Introduction
Energy poverty results when people lack affordable and reliable access to modern forms of energy. It may be chronic or temporary, and like poverty itself, it occurs everywhere. Indeed, it is both a symptom, and cause of poverty – one that has been made worse by the Covid-19 pandemic, and the unfolding war in Eastern Europe. This paper describes the challenges along with new ideas, recent progress, and reasons to be optimistic about ending energy poverty in the developing world without accelerating climate change. It makes the following recommendations directed at the international community and the leaders of low access countries:
- Governments should develop structured programs when pursuing universal electricity access following the core principles set out in the Integrated Distribution Framework (IDF) adopted by the Global Commission to End Energy Poverty, including a focus on economic impact and the use of on- and off-grid technologies.
- In partnership with international experts and institutions, governments should use modern computational geospatial tools to plan resilient and affordable energy infrastructure to enable universal access and drive equitable economic growth.
- To help reduce consumer energy costs, increase system resiliency, and encourage investment in low carbon generation, governments of small low-access countries should more aggressively pursue cross-border trade and regional integration of their electricity systems.
- To enable 1-3, the international community must be far more generous in supporting access programs with greatly expanded concessional lending and grant-making to poor countries. Governments in turn must commit to efficient business models that encourage greater private sector investment in access and service reliability. Absent this large increase in wealth transfers, the SDG7 goal of achieving universal access cannot be achieved, and energy poverty will persist.
Background
The concept of energy poverty was first introduced in the 1970s in relation to “fuel poverty” in the UK, and the need to shape public policy that would ensure that home heating fuel was available and affordable universally (Isherwood 1979) – a narrowly defined, but important objective. Contemporary usage has largely maintained this connection with residential consumption. Indeed, ending energy poverty has become virtually synonymous with achieving universal residential access to modern energy, and in particular, to electricity and clean cooking fuels (such as liquified petroleum gas) that can displace so-called traditional fuels such as firewood and dung. Thus, the United Nations has prominently identified achieving “universal access to affordable, reliable and modern energy services” among the objectives of Sustainable Development Goal 7 (SDG7). As shown in Figure 1a, progress in expanding electricity access has been rapid over the past two decades, with only 10% of the global population living without electricity services as of 2021, or some 759M people – 84% of them in rural areas (IEA 2021), and the vast majority in sub-Saharan Africa. Progress over the same period has been slower for clean cooking fuels (Fig. 1b), with less than a 15% reduction in the population lacking access since 2000. Notably, the effect of the Covid pandemic has so far been to stall continued progress on both fronts. Here we will focus on the electrification problem, noting that electrification also provides a potential pathway to clean cooking that can significantly improve the economics of grid electrification.[1]
Electricity access is not defined uniformly from country to country. For modeling purposes, the International Energy Agency (IEA) uses a uniform minimum level of consumption of 1250kWh per year per grid connected household, or 250kWh per capita (IEA 2020). As an alternative to grid service for rural households, so-called off-grid alternatives are increasingly used. These include mini-grids, that is, isolated self-contained grids serving tens to thousands of dwellings with aggregated generation (diesel, or solar with battery back-up), and solar home systems for individual dwellings. The latter come in a range of configurations comprising a small solar array and battery bundled with a number of pre-wired LED light fixtures, and possibly a phone charger, fan, or small television. Mini-grid service is typically provided by small firms that design, build and operate systems configured to meet community requirements, which may vary widely depending on the level of wealth and economic activity. Users either pay a fixed monthly fee, or according to metered consumption. Solar home systems, on the other hand, are either purchased for a single up-front price, or on a rent to own, or Pay-as-You-Go (PayGo) basis, with a two- or three-year purchase period (Jacquot 2021). In its modelling work, the IEA defines the minimum level of service to be 50kWh per capita per year for off-grid rural households, and 100kWh for urban households (IEA 2020). The cost of service in either off-grid mode is high on a $/kWh basis compared to typical grid service – however, the economics of extending and maintaining grids in rural areas to serve dispersed populations of small residential consumers are very unfavorable for utilities, which given the choice resist such investments. Off-grid technologies therefore represent a more feasible option for many rural consumers in developing countries, rather than one that is necessarily inexpensive.
Nevertheless, we emphasize that the attainment of a high level of residential access economic development may be fleeting if not accompanied by economic development. To draw attention to the much larger electricity investment gap that still must be addressed throughout the broader economy in many unindustrialized countries, a Modern Energy Minimum (MEM) was recently proposed (Moss 2021). This economy-wide level of consumption is some four times more than the IEA’s minimum grid service level, and ten to twenty times more than its off-grid minimum.[2] Therefore, although achieving universal access to modern energy is a precondition for ending energy poverty, it must be emphasized that access alone will not end energy poverty – the scale and use of energy is also crucially important.
