Addressing challenges to sustainable development with innovative energy technologies in a competitive electric industry

Abstract

Radical change in the energy system is essential in the decades immediately ahead in order to address effectively the multiple economic, social, environmental, and insecurity challenges posed by conventional energy. This can come about only through a concerted international effort to speed up the rate of technological innovation worldwide for technologies that offer promise in addressing sustainable development objectives – with particular attention given to developing countries, which account for much of the world's energy demand growth and where problems posed by conventional energy are severe. The effort should be aimed at channeling some of the enormous private-sector financial and technological resources to the development and widespread deployment of such new energy technologies. In the industrialized countries, public policies supportive of innovation directed to the needs of the developing world as well as domestic needs are called for. Developing country governments should strive to make their countries favorable theaters for energy technological innovation that is supportive of their development needs. There is a need to complement such national policy measures with establishment at the multilateral level of a framework for channeling vast private-sector financial resources to this process, with emphasis on developing countries. Either new multilateral institutions should be created to carry out the needed activities or some existing institutions might be transformed to take on these new responsibilities. It is suggested that if the latter approach is taken, the Global Environment Facility might be given this responsibility. The ongoing process of reform to improve the economic efficiency of electricity markets can assist the needed transition to the needed new energy technologies – if reforms include measures to promote energy technological innovation in ways that would serve sustainable development objectives. The combination of rapid energy demand growth plus environmental and energy market reforms could potentially transform developing country energy markets into favorable theaters for energy technological innovation. Under these conditions, developing country governments would have considerable market power to direct the course of this innovation – including the power to induce the private sector to provide those new energy technologies that they believe are well-suited to their development needs. With large internal markets, large rapidly industrializing countries in particular have an opportunity to become market leaders for selected sustainable energy technologies, with eventual export capability. It is desirable to put the needed innovation policies in place soon. Fundamental policy changes such as those proposed are typically easier to introduce when institutions are in ferment, as is the case with ongoing power sector reforms. Once power sector reforms have been put into place the policy arena will become quiescent, and it will be more difficult to bring about fundamental change.