FIGURE 3: Impacts of unreliable infrastructure (World Bank, 2007) Service problem: Electricity Delay in obtaining electricity connection (days)
Sub-Saharan Africa 79.9 days Developing countries 27.5 days Electrical outages (days per year)
More than just a light
Sub-Saharan Africa 90.9 days Developing countries 28.7 days Value of lost output due to electrical outages (percent of turnover)
%
6.1
Sub-Saharan Africa
%
4.4
Developing countries
Firms maintaining own generation equipment (percent of total)
%
47.5
Sub-Saharan Africa
over the period – or around 10% of the total investment in the energy sector each year (according to the IEA reference case). It is roughly in line with experiences from Brazil and South Africa that show that about US$2,000 per household is required. While the bulk of the investment in the IEA scenario goes to grid extensions and grid-tied generation, there is a large role for mini-grids (but not mini-financing!) to serve rural populations. Overall, the existing macro investment calculations cannot reflect the varied and complex investment requirements and environments. In addition, calculating this figure for electricity is a simpler task than doing so for modern fuels (where there are more substitutability issues, cultural and gender issues, etc.). It bears repeating that this issue will require a large suite of financial mechanisms with a focus on addressing a large array of real and perceived risks.
%
31.8
Developing countries
Council for Sustainable Development, the World Energy Council, and the World Economic Forum, aiming to demonstrate business-oriented approaches to modern energy provision at community level which are scaleable, replicable, and commercially and environmentally sustainable. All of these programmes and campaigns will be better implemented if they are grounded in national policies. Those of us working in international organizations need to support national and regional plans and targets. A recent UNDP paper showed that 68 developing countries have electricity targets (Fig. 1), but in order to meet their targets, these countries will require financial support, capacity development, and better regulation and governance structures.
Money matters The financial implications of universal energy access are huge, and are comprehensively described in the World Energy Outlook 2009, published by the International Energy Agency (IEA). The agency looked at a specific universal energy (electricity) access scenario, and the results showed the need for around US$800 billion over the next two decades (Fig. 2). This figure equates to approximately US$40 billion per year
It is essential to remember that providing reliable and secure energy services to those currently without access is not simply about supplying electricity for lighting or improved cooking stoves. To promote economic development and growth, these energy services need to be put to productive uses that positively affect livelihoods, providing power for industry, improving health care and education, and improving transportation. Furthermore, simply supplying the power source will be insufficient if the necessary equipment and appliances are not deployed. Finally, sustainable energy access will require a model that generates local revenues to pay for modern energy services. Electricity not only provides lighting that permits children to study at night, it allows for the refrigeration of perishable agricultural products, and increased value added through the first steps of industrialization. Experience has repeatedly shown that subsidy schemes cannot be sustained over the long-term. The ultimate goal must be a market-based approach. However, many energy markets are distorted, and political intervention is common. For example, in India, certain states provide free electricity to farmers. This has resulted in huge government deficits, wastage of scarce groundwater resources on inefficient irrigation, and a lack of funding for enhanced electrification, upgrading of power plants, and improvement of transmission and electricity grids elsewhere. Energy subsidies are clearly not the optimal way to solve access problems. It is clear that access to energy is about more than quantity. Quality is essential. This is true for both electricity and fuels. As an example, high costs and unreliable electricity service constrain economic activity in many countries, and constitute a severe obstacle to business operation and growth. The World Bank indicators (Fig. 3) show the scale of the issue in terms of connection times, outages, the value of lost output, and the need for onsite generation. High transaction and unit investment costs constrain service provision in rural areas because of low demand and dispersed populations. Utilities that are commercially and financially weak cannot drive access expansion of the network, but nevertheless occupy a monopoly position in many countries. South Africa is a typical case, where very low electricity prices have resulted in under-investment, followed ÂŽ
MakingIt 27