Energy Poverty and Political Vision, Alejandro Litovsky

Wednesday, September 5, 2007

The delivery of affordable, reliable and sustainable power to citizens is one of the key challenges of the 21st century. Alejandro Litovsky reflects on the importance of political leadership in addressing an acute global problem. Around 2.64 billion people, 40% of the world?s population, lack modern fuels for cooking and heating. 1.6 billion have no access to electricity, three-quarters of them living in rural areas. As decision-makers in Europe and north America wonder how to reduce energy consumption, massive regions of the developing world remain literally in the dark. Populations in the energy-poverty trap – covering vast areas of south Asia and sub-Saharan Africa – are nowhere likely to influence the accountability of the energy policies of their governments.

At high-level workshop on Energy and Democratic Leadership: Promoting Access to Energy for Poverty Reduction in Santander, Spain on 20-21 August 2007, the debate on this global energy poverty took a welcome turn towards politics. The event brought together an unusual crowd to discuss the solutions: energy-poverty experts from international agencies, civil society and energy businesses were joined by former political leaders (Mary Robinson, Jimmy Carter, Sadig al-Mahdi and other members of the Club of Madrid among them) to attempt to put the pieces of the puzzle together.

Building an energy vision

From Nepal to Uganda, Guatemala to India, hundreds of examples demonstrate the potential of energy innovations to overcome energy poverty – a mix of wind, solar, small hydro, biomass power, or technology such as LED lighting. These can empower the poor to develop productive small and medium enterprises, to gain autonomy and independence in the generation of energy. Off-grid projects are increasingly seen in areas where publicly regulated electricity grids have found it unviable to reach. These initiatives can deliver real change on the ground, enabling citizens to access refrigerated medicines, light schoolrooms, power water pumps and use mobile telecommunications – but only if they are tailored to local needs and delivered in sustainable ways.

Efforts to bridge the energy gap are often fragmented internationally. Scaling up successful projects remains the biggest challenge. As Kamal Rijal, energy-policy advisor to the United Nations Development Programme (UNDP), explained in Santander: “Scaling up pilot projects requires political commitment. Reducing the risk to investors and strengthening the institutional capacity is the key to achieve scale.”

One illustration of the bottlenecks in the system is the African Rural Energy Enterprise Development (Areed). Areed offers rural energy entrepreneurs in countries like Mali, Ghana, Tanzania, Senegal and Zambia a combination of enterprise-development services and start-up financing; but it is finding that governments are not fully supporting these enterprise approaches because they are not convinced these are in line with their political interests or their developmental priorities (see United Nations Environment Programme/Areed, Open for Business: Entrepreneurs, Clean Energy, and Sustainable Development [2006]).

Institutional barriers to the setting up of new renewable-energy enterprises currently prevail; their competitiveness largely depends on effective regulatory frameworks and government policy. Yet renewable energy enterprises can be very competitive, as the Alliance for Rural Electrification is quick to point out, citing examples from its members such as BP Solar or the Spanish solar company Isofoton. Investment conditions for renewable energies are being improved through innovative approaches like the Sustainable Energy Finance Initiative (Sefi), which show that public-private partnerships and mobilising investors can improve the investment environment considerably. International donors, from the European Union to the UNDP are doing innovative work. The World Bank has set a target to supply 250 million Africans with clean-energy lighting by 2030.

But these worthy initiatives are fragmented pieces of the larger vision which is currently lacking. Inter-agency coordination needs to improve to build synergies. Where attempts in this direction have been made, the challenge becomes to translate national and regional political consensus into long-term, sustainable investment programmes. To do this effectively, political leaders need to step in and develop robust energy strategies that link together the work and interests of the different stakeholders.

The smart-government factor

Nigeria, a country with vast oil and gas reserves, is facing an energy crisis. The domestic energy sector of the world?s eighth largest exporter of oil is ailing, with 70% of citizens in the dependent on forest resources to meet their domestic energy needs. In August 2007, the new president, Umaru Musa Yar?Adua, declared an emergency in the energy sector and called, not surprisingly, for a new energy vision.

