Respond to this Article December 2002

Bright Lights, Small Villages

Why helping Africa get solar power is good for America.

By Nicholas Thompson and Ricardo Bayon

In most ways, Patriensa is just another tiny town amidst lush farming land in the Ashanti region of Ghana: a remote part of a remote country where per-capita income is less than a dollar a day. The day starts when the rooster crows and ends at about 9 p.m., when everyone has finished eating their pounded yams and plantains.

To Osei Darkwa, however, Patriensa is the ideal place to build a technological metropolis. A calm, jovial man who isn't sure whether there are 20 or 30 people living in his house, Darkwa was born in Patriensa, educated in Norway, and able to make a little bit of money working as a professor at the University of Illinois. Now he's come back and is currently building a giant telephone, Internet, and health center, with a radio station and potential data-processing facility for foreign companies to boot. Already, he has shipped hundreds of old computers from the United States, set up computer literacy courses, found donated hospital beds, and even promised space to an indigenous healer and her potions. He's currently maxing out his American credit cards and cajoling friends and fellow villagers to give free labor and donate land. "It's just a sacrifice for a better tomorrow," he says.

But one thing is stumping him right now: power. The telecenter lies too far away from Ghana's national power grid to receive any electricity, so Darkwa, who needs lights to build his metropolis, has set up solar cells on his roof. Funded partially by an American non-governmental organizations, Greenstar, the cells provide enough power for basic lighting and about five computers. Darkwa would like to do more, but he doesn't have the money to buy further cells; getting electricity from the grid means wading and bribing his way through a corrupt and convoluted bureaucracy.

At first blush, it may not be clear that Darkwa's problem should concern anyone outside Patriensa. But although most Americans couldn't even find Ghana on a map, the energy choices of this small African country, together with those of millions of other people in the developing world, will ultimately affect the environmental, economic, and energy prospects of all Americans. If Darkwa and those like him--some 2 billion energy-starved people around the world--decide to power their televisions and refrigerators with coal and oil, the eventual environmental meltdown will affect every place on earth.

But if wealthier nations can help a large part of their poorer brethren turn to clean and renewable energy, the air will be a lot cleaner, there will be less pollution and poverty, and new trading markets will develop--and the price of oil may even drop. In other words, the United States shouldn't help Darkwa go green merely for his sake, or just because it's a nice thing to do. We should help Darkwa go green because it is profoundly in our own interest.

Power Gridlock

It may sound far-fetched to ask poor rural communities to adopt solar and renewable energy before rich developed countries. But in fact, solar energy makes vastly more sense in Patriensa than it does in Philadelphia. Americans tend to take electricity for granted. You can buy a hair dryer, plug it in, and turn it on just about anywhere, thanks to a "grid" of generating stations, power lines, and transformers that enmeshes the entire country.

But that grid is the product of hundreds of billions of dollars of government subsidies and private investment over the years. In developing countries, by contrast, fully functioning grids tend to be limited to urban areas, are usually nearing obsolescence, or cannot keep up with demand. Most places lack any grid at all. And even if poor countries had the money or inclination to build grids--most have more pressing worries--bringing electricity to small rural villages like Patriensa wouldn't be at the top of their list. As ESKOM, South Africa's largest utility, has discovered, extending the grid to serve a few households often costs significantly more than providing the same village with solar power, and so it has begun to install solar energy in hard-to-reach communities on a monthly-fee basis.

Even where government-built grids are available, there's often a further problem: the government itself. In many developing nations, state-owned or -run utilities are corrupt and unreliable. In Ghana, for example, the one-third of the population that does have access suffers through periodic blackouts, energy spikes, and capricious policies such as a recent 60 percent increase in electricity taxes. The country largely relies upon a single giant dam. When rainfall is low, electricity is low. When a 1998 drought inflicted rolling blackouts, students at the country's top university clustered underneath solar-powered street lamps just off campus to study for their exams.

