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OFID’S energy poverty alleviation programs and the SDG’s

By Suleiman Al-Herbish
Director-General, OFID

No country has developed without access to reliable and affordable energy. Energy directly impacts on people, communities and countries in terms of economic growth, health, security, food and education. It also affects ecosystems and is directly linked to climate change.

Human development and energy use are intrinsically connected. As shown in Figure 1, there exists a strong correlation between electricity consumption and the UNDP’s Human Development Index (HDI) which measures human well-being. For instance, countries with an electric consumption below 4,000 kWh have a low HDI. Likewise, countries consuming more than this value per capita have a higher HDI

Figure (1) – Human Development Index (HDI) and Electricity Use

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Source: The World Bank and the United Nations Database

Indeed, economic and social development is seriously impeded by the lack of energy services. Countless examples have shown that, once modern energy is available, families and businesses benefit enormously from light, power and heat and the associated opportunities for job creation and income generation. The World Health Organization estimates that if half of the global households that still use traditional fuels and stoves switched to cleaner cooking sources, over a ten year period, families would save US$34bn per year and generate an economic return of US$105bn per year.

At the household level, energy provides electrification and cooking and heating solutions. Energy use for productive engagements increases income, productivity, and employment. At this stage, participation of the low income population is maximized, and productivity fostered. The transition towards environmental sustainability begins as poverty drops because poverty is the prime adversary of the environment.

Deficient access to energy also undermines resilience to socioeconomic and climate vulnerabilities. For example, energy services for use by health centres and communities are essential for disaster management. Energy access is therefore crucial to resilience and adaptive capabilities. Moreover, delivering energy for community infrastructure such as schools, health facilities, and government offices, can lead to substantial improvements in service delivery, human capital, and governance. This contributes to social development.

The Scale of the Problem

Although a proper definition has not found agreement yet, energy poverty may be defined as the lack of adequate, accessible and affordable energy to promote economic growth and satisfy basic human needs. This definition encompasses household demands for energy services such as cooking, space heating/cooling and lighting; as well as other energy needs for a society to develop and thrive.

Similarly, there is no universal agreement on how to measure energy access. Yet, the provision of energy access depends on an international consensus to define energy access and to appropriately measure it. Only then progress can be tracked.

The World Bank Global Tracking Framework Report has defined energy access as the “availability of an electricity connection at home or the use of electricity as the primary source of lighting”. Equally, access to modern cooking solutions has been understood as ‘relying primarily on non-solid fuels for cooking’. This binary approach suggests measurement as energy access or absence of access based on the availability or the use of electricity at home and similarly the usage of non-solid fuels for cooking.

The multi-tier framework was developed as an alternative to the binary approach by the World Bank/ESMAP (Energy Sector Management Assistance Program) in consultation with a number of international development institutions. It reflects a five-tier measurement of energy access from an operational point of view. Energy access is not availability of access but a continuum of increasing levels, so-called ‘tiers’, of energy attributes.

It is estimated that almost 1.1 billion people, mainly in Sub-Saharan Africa; developing Asia; and Latin America, who have no access to electricity what so ever. That is almost one of every 5 persons on the planet to whom electricity is truly unknown. In addition, 2.9 billion people have no access to clean cooking facilities. They rely on intensified use of traditional biomass fuels to meet their cooking needs. This produces indoor air pollution and its exposure impacts health, causing illnesses and premature deaths.

Figure (2) – Countries most impacted by energy poverty

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Source: IEA, WEO 2013.

Lack of access to electricity is primarily a rural problem. In Developing Countries, rural areas are home of most of the people. For example, in sub-Saharan Africa, 63% of the population is classified as rural and 78% of those who lack access to electricity are rural people. At the individual country level one can clearly discern a strong almost linear relationship between the number of people with no electricity and the number of people living in rural areas (See Figure. 3).

Figure (3) – Lack of electricity vs. percentage of rural population

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Sources: WEO 2014 Electricity database, IEA, and World Bank Statistics

Energy is regarded as a resource to fuel economic growth. Though this relationship is bidirectional – increased energy access fosters income growth, and energy use tends to increase with income – there is growing evidence of the influence of energy access on GDP and income growth. This in turn enables basic human needs for long-term physical well-being to be met.

The binary indicators, however, address merely a household focus and leave aside the community and productive applications of energy access. But access to electricity across all economic sectors is not properly reflected by a simple statement of whether electricity is available or not. Figure (4) shows, at the individual country level, a plot of electricity consumption per capita vs. the electrification rate. While consumption is more consistent (low) at low electrification rates, the plot shows a vast variation in consumption per capita in countries where electrification rate is 100% (from 16,500 to 1,300 kWh/cap.), with the plot more densely packed towards the lower end. Considering the 4000 kWh per capita dividing line suggested by the HDI in Figure (1), one can conclude that a 100% electrification rate does not guarantee that a given country has emerged towards being a developed one.

Figure (4) – Electricity consumption per capita vs. electrification rate

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Source: World Bank Open Data Services

The International Community Rallying

When the Millennium Development Goals (MDGs) were adopted by the international community in the year 2000, no specific MDG related to energy was considered, despite the fact that access to modern energy services is a catalyst to achieving the very first MDG?the eradication of extreme poverty and hunger?as well as every other goal.

In November 2007, this oversight was highlighted in the Riyadh Declaration, which was issued at the conclusion of the Third Summit of Heads of State and Government of OPEC Member Countries. The Declaration recognized that energy is essential for poverty eradication, sustainable development and the achievement of the MDGs.  It is conceived as a baseline to end poverty, a prerequisite for economic growth and social development, and instrumental to meeting human basic needs. This prompted OFID to call for energy poverty eradication to be identified as the “Missing 9th MDG.”
The role of energy in sustainable development was subsequently emphasized in numerous international forums, including the G8 Energy Ministers Meeting in Rome and the G20 Summit in Pittsburgh?both in 2009?and the March 2010 Ministerial Meeting of the International Energy Forum in Cancun.

