The Sustainable Development Goal for energy (SDG7) supplements the vision of universal access to electricity and clean cooking with two further aims. These address global energy efficiency and the use of renewable technologies. As these sustainability aims focus on enhancement of existing energy capacity, engaging rich countries as well as poor, estimates of the cost of providing universal access to electricity and clean cooking can be confused with those for SDG7 as a whole.
Estimates dating from 2015 suggest a global financing requirement for universal access to electricity and clean cooking of the order of $45 billion and $4.4 billion per annum respectively, for the period to 2030. These were compiled by Sustainable Energy for All (SE4All) and the International Energy Agency.
What can be stated with greater certainty is that the actual scale of funding support has been pitifully modest, possibly as low as 1% of requirements for both electricity and cooking. In failing to deliver the flurry of promises made in 2015, many international institutions are accountable for the disappointing progress reported to date.
For example, the African Development Bank’s New Deal on Energy for Africa had a vision of universal energy access on the continent by 2025, five years earlier than SDG7, targeting investment of $30-$55 billion per year. The European Commission promised to facilitate access to modern energy supplies for 500 million people by 2030. These and many other pledges remain unfulfilled.
Most current projects of significant scale in developing countries are devoted to extending grid services for urban and industrial customers, often resorting to fossil fuel generation. Although fraught with political and other risks, these represent familiar financing territory for multilateral development banks, private sector corporations and domestic governments. This structure of energy finance has failed to shake off its preference for middle class urban customers over the rural poor.
However, the off-grid needs of the poorest households do bring out the best in local innovation and entrepreneurship. As these households already pay for expensive kerosene and candles for lighting, a basic solar home system has become a viable proposition, aided by innovative repayment models for loans. There is undoubtedly a frenzy of entrepreneurial solar business activity in Africa and South Asia, backed by diverse funding sources and partnerships.
Climate finance offers another source of optimism for meeting the energy needs of the poorest households. Traditional biomass cookstoves make a significant contribution to global warming, through unsustainable collection of firewood and its inefficient combustion. Smoke from cooking fires is believed to contribute almost a quarter of worldwide black carbon emissions, one of the causes of global warming.
Development projects for conversion to modern stoves, or installation of low carbon mini-grid capacity, therefore have a very strong claim on international climate finance. An encouraging development is the commitment of the Green Climate Fund to include energy access as an eligible activity for grantee project applications. The GCF is the principal global vehicle for climate finance.
The Covid-19 pandemic has revived awareness of the importance of energy to poverty reduction, accompanied by alarm at the lack of progress. In a major response, the Global Commission to End Energy Poverty will bring together major US institutions in a drive for funding of small-scale solar power projects for improved energy access and rural economic performance. Established by the Massachusetts Institute of Technology Energy Initiative and the Rockefeller Foundation, the Commission hopes to leverage funding of $2 billion from the US Development Finance Corporation.