Powering Poverty Reduction

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In its paper, Powering Poverty Reduction, launched at the International Conference for Renewable Energies in Bonn 2004, ITDGPractical Action called for international policies that consider the needs of the poor and ensure that appropriate, workable and renewable services are promoted. ITDG's paper, Powering Poverty Reduction

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· Renewable energies: (l-r) Sri Lankan farmer with biogas tank and slurry pit - Waterfall supplying micro hydro plant - Woman cooking in Sudan (© Nigel Bruce) - Wind turbine in Sri Lanka

Executive summary
Why Renewables 2004 must address poverty
Failure of centralised energy to reach millions of the poor
Expanding energy choices for the poor
Priority concerns for energy and poverty
Climate change a Northern problem with a Southern victim
Need for appropriate local renewables for poverty alleviation
Pro-poor Policy Agenda
Case studies

Executive summary

"In bringing together the key decision-makers from the fields of energy, environment, development and planning, the conference will address key challenges in sustainable development such as access to energy for the poor and the protection of the global climate."

Renewables 2004 conference announcement

The ministerial conference Renewables 2004 being held in Bonn on 1-4 June provides an opportunity to reach ‘win-win’ results on reducing poverty and protecting the environment. The conference must commit to clear poverty-focused targets for increasing poor people’s access to energy. The international community needs to make appropriate, affordable and decentralised energy services available to the poor if it is to achieve the Millennium Development Goals of reducing global poverty. Failure to grasp this opportunity will further marginalise the world’s poorest people from the benefits of energy technology and put further pressure on the planet’s dwindling resources.

More than a third of humanity, 2.4 billion people, use biomass - wood, dung, crop waste - for their basic energy needs; cooking. By 2030 this will increase to 2.6 billion. The burning of this fuel and coal in poorly ventilated homes is responsible for the deaths of 1.6 million people a year, mainly children and women. In Africa 80% of the population rely primarily on biomass for their domestic needs.

More than a century after the invention of the light bulb, a quarter of humanity, 1.6 billion people, have no access to electricity. Some 99% of these people live in developing countries. Four out of five of them live in rural areas. On current trends there will still be 1.4 billion people without electricity by 2030.

Providing clean modern energy services to poor communities will require the expansion of choice of energy options, including conventional and non-conventional sources. Modern renewable energy technologies can expand the energy choices available to the millions of people living without electricity or clean fuels. They can also offer a mix of decentralised energy sources to increase energy security as well as economic and social benefits.

However, purely market-driven and supply-led approaches to energy delivery, which promote mainly Northern renewable technologies, often do not reach the poor, leaving them with insufficient resources to escape poverty.

At the Bonn International Conference for Renewable Energies ITDGPractical Action is calling for international policies that consider the needs of the poor and ensure that appropriate, workable and affordable renewable services are promoted.

Pro-poor Policy Agenda:

Put energy at the heart of poverty reduction strategies
Provide aid support to sustainable energy options for the poor
Develop financing mechanisms to reach the grass roots
Increase national capacity for sustainable energy
Leverage private sector partnerships to target the poor
Engage the poor as active partners in delivering change
Best practice knowledge sharing

Why Renewables 2004 must address poverty

Goals for a sustainable energy future in developing countries must be focused on achieving real poverty reduction for billions of people worldwide.

Energy is the lifeblood of human society and economics. It cooks the food we eat. It heats our schools. It lights our hospitals. It powers our industries. It keeps us warm - or cool - in our homes. And for a majority of the industrialised world, turning on a light switch is something that rarely, if ever, requires conscious thought. Yet over 1.6 billion people today have no access to electricity, including 80% of people in sub-Saharan Africa. In addition, more than a third of humanity, 2.4 billion people, use biomass - wood, dung, crop waste - for their basic energy needs of cooking and heating.