In September 2011, the UN Secretary-General launched his “Sustainable Energy for All” (SE4ALL) initiative to drive action and mobilize commitments to achieve three objectives: universal access to modern energy services; double the global rate of improvement in energy efficiency; and double the share of renewable energy in the global energy mix.

Since its launch, the Global Tracking Framework has reported relative progress toward achieving the three SE4ALL objectives over the two-year tracking period 2010 and 2012. In total, 222 million people gained access to electricity, particularly in South Asia, Sub-Saharan Africa and in urban areas. The annual access increment of 111 million people marks a sharp acceleration from around 84 million people a year over 1990–2000 and 88 million in the subsequent decade. However, 1.1 billion people still lie in the darkness, which requires an even higher annual pace of growth of 135 million from 2012 through 2030.

In the same period, around 125 million additional people have gained access to clean, modern and cooking fuel, however this number is falling behind the 138 million population increase that took place over the same period. The urban and rural access rates remained similar at 87% and 27% respectively during the tracking period. Overall the global access deficit barely moved from 2.9 billion. The population to be served during the period to 2030 corresponds to the current access deficit plus the new population likely to be added (around 1.5 billion). While the access deficit in 2012 is a mix of rural and urban, the new population increment between 2012 and 2030 is almost entirely urban.

Overall progress over the two-year tracking period falls substantially short of what is required to attain the SE4All objectives by 2030. A partial explanation for slow progress on sustainable energy objectives is the shortfall in investment. Global investment in areas covered by the three objectives was estimated at around US$400 billion in 2010, while requirements are in the range of US$1.0–1.2 trillion annually, requiring a tripling of current levels. Nevertheless, the 2010–12 tracking period does present some encouraging acceleration in progress relative to what was observed in prior decades

Energy in the SDGs

Although energy in itself is not a basic human need, energy is essential for reaching sustainable development. Lack of access to affordable energy services means that the basic needs of many people are not being met. Energy is thus a key enabler of sustainable development for all countries and all people.

The Sustainable Development Goals (SDGs) are an ambitious shift from the MDGs. While the MDGs aimed to lift people out of poverty, the SDGs aim to keep them out of poverty by ensuring that development is both socially and environmentally sustainable. Long-term sustainability requires acknowledging that many of the resources that support development – water, land, materials – are finite and are also needed to support vital ecosystem services. Development can only be sustainable if it works within those constraints, over time and across sectors and locations. A key principle of the SDGs is universality – that the goals will be relevant to all countries, and all will contribute to achieving them, but with differentiated targets and actions.

SDG7 centres on ensuring universal “access to affordable, reliable, sustainable and modern energy”. It further sets to substantially increase “the share of renewable energy in the global energy mix”, to “double the global rate of improvement in energy efficiency” and to expand infrastructure and upgrade technology for supplying modern and sustainable energy services for all in developing countries, particularly Least Developed Countries (LDCs) and Small Island Developing States (SIDs). The year 2030 marks the deadline.

But in addition to energy, water and food have also been identified as priority areas for the SDGs. The interlinkage between the water, energy and food supply systems is a major consideration in countries’ sustainable development strategies. Rapid economic growth, expanding populations and increasing prosperity are driving up demand for energy, water and food, especially in developing countries. By 2050, the demand for energy will nearly double globally, with water and food demand estimated to increase by over 50%. The ability of existing water, energy and food systems to meet this growing demand, meanwhile, is constrained given the competing needs for limited resources. The challenge of meeting growing demand is further compounded by climate change impacts.

A framework to achieve this must consider the ways that activities in different sectors interact, including their respective pressures on natural resources. A “nexus” approach can help to formulate goals and targets that minimize trade-offs and maximize synergies between goals, making the SDGs more cost-effective and efficient, reducing the risk that progress towards one goal will undermine progress towards another, and ensuring sustainable resource use. Thus, the targets can be seen as building blocks that each country will combine in its own way, balancing the need for ensuring access to resources, efficiency, and long-term sustainability to fit the local context and capabilities. Through a bottom-up process and nexus approach, a suitable set of actions for a specific country (or region) can be identified.

OFID: a Leader in Alleviating Energy Poverty

OFID is keenly aware that energy is part of a bigger picture in terms of achieving sustainable development. In fact, it was OFID that first labelled access to energy services as the Ninth Millennium Development Goal. OFID activity in fighting energy poverty extends to all regions of the world, finances all types of cleaner and efficient technologies, and boost cooperation with all varieties of financial partners, without imposing any conditionality. It is driven by OFID’s firm belief that human development and energy use are inseparably linked.

This belief had received a considerable boost from the Riyadh Declaration of the Third OPEC Summit held in Riyadh, Saudi Arabia, in November 2007, which called upon OFID to continue its efforts in the fight against energy poverty. OFID responded to this mandate promptly and launched its Energy for the Poor Initiative (EPI) in 2008. Since then, energy poverty alleviation has been OFID’s primary strategic focus, with activities carried out at both an advocacy level and an operational level.

Its active role in the field of energy poverty alleviation had brought OFID in 2011 to be a member of the United Nations Sustainable Energy for All (SE4ALL) initiative and its advisory board. This has enhanced OFID’s role in the context of international framework and partnerships to continue championing in addressing issues and finding solutions relating to energy poverty, adding to its existing partnerships with a number of organizations such as the World Bank, the Asian Development Bank, CAF, and IFAD.

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