3 A’s of sustainable and affordable access to modern energy: Smart Energy Access

March 1st, 2017

3AsImproving energy access has been in the agenda for quite some time in the Agenda of development partners – State, donors and civil society. After the UN Secretary General called of Sustainable Energy Access for All (SEforAll in 2012), the agenda got hyped in almost all development partners menu. With its integration in Sustainable Development Goal, it has firmly established as one of development agenda worldwide. Awareness, affordability and availability are described here as three pillars of energy access that is sustainable and smart.

1. Awareness – Knowledge about and knowledge how to use, cognizance
Knowledge on ways and means how people understand their energy need and their access to it is a matter of their level of knowledge. A person’s ability to live a decent living in terms of health, safety, convenience and comfort and exploit potential to earn a decent living or exploit economic opportunities depends on knowledge and skill set owned in addition to assets (resources) at ones disposal. Since energy and device to use energy can impact heavily on one’s productivity, capacity to achieve her/his earning for living, importance of knowledge and awareness of existing options of energy access is immense. Another dimension of awareness in this regard is how the state or society supports or deters her/his access, which is equally important (politically) to ensure equitable energy access.
Therefore, awareness–knowledge at all level including policy makers, users and suppliers is essential for sustainable access to ensure optimum resource utilization in terms of attaining high impact at household national and global level. Competency to select and use the best technology/resource option means being able to acquire and operate based on unabated availability of technical and market information. The ultimate result of knowledge and awareness can be perceived to be willingness to invest at all level by users, state and global actors.

2. Affordability – Be able to buy, able to purchase or able to secure finance
Access to energy resource and device that are better efficient comes at a price. This price needs to be analysed in terms of capital investment and day to day operating costs. The better options are often associated with higher up-front capital requirement. They end of in saving in operating costs mainly fuel costs later. This requires summing-up up-front cost and operating cost to derive real cost of service. Life-cycle costing technology using appropriate discount rate can provide meaningful insights to help in making energy access option selection process. This analysis can be used by consumers, national policy makers and global actors, alike. However, consumers may select discount rate purely based on his financial costs, usually based on current projected market interest rate at which he will be able to source his funding requirements. National policy makers will need a different set of discount rates that takes into account parameters such as supply risks, political and social in addition to financial parameter alone. Further, global actors would add additional parameters like global environmental concern and other matters like world peace etc. while choosing a discount rate to make their decision.
Differentiating consumptive and productive use of energy from affordability aspect is also important. Often higher per unit cost can be affordable for productive use as costs are passed-on to final product costs. Amalgamation of productive use of energy with access for basic need will in effect provide opportunity to bring-down cost of basic energy access through cross-subsidy from productive use. Similarly, grants of various shape and size will impact the immediate affordability. Capital cost, operating cost grants are most common ones.
Financial analysis and life cycle cost of access is only a part of story; another side of coin from affordability point of view is access to finance. What is important to understand and realize is that affordability is not about being able to pay but it is institutional back up including mechanism for grant and loan that will make end-users able to afford. The socio-politico-economic perception and commitments will greatly impact people’s affordability.

3. Availability – Resources and devices are physically available in different size and quality to serve different energy needs. Resource availability is a factor that is governed by nature in tandem with human ingenuity in terms of harvesting technology and processes. However, availability of devices to enable use of resources is entirely made of parameters made by the society. Therefore, as it sounds availability of natural resources and devices for energy access may not be as simple as it sounds. Availability is matter of fact driven by geopolitical realities. Economic policies like pricing and tax and subsidies will determine immediate availability and long-term sustainability. Politically, it may sound attractive to subsidise primal energy access for poor, particularly in poor countries, however financing such a subsidy has always been a challenge. Difficulties in targeting such subsidies, transaction cost and financing the policy are some of the argument that will tend policy makers to look for alternatives. Energy access in the urban and rural areas varies widely in terms of access be it in quantity or in quality. Rural areas are mostly at the short-change side. Enhancing availability in the rural areas, therefore, warrants more importance for multiple reasons including reducing pressure on urban infrastructure and keeping rural economy rolling in addition to maintain geopolitical balance. Optimising resource utilisation, natural as well as financial, will hold the key to a balance and sustainable energy access. Use of various innovative financing instruments and market regulation should be the areas to look for to improve availability. A systemic analysis that comprises market (supply chain) enabling factors like governance and regulations and necessary services to avail energy such as after sales service, finance, insurance, road-access, human resource capacity to acquire and operate will be a way to start analysis and planning for availability.
On the whole, to achieve sustainable energy access, the mechanism and procedures of energy access need to be made “smart”. Use of existing and new technologies with maximum involvement of citizens politically and financially with innovative governance and administration to improve cost-effectiveness are some of the key components of “smart” energy access.

Vishwa Bhushan Amatya
Head of Programme, Energy
Practical Action South Asia Regional Office

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