Access to basic, clean energy services is essential for sustainable development and poverty eradication, and provides major benefits in the areas of health, literacy and equity. The Millennium Development Goal of halving poverty will not be achieved without improved energy services to increase production and income, create jobs and reduce drudgery. Improving health and reducing death rates will not happen without energy for the refrigeration needed for vaccination campaigns and electric lighting for maternity services. The world’s greatest child killer, acute lower respiratory infection, will not be tackled without dealing with smoke from cooking fires in the home. Children will not study at night without light in their homes. Water will not be pumped or treated without energy.

Failure of centralised energy to reach millions of the poor

‘In all but the largest developing countries, the planning and implementation of large hydro projects are dominated by foreign consultants and contractors. The low-income majorities in these countries see few if any benefits from large hydro projects.’

International Rivers Network

Achieving the Millennium Development Goals means reaching the poorest and most isolated communities. Most of these people are in rural areas, though there is an increasing marginalised urban population who have no access to basic services. For many millions of poor people, centralised services have failed to deliver.

Conventional approaches to electrification, through centralised power plant and power line distribution, often by-pass rural communities because they are located too far away from the grid. Four out of five people without electricity live in rural areas of the developing world, mainly in South Asia and sub-Saharan Africa. Rural population densities are generally low, levels of demand are limited and the cost of providing an energy supply is high compared with densely populated areas. Electricity companies - public or private - have little or no incentive to provide services to these areas. According to the International Energy Agency, on current trends, while 75 million people per year will gain access to electricity over the next 20 years, there will be no resultant major change in the number of people lacking electricity. Investment in conventional power generating capacity in developing countries over the next three decades to meet this meagre target will be $2.1 trillion. Where centralised approaches have failed to reach the poorest communities, there is a need for a new approach based on small-scale, decentralised sustainable energy options.

Expanding energy choices for the poor

‘Poor people often have a limited choice of technologies that convert energy to useful services. The technologies most readily available to them are typically inefficient or low quality, so they end up paying much more per unit of useful energy service than the rich.’

UK Department for International Development

The main energy issues in rural and many urban areas in Africa, Asia and Latin America are the accessibility and affordability of clean, modern energy services. The poor have limited choice and they tend to depend on one type of fuel due to lack of secondary options. Wealthier people can afford the luxury of using a combination of energy types, and will often use a mix of biomass, electricity and liquid and gaseous fuels for different purposes. Providing clean modern energy services to poor communities will require the expansion of choice of energy options, including conventional and non-conventional sources. Within this context, renewable energy technologies can be the most cost effective solution and can be a powerful option for providing services for millions of currently unserved people.

However, it is essential that renewable energy technologies expand the choice of energy for poor people. By focusing on renewables alone we are in danger of restricting the already very limited choice of poor people. If renewables are promoted to the exclusion or detriment of expanding other options for the poor, then we are limiting development options for the poorest people on earth. For example, we cannot limit the poor to the use of biomass fuels for cooking simply because it is the renewable choice. We know that biomass fuel collection limits women’s economic and social activity, and that smoke from traditional biomass fuels leads to higher death rates in poor communities. We cannot expect poor communities to continue to use traditional fuels, when people in the industrialised world predominantly use clean (non-smoky) gas or electricity.

Priority concerns for energy and poverty

It is essential to deliver energy services which meet the priority needs of the poor.

It is essential that delivery of energy services to the poor meets the real development needs of the poor. Therefore successful delivery of energy should not be judged by the number of houses with a light bulb, but by the essential services delivered and the real needs met. Priorities for energy for poverty reduction are:

Sustainable energy for cooking and heating ?
More than a third of humanity, 2.4 billion people, burn biomass (wood, crop residues, charcoal and dung) for cooking and heating. Biomass energy accounts for approximately 80% of the current global renewable energy supply. Burnt on open fires and rudimentary stoves, the smoke produced from these fuels is the fourth greatest risk factor for death and disease in the world’s poorest countries, and is linked to 1.6 million deaths per year, a death toll greater than that caused by malaria. Many home-based enterprises, such as beer brewing or street foods production, increase a family’s dependence on biofuels and exposure to smoke. Simple, low-cost solutions to deadly indoor air pollution are available, including cleaner fuels, more efficient and better-ventilated stoves and switching to cleaner fuels (including kerosene, LPG, biogas).

