Energy for the poorest – going beyond the reach of markets.


July 24th, 2014

I was lucky enough to be part of a panel discussion today marking the European launch of the UN Decade for Sustainable Energy for All. The event was hosted by the Scottish Government in Glasgow as a cultural side event to the Commonwealth Games.

Scotland is an interesting place to host such a discussion. It’s a country with some fairly remote, small and difficult to serve communities in the highlands and islands, for whom a connection to the national grid would be prohibitively expensive – mirroring some of the problems faced by rural communities in the developing world.

One such example is the Isle of Eigg, off the west coast of Scotland, which only got 24 hour electricity in 2008. You can read more about this on their great website: islands going green but, in short, universal access to energy on Eigg was achieved through the efforts of the Eigg Heritage Trust via a community-owned company Eigg Electric. Their scheme is a hybrid one in that it delivers power via a mini grid attached to 3 renewable sources (hydro power, wind and solar) plus a diesel back-up generator. It was financed from a mixture of sources including the European Regional Development Fund, the Big Lottery, HIE Lochaber, the Highlands and Islands Community Energy Company, the Scottish Households Renewables Initiative, the Energy Saving Trust, the Highland Council, the Isle of Eigg Heritage Trust and the residents of the Isle of Eigg themselves.

Technicians George and Lisungu working on the MEGA project in Malawi

At 184kw of total renewable generating capacity, 11 km of grid, and a few hundred consumers the Eigg system is not dissimilar to the sort of mini grid projects Practical Action would work on in places like Malawi. What’s particularly interesting is that it is owned and operated by a community organisation and that its capital costs were financed (judging from the list above) at least in part from grant funds.

Why is that interesting? Because at the moment there is a largely unchallenged assumption in many circles that the additional energy infrastructure needed to ensure universal access by 2030 will be funded through the actions of markets responding to unmet demand. All we need to do, the narrative goes, is get regulation right, remove market barriers, perhaps do a bit of capacity building and then stand back!

That assumption does hold true to an extent, in certain circumstances – witness the progress made in Bangladesh with over 4 million solar home systems installed since 2004. But even in this great success story, if you dig a little deeper, you find the assumption holds true only for a certain segment of the ‘market’. As a recent World Bank study shows, people who install solar home systems in Bangladesh have, on average, twice the landholding and three times the non-land assets of those who do not. In other words the poorest and most marginalised are still being left behind (not surprising when a solar home system costs around $450).

In terms of up front capital costs, the gap between what people can afford and what systems actually cost gets much bigger when you move from solar lamps or solar home systems to mini grids with the capacity to power more than just a few lamps. Which was why, I guess, the people of the Isle of Eigg’s energy needs were not resolved by a market responding to unmet need, but through the actions of their community organisation and the availability of grant financing.

The Isle of Eigg is not a unique example in the ‘developed’ world of how remote rural communities have eventually got access to electricity. In the US difficult to reach rural communities were connected to electricity in the 1930s and 1940s through the actions of farmers’ cooperatives and subsidised funding from the government. Indeed 11% of all electricity sold in the US today is still provided by those cooperatives, helping to connect the 16 million rural citizens living in places where it remains too difficult for commercial utilities to generate sufficient return to invest (see the NRECA website for further details).

We need to remember this experience when we make assumptions about how the goal of achieving universal energy access will be financed. Markets, the private sector and private finance will make a huge contribution to this process. But for the poorest and most difficult to reach, history in the ‘developed’ world shows that markets alone will not bridge the affordability gap.

In her contribution to the discussion at the launch of the UN Decade of Sustainable Energy for All today Lynne Featherstone, the UK Under-Secretary of State for International Development, emphasised a principle of ‘leaving no one behind’ as we pursue development. My main point in the same discussion was that, if we are to achieve that with respect to energy, if we are truly to ensure energy for all, then we cannot just leave everything to the market. There will still be an important role for civil society organisations and public finance.

One response to “Energy for the poorest – going beyond the reach of markets.”

  1. Md. A. Halim Miah Says:

    Many thanks to respectable author as shared experience with us his participation in the European launch of the UN Decade for Sustainable Energy for All. In this writing author has illustrated gaps in access to energy for all and in what way we could reach a majority people who are deprived from energy with pointing the American case of cooperative system of reaching 16 million rural citizens , which is 11% of total electricity sold in USA. This is very fascinating information for country like Bangladesh where very low rate of electricity consumption ( Per capita165.32 KWh, BBS, 2010) and yet about half of the hh are lagging behind to get connection of electricity. It is about 17.5% people who are extreme poor earn 25 taka a day ( Less than one third of a $), still they are fighting for meeting their hunger let alone access to safe housing, medication and sanitation and education. Bangladesh has observed 9th August National Energy Day and theme of the year is ‘be careful to wastage of natural gas’ , a major source of electricity production and fuel source of the nation. The controversial issue is though its major source but still a fortunate number of people of Bangladesh are major consumers of this energy source and poor and particularly extreme poor do not have access in this national resources and once this natural resources may be finished, which is not far but poor people may not be able to know that they were also owners of that natural resources! So lets talk about the energy justice for the poor and extreme poor as without accessing it other development rights could not be ensured for them.

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