Fine-tuning energy access financing in Africa for bigger returns
By: Peyton Fleming / SEforALL
It’s one of the most vexing challenges facing global leaders today: How to give billions of people electricity for reading and refrigeration and clean cooking fuels to help them breathe easier – but still slow climate warming.
For African and Asian governments that are confronting these energy access gaps, this challenge centers on finance – or a lack of it.
While many studies have estimated the amount of investment needed to meet energy access goals, none have systematically analyzed how much finance these countries are actually committing to electrification and clean cooking access. Nor have they examined the overall effectiveness of these commitments in delivering modern energy services – including clean renewable energy – to more people, more affordably.
New pioneering research unveiled by Sustainable Energy for All at last month’s UN General Assembly helps answer these questions. It offers key insights and pathways to help governments, development finance institutions and other decision-makers accelerate progress on energy access.
The “Energizing Finance” research – done in partnership with the World Bank, African Development Bank, Climate Policy Initiative, Practical Action Consulting and E3 Analytics – tracks and analyzes finance flows for electricity and clean cooking access in 20 key countries in Sub-Saharan Africa and Asia that have significant energy access gaps.
The results are sobering: overall investment in these countries is not nearly at the levels needed to achieve the UN Sustainable Development Goal of ensuring access to affordable, reliable and clean energy for all by 2030.
Annual finance flows for electrification averaged $19.4 billion, less than half the estimated investment needed to achieve universal electricity access in these countries. Spending was especially low in 14 Sub-Saharan Africa countries, where roughly half a billion people are living without power, most of them in hard-to-reach rural areas. Decentralized renewable energy, such as household solar, offer a promising more-affordable solution for these populations, but precious little financing – only 1 percent of the finance that was tracked – is going toward these services.
Even more shocking, despite 3 billion people worldwide lacking access to clean cooking, investments in clean fuels and technologies for cooking are even lower. Financial commitments for residential clean cooking averaged just $32 million a year; that’s many orders of magnitude lower than the estimated $4 billion in annual investments needed.
But the research also shows a myriad of encouraging indicators, including tangible gains in several countries that have made access to electricity energy and clean cooking key political priorities. It also shows early-stage shifts in financing strategies by governments and development finance institutions that will enable finance dollars to deliver energy to more people, more quickly.
Bangladesh and Kenya, in particular, are making notable gains in urban and rural areas with integrated electrification strategies that include centralized electric grid infrastructure as well as decentralized solar which is already powering millions of rural households. They’re also enacting policies to spur diverse types of public and private finance for centralized and decentralized energy access projects and companies – such as the Infrastructure Development Co. in Bangladesh, which is helping renewable developers gain access to local debt, and the rise of pay-as-you-go solar enterprises like Mobisol and M-KOPA Solar in Kenya. It’s no coincidence that Kenya and Bangladesh were among the top scorers of these 20 countries on energy access in the 2017 Regulatory Indicators for Sustainable Energy (RISE) report.
Still, scattered, incremental successes will never deliver the global results that are needed on energy access. More than ever, we need bolder, more refined strategies that will catalyze larger and smarter investment.
Government leaders, financiers and other key influencers need to work together with greater urgency toward targeted, integrated electrification strategies that emphasize both large grid-scale projects and more affordable decentralized renewable energy. On clean cooking, we need fresh, bolder thinking on market-based strategies to deploy a wide range of clean fuels – as opposed to dirty, high-polluting fuels like charcoal – more rapidly and at far bigger scale.
We can do better. The commitments governments made in adopting the Sustainable Development Goals and in joining the Paris Climate Agreement means that we need to extend energy services to people we have never reached before, and to do so while decarbonizing. We believe the “Energizing Finance” research provides a pathway and concrete guidance for achieving this goal.
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