Universal access to energy services is technically possible, but new approaches are needed, say Kandeh Yumkella and Morgan Bazilian.
About 1.5 billion people in the developing world do not have access to electricity and about 2.5 billion people rely on traditional biomass, such as wood, for fuel, according to the International Energy Agency.
Lack of access to affordable, clean and reliable energy services hinders human, social and economic development and is a major impediment to achieving the UN Millennium Development Goals.
But current efforts to fill this 'energy gap' are insufficient in scale and scope. If we go on with 'business as usual' the absolute number of people who do not have access to modern energy services will not fall in the next few decades — an unacceptable outcome.
The obstacles to energy access are not technical — we know how to build power systems, design good cooking stoves and meet energy demand efficiently.
What we need is a global commitment to move energy access up the political and development agendas to become a key priority.
Equally important is understanding that interventions must be guided by an awareness of the unique situations and needs of local communities.
And we must emphasise that universal energy access presents a new market opportunity — but one that needs the right support to thrive.
Activities to build on
Several programmes are starting to stimulate support for energy access along these lines, such as those carried out by international financial institutions, UN agencies, nongovernmental organisations and private sector companies.
One example is the Lighting a Billion Lives campaign in West Bengal, which replaces kerosene and paraffin lamps with solar lanterns in rural settings. This campaign, led by The Energy and Resources Institute in India, illustrates the opportunities to mobilise industry participation for development.
Other large campaigns include Lighting Africa, a World Bank Group initiative that aims to provide up to 250 million people in Sub-Saharan Africa with access to affordable, safe and reliable lighting and energy by 2030.
And Energy Poverty Action, a joint initiative of the World Business Council for Sustainable Development, the World Energy Council and the World Economic Forum, aims to demonstrate business-oriented approaches to providing modern energy for communities.
Innovative financial solutions such as those used by Grameen Shakti and SELCO in Bangladesh and India also provide important precedents, but require enormous scale-up.
It is essential for delivery that these programmes are well-aligned with, and supportive of, national policies. A recent paper from the UN Development Programme (UNDP) showed that 68 developing countries have electricity access targets. Meeting them will require capacity development, better regulation and governance structures and, not least, financial support.
Those of us working in international organisations must support the development and implementation of these national and regional plans and targets.
The money question
The financial implications of universal energy access are large, yet not overwhelming if put in the context of the enormous benefits. The International Energy Agency estimates that ensuring universal access to electricity would require around US$800 billion over the next two decades — about US$40 billion every year, or ten per cent of the total annual investment in the energy sector.
Calculating investment requirements for a switch to modern fuels, where there are decisions such as choice of fuel, local culture, and gender issues, is more difficult. Here, a suite of financial mechanisms with a focus on addressing an array of real and perceived risks will be needed.
The reality is that for both electricity and modern fuels, there are varied and complex investment requirements and environments.
Putting energy to work
Increasing energy access is not simply about supplying lighting or better cooking stoves. To promote economic development and growth, energy services must also be put to work towards wealth creation — providing power for businesses, and improving healthcare, education and transportation.
Experience has repeatedly shown that inefficient subsidy schemes cannot be sustained over the long term and do not effectively address these issues. For example, the free electricity provided to farmers in some states in India has resulted in huge government deficits, inefficient irrigation and a lack of funding to enhance electrification, upgrade power plants and improve electricity grids elsewhere.
While good regulatory and tariff policies are fundamental, governments should first focus on creating enabling infrastructure, building human and institutional capacity, incentivising utilities and the private sector to deliver rural electrification, and creating favourable conditions for long-term investment.
A new direction
The UN Industrial Development Organization (UNIDO), together with our partners, prioritised energy access at our Vienna energy conference last year, emphasising the need for both increased international recognition of the access issue and a robust international framework that clearly articulates an energy access target.
This must be complemented with a detailed implementation roadmap, mechanisms for enhancing investment in energy access and building in-country capacity across political, governmental, technological, financial and operational sectors.
As the Forum of Energy Ministers in Africa recognised in2007, achieving this means "replacing existing project wish lists with bankable projects, establishing regulatory policies that improve country investment attractiveness, and establishing institutions that have clear roles and are appropriately resourced".
The importance of universal energy access is rapidly gaining recognition. Now we must use this consensus to build on existing effective models and create new ways to unlock the enormous opportunities.
Kandeh Yumkella is director-general of the UN Industrial Development Organization (UNIDO).
Morgan Bazilian is special advisor to the UNIDO director-general on energy and climate change.
This opinion is based on an article published in Making It: Industry for Development