Getting electricity to the rural poor ?
Eighty per cent of the 1.6 billion people who lack access to electricity live in rural areas that are far from transmission grids. Electricity is needed to power small industry and enterprise, run health clinics and light schools. Without it rural poverty will not be eradicated. The options for decentralised rural electrification are either through diesel-powered generators or renewable energy sources (eg micro-hydro, wind, solar PV or bio-diesel). Renewable energy has distinct advantages over diesel as it has much lower running costs, uses local energy sources, does not run out, is much cleaner and does not contribute to global warming. However, the up-front costs of the renewable option is often higher, and a prohibiting factor if appropriate financing is not available.

Energy to power production ?
The livelihoods of many small producers relying on energy are under threat because of inefficient production methods and diminishing natural fuel resources. For enterprises relying on heat, such as bakeries or brickyards, up to half of the production costs are on fuel. Options at the industrial level include more fuel-efficient kilns, turning waste into energy (such as sawdust, agro-waste or charcoal dust), and fuel diversification. Greater fuel efficiency will reduce costs, hence increasing long-term profitability, as well as improving the environmental impact of the enterprise.

Many enterprises in rural areas require motive energy to drive sawmills, pump water or grind grain. This can be achieved directly through water or wind turbines, or through diesel or biofuel motors.

Energy to modernise public services ?
More emphasis is required on energy services for public services like remote health centres, schools and water supply. Whether it is refrigeration for vaccines, lighting for maternity wards, pumping drinking water or lighting for evening study, there is no doubt that the impact in terms of quality of life of poor people in remote areas is very significant. Public services are central to achieving the Millennium Development Goals on health and education, and modern energy will be an essential input to modernising and expanding service provision.

Sustainable energy for the urban poor ?
Urbanisation is one of the defining trends of the developing world today. Many poor people living in cities depend on wood and charcoal for fuel, which contributes to both air pollution and deforestation. In the short to medium term, fossil fuels will continue to be the main alternative fuel for poor urban households. However, innovative technologies like solar water heaters, waste-to-energy and biogas need to be further developed for urban use to deliver sustainable long-term solutions.

Climate change a Northern problem with a Southern victim

‘The WSSD was not successful in bringing the world closer to achieving the goals of poverty eradication, increasing gender equity, providing all people with clean and affordable energy services or avoiding dangerous climate change. This failure was a tremendous let-down to billions of people.’

CURES Declaration

Another great challenge faced by the world is the prospect of catastrophic climate change if present trends of fuel consumption continue. Heat-trapping gases such as carbon dioxide and methane, that keep more of the sun’s warming energy in the earth’s atmosphere, cause climate change. This is primarily caused by the industrialised world’s fossil fuel consumption, although developing country emissions are rising quickly. Per capita emissions of developed countries are far higher than those of developing countries: the average American produced 20 tonnes of CO2 in 1998, compared to an Indian average of less than one tonne.

The Intergovernmental Panel on Climate Change projects a substantial global temperature rise and sea level increase, and more extreme weather events such as floods, hurricanes, drought and heatwaves. Those most vulnerable to these changes live in the developing world.

Developing countries will feel these impacts most acutely, even though they also have the least responsibility for climate change. Unexpected weather events are growing more extreme and more frequent, as shown in events ranging from the Orissa Cyclone in India and floods in Mozambique to Hurricane Mitch in Central America. Rising sea levels are increasing salt levels in low-lying cropland in Tuvalu and making it unusable.

Our aim must be to achieve global climate equity, allowing the South to develop its way out of poverty whilst reducing the devastating impact of Northern over-consumption. Models such as ‘contract and converge’ (C&C) offer a way towards equality. In the C&C approach, Northern countries ‘contract’ their greenhouse emissions, while poorer countries are allowed to increase their emissions up to a point where both Northern and Southern countries have an equal per capita emissions rate. This approach admits that poor countries will require to continue to use fossil fuels for development purposes for the time being, but at the same time must be assisted to leapfrog to cleaner energy technologies as rapidly as possible. This provides the opportunity for developing countries to expand the choice of energy options available to poor communities.