Universal Access and Climate Change in India
India’s rapid electrification in the past two decades serves as a hopeful and informative beacon, and a counterpoint to the African story (IEA 2020(2)). In addition to massively expanding its electricity distribution network during this period, India also increased its generation capacity (with a substantial share coming from renewable sources), and created a synchronized national transmission network. To be sure, India has many advantages relative to other developing countries that enabled this success, including the sheer size of its electricity market which provides considerable economies of scale that help to keep electricity prices low. India also has deep domestic capital markets, as well as a large tax base, and substantial technical capacity within government and industry to tackle large programs and projects. Thanks to the determined efforts of successive governments, and especially the present one, over 700M have gained access to electricity since 2000, many of them within the last five years. While the vast majority of new connections were via grid extension, off-grid technologies remain important in India for the relatively small number of those who live in deeply rural and itinerant communities where grid access is infeasible.
Concerns have been raised that rapidly developing countries like India will come to dominate global greenhouse emissions as their wealth and consumption continue to increase in the coming decades. However, it is far from clear that this is inevitable. A recent study (MIT 2022) modeled plausible growth scenarios for the Indian power sector through 2050, and concluded that even under relatively conservative cost and performance assumptions, the Indian grid can continue to expand at its present annual rate of roughly 5% through mid-century by making extensive use of solar and wind energy, with significantly lower emissions than today by 2050 – even without an assumed price on emitted carbon. The study concludes that similar outcomes are possible in other emerging economies in South and Southeast Asia.
Challenges for Sub-Saharan Africa
As we have noted, access levels in sub-Saharan Africa are low, hovering in the range of 25-50%, and they are expected to remain so for decades as the rate at which new connections are made lags population growth. But even with its growing population, Africa remains relatively sparsely populated, and African electricity markets are small, depriving them of India-like economies of scale. African economies and financial markets are likewise small. These factors weigh on energy infrastructure investment, and contribute to relatively high bulk grid electricity costs, compounded for consumers by the high cost of distributing electricity in its sparsely populated rural areas.
Off-grid technologies therefore play a more prominent role in sub-Saharan Africa than India. Many governments have incorporated off-grid elements into their overall electrification strategies – assisted by professional planners, some using sophisticated geospatial planning platforms.[3]
The Integrated Distribution Framework
In 2019, to help inform energy access policy and programs in sub-Saharan Africa and elsewhere, the Rockefeller Foundation, in partnership with MIT, assembled the Global Commission to End Energy Poverty.[4] Focusing initially on electricity because of its close connection to economic development, the Commission has sought to identify successes in ending energy poverty from around the world, analyzing best practices and building a consensus for global action. Among other things, it has promulgated a set of principles under the banner of the Integrated Distribution Framework (IDF) (GCEEP 2020) to help shape policy in low access countries.
The IDF focuses on the electricity distribution segment rather than transmission or generation. This is the part of the electricity system that consumers interact with in their daily lives comprising meters, wires, and the short connecting lines that carry power from the transmission network, and the generating stations that supply it. Transmission and generation investments are generally self-contained and carefully planned, and investor returns are relatively predictable – and are therefore they are typically paced not by a lack of investor appetite, but rather by investor confidence in distribution utilities to be a reliable downstream off-takers. In developing countries, where utilities commonly experience government pressure to expand into rural areas while providing service at unrealistically low tariffs, they seldom are. Indeed, stretched thin under such pressure, the majority are unable to invest adequately in either expansion or maintenance, and their customers, dissatisfied with the low reliability and quality of service they receive – or simply too poor to pay – complete a destructive cycle that ensures the chronic failure of the segment. Distribution is therefore the persistent access bottleneck, and making distribution work is therefore central to achieving universal access to electricity, and ultimately to ending energy poverty. The so-called viability gap between the total remuneration that distributors (including the providers of off-grid technologies) require in order to deliver reliable service and the revenues they can expect to receive from their customers, some of whom cannot pay anything – must be somehow filled for the utility to be viable. This generally requires a combination of two things: that utilities raise additional revenues from mainly industrial and urban customers (in order to cross-subsidize rural service), and governments provide grants or very low-cost loans (thereby directly subsidizing service) to utilities and off-grid providers to offset what would otherwise be unsustainable losses. To help reduce the subsidy burden as much as possible, lower cost off-grid connections should be used where grid service is too expensive.
The IDF rests on four deceptively simple principles designed to guide governments in the process of expanding service to the poor without undermining service overall:
(1) A commitment to universal access that leaves no one behind, and includes permanence of supply and the existence of a utility-like entity with ultimate responsibility for providing access to everyone irrespective of wealth, in a defined territory.
(2) Efficient and coordinated integration of on- and off-grid solutions (including grid extension, mini-grids and stand-alone systems) linked through integrated planning and appropriate business models for all types of consumers whether rural, urban, industrial or residential.
