy systems. The key physical constraint on the development of wind energy projects is land requirement. Acoustic noise emission and visual impact are environmental concerns.

75. Only modest achievements have been made in the development of small-scale hydropower systems in most DMCs with the exception of the PRC. The total installed capacity for small-scale hydropower in the PRC is about 13,000 MW, forming about 7 per cent of the aggregate installed capacity of the centralized power system. This high level of development is largely due to the use of simple technology with equipment, construction materials and labor obtained locally. In respect of biogas technology, it is well established that PRC and India have extensive experience among the DMCs. The costs of both family and community size plants have come down over the years in most DMCs and their reliability has improved. The most significant advantage of biogas is its ability to displace fuelwood use for cooking. In addition, waste discharge from biogas systems is rich in mineral nutrients which are used as fertilizers.

76. Some experience has been gained in the installation and use of solar photovoltaic domestic lighting systems in Sri Lanka, Indonesia, the Philippines and some of the Pacific island economies where private sector firms have been involved in intensive marketing efforts. Solar energy based domestic water heaters are also being marketed in most of the DMCs by the private sector. However, it is relevant to note that such systems are not commonly used in rural households because of high initial capital costs. Solar drying processes are well-established and proven in most DMCs. A measure of success has also been achieved in the DMCs in using windmills for water pumping and battery-based lighting systems due mainly to the simplicity of the technology, the capacity for its local manufacture and the relatively low import dependency.

77. Significant technological advances are being made in solar and wind energy systems. Because capital costs of these options are coming down as a result of such advances, they are becoming reasonable decentralized solutions for remote locations in isolation or in combination with other energy supply options. Such systems should be marketed and serviced by the private sector and the Bank should at best provide lines of credit to local development finance institutions or commercial banks, as well as TA for a better understanding of the scope, costs and risks involved. Governments may have to adjust their trade and fiscal policies to remove barriers that deter the private sector from importing, manufacturing, marketing and servicing such systems. The institutional issues are important and the Bank will focus on them through TA activities.

78. Some of the major constraints to the development of decentralized and sustainable renewable energy systems in rural areas include (I) overemphasis of national energy policy on the expansion of bulk commercial energy supply capacity through centralized systems largely to meet urban and industrial needs; (ii) low priority of energy in rural development in national planning, leading to the lack of fiscal and financial incentives for decentralized renewable energy systems; (iii) weak technology research, transfer and development policies; (iv) lack of emphasis on establishing close links between research and development outputs and local manufacturing and fabrication capabilities; (v) weak institutional structures for implementation of rural energy projects; and (vi) unavailability of reliable information on rural energy needs, supplies and environmental status.

79. Limited access to investment capital and distorted pricing of alternative energy forms also prevent renewable energy applications from achieving their potential market shares. Fuel subsidies and electricity rate structures that do not make consumers pay more for power during peak demands or at remote locations bias end-user decisions against renewable energy supply sources. Removal of such energy price distortions needs to be supplemented by fiscal policy reforms that encourage imports of renewable energy generating equipment. The environmental benefits of renewable energy sources, their modularity and fuel independence, and applicability in remote locations have also to be captured in energy planning models in an economically unbiased manner.

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