I participated in a conference in Oslo this week titled Energy for All. The subject of energy access is relatively new to me, except in the context of climate change where Arvind Subramanian and I have concluded that short of unprecedented technological breakthroughs in both energy efficiency and low-carbon generation to meet the needs of people currently lacking electricity, the planet is cooked.
I found the conference, well, energizing. The Norwegians brought together an impressive array of well-informed and influential participants. UN secretary general Ban Ki-Moon opened the conference. There were two prime ministers (Meles of Ethiopia and Odinga of Kenya), representatives from Deutsche Bank and the CEO of the Norwegian energy company, plenty of African and Asian ministers (mines and energy; environment), the heads of power utilities, civil society advocates of all stripes, and the usual army of representatives from the UN and multilateral and bilateral funders.
But the big countries and big emitters were mostly absent. There was no one from China, India or Indonesia, and just one lone U.S. State Department representative (Carlos Pascual, former U.S. ambassador to Mexico previously with Brookings). Perhaps they weren’t much interested because the conference sub-title was “Financing Access for the Poor” ?
An upcoming report of the International Energy Agency includes this chapter, pre-released at the conference (full report not yet out), that says energy poverty afflicts almost 3 billion people, limiting their chances to be productive (work/study) as well as comfortable (heat their home etc.) and safe (childbirth is tough in the dark). The report estimates it will take $48 billion of investment a year for the next two decades to achieve universal access to modern energy. That’s five times the estimated current annual investment of $9 billion.
I remember similar estimates for the “cost” of getting all children in school and meeting other Millennium Development Goals. They are meant to be challenging but they can also be numbing. They sound really big - but of course they’re tiny compared to the world economy: Americans are expected to spend about $50 billion this year on their pets.
Regardless of the $$ number, I think it makes sense to include energy services for all in the next round of MDGs.
The focus was on access and the assumption was that this would be green energy – hydro and renewables primarily. But important issues related to cutting emissions were ignored. Nobody mentioned the lack of action on the G20 commitment to reduce fossil fuel subsidies. Nor did I hear any talk of carbon trading (not even about the Clean Development Mechanism) let alone carbon taxes. Energy access aficionados are definitely post-Copenhagen bottom-up thinkers.
But beyond cheerleading on energy for all, what can be done – about energy poverty -- and the risk to the climate if energy poverty is addressed via fossil fuels?
At a panel on the role of the private sector and international organizations in financing, Michael Liebreich of Bloomberg (advisor unit on energy) said wind power in Brazil is now just 6.5 cents per kilowatt hour (roughly half of the average U.S. cost for all types of generation) and that solar prices have dropped 70 percent in three years. Others said there’s plenty of capital in sovereign wealth funds and with institutional investors for renewable energy but not enough big projects to absorb it in Africa and Asia – and too much non-commercial risk.
The minister of energy from Malawi, speaking from the floor, complained that the bilaterals “don’t do” energy access. There was talk of feed-in tariffs and auctions in which bidders bid on how much subsidy they need. And for off-grid energy a recurring theme was getting microfinance to small local entrepreneurs to, for example, set up charging stations. The CEO of Liberia Electricity Corporation made a plea for the donor community to organize potential private investors to develop “bankable projects” that could be scaled up. Sounds to me like a GVF should be on the table – and included in the Green Climate Fund in Durban.
Speakers from the private sector referred often to the “enabling environment” mostly in the context of big hydro with adequate returns only after 20 years. But they seemed less concerned with it than did Sri Mulyani Indrawati of the World Bank, and much less concerned in the case of off-grid and mini-grid projects, where the issue seemed to be lack of scale and lack of local microfinance-style financing for those local entrepreneurs.
At a session on results-based financing for energy access, Norway’s minister of environment and international development (interesting combination of roles – wave of the future?) endorsed ideas like cash on delivery aid; Oliver Knight of the World Bank gave an excellent presentation of the various results-based instruments and their potential application to increasing energy access. I gave example of possible Cash on Delivery Aid pilots to increase clean energy access: (1) ex post cash payments to national or local governments for each additional household that acquires access to energy services (including off-grid and mini-grid that is privately provided of course) (2) ex post cash bonuses to municipal governments for each increment of billable payments the local electric utililty collects (including from the municipal government!) and (3) ex post cash payments to national governments for specified reductions in rates of deforestation -- as Norway is doing in Brazil, Indonesia, and Guyana though without the hands-off (patient money) approach in the latter two countries. Watch for slide deck and on #3 an upcoming David Wheeler CGD paper.
Finally: To help improve energy access, the Norwegians have started a new initiative called Energy+. It’s too new to find a web link. During the conference they convened a meeting to which more than 60 people came to explain their programs in this area. It worries me that most represented bilateral, multilateral and UN agencies. Rather than donor coordination, Energy for All and Energy+ need a person who can do what Bill Gates and his foundation have done for global health: offer a clear vision, flexible funds, and a willingness to lead rather than join the herd. Maybe the Norwegians will find a way.