(3) A financially viable business model for the overall distribution system combining on- and off-grid approaches typically in the form of a concession that provides legal security and ensures the participation of external, mostly private investors, and may include subsidies for viability gap funding.
(4) A focus on economic development to ensure that electrification produces broad socio-economic benefits including expanded access to critical public services such as health and education, and economically beneficial end-uses.
With help from the Commission, the IDF has now been incorporated into the plans and programs of numerous countries.[5]
The IDF helps to dispel the unhelpful perception of a competition between on- and off-grid approaches – both are needed, and in a measure that will change over time as wealth increases and needs change. The overall conception is that coexistence should be encouraged to enable rapid service expansion at the least possible cost, but coordinated by a single utility-like entity to avoid wasted investment. The IDF also posits that service permanence must be back-stopped, so to speak, by the utility in the sense that if a private off-grid supplier fails to offer or maintain reliable service, then the utility must assume responsibility for providing it (by on- or off-grid means). Moreover, as default-provider and provider-of-last-resort, the utility must clearly exist within a financially viable regime – when necessary, receiving additional remuneration from the government to cover the cost of extending service to rural areas, and meeting obligations that are not covered through billing, such as providing free or below-cost service to economically disadvantaged consumers. Under the IDF, the government and utility further assume joint responsibility for planning service expansion in a way that provides for both residential service, and service to economically productive industry in rural areas.
One implication of such a cooperative arrangement is that the continued viability of the utility depends on the financial capacity and good behavior of the government itself. Implicitly, if the government lacks the financial resources to subsidize, or otherwise cannot be relied upon, then the shortfall, or viability gap, must be guaranteed in some way by a third party such as a development bank with concessional funding in the form of a concessional loan, or grant to the government. A key finding of the Global Commission to End Energy Poverty is that the amount of funding made available by wealthy countries to developing countries with high levels of chronic energy poverty is far too low.
Measuring the Financial Gap
To shed light on the overall and relative scales of private, government, and concessional funding required, the Global Commission recently developed a multi-dimensional Electricity Access Index (Perez-Arriaga 2022). On its financial axis, the index compares a country’s rate of historical investment in distribution with the rate that would be needed, based on a model calculation, to achieve universal access by 2030 – referred to as the “adequacy” of investment.[6] The model calculation includes the share of private, government and concessional capital that must be deployed. To date, this has only been done for a small number of countries – but it is clear from these that the present level of investment, and notably the concessional portion, is far below the required level. An unavoidable conclusion is that the international donor community must be far more generous in supporting access programs. As noted above, to help minimize the burden on donors, planners should use modern geospatially referenced tools to help plan resilient, and affordable energy infrastructure using a combination of on- and off-grid technologies.[7]
Regional Cooperation for Resilience and Security of Supply
The affordability of the bulk electricity supply (i.e., the electricity that it produced by generators and delivered to distribution utilities via the transmission network), which depends strongly on market size and the economies of scale that it provides, also clearly influences the level of support that governments and external partners must provide to ensure end consumer affordability. To achieve economies of scale, small countries must engage in regional trade in electricity by connecting their transmission networks with their neighbors in bilateral arrangements, or via multi-country power pools (GCEEP 2020). This also naturally engenders diversity of supply as different countries develop resources such as hydro, solar, and wind according to their unique access to such resources, and increases supply resiliency. Diversity and scale of supply and demand also lessen the need for energy storage on the grid, and thereby further help reduce supply cost in solar- and wind-intensive systems. Despite this, and despite the extensive positive experience in other parts of the world, progress in establishing cross-border trade in electricity in Africa has been much slower than elsewhere.[8] Governments of small low-access countries should more aggressively pursue cross-border trade and regional integration of their electricity systems to support access programs and prepare them for a low carbon, electrified future.
The ongoing work described briefly here, as well as other private, multilateral and government initiatives cast a hopeful light. Despite recent Covid and war-related reversals, and the financial stress created by deglobalization, progress over the long term globally in ending energy poverty in the developing world has been uneven, but also unmistakable. Over the past two decades, the number of people lacking access to electricity outside Africa has been reduced by nearly a billion to roughly 200m. Within Africa over the same period, however, the number of unelectrified has continued to increase as population growth steadily outpaces new, mainly rural connections. The introduction of off-grid solar technologies has helped to slow this increase, but to reverse it will require a massive expansion of access programs making use of these technologies, as well as grid extension. Our essential point is that electricity is essential to modern life and living standards, and cannot be thought of as optional for the poor. It is essential for everyone and embedded in our economies, and must be provided in such a way that ensures that service is reliable, affordable and viable in the long-term everywhere. We have offered a guide to governments in the form of the IDF.
