Energy Poverty

From challenges to opportunities


Energy poverty means a lack of basic needs, profound inequality and economic stagnation.

Providing clean, sustainable, and affordable energy to all is a priority for governments around the world and is one of the United Nations’ Sustainable Development Goals for 2030. In 2016, 1.1 billion people (14 percent of the global population) were without electricity, and 2.8 billion (37 percent) lacked access to clean fuels. Human development and energy use are intrinsically linked: energy is needed to provide for human needs, such as clean air, health, food and water, education and basic human rights; and it is fundamental to the development of every economic sector (see figure 1).

There are health and safety risks associated with traditional solid fuels for cooking and heating. In 2015, household air pollution caused about 3.8 million deaths. In its New Policies Scenario, the International Energy Agency forecasted that the situation will not dramatically improve until 2040 because access to clean cooking fuels increases slowly.

Numerous organizations have developed indices and definitions to attempt to characterize and quantify the energy situation of individual countries and provide a meaningful comparison between them. But there is no consensus on the definition of energy poverty. Most definitions aim to reflect a lack of access to the modern sources of energy—electricity and non-solid fuels—needed to provide basic services such as lighting, cooking, and heating. However, quantifying such criteria is difficult as the threshold for energy poverty varies by country. For example, individuals consuming less than 1,000 kWh per year of modern forms of energy could be said to be experiencing energy poverty (see figure 2). But this threshold inevitably varies according to local conditions, such as the average annual temperature. Fuel poverty, another commonly used term, usually refers to households with access to modern energy services that they cannot afford, but again, there is no universal definition.

Energy poverty mostly affects low-income economies and rural areas; electrification is making progress, but clean-fuel development is stagnating
From 2000 to 2016, the number of people without access to electricity dropped by nearly 35 percent, from 1.7 billion to 1.1 billion. During that period, about 1.1 billion people gained access to electricity, exceeding global population growth of 0.6 billion people. India experienced some of the world’s fastest rates of electrification, with an average of more than 33 million people gaining access every year.

By contrast, access to clean cooking fuels did not make significant progress. Over the past two decades, the number of people without fuels for clean cooking remained stagnant at 2.8 billion. Globally, access to non-solid fuel is a more acute problem than access to electricity; in almost every country, the transition to electricity has been faster than to clean cooking fuels.

The International Energy Agency says deploying energy for all would have a very limited impact on energy demand (more than 37 MTOE in 2030) and a small positive impact on climate change (an increase of 70 MT of CO2 emissions by 2030, but an overall reduction of greenhouse gases of 165 MT CO2 equivalent in the same period).

About 95 percent of people who lack access to electricity and non-solid fuels live in sub-Saharan Africa and developing countries in Asia
The 15 worst-affected nations in terms of the proportion of the population experiencing energy poverty are all in Africa. In these countries, the share of the population living with no access to electricity ranges from 65 to 92 percent, while 95 to 98 percent of people lack access to clean fuels for cooking. But the largest populations suffering from energy poverty are in India and China. In 2016, 239 million people in India did not have access to electricity (accounting for 22 percent of the global population without electricity access). Combined, India and China accounted for 1.3 billion people without access to clean fuel (48 percent of the global population that lacks clean fuel access).

In general, access to electricity and clean fuel varies according to a country’s average economic wealth. In low-income countries, the percentage of the population with access to electricity ranges from 10 to 40 percent, compared with 40 to 80 percent in lower middle-income countries. Only 5 to 30 percent of people in low-income countries have access to clean fuels, compared with 30 to 50 percent in lower middle-income countries.

Given existing policies and investments ($334 billion), the International Energy Agency expects a global reduction in the number of people who lack access to electricity from 1.1 billion in 2016 to 0.7 billion in 2030. Between 2030 and 2040, the reduction will weaken unless further measures are taken. The outlook for access to non-solid fuels is even worse. The global population lacking access to modern fuel is only expected to fall by 7 percent between 2016 (2.8 billion people) and 2030 (2.6 billion people). Investments would need to quadruple globally to provide universal access to clean fuel, with about 30 percent of spending allocated to Africa.

Wind, hydro, and solar can supply more than enough power to achieve universal access to electricity
Global access to electricity has accelerated over the past two decades, with growing reliance on coal and hydropower. A wide range of electrification options can help eradicate energy poverty, from small devices deployed locally to utility-scale solutions. All renewable energy sources, including hydro, wind, and solar photovoltaics (PV), offer scalable applications in a range of locations and with a variety of grid connections and power-output capacities.

Harnessing the potential of local renewable resources could end energy poverty in underdeveloped countries. Solar PV and wind have the potential to raise average power consumption per capita to at least 1,000 kWh per year in poor region, solving global energy poverty with no contributions from other energy sources (see figure 5). Small hydropower plants offer another sustainable way of enhancing electrification, especially in rural areas.

Electrification solutions range in scope from small local solutions to mini-grid interconnections and national-grid development. Grid-extension (transmission and distribution lines) or micro-grid systems are the most cost-effective solutions for electrification in areas where demand intensity is high. But considerable upfront investments are generally needed, and operation and maintenance costs might also be high depending on local conditions. For less dense urban areas, remote areas, or complex terrains, other off-grid solutions might be cheaper but will generally provide less reliable power services. Further, electrification can follow various progressive paths—from small local solutions and mini-grids interconnections to national grid development (see figure 6).

Electrification strategies and the choice of technologies depend on more than economics. Other important factors include local geography, the environmental impact of the selected technologies, and social acceptance. Criteria that determine cost-effectiveness typically include distance to the existing grid, population size, affordability, and generation potential. Off-grid systems, mini-grids, and grid extensions all have pros and cons that must be carefully evaluated within the local context (see figure 7).

Eliminating household air pollution will depend on the use of better technologies and cleaner, more efficient fuels. Eradicating non-clean fuels for cooking would not only reduce dangerous pollution but also reduce primary energy demand since non-clean fuels are extremely inefficient. Modern stove and fuel technologies generate health and economic benefits.

Policies, regulations, and subsidies are crucial to expanding access to clean, reliable, and affordable energy
Favorable policies and a clear regulatory regime are imperative in addressing challenges associated with developing sustainable energy. An analysis of national policies indicates that sub-Saharan African countries tend to have weaker policy and regulation structures than South Asia (see figure 8). Successful country programs, such as Vietnam’s multiphase electrification plan, demonstrate the need for a long-term approach to policy, regulation and incentives.

Energy-access ecosystems consist of multiple stakeholders, each with a crucial role to play (see figure 9). Many private and public sectors are dedicating more resources and funds to important issues, such as the efficient use of existing solutions at scale, the lack of affordable products and appliances, the lack of financial resources for innovative energy entrepreneurs, and the shortage of local skills and expertise.

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