Solar power and other decentralized sources of energy can help get around these problems. Mobile phones in Africa, Asia, and Latin America provide a hopeful parallel. For decades, people in developing nations had to put up with expensive and poorly designed telephone networks controlled by corrupt and inefficient bureaucrats. But over the past five years, entrepreneurs have built cellular-phone networks that, in effect, circumvent the national telephone system. Five years ago, Ghana didn't have mobile phones. But as a U.N. task force recently discovered, more cell phone connections have been turned on in Africa in the last five years than land-line connections in the past century.

Solar Power to the People

Another reason why solar makes more sense in rural Ghana than downtown D.C. is, simply, competition. In the United States, renewable energy has to compete with highly efficient, cheap, subsidized, and easy-to-find fossil fuels. Burning coal may melt icebergs, but in America it's inexpensive and widely available. Additionally, in the United States we have already invested in the infrastructure needed to transmit electricity from central generating stations to wherever it is needed. So while it costs approximately 2 cents a kilowatt hour to generate electricity from coal, solar energy still costs about 10 times that amount. Of course, solar energy is getting cheaper every day, and burning coal carries long-term health and environmental costs. But in the short term, it makes the most economic sense.

In much of the developing world, on the other hand, burning fossil fuels for electricity doesn't make economic sense--even in the short term--because it would mean investing heavily in infrastructure, transmission capabilities, and generating facilities. (Not to mention the annual costs of buying the necessary fuel.) In other words, for much of the developing world, clean energy competes only with energy generated by burning extremely inefficient, expensive, and difficult-to-find fuels. For these people, solar power would cost less over the long term than what they spend now collecting or buying firewood, kerosene, candles, and dry-cell batteries. In Morocco, for instance, "more than half of the people who live off-grid already spend close to $100 dollars a year" on such fuels, notes Vikram Widge, a renewable-energy ex-pert at the International Finance Corporation, the private-sector arm of the World Bank. "Meanwhile, a solar home system of 50 watts--enough to run two or three light bulbs, an electrical outlet, a TV, and maybe a fan--costs about $550 but has an estimated lifetime of 20 years."

In Timber Nkwanta, another Ghanaian village experimenting with solar energy, villagers already pay about 20 percent of their income for kerosene and batteries, not to mention the countless hours spent carrying firewood on their heads from increasingly remote forests. In a recent study, the International Energy Agency found that this figure compares to as little as 2 percent of household income paid for energy in countries like the United Kingdom. In the long term, solar is a cheaper option, and it's healthier, too. The World Health Organization estimates that 2.5 million people die prematurely each year in the developing world from inhaling biomass burnt indoors--deaths that could be averted in many cases through the use of cleaner energy sources.

So why aren't more developing-world villagers using solar power? The main obstacle isn't income, but access to financing. Though the world's poor can and often do pay for energy on a month-to-month basis, it's difficult for them to amass the small amounts of capital needed to pay for renewable energy systems upfront. A common problem in many developing nations is that no one is quite sure who owns a given plot of land--which deprives would-be entrepreneurs of the most common form of collateral for loans. In many cultures, particularly those where poverty has been a way of life for centuries--most of Africa for example--the notion of saving up money is unheard of; as soon as someone has accumulated a bit of cash, he's often expected to share it with the rest of the community. And, of course, most people are living day-to-day and hand-to-mouth. Both Widge and Phil LaRocco, head of a New Jersey-based company that provides support and seed capital for energy entrepreneurs in developing countries, say that the key to getting solar into developing countries is to use financial products geared to the poor. Credit guarantees, small loans via agricultural banks, micro-credit, and the like can lengthen the short time horizons against which the poor generally make their everyday energy decisions.