International partnerships such as the Extractive Industries Transparency Initiative (EITI) have done much to mobilise consensus among stakeholders and support in-country activities that improve revenue transparency, but more needs to be done to support the environment for government reforms. To fight energy poverty, democratic leaders need to improve the link between the revenue management of natural resources, investment in sustainable technology and the provision of energy solutions for the poor.

Government leaders can be visionaries and promote the uptake of renewable energy sources. For example, Algeria aims to tap its solar thermal resources to export solar energy to Europe. The Algerian government created New Energy Algeria (Neal) in 2002 to help develop its renewable resources. Neal has inaugurated the construction of a hybrid solar thermal power plant that is expected to generate 150 megawatts by 2010 and up to 6,000 megawatts by 2020. The thermal component is not expected to be economically competitive for the next ten years, but this hasn?t dissuaded the Algerians from pursuing their plans. “Our potential in thermal solar power” says Tewfik Hasni, Neal?s managing director, “is four times the world?s energy consumption so you can have all the ambitions you want with that…” South Korea?s $170 million investment to build both the world?s biggest solar plant together with the largest tidal power plant is part of another focused effort to take renewable energy seriously in a national strategy.

The democratic challenge

Governments need to look for strong partners to deliver change on the ground, and here the private sector can be part of the solution. Companies have become interested in the 4 billion low-income people in the world who constitute the base of the economic pyramid. Their behaviour as consumers and aggregate purchasing power is now an incentive for business to join the fight against poverty, and an interest of companies to joint multi-stakeholder alliances.

The total “base of the pyramid” household energy market in Africa, Asia, eastern Europe, and Latin America and the Caribbean has been estimated by the World Resources Institute to be $433 billion dollars (see World Resources Institute, The Next 4 Billion (2006; chapter 7). International companies, providing products and services in energy, home appliances and mobile communications, are innovating business models targeted at those at the pyramid?s base.

However, participants at the Santander meeting insisted that a positive contribution of the private sector to development also depends on the capacity and willingness of democratic leaders in at least four areas.

First, they must create economic incentives for innovation – e.g. through targeted public subsidies – that benefit local entrepreneurs. Democratic leaders will face the difficult task of re-establishing energy-policy priorities, manage established interests, and an energy culture of policy-makers not used to thinking in terms of the decentralisation of energy generation.

Second, they must regard a vibrant private sector as an opportunity to improve the skills and capacities of the poor. Technologies that enable poor people?s independence – for example, through the use of decentralised energy generation with renewable energies – must be prioritised in electrification plans, coupled with the promotion of small enterprises.

Third, public-private partnerships are likely to offer an attractive option for governments to improve their capacity while leveraging private capital and knowledge. Democratic leaders must ensure that partnerships have a strong focus on their own good governance and on capacity-building for the poor, so that private interests do not dominate over public goals.

Fourth, a sustainable contribution from the private sector will depend on a framework of good governance of the energy sector, one that can guarantee the rule of law, transparent accounts and decision-making, and a fight against corruption.

Infrastructure has increasingly been delivered through public-private partnerships over the past decade; but as Ricardo Lagos (Chile?s former president, head of the Club of Madrid, and current United Nations special envoy for climate change) argued in Santander, governments must lead and not relinquish their responsibility in these initiatives: “This is a political discussion… the role of governments remains essential even if it needs to work with the private sector.”

A new political leadership based on a collaborative ethos

The delivery of affordable, reliable and sustainable power to citizens is one of the key challenges of the 21st century. Yet the Millennium Development Goals (MDGs) fail to address the topic explicitly and many developing countries have poorly formulated national energy strategies in relation to achieving the MDGs. Worldwide, no sector is more fragmented than energy.

Strong political leadership is imperative for a robust energy vision that can reduce energy poverty around the world. Strategies need to address various fronts: regulation, gender policies, public-private cooperation, differences between urban and rural populations and service providers, the choice of technologies and financing schemes based on the people?s ability to pay. At the local level, projects need to be sensitised to community demand and prospects for their associated economic productivity. Economic incentives to sustain small-and medium-energy enterprises are likely to offer a pathway for local ownership of the plans and projects.

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Source: Agora Vox (link opens in a new window)