EGG-energy

Crisis Mode in Clean Energy and Africa Investments: Ironic?

Isn’t it ironic that some of the most important areas for investments in sustainable, balanced and long-term development, namely Africa and clean energy, are so heavily impacted by the current economic downturn? It certainly makes sense for investors, companies and consumers to focus on their investment base, reduce their risks and consolidate to do better in the future.  At the same time, isn’t it the best time to support the potential products, ideas and startups that can make a difference in the global warming mitigation and sustainable growth race?

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2009 was a tough year and the situation looked scary.  Stock markets were down – see the Dow Jones’ 50% drop in two years -, banks such as Lehman Brothers were going bankrupt and unemployment reached 20% in such places as Spain.  It therefore made sense for consumers, companies and investors to reduce their spending and appetite for risky investments.

One of the sectors which suffered the most was clean energy.  A look at the fluctuations of the Wilderhill New Energy Global Innovation Index highlighted in an article from the Economist (The Green Slump, http://www.economist.com/specialreports/displaystory.cfm?story_id=14994802) shows that clean energy was hit almost twice as hard as the S&P 500, losing 43% of its value between 2007 an 2009 when the S&P 500 was only losing 24%.  In 2009 alone, clean-tech companies saw a 50% drop in investments from the previous year, although fortunately the number of deals increased (U.S. clean-tech investment falls 45% in fourth quarter, http://latimesblogs.latimes.com/technology/2010/02/us-cleantech-investment-falls-45-in-fourth-quarter.html).

This is alarming as clean energy is one of the most critical areas for investments, not only for financial returns but also and above all as the fuel to the engine of global warming mitigation.

Why are clean energy investments suffering so much?  Some of the key reasons put forward in the Economist (The Green Slump, http://www.economist.com/specialreports/displaystory.cfm?story_id=14994802) include high up-front costs. This means debt finance funding and high debt-to-equity ratios, which explains why, when the financial crisis made money less available, the clean energy sector was among the first to suffer.  Others argue that the lack of support from consumers triggered fear from investors.  Lack of support from consumers?  Well yes, in critical times, consumers tend to flow towards whatever cost effective solutions they can find.  And the relative failure of the Copenhagen meeting in 2009 did not help incentivize consumers to favor more eco-friendly solutions.

It remains to be seen what impact this will have on global warming.  Clean energy investments must grow to reduce our environmental impact and limit temperature rises.  But by how much?  Different views have been voiced.  A study by New Energy Finance and the World Economic Forum shows, for instance that they should reach $600 billion yearly by 2030, from a little more than $100 billion in 2009 (Green Investing: Towards a Clean Energy Infrastructure, 2009, http://www.weforum.org/pdf/climate/Green.pdf).  This would imply a five-fold increase in 20 years, which will not be easy.  We were already late when signing the Kyoto protocol in 1997, we are still very much behind this target today.

At the same time, the financial crisis has also had a significant impact on Africa.  The BBC estimates from $49 to $280 billion the losses for 2009 alone (Crisis will cost Africa $49bn,  http://news.bbc.co.uk/go/pr/fr/-/2/hi/business/7945843.stm).  This is bad news for a continent that needs to catch up on development and accelerate its growth.  What’s more, the impact of a $ 280 billion drop in investments on poverty and development is likely much worse in Africa than on other continents.  Programmes for health, education, nutrition and infrastructure were reduced or stopped.  And some are wondering if Africa will ever meet its Millennium Development Goals.

People, here is a gap to fill.  To catch up, we need to find solutions that are innovative, affordable and efficient.  This is what we have been trying to develop at EGG-energy: an innovative supply chain, an affordable project for investment and an efficient idea using existing products, channels and means to reach consumers and reduce their kerosene/carbon footprint as quickly as possible.  Luckily enough, EGG-energy is only one of many ideas that are out there to help the world be a better place: good luck to them all!

