5 Steps To Close The Electricity & Clean Cooking Access Gap
Many studies have estimated the amount of investment that is needed to meet energy access goals, but none have attempted to analyze what finance these countries are actually committing to energy access, what is known about the disbursement of development finance for energy access or the challenges facing energy access enterprises in delivering modern energy services to more people, more affordably.
A new report from Sustainable Energy for All does exactly that.
Energizing Finance: Scaling and Refining Finance in Countries with Large Energy Access Gaps analyzes finance flows for electricity and clean cooking access in 20 countries across Africa and Asia, demonstrates the significant access gaps, and shows how finance strategies could be scaled and refined to reach more people, more affordably, with sustainable energy.
The main conclusion of the report is that the current flow of finance for energy access and clean cooking will not achieve global goals for delivering universal access by 2030. Now, let’s develop these findings and recommendations a little bit.
On universal electrification
Estimates show an annual investment of $45 billion is needed to meet universal electrification, but the latest data shows that finance commitments for electricity in these 20 ‘high-impact’ countries that represent 80% of those without electricity access is less than half that number, averaging just $19.4 billion a year.
Detailed case studies on Bangladesh, Ethiopia, and Kenya indicated that these countries allocated 2 to 3% of their GDP to finance electricity, equivalent to an average of $13–33 per capita per year for electricity. This compares to the cost of basic electricity access of a small solar home system that is around $50–100 for a typical household of five people.
On clean cooking
Finance tracked for clean cooking revealed a much greater challenge. Across the 20 countries with the largest clean cooking access gaps representing 84% of the global population without access, annual finance committed averaged just $32 million, compared to the estimated annual investment need of at least $4.4 billion. Financial commitments for clean cooking in these high-impact countries are shockingly low and, if such levels continue, will not have an impact on closing the cooking access gap.
Let’s look at a case study. In Ethiopia, about 98% of the population lacks access to clean cooking, mostly in rural areas. The enterprises target urban households as the primary market, but there are still a lot of market barriers (low margins and small sales volumes, high overheads and capital costs, inability to raise debt, etc.). In rural areas, consumers are not aware of clean cooking methods and have very low income levels, which make them more vulnerable.
“While it’s good to see encouraging, early-stage progress in a handful of countries on electricity access, we urgently need targeted, refined strategies to increase investment in integrated electricity solutions. At the same time we need to open-up a frank new dialogue around bold market-based strategies that can deploy clean fuels and technologies for cooking at the speed and scale needed. The lack of financing for clean cooking solutions is shocking. Fixing financial flows to ensure everyone has access to clean, affordable reliable energy is essential in meeting our commitment to leave no one behind.” – Rachel Kyte, CEO and Special Representative of the UN Secretary-General for Sustainable Energy for All
The recommendations
Whether we talk about universal electricity access or clean cooking, structural changes — such as reforming and aligning government policies on energy access and banking-related financing barriers that inhibit energy access enterprises — are important to ensure that exponentially more finance is being allocated for electricity and clean cooking, more quickly.
When combined with insights on the policy, regulatory, and investment context set out in related research, these findings can support governments and the finance community to identify more targeted, refined strategies to increase investment in grid-scale projects and decentralized energy solutions.
The Energizing Finance research created a roadmap of opportunities which, if finance is more strategically directed, will allow us to meet the UN Sustainable Development Goal 7, and provide affordable, reliable, sustainable and modern energy for all by 2030.
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