Light Up My Life

If the United States can help provide financial tools and incentives to change that short-term mindset born of necessity and bring power to the world's poor, the benefits would be enormous. Electricity--from whatever source--does much more than bring light to a village. It allows people to irrigate their farmland, refrigerate their vaccines, and run their machines. It allows them to work later, pump water, watch TV and perhaps, eventually, connect to the Internet. Widespread access to power can lead to fundamental changes in how people work, trade, and farm, setting the stage for a global surge in development. "People don't have power because they are impoverished," says Nana Yaw Boakye Asante, the CEO of a private Ghanaian solar company, Terrasolar. "But they are impoverished in part because they don't have power," he says.

Electricity could also have a profound impact on local demographics. One of the greatest problems in Africa is the mass migration of young men away from their farming villages and toward major cities. They go there in search of excitement and electricity--in both a figurative and a literal sense. What they usually find, of course, is unemployment and wretched poverty. That isn't good for them, and it generally isn't good for us; one more man selling pineapples on a city street corner means one less man growing pineapples for export.

It might also mean one more person with AIDS. When young men migrate to the cities, they often visit prostitutes, contract AIDS, and bring it back to their families and villages. Research shows that this is a key vector for AIDS in a continent where homosexual sex and blood transfusions are relatively rare. Having electricity in their villages wouldn't stop such migration completely, but it would make a difference. "If they just had TV and radio here, they might stay," argues J.K.N. Budu, the chief of Timber Nkwanta. "And then there wouldn't be just old men and women working on the farm."

But there are also potential benefits to the United States. Increased access to electricity means a greater demand for televisions, VCRs, and stereos--not to mention CDs and videos. "If we don't develop new energy markets," says LaRocco, "where are future purchases of U.S. DVDs going to come from?"

More directly, if developing countries rely mostly on traditional energy sources as they grow, they will begin to compete with the United States for oil and gas. China, for instance, currently uses coal for about 70 percent of its energy needs. But by 2030, estimates the International Energy Agency, China's demand for oil will equal that of the United States, making it a strategic buyer on world energy markets. The emergence of China as a new "energy giant", says the IEA, will have an impact on the energy security of all other energy-consuming countries. And, depending on how India's economy grows, it too could one day compete with the United States for imported oil. Simple economic theory indicates that as the demand for a commodity increases (assuming that supply remains stable), so too will its price. In other words, by helping developing countries adopt solar and wind energy, the United States may be helping hold down its own oil bill.

The main benefits to the United States from clean energy in the developing world are, however, environmental. While global energy use is expected to grow at an average rate of about 1.7 percent per year in the decades to come, it will likely increase more than twice as fast in developing ones, and even faster than that in China. Over the coming decades, China and India will need to provide energy to millions of peasants who, like those in Timber Nkwanta, are miles away from the nearest electrical line. If China and India meet that demand by expanding their grids and burning more coal--both have plentiful coal supplies--and biomass, the resulting pollution will make the brown cloud that has been stifling parts of Asia this year look like cigarette smoke on a windy day. But with some help from the international community, it would be cheaper to provide solar electricity to these multitudes than to extend grids to reach them--and better for the environment, too.

Then there's the problem of climate change. If China and India--not to mention Africa, the rest of Asia, and Latin America--expand their energy consumption via a traditional fossil fuel-based energy path, they will quickly overtake the United States as the leading emitters of greenhouse gases, frustrating any hope of preventing the predicted climatic upheaval which would spare no country: Munich Re, the world's largest re-insurance company (which provides insurance to the world's insurers and, therefore, bears the risk of large catastrophic events like earthquakes and storms), has estimated that even a mild degree of climate change could cost the world more than $300 billion a year in lost crops, increased storms, droughts, hurricanes, and other calamities.

"My worst fear," says Kevin Baumert, a senior associate at the World Resources Institute, a Washington, D.C.-based environmental group, "is that the United States continues to shirk its responsibilities on climate change and that, partly as a result, developing countries begin using energy and polluting at U.S. levels. That would be an unmitigated disaster."

Got a Light?

