The search engine giant Google (google.com) announced yesterday that it will spend $500 million (or 3 percent of its cash holdings) on developing inexpensive energy alternatives to coal. The goal is to lower the costs of solar, geothermal and wind energy to produce 1 gigawatt of energy at costs that are lower than coal. Google says that it aims to accomplish this task in 10 years and is optimistic that it will take even less time than that.
This initiative on the part of Google could have far reaching consequences. In particular, there is almost an entire continent across the Atlantic that does not have access to clean, safe and reliable energy--Google's cost-saving innovations could change this.
The World Bank estimates that about 500 million people in sub-Saharan Africa are without access to electricity. Moreover, African households spend as much as $17 billion a year on unsafe fuels for lighting and cooking. Biomass is the main source of fuel in rural areas, contributing to the rapid rate of deforestation in may parts of Africa.
Comprehensive enterprise surveys undertaken over the past decade in Africa show that the lack of electric power is an enormous problem for the private sector as well. African businesses spend far more than their counterparts around the world for electricity that is highly unreliable and of poor quality. Any business large enough to afford it has a generator, which produces electricity at three or four times the cost of the grid along with a lot of noise and pollution. The enterprise survey data also show that most Africans who do have electricity experience several power outages a day, often lasting several hours. Energy as a share of indirect costs is three to four times that of the costs of Chinese businesses and losses (CGD Working Paper #56) due to power outages average about 5 percent of sales and run as high as 15 percent. Outside of a few metropolitan areas, almost no one is connected to the public grid.
In contrast, Africa's potential to generate energy from renewable sources is unparalleled. Rigorous analysis by my CGD colleague, David Wheeler, and his coauthors shows that of the top 35 countries for solar, wind, hydro and geothermal energy, 17 are in Africa.
Solar power is particularly well-suited to meet Africa's energy needs. Much of sub-Saharan Africa receives solar radiation of the order of 6-8 kWh/m2/day--some of the highest amounts of solar radiation in the world.
Africa Annual Average Solar Radiation Map
(Flat Plate Tilted at Latitude)
For businesses paying upwards of 15 to 20 cents per kWh for electricity that is unreliable and of low quality, the installation of solar panels would reduce the reliance upon poorly-maintained grids, which would in turn enable businesses to compete more effectively in the global market.
Solar energy that is generated via rooftop solar panels is also less problematic in terms of the regulation and management issues that have plagued delivery of grid-based energy by public utilities. Wind, geothermal and micro-hydro projects also have the potential to meet the needs of households and businesses that have little chance of being connected to a public grid in the near future.
For all of this to happen, the costs of solar power and other renewable energy sources needs to be lowered. Coal-based energy is still very cheap to produce and as CGD's new database (www.carma.org) shows, this is the dominant source of energy and pollution in many countries around the world. Many visitors to CARMA's website will find it via their favorite search engine--Google. Perhaps this same company will find a solution to meeting the world's ever-growing energy needs as well.