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Responding to Bill Gates and Jigar Shah on Powering World’s Poorest Economies

Responding to Bill Gates and Jigar Shah on Powering World’s Poorest Economies

Microsoft founder Bill Gates and SunEdison founder Jigar Shah have clashed in a heated debate over the best way to provide energy access to the world's poor.

Gates sides with Bjorn Lomborg (author of The Skeptical Environmentalist) in making a call for centralized, fossil-fuel-based electrification. Shah calls for prioritizing distributed renewable solutions.

Bill Gates, Carl Pope and Jigar Shah insights to this question: What's the quicker, more reliable and cheaper solution to reach the 3.2 billion electricity-deprived people around the globe? New centralized, fossil-fired generation or distributed renewables?

Both Gates and Shah agree that it should be a high moral priority to provide modern energy to the poor as quickly, reliably and cheaply as we possibly can. Both also agree that to the extent that this goal involves some additional use of fossil fuels, climate concerns should not be regarded as a barrier. Both are right on this count.

It would be wrong for the rich to continue to burn fossil fuels while denying them to the poor to protect the climate. It would also be a pointless exercise, since the poor cannot afford enough fossil-fuel consumption to make a meaningful climate difference.

However, neither Gates (and the Bjorn Lomborg clips which Gates cites) nor Shah provide meaningful, supporting data analysis for their divergent solutions.

What's the quicker, more reliable and cheaper solution to reach the 3.2 billion electricity-deprived people around the globe? New centralized, fossil-fired generation or distributed renewables? This ought to be a data-driven conversation, so here are the facts.

New fossil-fuel electricity can reach the poor cheaply, quickly and reliably, if:

The households or businesses have already been wired to the grid: If not, the cost of connection is the killer, not the price of electrons. For every kilometer in distance that an Indian household is from a substation, the wiring alone adds 2 cents per kilowatt-hour to the cost of power. In Kenya the cost of connecting a single family to the grid runs from $900 to $4,000.

The coal (or natural gas) is local, easily extracted and does not require massive disruption of existing communities or livelihoods. Imported or long-distance coal or gas costs twice as much as mine-mouth fuels, and it eliminates the wholesale price advantage often claimed for fossils over wind and solar. The more coal power plants Asia and Africa build, the higher the prices soar. That's better for Australian coal barons, but not for India's or Pakistan's economy. Coal that is found underneath villages or farmlands is often deceptively cheap. Mining it and forcing people off their land creates more poverty than it alleviates, and the practice has embroiled India in an enormous (if barely reported) peasant insurrection.

The population to be served is small enough that plants don't need pollution-control equipment for soot, sulfur and mercury to avoid unacceptable increases in disease and mortality. Otherwise, you end up mired in the dilemma currently facing China, where the government estimates that the health bill from burning coal is more than $200 billion per year—an amount equal to the annual revenues of the country's biggest power company, State Grid. Once you start cleaning up pollution, coal's economics tank.

The region has a sufficient water surplus to treat the coal and cool the power plants. Overlooking this need has resulted in the Indian state of Maharashtra having to shut down fossil-fuel power plants in the summer, just when the load is highest. China, having depleted natural water flows in the north to generate coal electricity, is now using that same electricity to replace the lost water with desalination plants!

Fossil fuels won't work in most energy deprived regions

There are places where enough of these conditions can be met that centralized fossil electricity will, indeed, be quicker, cheaper and more reliable than distributed renewables. The wastefully flared natural gas of Nigeria and Angola should be used to provide electricity to their populations. South Africa's local coal could provide electricity to poor villages—but the nation has chosen not to use its new coal plants for that purpose. The same opportunity—and challenge—will face Mozambique if its coal reserves turn out to be affordably extractable.

But for most of the world's 3.2 billion energy-deprived, the costs of grid extensions, fuel importation, pollution clean up and water shortages mean that central station coal or gas can't provide affordable and reliable electricity for decades—if ever.

The idea that renewable electricity costs more than fossil fuel power is simply no longer true

Even for on-grid customers, for whom the biggest cost is already sunk, renewables are increasingly cheaper than fossil alternatives. South Africa's new World Bank-supported Kusile and Medupi coal plants will cost 10 percent more per kilowatt-hour than Eskom pays for renewable electrons. When the new government of Pakistan decided to use imported coal to replace depleting local gas for electricity, it concluded that in order to pay for the projects, the wholesale price would have to be 16 cents to 17 cents per kilowatt-hour. By contrast, both China and India are building massive volumes of wind projects for less than 8 cents per kilowatt-hour and solar for less than 13 cents per kilowatt-hour.

Plummeting costs for solar and wind (and battery storage) paralleled by increasingly expensive long-distance coal and gas mean that for most developing nations, the time for grid parity has come and gone—renewables are cheaper even on grid.

And for the 1.2 billion people with no grid access at all, it's not even close. Taking $0.15 or even $0.10 wholesale new coal power, and adding on transmission and distribution losses and costs, the true marginal cost of new fossil electrons is far higher than electrons from a distributed solar system. (For the $900 grid connection charge a Kenyan household faces, it could purchase a home solar system capable of powering lights, computers, fans, charging cell-phones and a small refrigerator—without the monthly bills and reliability issues of the grid.) Off-grid renewables sweep the affordability table.

Fossil advocates ask, “What about reliability? Solar lanterns are nice, but can renewables really power an economy?" or say "The sun doesn't always shine and the wind doesn't always blow."

It turns out that fossil power plants don't always have fuel, either—this summer, two-thirds of India's coal plants fell below the emergency one-week-of-coal-reserves benchmark, threatening to shut down power for much of the country during the hottest part of the year. Pakistan bet its electricity sector on natural gas. This led to routine power outages of 10 to 20 hours in its industrial power center, Lahore. Where coal is available, water may not be, as mentioned above. Africa and Asia have probably built more coal plants than they can find cheap coal to fuel.

Can renewables meet industrial as well as household needs? India uses 25 percent of its scarce electrons providing occasional, middle-of-the-night irrigation power—a purpose for which solar pumps are phenomenally reliable. Solar pumps work when farmers want them to—during the day. In Chile, solar electrons easily outperform imported LNG for meeting the power needs of copper mines. In the conditions where the poor live, renewable power is more reliable and robust than fossil fuels.

It is striking that in Big Carbon's response to Jigar Shah in a Forbes blog post, the industry was forced to predict fossil fuel's continued global dominance by citing growth trends over the last thirty years. Unsurprisingly, it failed to reveal the cresting competitive edge for distributed renewables. That's akin to looking back 40 years and suggesting that today's dominance of mobile phones is a delusion.

Distributed renewables are about a decade behind telephony, but the arc of the two technologies is the same. The new world will come to small villages in Tanzania before it comes to Chicago—just as the cell-phone revolution reached Bangkok before it dominated New York.

Bjorn Lomborg may not want to believe Jigar Shah—or me—on this. But he ought to base his projections and assumptions on current numbers, not outdated ones.

So, who is right? Well, in the nation with the world's largest energy-deprived population, India, a new, very pro-business and quite conservative prime minister, Narendra Modi, has cast his best with distributed solar. He is promising to give every energy-deprived Indian household solar power within the next five years.

Let's get on with the job.

Co-posted with Green Tech Media.

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