THE ENERGY EXPENDITURE CONUNDRUM: WHY CAN’T CLEAN ENERGY BE AFFORDABLE?

October 26, 2015

On 25 September, 2015, the UN General Assembly officially adopted 17 new Sustainable Development Goals (SDGs). These replace the Millennium Development Goals (MDGs), due to expire this year.

 

Goal 7: Affordable and Clean Energy includes 2030 targets for universal access to substantially increased affordable renewable energy generation, particularly in developing countries through expanded and upgraded energy infrastructure. The goal sets out to enhance international cooperation to facilitate access to clean energy research and technology, including renewable energy, energy efficiency and advanced and cleaner fossil-fuel technology, and promote investment in energy infrastructure and clean energy technology.

 

However, the question remains, what has so far prevented the greater uptake of clean energy forms? The technology for Solar and Wind power have existed for some time, with many projects scattered worldwide. Cochin International Airport runs on a 45-acre plot of 46,000 solar panels producing 60,000 units of electricity a day. The green initiative makes the Indian airport ‘absolutely power neutral’, saving 300,000 tons of carbon emissions. Over the next 25 years it is set to have the impact of planting 3million trees, according to an airport statement. Read more here

 

 

 

Cochin International Airport is the world’s first to operate 100% on Solar Power. (Image source: NDTV)

The answer lies in what in Accounting Terminology is known as ROI;- Return on Investment. Potential project developers have to raises millions in potential funding in order to be able to set up Wind, Solar, Methane Capture or Hydroelectric projects. Lending institutions, financiers and investors often have the same question on their minds: "Just how quickly can I earn my money back?"

 

The higher relative cost of clean energy projects ( even with technology getting significantly cheaper ) means a longer payback periods thus reducing the attractiveness to potential backers of the projects.

 

The answers lies in the international mechanism know as ‘Carbon Offsetting’

 

Carbon offsetting is the use of carbon credits to enable businesses to compensate for their emissions, meet their carbon reduction goals and support the move to a low carbon economy.  Businesses compensate for their environmental impact in order to meet increasing stakeholder pressure and are able to demonstrate leadership, differentiate from competitors and engage internal and external stakeholders in their action. By purchasing carbon credits to offset their emissions, businesses contribute essential finance to renewable energy, forest protection and reforestation projects around the world that would not otherwise be financially viable.  These projects play an important role in the mitigation of climate change.

 

Carbon offsetting works by purchasing carbon credits which are sold in metric tonnes of carbon dioxide equivalent (tonnes CO 2e). Projects which sell carbon credits include wind farms which displace fossil fuel, household device projects which reduce fuel requirements for cookstoves and boiling water in low-income households, forest protection from illegal logging, methane capture from landfill gas and agriculture, reforestation for small-hold farmers and run-of-river hydro power and geothermal energy.  These projects have to demonstrate that they require carbon finance from the sale of carbon credits in order to be financially viable and achieve greenhouse gas emission reductions.

 

For the last four years, The Carbon Consulting Company has been the regional partner of Natural Capital Partners (formerly The CarbonNeutral Company) of the UK, the world’s leading provider of ethical and verified carbon credits. Our clients in the South Asian region have retired approximately 40,000 carbon credits, by funding clean energy projects in projects in the region. All this funding serves to provide a much needed financial infusion into each project, without which the said projects would never have been to be financially viable. The vision of CCC to encourage and facilitate more private sector investment in clean energy significantly aligns itself with the newly introduced SDG 7 and will make a considerable difference in creating cleaner more affordable energy.

 

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