Need for appropriate local renewables for poverty alleviation

Locally manufactured renewable energy technologies, using local resources, managed within the communities themselves can empower communities to develop in a sustainable manner.

Energy is fundamental to the great challenge facing the world at the beginning of the 21st century: how to eliminate the obscene levels of poverty without further polluting the planet or worsening climate change. These two goals need not be in conflict - indeed, they can be achieved in tandem. There is a huge potential for renewable energy to provide clean, appropriate and efficient energy to many of the world’s poorest people. Millions can be lifted out of poverty without costing the earth, with the help of clean sustainable energy.

We should not assume that renewable energy technologies mean Northern technologies, such as photovoltaic cells or high efficiency wind or hydro turbines - these are high cost, and can tie poor countries further into a dependency culture. Promotion of such technologies will usually focus on the segments of the markets which can afford their products, and are not interested in markets that have little buying power. Nonetheless, there are markets there among the lower income communities, which can be made to work by offering different options if appropriate policy and financing are in place.

Often appropriate locally-developed technologies for delivering energy services are by far the most appropriate solution. We should not assume that local technologies mean poor quality. Quality assurance can be controlled for local technologies and ‘lower-tech’ solutions are often the appropriate solutions for poor people, as they can be maintained locally and managed locally. There are a number of case examples illustrating good practice, including micro hydro power, small wind battery chargers, biogas units and clean cooking technologies. Decentralised local renewable energy options can:

make efficient use of local energy and human resources to provide hydro, solar, biomass, wind etc.
avoid the negative environmental and social impacts of large-scale projects, and remove dependency on costly supplies of fossil fuels or grid power
make use of and develop indigenous manufacturing and technical capability
be controlled by local communities and their organisations, enabling them to identify their own needs

When implemented in an appropriate manner, renewable energy services can contribute significantly to empowering communities towards development. Relatively small investments are needed to produce or improve technologies that are within the reach of low-income communities.

Because of the extreme poverty of people without access to modern energy services, in many cases market-based solutions have to be complemented by intelligent subsidies or appropriate financing mechanisms which better target the poor. For example, in some countries there are blanket subsidies on options like solar panels, which benefit mainly the better off. A lot more could be done for the poor if subsidies and financing were better targeted. There are effective examples of pro-poor financing, such as the revolving fund for micro-hydro in Peru or the Biogas Support Programme in Nepal (see case studies 3 and 5).

There are many examples of good practice in this field. Success stories should be replicated, especially through South-South transfer of technologies and experience. The case studies in this paper provide clear illustrations of successful use of locally produced renewable energy technologies for poor communities.

Pro-poor Policy Agenda

‘When financial concessions are offered to multinational companies they are treated as incentives, while the financial aid given to rural poor is termed as subsidy.’

1. Put energy at the heart of poverty reduction strategies
There is general agreement on the need for a ‘joined-up’ approach to energy and poverty reduction. It is essential that energy strategies for poor people are incorporated into national and international development frameworks. Currently where national Poverty Reduction Strategy Papers (PRSPs) in developing countries address energy, they generally consider only centralised power production and fuel supply. It is essential that PRSPs should explicitly state the energy services required to achieve their poverty reduction goals.

2. Provide aid support to sustainable energy options for the poor
Bonn Renewables 2004 provides an opportunity for governments to commit grant funding to make a significant impact on the lives of the world’s poorest and most vulnerable communities. There are two key areas where aid funding is required to improve energy services for poverty reduction:

Development assistance must recognise that the principal energy need of the poor is for cooking. Bi-lateral and multi-lateral agencies should therefore provide increased support for clean cooking strategies in order to reduce deaths from acute respiratory infection in children aged under five years. It is estimated that $500 million per year will be required to put clean cooking technologies in every home by 2015.

