Many parts of the developing world are ‘leap-frogging’ the developed world’s centralized energy systems – large, remote power generation stations connected to consumers via extensive (and expensive) national power grids – and going straight to a decentralized system, where generators are smaller and often local to consumers, often connected in microgrids.
And there is a huge need here – more than a billion people, did not have access to electricity in 2013, according to the International Energy Agency (IEA). More than 95% of those living without electricity are in countries in sub-Saharan Africa and developing Asia, and predominantly in rural areas.
The move straight to local, small-scale power systems is analogous to the growth of mobile phone use in the third world, where people who were never connected to a stationary phone system now use mobile phones as a matter of routine.
To meet the need, there is an international drive for electrification for poor rural communities in the developing world, and it’s important that finance providers treat potential decentralized energy users fairly. Are they doing so? No so far, says a report from the International Institute for Environment and Development (IIED). Its recent report: Unlocking climate finance for decentralised energy access suggests that the risk of spending – from the Green Climate Fund (GCF) for example – being skewed towards centralized energy developments is all too real.
Established in 2010 by the United Nations Framework Convention on Climate Change (UNFCCC) to limit or reduce greenhouse gas emissions in developing countries, the GCF has $10 billion to invest in low-emission and climate-resilient development. It also aims to help vulnerable societies adapt to the unavoidable impacts of climate change.
The IIED warns that the need to allocate its funds in a hurry to make an impact could lead to prioritising conventional large-scale energy infrastructure projects over smaller, decentralized solutions – such as off-grid and micro-grid services for rural communities. Just 3% of international climate funds have targeted decentralized energy projects, compared to 40% for larger, grid-based projects, it adds.
That seems wrong. It’s time for financiers to recognise the affordability and environmental advantages and ensure that development funds do go to new decentralized energy projects.