Powering poverty reduction

More than 100 years after the invention of the light bulb, over 1.6bn people around the world do not have access to electricity. Yet the provision of electricity – and something as simple as a light bulb – can transform lives.

Siàƒ¢n Green

At the G8 Summit in Gleneagles last month, world leaders agreed to a package of measures to help overcome poverty in Africa, including a pledge to increase aid to the continent by $25bn a year by 2010. British prime minister Tony Blair said that the package was the most ambitious ever agreed for Africa by the G8.

Africa was one of the main focuses of the conference because it is “an immediate moral cause which commands our attention,” said Blair. Four million children under five die in Africa every year. Three thousand children die a day from malaria. Fifty million African children don’t go to primary school, and life expectancy is falling. It is the only continent which, without change, will not meet any of the United Nations’ Millennium Development Goals (MDGs).

The MDGs include eight targets aimed at eradicating extreme poverty and improving health and basic standards of living. All 191 UN countries have pledged to meet the goals by 2015, yet the latest UN progress report indicates that in most cases, this deadline is unlikely to be met.

HDI and per capita electricity consumption. Source: IEA World Energy Outlook 2004
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In its World Energy Outlook 2004, the International Energy Agency (IEA) states that the provision of modern energy services is essential for the UN poverty-reduction targets to be met. In 2002, 1.6bn people had no access to electricity and in its reference scenario, IEA forecasts that this number will only be fractionally smaller by 2015.

Energy plays a crucial role in human development, contributing not only to economic growth and household incomes, but also an improved quality of life that comes with better education and health services. As life expectancy falls in sub-Saharan Africa, statistics show a correlating reversal of trends in the energy sector: per capita consumption of modern energy is falling, and consumption of biomass is increasing.

To better understand the link between development and energy, the IEA has devised an Energy Development Index (EDI) which measures a country’s progress in the transition from traditional biomass to modern fuels. It captures both the quality and quantity of energy services and is designed to mirror the UN’s own Human Development Index (HDI), which measures factors such as life expectancy, adult literacy and per capita GDP.

Sub-Saharan African countries such as Ethiopia, Mozambique, Kenya and Angola are at the bottom of the EDI rankings. These countries all have very low electrification rates (less than ten per cent), and are also ranked low on the HDI scale (HDI of around 0.4). Asian countries scoring low in the EDI table include Myanmar, Nepal, India, Bangladesh and Sri Lanka.

There is a strong positive correlation between the Energy Development and Human Development indices, and between per capita electricity consumption and the HDI. This indicates that access to modern energy services is crucial to development. The correlations, however, are non-linear; modest increases in per capita electricity consumption are associated with large improvements in human development.

“The social benefits of having access to electricity are obvious,” says Teo Sanchez, energy technology advisor at Practical Action, a UK-based NGO which carries out development projects around the world. “But there are also benefits in terms of local economies and the creation of jobs and services.” Through the provision of electricity to rural communities, Practical Action projects have enabled the creation of businesses as diverse as a chicken farm, welding and repair shops, dental services and a milk chilling facility.

But in spite of the link between energy and development, there is no mention of energy in the MDGs, and only a small fraction of aid and private foreign investment into Africa is spent on energy. Energy projects account for less than five per cent of European aid to Africa since 1990.

“People sometimes don’t understand how electricity can change a family’s situation, particularly in terms of the provision of health services and schools,” says Sanchez, who also points to the cost of connecting remote rural households to the grid as a barrier to electrification. “It is a huge cost and poor countries have to prioritise their expenditure, usually starting with health. Although energy is a fundamental need, it generally comes low on the list of priorities.”

According to Practical Action, aid that is used on energy projects is usually used for large-scale national or regional projects, with almost no focus on the delivery of energy services to the rural or urban poor. Both the New Economic Partnership for Africa (NEPAD) and the Commission for Africa, launched by Tony Blair in 2004, focus on large projects.

Large-scale projects, such as hydropower plants and regional grid expansion projects, aim to boost development through macro-economic expansion. Although large-scale projects have a place in development, it is clear that poor rural populations seldom see the benefits.

The IEA forecasts that although electrification rates will rise in its projection period of 2002-2030, half the population of sub-Saharan Africa will still be without electricity in 2030. Due to population growth, some 1.4bn people around the world will be without electricity in 2030. It says that the MDG of halving the number of people living on less than $1/day by 2015 will require an enormous increase in electrification rates in poor countries. For this goal to be met, the number of people without access to electricity needs to be reduced to about 1bn. This would require an investment of $200bn, three-quarters of which would be needed in sub-Saharan Africa and South Asia.

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