Research Press Release

Renewable energy costs in developing countries

Nature Climate Change

May 3, 2012

A more fine-grained bottom-up approach to climate change can identify important climate variations across countries as well as what technologies would help in meeting emission-reduction goals, reports a paper published this week in Nature Climate Change.

At the 2010 Cancun meeting on climate change, nations agreed on a number of new mechanisms - such as the Green Climate Fund - to support financially the greenhouse-gas emissions abatement efforts of developing countries. Renewable energy technologies have a great role to play, but the discussion about their adoption in developing countries is traditionally informed by highly aggregated top-down cost analyses that hide important cross-country differences.

Tobias Schmidt and colleagues estimated the costs of photovoltaic (PV) and wind energy technologies in six very different developing countries: Brazil, Nicaragua, Egypt, Kenya, India and Thailand. With their detailed bottom-up approach, they estimated that PV electricity costs are by far larger than wind costs in all countries (between 2.2 to 4.5 times in 2010) and are likely to remain so at least until 2020 (between 1.7 and 3.4 times). However, the incremental electricity cost of wind (the cost of wind energy minus the cost of baseline energy) varies significantly across countries. In particular, it is very high in Brazil, India and Thailand, much lower in Egypt and negative in Kenya and Nicaragua where the high baseline costs by far exceed the costs of wind. The authors emphasize the importance of a fair methodology to calculate the incremental costs, which ideally should exclude fossil-fuel subsidies from the baseline.

In light of the country-technology patterns identified, the researchers discuss the best approaches to scale-up renewable technologies. They suggest that large developing countries with good institutional capacities should rely on nationally appropriate mitigation actions to address country-technology combinations through technology-specific feed-in tariffs on a national level. In contrast, small countries are more likely to succeed under a reformed Clean Development Mechanism.


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