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Energy in the Developing Countries Poses Global Challenges

March 2007

STANFORD GRADUATE SCHOOL OF BUSINESS—For the 1.6 billion people who live without access to electricity, indoor wood stoves that blacken lungs have long since lost their fireside coziness. The same goes for romantic candlelight, which sours when it is the only option for evening light.

These novelties to the electrified world are necessities to a fourth of the world's population. The debate over alternatives in the non-electrified world was just part of the March 3 program during the annual Stanford International Development Conference at Stanford University, sponsored by the International Development clubs from the University and the Stanford Graduate School of Business.

Power plant emissions, which contribute to global warming and lung disease, must be weighed against the belching of biomass-burning stoves, which often stand in for electricity, and trigger 1.3 million early deaths worldwide each year, according to the United Nations.

That's not to say new power plants are the answer, however. In China, where the fleet of power plants built in 2006 outdoes the generating capacity of the entire United Kingdom, the government is likely overlooking local streams as possible sources of hydropower, said Patricia Flanagan, a conference speaker who is an environment officer with the U. S. Agency for International Development.

The point is that energy is a thorny issue, and the solution for rural China won't necessarily work in Guatemala.

"No single technology, no single business model, can meet the needs," Flanagan said.

The conference, titled "Energy and the Developing World: Working Toward a Sustainable Future," drew government officials, business leaders, and academics exploring ways energy can improve lives worldwide. Geographic challenges discussed included:

The Case of Mexico

As an advocate for the environment within the Mexican government, Adrian Fernandez-Bremauntz regularly clashes with powerful industry groups and fellow government ministers. One of Fernandez-Bremauntz's strategies is to talk dollars and cents, as he did when quantifying air emissions from one of Mexico's largest power plants near the city of Tuxpan, Veracruz. To help his government colleagues appreciate the plant's health impact, he described it in dollars, estimating that the facility costs $13 million each year in health impacts and premature deaths. His goal is to show the government that "not doing anything is going to be more costly to the country than trying to do something to cut emissions," he said.

As president of Mexico's Instituto Nacional de Ecologia, Fernandez-Bremauntz has helped shepherd green housing developments that will someday include roughly 400,000 energy-efficient homes. He helped introduce low-sulfur fuel standards in Mexico and has worked on rules that would require car makers to label vehicles with fuel economy information. He measured the air impact of Mexico City's new bus rapid transit line, finding that the new route not only saved commute time, but it halved air emissions.

Transparency is the environment's best ally against powerful opponents of pollution controls.

"I have leaked information to the media every other day for the past 10 years," he said, smiling but clearly not joking. "You have to make a big splash with the media to persuade policymakers."

A Success Story in Africa

In Africa, where 75 million households don't have electricity, Ghana is winning the battle of electrification. In 1989, when roughly 90 percent of the nation's communities lived without electricity, the government began working on a national electrification program using solar panels. By 2005, 54 percent of all communities in Ghana had access to electricity.

Ghana's success is due to a "balancing act" that weighs costs, political correctness, social equity, and the economy, said Abavana Clement Gwalania, who works for the World Bank as technical advisor to Ghana's ministry of energy. Ghana has overcome major obstacles, including the fact that some citizens balked at paying a single energy bill despite the fact that it was cheaper than a month's supply of kerosene and candles. The government is still working out other kinks, including the fact that solar panels get stolen, and residents try to bypass regulators by charging their own batteries.

A Small-Scale Solution in India

Panelist Evan Fox is hoping his business idea will serve a neglected corner of the energy market in India. Fox is founder and chief executive officer of Familiar Fuels, a company that aims to build small biodiesel plants in rural Indian fishing villages. The idea came out of an environmental entrepreneurship class at Stanford, in which Fox, an anthropology and environmental science major, worked with a biologist, an MBA candidate and product designer to solve the problem of unreliable diesel shipments to rural fishermen.

Fox stuck with the idea after graduation in 2005, and is hoping to fire up the company's first biodiesel plant in India this summer. Familiar Fuels will make biodiesel from a hardy plant crop grown by local farmers, and will sell the fuel directly to fishermen. If the model works, Familiar Fuels will eventually sell franchises.

Paul Frankel, Environmental Entrepreneurship lecturer at Stanford, also sat on the panel. Frankel manages Ecosa Capital, a socially and environmentally responsible investment firm, and he dissected Fox's idea through a business lens. Are fishermen going to trust that the new fuel won't destroy their engines? Has Fox found local partners in India to build confidence in the product? Will the idea catch on widely enough to be self-sustaining and turn a profit for Familiar Fuels?

Both Frankel and Fox are optimistic about the company's prospects. Familiar Fuels attempts to solve a well-defined problem—access to diesel fuel—for which there is potentially a large market. In his class, which is offered through the Public Policy and Earth Systems departments, Frankel teaches environmentally-minded entrepreneurs to mine their ideas for profit potential, because profits allow socially-responsible businesses to stay afloat once the startup money runs out.

A Worldwide Solution

Michael Powers, who cofounded Stellar Solar LLP and helped launch Home Depot's national solar energy program, might seem an unlikely advocate for more power lines fed primarily by polluting power plants. But Powers is an advocate for the Global Energy Network, a worldwide energy-sharing plan that would allow regions to buy energy from the other side of the globe during peak demand periods rather than keep extra local plants on standby.

Buckminster Fuller, father of the geodesic dome, first hatched the Global Energy Network idea in the 1970s, arguing that the world's energy problem is one of distribution, not of supply. At any given hour on the planet, one side of the globe is asleep and the other is idling power plants in the event that residents put their thermostats on overdrive. For example, at 8 a.m. in Los Angeles, when residents need the most power, it's nighttime in Shanghai, where utilities could easily trade away excess power. Many regions already share energy this way, and with new transmission lines linking continents, utility managers could send excess energy across the globe instantaneously.

"It's not as impressive to put the name of a prime minister on the side of a tower … but what societies need is better connections," Powers said.

—Sarah Ruby