Emmanuel Cassimatis

Okay, I admit it. As a kid, I was afraid of the dark. When I had to go back to my pitch-black room to retrieve something I had forgotten, I would have to be very strategic about it. I would sneak around the corner until I could just barely peek out from behind it, then BAM, I would make a frenzied dash to the light switch and throw on the lights, scanning the room quickly to be sure there did not happen to be a monster on my bed, waiting to get me.

The fact that the light switch was there, and that flipping it would illuminate the room, had always been blindingly obvious to me. What does one do when the sun begins to set and it becomes too dark to continue reading? What does one do when entering an unfamiliar area, perhaps the basement, or the garage? “Well, duh,” my smart-aleck younger self might had replied. “You figure out where the light switch is!”

However, for almost a quarter of the Earth’s population, that light switch doesn’t exist. According to a WHO/UNDP report released November 2009, there are one and a half billion people in the world today who lack access to electricity. The problem is worst in Sub-Saharan Africa, EGG-energy’s home turf. In Sub-Saharan Africa, 74% of people don’t have access to electricity, and in Tanzania, the figure comes in at a shocking 89%. As we can see from Map 1, over 80% of those without electricity worldwide reside in Sub-Saharan Africa or in South Asia.

But the problem doesn’t stop there. Research shows that households without access to modern energy sources (such as electricity) often turn to solid fuels (coal or traditional biomass, such as wood, dung, or charcoal). Indoor air pollution caused by the smoke from solid fuel use has been linked to almost two million deaths per year worldwide from child pneumonia, chronic obstructive pulmonary disease (COPD), and lung cancer. A remarkable 99% of these deaths are occurring in developing countries, suggesting that these deaths are highly preventable.

Important an issue as energy is here in the developed nations, regularly bandied about in the halls of our capitals, how much more important must it be in the developing nations that don’t enjoy our indulgent level of access! The fact of the matter is, energy is a challenge for all of us, because it touches upon so many inescapable aspects of our well-being, from quality of education to quality of medical care, from economic impact to ecological impact.

Developing countries, especially, cannot hope to achieve the national energy access targets they have set (and in particular, those Millennium Development Goals set for six years from now) without a significant increase in efforts to make modern energy sources available to their citizens, efforts that EGG-energy is very much a part of. Working together, we can and we will start switching on the lights for those 1.5 billion people still living in the dark, and help them begin to vanquish the monsters that they face in their own lives every day.

-Mark

Access to affordable energy is one of the greatest challenges that countries face today in creating sustainable growth. This point was highlighted by two of the latest visitors to MIT’s campus. The first was William Kamkwamba (whom Ben previously blogged about), who built a windmill from junkyard parts at age 14 with no formal engineering training. The second was President Barack Obama, who came to campus to talk on the topic of “American leadership in clean energy.”

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Yesterday afternoon, I was listening with Clélia to the “Bedtime Stories” CD that her father bought in London. I’m not sure that my two and a half month old daughter fully appreciated the narrative that led the donkey, the dog, the cat and the cockerel on their way to be musicians in Bremen to chase thieves out of a hidden cottage, but the seven children of the farmer’s wife whose big pancake ends up being eaten by a pig reminded me of how special the number 7 is.

1987, 1997 and 2007 were all remarkable years for green, cleantech, carbon cap and trade, global climate change and Kyoto to become respectable household words.
1987: birth of sustainable development as a concept (Brundtland Commission’s Report)
1997: commitment by industrialized nations (minus the USA) to lower their greenhouse gas emissions (Kyoto Protocol)
2007: formal acknowledgment by the international community that anthropogenic emissions of greenhouse gases cause climate change (IPCC’s 4th assessment report).

It took more than 30 years to make the case for businesses to plan their long term growth in a carbon-constrained economy so clear that the oldest consulting firm in the world, Arthur D. Little, recently cautioned against not doing so. Yet, “carbon” (and all the environmental externalities that it has come to represent – remember acid rains, mercury contamination, dead rivers and chemical dumps?) is only one of the three sustainable development stool’s legs. The economic crisis that unfolded in 2008 brought the “economic leg” on the front scene, but what shall we do about the “social” one?
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