Energy for All: Financing Access for the Poor
As energy is the source of all life, so modern energy can be the source of a better life for all. The International Energy Agency’s World Energy Outlook (WEO) has focused attention on modern energy access for a decade, providing the international community with quantitative, objective analysis. This report, a special early excerpt of World Energy Outlook 2011, tackles the critical issue of financing the delivery of universal modern energy access.
Modern energy services are crucial to human well-being and to a country’s economic development; and yet globally over 1.3 billion people are without access to electricity and 2.7 billion people are without clean cooking facilities. More than 95% of these people are either in sub-Saharan Africa or developing Asia and 84% are in rural areas.
The report estimates that, in 2009, $9.1 billion was invested globally in extending access to modern energy services.In the absence of significant new policies, the report projects that the investment to this end between 2010 and 2030 will average $14 billion per year. It is projected that this will still leave 1.0 billion people without electricity in 2030 and, despite progress, population growth means that 2.7 billion people will still be without clean cooking facilities.
Giving modern energy to the world by 2030 is achievable, but the annual investment to do so must be increased to more than five-times existing levels and the extra spending must be matched by public-sector reforms. This report estimates that investment of $48 billion per year is needed to provide universal access to modern energy. This is only around 3% of projected global energy investment. The majority of the additional investment is required in sub-Saharan Africa.
Providing electricity access to those that do not have it would increase carbon dioxide emissions by only 0.7%, equivalent to the emissions of New York State but giving electricity to a population more than 50 times the size. The prize would be a major contribution to social and economic development, a fundamental improvement in the lives of billions of people through the provision of modern lighting, electrical appliances and cooking facilities. Furthermore, universal access to clean cooking facilities will help to avoid 1.5 million premature deaths per year.
The report also finds that national governments need to adopt strong governance and regulatory frameworks and invest in internal capacity building. The public sector, including multilateral and bilateral institutions, needs to use its tools to leverage greater private sector investment where the commercial case is marginal and encourage the development of replicable business models. The report recommends that an important part of multilateral and bilateral direct funding be concentrated on those difficult areas of access which do not initially offer an adequate commercial return. Furthermore, operating through local banks and microfinance arrangements can support the creation of local networks and the necessary capacity in energy sector activity.
[First published at iea.org.]