To prevent this nightmare, the developed world needs to help the developing world get over the initial hump of setting up solar and other forms of renewable energy. Some people and institutions have already taken the lead. For example, Widge and his partner, John Forster, say the IFC is working with local banks in Morocco, India, and Kenya to provide affordable loans for solar energy in off-grid, rural locales. They've spent only about $19 million dollars so far, but the money seems to have had a substantial impact and they report that they are beginning to uncover a huge pent-up demand for solar energy. This squares with our experience in Timber Nkwanta, where the villagers seem to consider their solar-powered lights as gifts from the gods.

And the vastness of this market is not lost on the world's solar energy technology sector. "Clearly this is a very promising area of potential business for us," says Todd Foley, spokesperson for BP Solar, the U.S.-based subsidiary of the mammoth energy company British Petroleum, which has now become one of the world's largest producers of solar cells. "Of the 2 billion people in the world without power, we think that maybe 1 to 1.5 billion will find that solar is the best and most economically competitive option." Of that total, he adds, about a quarter can already afford solar and the rest could get it if they only had some form of government subsidies or credit.

And BP has already taken steps to tap into it. Last year it signed a $48-million-dollar contract to bring solar energy to some 400,000 households in the remotest parts of the Philippines. What is interesting about this project, however, isn't only that it constitutes an important source of business for BP, but also that the financing came from the Spanish government. Bilateral and multilateral aid, says Foley, must be involved for this business to develop. Thus, by supporting renewable energy projects in the developing world, the United States can simultaneously help the global poor and support a budding solar-energy industry.

There are two easy ways that the United States can help bring renewable energy to the developing world. One would be a massive aid grant to create clean sources of energy for the Third World; the other would be to push the World Bank to vastly enlarge its budget for projects such as Widge and Forster's. But neither seems likely, given America's aversion to foreign aid and its current foreign-policy priorities: The United States today provides almost as much military aid to Israel as it does all forms of aid to all of sub-Saharan African.

A more realistic approach would be to tie debt relief to the use of clean energy. For the last two years, thanks in part to high-profile advocates like U2's Bono, debt relief has been gaining ground in U.S. policy circles. Everyone now agrees that unsustainable levels of public, private, and multilateral obligations are dragging down the developing world: Overall debt per person owed by developing countries to developed ones is about $500--more than annual per-capita income in most of Africa. And while nobody really expects poor countries to pay off their debts, simply servicing those debts shackles many third-world governments. So why not set this debt against clean-energy development? The result could be a win-win-win situation: Developing countries would benefit, renewable energy businesses in the United States would benefit, and the global environment would benefit.

Innovative conservation organizations have had more than a decade's worth of experience organizing debt-for-nature swaps; experience that could serve as a model for "debt-for-clean-energy swaps." For example, the Tropical Forests Conservation Act, passed by the U.S. Congress in 1998, allows the U.S. government to forgive debts owed to it by other governments in return for investments in forest conservation. The countries get to pay back their debts at reduced rates, in local currency, for activities that help them develop. The United States gets something it considers valuable in return for debt that may never have been recovered at all.

The legislation, which has received support from both parties and President Bush, is expected to channel more than $250 million into conservation in developing countries over the next three years. A similar bill could do the same--or more--for renewable energy development. Ghana's government, for example, could buy Darkwa his solar cells, whereupon the United States could forgive an equivalent amount of debt.

Asked about such exchanges, Terrasolar's CEO, Nana Yaw Boakye Asante, jumps and says that's exactly what Ghana needs. "It's staring us in the face," he says, looking at the sun and wiping away the sweat from yet another 90-degree day in what is supposed to be the country's cool season. "We're at the center of the earth in latitude and longitude. There's lots of sun. And the sun doesn't move. It's always there." With a little help from the United States, its energy could be as well.

Ricardo Bayon is a fellow, and Nicholas Thompson a Markle fellow, at the New America Foundation.


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