Although we have not emphasized it here, despite recent gains in electricity access in most parts of the world, access to clean cooking technologies has increased at an unacceptably slow pace owing mainly to a lack of affordable options to so-called traditional fuels such as wood and dung. We note, however, that the rapid advance of electrification, and declining renewable generation costs are making electrified cooking a new option for many. We see this as an important recent development, especially for developing countries with abundant renewable energy resources where many now depend on traditional fuels with grave consequences for their health and safety.
We also emphasize that, as evidenced by the rapid growth of renewable generation in developing countries, the objective of providing modern energy to all humanity, and along with it, prosperity and hope for the future, does not have to be in conflict with climate change mitigation efforts. A low carbon global economy with universal access to modern energy is clearly possible. Bringing it about, however, will require a mix of discipline on the part of political leaders and unprecedented generosity on the part of the international community to ensure that affordable low-carbon electricity service is made available to all.
References:
Isherwood, B., Hancock, R. 1979: “Household Expenditure on Fuel: Distributional Aspects”. London: Economic Adviser’s Office.
IEA, IRENA, UNSD, World Bank, WHO. 2021. “Tracking SDG 7: The Energy Progress Report”. World Bank, Washington DC. © World Bank. License: Creative Commons Attribution – NonCommercial 3.0 IGO (CC BY-NC 3.0 IGO).
IEA 2020, “Defining energy access: 2020 methodology”, IEA, Paris.
IEA 2020 (2), “India 2020”, IEA, Paris.
Jacquot, G., Perez-Arriaga, I., Stoner, R. 2021, “Reaching Universal Energy Access in sub-Saharan Africa: The Promises of Pay-As-You-Go Business Models Under Comprehensive Electrification Planning”, Global Commission to End Energy Poverty Working Paper Series.
Moss, T., Bazilian, M., Blimpo, M., Culver, L., Kincer, J., Mahadeevan, M., Modi, V., Mutiso, R., Sivaram, V., Taneja, J., Thurber, M., Urpelainen, J., Webber, M., Muhwezi, B., 2021 “Raising Global Energy Ambitions: The 1000 kWh Modern Energy Minimum”, Energy Growth Hub.
MIT 2022, “The Future of Energy Storage: An Interdisciplinary MIT Study”, MIT, Cambridge USA.
GCEEP 2020, “Global Commission to End Energy Poverty 2020 Report – Electricity Access”.
Perez-Arriaga, I., Diaz-Pastor, S., Mastropietro, P., Abajo, C. 2022, “The Electricity Access Index Methodology and Preliminary Findings”, Global Commission to End Energy Poverty Working Paper,
Abajo, C., Diaz-Pastor, S., Gonzales, A., Perez-Arriaga, I. 2020, “A Business Plan to Achieve Full Electrification in Rwanda Under the Integrated Distribution Framework (IDF)”, Global Commission to End Energy Poverty Working Paper.
Figures:
Figure 1a. IEA, Global population without access to electricity by region, 2000-2021, IEA, Paris used with permission.
Figure 1b. IEA, Global population without access to clean cooking by region, 2000-2021, IEA, Paris used with permission.
[1] For countries with excess generating capacity, including many in Africa, electric cooking represents an important potential load that can help to offset fixed generation costs. This can have a beneficial impact on consumer costs if the savings are not overwhelmed by any additional cost associated with upgrading the distribution network.
[2] Taking $2,500 as a target minimum household income level (roughly in line with the median household income in a lower middle-income country), the MEM offers per capita consumption of 1,000 kWh per year as an appropriate minimum benchmark based on the established correlation between household income and economy-wide electricity consumption.
[3] See for example, WAYA Energy.
[4] The Commission is co-chaired by Rockefeller President, Raj Shah, Emeritus MIT Professor and former US Secretary of Energy, Ernest Moniz, and Akinwumi Adesina, the President of the African Development Bank. Its members include CEOs of major international firms, the heads of many of the world’s leading bilateral and multilateral development agencies, as well as the leaders of multilateral agencies leading global energy-related programs, including Power Africa, the IEA, UNECA, IRENA and SEforALL. The author is also a member, and serves as secretary and co-director of research.
[5] See for example (Abajo 2020).
[6] On a second axis, the index measures investment “efficiency” based on an expert assessment of measures linked to the IDF.
[7] It must be acknowledged that while geospatial tools can help to minimize the cost of achieving universal access to electricity, political leaders must also account for public opinion, and other socio-political factors in ways that may shift the relative roles played by on- and off-grid technologies. A preference for grid-electrification is common, and often well-justified in terms of physical permanence and economic impact, if it is within the government’s capacity to provide it. If not, then off-grid technologies should be considered, recognizing that they may displaced by the grid in the future.
[8] Regional, including international and subnational trade via power pools is well-established in North America and Europe, and Latin America, for example, where it plays a vital role in maintaining price stability and system resilience.