It is now well recognized that energy is a cornerstone of the modern industrial economy as it is demanded in almost all human activities, not limited to heating, lighting, health, food production and storage, education, mineral extraction, industrial production transportation, with essential ingredients.
Modern energy services are a powerful engine of economic and social development, and no country has managed to develop much beyond a subsistence economy without ensuring at least minimum access to energy services for a broad section of its population.
The Ethiopian Herald approached with Dejene Adugna, an agro-economist graduated from Haramaya University, to have a piece of information about the association between energy supply and economic progress.
As to Dejenie, electricity represents an essential factor in both consumption and production of goods and services in the economy as a major contributor to improve the standard of living and enhance economic growth. Yes, increased consumption of electricity signifies high economic status of a country as electricity promotes the productivity of labor, capital, and other factors of production.
He said, “A positive correlation between energy and GDP could be due to either a causal link from energy to growth, or from growth to energy, or both. This possibility means that it is necessary to use a means than can separate the two directions of causation and evaluate their relative importance. Many factors play a role in influencing energy supply, not least of which are its availability, price and accessibility.”
The increased cost of accessing energy and the effects on economic growth across the nation is one of the grave concerns. Energy generation was found to have some implications for economic growth across Ethiopia, indeed! It was found that hydro electric and other renewable energy generation sources have been significantly driving growth across the nation, he added.
He further elucidated that given the growing concerns about the consequences of climate change; however, the economic welfare is threatened with increased electricity demand, which associated with increased consumption of fossil fuels. Therefore, increasing the share of renewable energy is the main requirement for sustainable development by reducing damages from non-renewable resources.
As to Dejenie, increasing trends in renewable electricity production is consistent with the fact that policymakers encourage development of renewable energy. The positive relationship between energy and economic growth is clear: income and energy consumption are tightly correlated on every continent and across every time period for which data exists.
Nowhere in the world is there a wealthy country that consumes only a little energy, nor a poor country that consumes a lot. While rural residential electrification does not appear to have meaningful impacts on household incomes among the extreme poor, growing researches link reliable, low-cost energy for firms with. Energy is a fundamental input to economic activity, and African firms identify poor infrastructure, especially power, as a leading constraint to productivity and expansion. This is most often established by examining the relationship of firm productivity to electrical outages.
The good thing is, he said, Ethiopia does have a range of energy sources and apt ground to utilize them accordingly. Hence, the energy generation has to receive due attention thereby coming up with sustainable energy supply and recurrent electricity generation process.
In spite of its being endowed with enormous natural resources and energy spots/means, Ethiopia has remained plagued with poor governance and weak institutions making many policies not to have any effect on growth and economic development across the nation. However, there is a growing concern to make the energy sector to grow, Dejenie said.
“Energy use in general across the nation is on the increase making since population growth and industrial development in Ethiopia continues to exert strain on current generation infrastructure making the nation to be constantly engaged in development of more plants and use of cheaper and alternative methods in the generation process.”
True, the world is heading towards another challenging era since global energy demands are on the increase, and threats have been found to matter in the energy production and access process. Some threats identified, negatively affect energy security in general including the cost of accessing energy, environmental issues associated with the generation process, growing domestic consumption demands and industrial demands for energy, he opined.
It was found that energy generating sources have been improving energy security in regional states with renewable and gas energy sources that had positive significant effects on mitigating energy generation disruptions across the nation.
Most renewable energy sources have low environmental impacts at both local and global levels compared with conventional fossil fuel energy technologies; they are available in a wide range of capacities; they offer fuel diversity and can make use of local resources to deliver energy to local users without extensive infrastructure investments.
A prime reason is their lack of cost-effectiveness, availability and reliability of the current renewable energy technologies. Furthermore, certain renewable systems are able to provide power only intermittently, and may need storage via batteries to give greater availability. It is worth noting that biomass technologies are an exception to this rule, as they utilize a resource that can be stored for use on demand when required, and which is not directly subject to short-term variations.
Bringing renewable energy systems to technical maturity will require substantial cost reductions, and continued efforts will be needed in demonstrating their contribution in competition with conventional fuels. A transition to a renewable based system will depend on political willingness to internalize the environmental and social costs of fossil fuel use, and on the successful development and deployment of technologies in appropriate commercially viable applications. Financial, administrative and institutional entities will also have to adapt their policies to take account of renewable energy systems so that barriers to market entry can be minimized.
The current patterns of energy production and use, which have shaped the development process in the past, are unsustainable. The energy challenge now faced by the nation is to provide energy services that allow all citizens to achieve a decent standard of living, consistent with sustainable human development. This link between energy and development remains a key factor in development policy. It will be shaped by current trends of globalization, markets and popular participation in decision-making processes, the changing roles of government and energy utilities, and the mix of sources of external funding.
As to Dejenie, agriculture is an important, but not dominant, user of energy in developing countries like Ethiopia. Nevertheless, improving energy services for rural people should include increasing the energy input to agriculture so that gains in productivity, enhanced food security and rural economic development can be made.
He said, “Providing access to energy services involves the conversion of primary energy resources as well as the manufacturing, construction of required technologies and distribution networks. These activities take material from the environment and inevitably split them into desirable products and wastes of various forms. The latter are returned to the environment, increasingly at levels beyond the carrying capacities of ecosystems, and threatens to have environmental damages undermining economic gains.”
Achieving even cost effective improvements in energy efficiency is commonly hindered by a range of market and non-market barriers and failures and many of them can be described as principal-agent problems. The extraordinary large number of actors involved, fragmented institutional framework and often comparatively small size of individual investment needs for energy efficiency improvements and long payback time make this market little attractive for individual investors.
Energy is not an end in itself but a prerequisite for economic development including for the achievement of the Millennium Development Goals, and for the achievement of growth. It is crucial for the necessary transition to a more equitable and sustainable world and one where all have access to the energy services required for comfort and for a secure and healthy livelihood.
In general, electricity provides the essential key to energy access, and is the energy prime mover enabling technical innovation and productivity growth. A healthy economy is needed to ensure that the energy demands are met and investments and infrastructure work is carried out and that resources for Research and Development flow to meet the needs and requirements for a sustainable future. Most clean technologies are capital-intensive, but make energy demand and fuel consumption lower.
BY MENGESHA AMARE
THE ETHIOPIAN HERALD WEDNESDAY 16 OCTOBER 2024
