Access to affordable and dependable electricity is critical for economic development and government functions. The global energy market, however, has been disturbed by demand and supply-side variables, resulting in rising costs and disruptions in energy supply chains. As a result, countries that rely heavily on fossil fuels, such as India, faced enormous challenges.
The relationship between energy availability and economic development
- Energy availability and accessibility are crucial inputs for many public services, and maintaining inexpensive and reliable access to energy remains a central political and economic objective for almost all governments.
- Energy availability and accessibility are required for economic growth and development, and a lack of access to energy can stifle industry expansion, limit productivity, and inhibit social development.
Demand and supply-side factors that contributed to the Global Energy Crisis Factors:
- The ongoing Russia-Ukraine conflict has caused interruptions in the oil and gas supply systems. Furthermore, energy prices were impacted by a rapid increase in demand caused by extremely high temperatures and concomitant heatwaves around the world. These factors contributed to an increase in the international price of oil and natural gas.
- Dependence on Depleting Fossil Fuels: Fossil fuels account for more than 80% of global energy requirements and 64% of global power generation. Furthermore, most countries are net importers of fossil fuels, making them vulnerable to supply shocks caused by a variety of geopolitical and economic events.
- Overdependence on Fossil Fuels: Many countries turned to coal to meet their energy demands, while those that were already using coal increased their exploitation, putting enormous pressure on the coal market.
- Rising energy Costs: The rising cost of energy as a result of increased use of fossil fuel-based sources imposed a heavier burden on low-income households because they spend a larger portion of their income on electricity and gas.
- Widespread Power Outages: Widespread power outages in numerous nations caused by disturbances in electricity supply disrupted people’s lives.
- Dependence on Imported Fossil Fuels: Europe, for example, faced a difficult situation due to its historic reliance on imported gas from Russia to cover its energy needs.
- Climate Change: Fossil fuels are responsible for approximately 75% of global greenhouse gas emissions and 90% of carbon dioxide emissions. Floods and droughts, for example, incur enormous human and economic devastation.
The effect on countries
- High energy prices: The rising cost of power as a result of growing use of fossil fuel-based sources places a heavy burden on low-income households, as they spend a bigger portion of their income on electricity and gas.
- Power outages: Widespread power outages caused by disturbances in electricity supply disrupt people’s lives in numerous countries. For example, Bangladesh experienced a nationwide blackout after major gas- and diesel-powered power plants, which generated around 85 percent of the country’s electricity, were forced to shut down owing to fuel shortages.
- Economic growth has slowed: Rising prices and disruptions in supply have had a significant impact on countries that rely heavily on fossil fuels, notably imports, and have resulted in a slowing of global economic growth, putting certain countries and regions into recession.
- Environmental degradation: Overdependence on fossil fuels has a negative impact on countries in the form of air and water pollution, soil degradation, and is a substantial contributor to climate change.
- Foreign exchange reserves: Countries’ reliance on fossil fuels affects their foreign exchange reserves since fluctuations in fossil fuel prices affect their import bills and balance of payments.
- Revenue loss: Many regions and economies, particularly in developing countries, rely on income from fossil-fuel-based industries such as mining, power generation, transmission, distribution, and storage. Many governments rely on the cash generated by fossil fuels to improve infrastructure that allows local populations to develop and diversify their livelihood alternatives.
Challenges in the shift to renewable energy sources
- Capital mobilisation: While the cost of clean energy is decreasing, many clean energy technologies require significant upfront investment, which may be beyond most poor countries’ capabilities. Furthermore, there is a lack of international support for developing nations, making it difficult for them to switch to renewable energy sources in the absence of supportive international initiatives.
- Ensure a Just Transition: There is a need to provide decent work possibilities and social assistance for persons who are likely to lose their livelihoods as a result of the transition to low-carbon and renewable-based economies. Many people work in the fossil fuel business around the world, and there is a risk that the shift could destabilise local economies.
- Technical difficulties: The switch to renewable energy sources may necessitate considerable infrastructure changes, such as energy storage and transmission networks, which can be costly.
- Challenges in policy and regulation: The transition to renewable energy sources necessitates considerable policy and regulatory changes, such as improvements to subsidy schemes, pricing mechanisms, and energy markets.
- Renewable energy sources’ dependability and intermittency: Unlike fossil fuels, renewable energy sources are frequently intermittent, making it difficult to ensure a steady supply of electricity. To provide a consistent supply, investments in energy storage and backup power systems may be required.
- Acceptance by the general public: Some stakeholders may be opposed to the shift to renewable energy sources, such as those who rely on fossil fuels for a living or are concerned about the visual and environmental implications of renewable energy infrastructure.
In the future: addressing these issues
- Capital mobilisation: Developed countries must keep their promise to provide climate funding to underdeveloped countries. Green bonds and blended finance are two innovative financial structures that could be used to attract private investment
- .Ensure a Just Transition: Governments must develop comprehensive policies to protect workers and communities impacted by the transition to renewable energy. Retraining programmes, investment in new businesses, and social safety nets might all be part of this.
- Investing in research and development: Governments, international organisations, and the private sector must invest in research and development to reduce the prices and enhance the efficiency of renewable energy technology.
- Promoting energy efficiency: To reduce energy consumption and costs, governments and businesses must prioritise energy efficiency initiatives such as upgrading buildings and optimising industrial processes.
- Accelerating renewable energy deployment: Governments must set aggressive targets for renewable energy deployment and provide policy frameworks that encourage investment in clean energy.
- Building energy infrastructure: Governments must invest in the infrastructure required to facilitate renewable energy development, such as grid upgrades, energy storage, and electric car charging stations.
- Promoting international cooperation: The shift to renewable energy necessitates worldwide cooperation, particularly between industrialised and developing nations. Developed countries can help developing countries through transferring technology, increasing capacity, and providing financial assistance.
@the end
Transitioning to renewable energy sources is an appealing alternative for countries seeking to hedge against the dangers associated with fossil fuel-based energy sources. However, access to affordable finance and international support are required to facilitate a just transition through on-the-job retraining programmes, infrastructure improvements, and other means. Access to affordable and dependable electricity is critical for long-term economic development.
Source: https://www.iea.org/reports/renewable-energy-market-update/challenges-and-opportunities-beyond-2021