Economics, Renewable Energy

Can Renewables Address the Economic, Social and Environmental Goals in the Caribbean?

The International Renewable Energy Agency (IRENA) in a ninety four (94) page publication titled “REthink Energy towards a new power system” articulated the point that policies that promote renewable energy can simultaneously address economic, social and environmental objectives. I too share this sentiment.

As global warming becomes more apparent, policymakers in the developed world have been embracing renewables as the main arsenal in the fight to curb greenhouse gas emissions. In the developing world, on the other hand, there is still the misconception that renewables are too expensive.

While this may appear to be true, IRENA thinks and I agree that proper analysis of the costs and benefits of different forms of energy should take into account a much wider view of economic development that is now the case. Included in such analysis should be 1) the balance of trade, 2) industrial development, 3) growth in gross domestic product (GDP), 4) employment, 5) energy access and 5) the environment.

Improving the balance of trade

We can all agree that solar, wind, hydro, geothermal and ocean energy are natural resources much the same as oil and gas are. Therefore, increasing the use of renewable energy can enable positive change in a country’s balance of trade, if the reduction of fossil fuel imports, or an increase in exports, outweighs renewable technology imports. Renewable energy deployment can minimize domestic fuel consumption and maximize the amount available for exports for fuel-exporting countries like Trinidad and Tobago with subsidized domestic fuel prices.

Industrial Development

Policy makers in the Caribbean states should assess the potential of renewable energy projects to add local content to maximize value to their economies. My first thought in regards to solar energy would be to locally assemble solar panels, but with a thorough assessment, the option of integrated photovoltaic manufacturing may be possible as is currently being touted in Trinidad and Tobago.

Increasing GDP

RENA examined the effect of renewables on the economies of China, Italy, Japan and Mexico, all of which were found to display positive net impacts from renewables deployment:

  • China’s solar industry generated national income of US $52B in 2013.
  • Italy’s investment in electricity based renewables contributed US $23B to GDP in 2011.
  • Japan’s energy mix (14-16% renewables) would deliver double to triple the installation cost in net benefits by 2030.
  • Mexico’s 20 GW of wind is projected to increase cumulative GDP by US $7-$28.5B by 2020.

Lower Unemployment: 

Renewable can create employment just as any other form of investment. In 2013 renewables supported 6.5 million direct and indirect jobs worldwide – including 2.6 million in China. Solar PV (2.273 million) was the largest employer, followed by Liquid Biofuel (1.453 million) then Wind(834 million) according to IRENA.

Improving Energy Access

Renewables can also bring electric power to people currently left off the grid, promoting productive uses, spurring education, allowing access to modern communications and offering a host of new opportunities.

Caring for the Environment:

The environmental benefits are just as compelling, on both local and global levels. Renewables also reduce the risk of ecological disasters. Crucially, they offer a route to reducing greenhouse gas emissions, the main cause of global warming. Electricity alone accounts for more than 40% of man-made CO2 emissions today.

Solar, wind, hydroelectric, geothermal and bioenergy are, across their lifetime, 10-120 times less carbon intensive than the cleanest fossil fuel (natural gas) and up to 250 times lower in carbon than coal. IRENA’s REmap 2030 estimates that doubling the share of renewables in the energy mix, coupled with greater energy efficiency, can keep atmospheric CO2 below 450 ppm – the level beyond which catastrophic climate change would occur.

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