Over the next 25 years, $20 trillion needs to be invested in energy infrastructure to keep pace with anticipated demand. Over $10 trillion dollars of that investment is required in developing countries.
Today, 2.5 billion people still depend on traditional fuel sources - wood, dung, agricultural waste for their energy needs. 1.3 million people die every year due to exposure to indoor air pollution - primarily from cooking.
There are still 1.6 billion people in the world with no access to electricity. It's quite a challenge to embrace the global economy if you don't even have a light to read by at night.
This is quite a problem - more on a later day about development objectives and the U.N's Millenium Development Goals but for now consider two other factors challenging countries trying to meet the energy needs of their poor people:
- climate change
- energy security
Plenty of time to talk about climate change another day too but what about energy security? The looming peak in oil production has been a long time coming - and by most rational accounts is still a good way off - to use the IEA's data again - later than 2030. However, constraint in supply is now increasingly being seen - and prices are rising. An economist will reassure you that the price mechanism will resolve this issue. As oil prices rise there will be incentives to extract previosuly uneconomic reserves and there will be incentives to evolve technologies to unlock non-conventional sources of oil (tar sands, oil shale etc).
All this is true - and is happening. Much of the increase in reserves in recent years are not new finds of oil - rather they are a recognition that more can now be economically extracted from existing sites. Also, head for Alberta and you'll see a gold rush underway as companies take advantage of high oil prices to unlock the energy in the vast tar sands in Canada. Note - Canada now has the second highest oil reserves on the planet, behind Saudi Arabia.
What does this do for a developing country in Africa or Asia? It struggled to purchase it's energy needs when oil prices were $10 a barrel. The market may still effectively balance supply and demand through price increases. However, the real impact of this is developing countries are squeezed out of the energy market - or, more likely - make cuts in health and education programs or take on debt that cannot be serviced to continue to source needed energy supplies.
How is this resolved?
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