The second priority must be to increase the access to off-grid electricity in rural areas. The total grant funding from aid sources to subsidise the access of one billion people to off-grid electricity would average approximately $300 per electrical connection. The majority of this funding would need to be spent in Africa and South Asia. Assuming an average household size of five people, the total cost would be of the order of $4.6 billion a year until 2015. The annual global subsidy for conventional energy is currently $250-300 billion. Increased aid can help deliver this figure - and it would be highly undesirable for it to be added to the existing burden of debt of the poorest countries.

3. Develop financing mechanisms to reach the grass roots
A critical factor in making sustainable, decentralised energy options accessible to poor people is affordability. The up-front cost of new technologies, whether an improved cook stove or a micro-hydro power plant, is extremely high for poor people. Appropriate financing and subsidies can give low-income communities, households or entrepreneurs the ability to invest in new energy technologies. Achieving this aim will require a sustained effort by the international community, as well as new local partnerships involving NGOs and private sector. There are models illustrating good practice that can be replicated. Lessons can be learnt from these success stories to create ‘smarter’ financing models.

ITDGPractical Action supports the G8 Renewable Energy Task Force (which is yet to be endorsed by the G8) and the UN Development Programme to call for changes in existing financing mechanisms in order to target poor people specifically; these programmes include the Global Environmental Facility (GEF) and the Clean Development Mechanism (CDM). The World Bank should continue to have a leading role through its people focused initiatives such as Community Driven Development and the Social Investment Fund.

4. Increase national capacity for sustainable energy
Developing countries need support in creating an environment in which renewable and sustainable energy technology can be effectively developed. The most urgent areas for capacity building in countries are:

Basic national assessments of local resources for renewable energy in order to plan for renewable energy development. Donor agencies should see this as a priority for external assistance.
Technical standards for quality assurance in the renewable energy sector, to ensure reliability and consumer confidence in the technologies. Standards of service of electrical utilities may not be appropriate in areas of very low demand, and a lower quality provision (for example based on battery charging) may provide a great improvement in energy service at a lower cost than conventional grid extension.
Business and technical training and strengthening of Business Development Service providers to support small and medium sized enterprise (SME) activity in renewable energy service and equipment supply.
Encouragement to local finance institutions to target renewable energy as a sound investment.

5. Leverage private sector partnerships to target the poor
While developed countries are leading the way in increasing the viability of renewable energy technologies, there is a clear need also to support the development of local technical skills and knowledge needed in developing countries. The private sector - particularly in the technology and banking sectors - needs to be encouraged to form local partnerships to supply services which are accessible and appropriate to the poor. Again, mechanisms such as the CDM and the GEF should lead international policy by creating opportunities and reducing risks for the private sector to work along side entrepreneurs in developing countries.

6. Engage the poor as active partners in delivering change
People living in poverty must have their say in the prioritisation of energy options if energy policy and services are to meet their needs and provide long term solutions. In energy sector planning, as elsewhere, the poor themselves are too frequently the invisible stakeholders. Evidence shows that if the primary stakeholders are involved in the design and implementation of development initiatives, these activities are much more likely to bring prolonged benefits. Local communities possess invaluable local expertise that should be taken into account in defining and implementing any energy project. Projects characterised by high levels of community engagement and involvement in infrastructure investment decisions will typically generate a greater sense of community empowerment. This will ensure that improvements are tailored to a community’s specific needs, and create a much higher probability that the improvements will be well maintained by the community after installation.

If the energy sector is linked with the poverty reduction strategy, by placing more priority to the end-use development aspect, there will be greater benefit for the poor and the renewable energy system will be more sustainable.

In addition, the participation of the local government, as well as the beneficiaries, at the time of plan formulation or project development can develop the sense of local ownership and increase the probability of government support.

7. Best practice knowledge sharing
Learning from past experience will be a critical factor increasing the wide-scale uptake and success of decentralised renewable energy technologies for poverty reduction. An increase in South-South transfer of technology, know-how and experiences will be essential for effective expansion and increased benefit across the developing world. The case studies presented in the following section provide effective illustrations of technologies, policies, financing mechanisms and impact.

Case studies