Is energy for all a basic right or an impossible dream?
January 25, 2013
Much of the talk here in Davos has been about an energy revolution. Not the long expected rise of renewables but the unbelievably fast emergence of fracking in the US. In just 12 months, gas has overtaken coal as the main source of power generation, and with gas prices now one third of that in Europe and one fifth of those in Asia, it's providing the US economy with a very welcome boom. There is even talk of energy self-sufficiency and exports. At the very least, it will help the US remain competitive on the global stage, underpin economic recovery and, in the short term, is driving a one-off reduction in carbon emissions.
However, none of this is going to help the 1.3 billion people who are not connected to the grid, mainly in Africa and developing Asia. For sure, expansion of grid infrastructure will reach some of these - perhaps as many as 550 million - but this could take decades. And it ignores the remaining 800 million who will never be reached. So it's clear that new approaches, and new business models, are needed to fully tackle energy access. As Ban-Ki Moon said at the conclusion of the work of the influential UN Sustainable Energy for All initiative, new partnerships with the private sector are needed.
This was the topic of a session in Davos this week in which I participated. At first sight it was a slightly unusual gathering, who crossed the town on a cold morning to meet for an early breakfast. Not the usual international development or government representatives or the world's energy companies, although they were there, but a cross sector, cross border group made up of telecoms and technology groups, consumer electronics giants, renewables companies, donors and social entrepreneurs. The discussion was rich, and focused on a cross sector model that recognises the wider value chain when humans are connected to energy. The development benefits are well understood and much documented, from education and welfare to health, hygiene and enterprise, but less often understood and usually understated are the new markets it creates. With electricity, people will buy a mobile phone, replace kerosene lighting with LED's, and in time purchase a fridge, a cooker and have the means to power a small business. And it is this which creates development opportunities for poor households, and also new markets for the providers of handsets and lighting and consumer electronics. Not to forget business distribution and maintenance models that bring in local entrepreneurs who understand local markets. Take Brazil for example: after 14 million people were connected to the grid, 2.2 million televisions and 2.1 million fridges were sold in the subsequent seven years.
Everyone agreed that the technologies exist today to give off-grid access to energy. And there is ample evidence that the poor are prepared to pay for energy; indeed, the poor spend US$37 billion a year on power, largely in the form of kerosene, equivalent to a US$150 annual bill per household. What is lacking are the enabling policies, business and distribution models that reach the last mile, financing, and high transaction costs of small scale energy deployment and the need to de-risk projects.
No wonder, therefore, that there was such interest in this topic. An approach that brings together all of those that will benefit from energy access, under an integrated business model, could really have a transformational impact on previously hard to reach communities - the rural poor. And in turn also deal with many of the barriers outlined above.
So I left the session feeling a sense of hope, confidence and expectation: hope that the agreements reached in Davos survive the journeys back home; confidence that a possible solution to energy access has been found; and high expectations of the pilot just starting in Kenya that could show the world how everyone can have energy.