Money Matters: what role for finance in achieving universal energy access?

This week saw key players from the energy world gather in Brooklyn, New York, at the SEforAll Forum to talk all things SDG7: that is, access to affordable, reliable, sustainable and modern energy for all by 2030. Overarching the vibrant panel discussions, a clear call has emerged: greater and more dynamic action is needed, and fast, if we are to achieve universal energy access on this tight timeline.

Energy access is vital to achieving nearly every sustainable development goal and progress on energy access acts as a barometer for development progress more broadly. Monday’s launch of the latest Global Tracking Framework, which looks at the state-of-play on energy efficiency, access and renewable energy, gives us food for thought…

The Global Tracking Framework update

The report, led by the World Bank Group and the International Energy Agency, confirms that global electricity poverty has declined only minimally from 1.1 billion (GTF 2015) to 1.06 billion (GTF 2017); while the number of people using traditional, solid fuels to cook has actually risen slightly to 3.04 billion, “indicating that efforts are lagging population growth”. For progress to move at the speed and scale required, the report asserts that we need to at least double our investment in modern renewables. But, is increased investment alone the answer?

Financing national energy access: a bottom up approach

Man and woman stand outside the Kalawa Financial Services Association in Kenya

The PPEO 2017 explores this question, using case study evidence gathered from 12 energy-poor communities across Bangladesh, Kenya and Togo. This brand new research, showcased by Practical Action for the first time at the SEforAll Forum this week, demonstrates that while the volume of finance does indeed need to be scaled up, we must delve deeper into understanding the types of finance and directions of financial flows that are key to planning for universal energy access at the national and global levels. Our analysis is unique in that it builds on poor people’s own preferences, and takes a holistic view across households, productive uses and community services.

Decentralised energy as the way forward

Villagers in Kitonyoni, Kenya, gather to discuss decentralised energy technologies. Credit: Sustainable Energy Research Group and Energy for Development.

This is particularly pertinent to the vast majority of those living in energy poverty today; poor rural populations who would best be served by the sorts of distributed energy (mini-grids and stand-alone systems) that receive a disproportionately small amount of the energy access financing pot – in comparison to the grid and in relation to their potential service provision. While World Bank funded power sector projects have an average timeline of nine years from conception to service delivery, research by Power for All demonstrates the vast benefits of decentralised systems; with mini-grids taking on average just four months to get up and running, while for solar-home-systems this is less than one month. According to our own modelling in the PPEO 2017, the distributed energy sector should account for a significant portion of future electricity access financing nationally; up to 80% in Bangladesh and 100% in Togo. At present just 25% of planned investments in Bangladesh, and 5% in Togo, will go towards distributed energy.

 

The PPEO 2017 also finds that:

  • Increasing national energy access financing for clean cooking to similar levels as for electricity will be key to empower energy-poor communities to use the very clean fuels (gas and electricity) they show a keen interest in.
  • Particularly in pre-commercial markets such as Togo, there is a real opportunity for the public sector to improve the policy and regulatory environment to better embrace distributed solutions, and encourage financial institutions to support consumer and enterprise loans more flexibly, so as to enable rapid market activation.
  • Concessional finance will play a vital role; and consideration of how best to deploy this will be important to help companies move up the ladder to scale and profitability, in order to bring energy access to more people.
  • To make further progress in already mature markets such as Kenya and Bangladesh, addressing barriers to accessing finance that are related to specific policies could help reduce the cost of distributed electricity and clean cooking solutions (including tax exemptions and streamlining of licensing requirements).
  • Inclusive energy access financing can actively promote gender equality. To enable women to participate meaningfully as consumers and entrepreneurs gendered norms around accessing small loans should be addressed, as should the impact of women’s caring responsibilities on their mobility and ability to participate in various markets and training.

Beyond Brooklyn: what next for SDG7?

Solar-powered irrigation provides smallholder farmers the water they need to cultivate crops in Gwanda, Zimbabwe

The PPEO 2017 and Global Tracking Framework agree that utilising the right tools and approaches takes us a step closer to bringing energy access to people more quickly, sustainably and affordably. By listening to the voices and preferences of energy poor communities, as the PPEO series has done, and by framing national planning processes and global financing mechanisms around the sorts of bottom-up approaches which put these priorities front and centre, SDG7 can be achieved. It has been immensely encouraging to see the voices of the rural energy-poor being elevated across the SEforAll forum this week; which has been undeniably multi-stakeholder, with actors from national governments and global institutions, civil society and the private sector rubbing shoulders and engaging in lively debate on the best way forward. One thing is for sure – to achieve the goal we are all aiming for, the elusive SDG7, this cross-sectoral dialogue must be continued well beyond Brooklyn, because no actor working alone will reach the light at the end of the tunnel.

 

One response to “Money Matters: what role for finance in achieving universal energy access?”

  1. peakaustria Says:

    not to forget the super cheap solar cookers…only aluminium foil is needed and some know how!

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