Forget Trump’s Paris Pronouncement: Renewable Energy is Part of the Future of International Relations
Abengoa's Solana Plant in Gila Bend, Arizona. Wikimedia.
By Shravan Bhat
In Jerusalem, a start-up called Energiya Global is designing solar energy projects in sub-Saharan Africa. Life in the colourful little company is a respite from “the conflict” that looms large over every dinner table conversation, every water-cooler chat, and every falafel line in Israel.
Though incorporated in the Netherlands, Energiya is, for all intents and purposes, Israeli and staffed almost entirely by American immigrants. One day, amid great excitement, the senior project developer scooped up a group of interns, and along with the CEO, headed over to the West Bank to sign the license for the West Bank’s first utility-scale solar energy project.
The delegation from the Israeli start-up — entrepreneurs, engineers, peace activists and hopelessly privileged Ivy-leaguers such as this author — took off their kippahs for the trip but no one – not least the Palestinians – was under any illusions that these were anything other than Israeli-American Jews who wanted to deliver energy to the West Bank.
As a student of global affairs, I couldn’t help but see Israel through the usual lenses of diplomacy, conflict, and identity politics. But here was another prism: renewable energy. It formed a bridge between two historical enemies, offering a sliver of hope for energy security, prosperity, and peace. To be sure, it wasn’t an easy path. The project’s license, alone, was years of tough negotiations in the making, and there is yet a long way to go. But, on that summer day, hands were shaken and smiles exchanged: simple gestures of hope in a place where they can be all too rare.
While covering solar energy in India for Forbes, I had seen the international dimensions of the industry. India’s ambitious solar energy dreams are largely being built in China and financed by Western capital; German engineers certify component quality; and the Asian Development Bank lends where Indian banks dare not.
I remember meeting Spanish engineers from Gamesa, a wind energy behemoth, at a rooftop party in Mumbai and chatting with consultants in Munich who have built the most comprehensive renewable energy map of India to date. Nearly all the solar panels used in India were imported from China. When it comes to renewables, China and India are not enemies.
As a journalist, I was trained to look for downsides. There aren’t many with renewable energy. Vested interests – like the oil and gas lobby – are being challenged and there was a time when renewable energy was simply too expensive. Not anymore. Renewables are intermittent, as the sun doesn’t always shine and the wind doesn’t always blow, but their average availability is easily planned for. Renewable energy can address economic development and climate change at once.
A single solar project can demonstrate globalization in action. Take Energiya Global’s 8.5 megawatt project in Rwanda, as an example. First: the project developer, incorporated in Amsterdam, works out of a Jerusalem office. The project team are American-Israelis. The U.S. government’s Overseas Private Investment Corporation provided grant money for the feasibility study. The project was constructed by Norwegian contractor Scatec Solar using Chinese-made panels. The debt and equity came from European funds. The level of inter-cultural knowledge and soft skills needed to pull together such a diverse set of stakeholders is enormous.
The global nature of such a business is self-evident, but the role of international politics perhaps less so.
Imagine a solar project in a country rich in oil and natural gas. Doing business in a country with massive fossil fuel exports alongside widespread energy poverty means you are going to be dealing with government officials who have an interest in keeping the oil flowing. How do you get permits for land and electricity interconnection when a solar power plant is the last thing the minister in charge wants to see? What if the energy minister has connections to an oil company and your climate-change spiel is at best, inconsequential, and at worst, a threat?
That’s where diplomacy comes in. One strategy for developers like Energiya Global – by virtue of being incorporated in the Netherlands, being funded by the US government and being based in Israel – is to leverage diplomatic might of the European Union, the United States, and Israel. The message from these countries to the government in a country may read: allow this little solar energy developer to operate fairly, or we will rethink our large scale investment plans in your country. While the energy minister may have had the power over the solar developer, the ambassadors from Israel, the Netherlands, and the United States wield huge collective clout over him and his bosses.
Whether you see this as cunning statecraft or overbearing lobbying, it is inevitable that clean energy will soon flow to some of the world’s poorest people. And that clean energy is largely financed and developed by global, not local, forces.
Renewable energy is surely one of the biggest and easiest public-relations wins for any government. In fact, it is only in the United States that I have come across major political factions who have not jumped onto the renewable energy feel-good gravy train. By deciding to pull out of the Paris Climate Agreement, President Donald J. Trump and the Republican party are pulling the United States off of this train, and back toward outmoded and cost-ineffective fossil-fuel production. Wind energy, for example, is categorically cheaper than coal, according to the latest Lazard study. It appears right-wing elements in the United States are happy to forgo the economic benefits of renewables in favor of soundbites about bringing back the coal industry. The rest of the world has, thankfully, reiterated its commitment to the Paris Agreement. The science and the economics are irrefutable.
Still, we must acknowledge that the renewable energy industry’s global nature also brings challenges.
Take, for example, raising equity investment for a solar project in a post-conflict country with an undemocratic leader. Only a tiny proportion of people in Burundi have access to electricity and even a relatively small solar project would provide energy to huge chunk of the population. But that might not be enough to convince Northern European sovereign wealth funds; even if proposals pass technical vetting, a fund’s board might fear being seen as an endorsing Burundian President Pierre Nkurunziza, who was controversially nominated by his party for a third term in office in 2015, sparking protests that police and the army violently tried to quell. His election win was disputed by human rights groups such as Amnesty International, citing allegations of fraud and intimidation of the opposition.
If global politics delayed the Burundi deal, global economics stopped another altogether. A joint-venture with project development partners in India proved untenable in light of the volatility of the Indian Rupee. While the Israelis would have been paid in Rupees, all their expenses were in U.S. Dollars. The Indian currency is so susceptible to fluctuations that any lender would require Energiya to keep a large number of Rupees in reserve. This requirement would effectively raise the interest rate from a workable 6% to an unrealistic 12%.
Overcoming these and other obstacles requires countries to cooperate to give their citizens the best chance of reaping the rewards of renewables. In a time when globalization is being questioned, renewable energy offers a reminder of both the necessity and the payoff of international cooperation, especially between the so-called “global North” and “South.” Renewable energy projects offer long-term investors in the developed world safe, predictable returns while offering developing countries the chance to electrify their cities without clouding their skies or poising their waters.
These opportunities are allowing India, as a market, and China, as a supplier, to take leadership in the energy sector where traditional energy powers like the United States cede it. Countries cooperating on renewable energy will be a central facet of international relations in the 21st century. If even Israelis and Palestinians can agree on renewable energy, the future bodes well.
About the Author
Shravan Bhat holds an M.A. in Global Affairs from Yale’s Jackson Institute for Global Affairs. He was Senior Correspondent for Forbes Magazine in India until 2015 and continues to write for the Hindu. Disclosure: he interned with Energiya Global in 2016.