Bloomberg News

Energy Poverty Seen as History at IEA for $48 Billion a Year

October 10, 2011

Oct. 10 (Bloomberg) -- The world’s entire population can have electricity and cleaner stoves by 2030 if $48 billion is invested each year, the International Energy Agency said in its first estimate of the cost to end energy poverty.

The sum is about the same as the combined annual capital spend of Europe’s two biggest oil companies, Royal Dutch Shell Plc and BP Plc, and five times the $9.1 billion that was invested in 2009 to boost energy access in developing nations. There are 1.3 billion people, or 20 percent of the world population, living without electricity and 2.7 billion that lack clean cooking facilities, the IEA said.

The obstacles to providing modern energy access to everyone are surmountable and national governments should publish targets and provide more seed capital to incentivize private investors, IEA Chief Economist Fatih Birol said in an interview from Paris.

“Providing energy for all is crucial for social and economic development, and beyond that it’s a moral obligation,” he said. An illustration of the inequality is that 791 million people in sub-Saharan Africa excluding South Africa use about as much energy each year as 19.5 million people in New York State, Birol said, citing IEA data.

Judy Mirangoh burns fuels in her house in the Kenyan village of Wanyororo to make heat and light because she has no electricity. Her mud-walled home is less smoky since she replaced her traditional wood-burning fire with a cookstove earlier this year, helping her wallet and her health.

Three-Stone Fire

Such stoves burn half the wood of the old three-stone fire, which contributes to indoor air pollution that causes about 1.5 million premature deaths a year, Birol said. The 45-year-old single mother of two still burns paraffin in lamps for light.

“I wish I would have electricity in my home,” Mirangoh said in a telephone interview. “The cook stove is really helping me. It has less smoke, so it is cleaner and healthier.”

Vietnam is an example of a success story, according to the IEA report titled “Energy for All, Financing Access for the Poor” that was published today. The share of the population with electricity has risen to 98 percent, from less than 5 percent, in the past 35 years, the agency said.

“The electricity supply has become far more reliable,” Tran Thi Thu Lan, 58, a retired high school teacher in Hanoi, said in an interview. “In the past we had rolling power cuts which made our lives more difficult.”

Power Connection Plans

Bangladesh, Ghana and South Africa have plans to extend electricity to all their populations by 2020, according to the IEA. Indonesia plans to connect 95 percent of its people to power supplies by 2025 while the Philippines targets 90 percent of households by 2017, according to the IEA, which is the Paris- based energy-security adviser of the Organization for Economic Cooperation and Development.

In Kenya, 84 percent of the 33 million population had no access to electricity in 2009, and 83 percent of Kenyans relied on traditional cooking facilities powered mainly by wood, agricultural and animal waste, the IEA said.

Mirangoh’s Envirofit cookstove was provided by the Colorado-based Paradigm Project, a venture started by Greg Spencer, the co-founder of Blue Source LLC, a company which develops and manages projects that reduce carbon emissions, generating tradable carbon offsets. Spencer, who is 55, wants to provide 5 million stoves in developing countries by 2020 and is tapping grants, investor capital and carbon offsets for funding.

Gathering Firewood

“We want to prove that it is possible to do good and make a profit at the same time,” Spencer said in a telephone interview. “We have to bring in for-profit capital to reach our objective.”

Spencer is currently on a 10-day, 136-mile (218 kilometer) trek from San Diego to Los Angeles with his 26-year-old son, carrying 50-pound bundles of wood on their backs to raise awareness of the grueling journey millions of women undertake in the developing world to gather firewood.

Women are often responsible for collecting firewood and are more susceptible to smoke-related respiratory diseases because they do most of the cooking, the IEA’s Birol said. Premature deaths from indoor air pollution are projected to exceed those from malaria and the HIV/AIDS virus combined in 2030, and can be reduced by improving access to cleaner and more efficient stoves and cooking facilities.

African nations that lack energy reserves face the greatest challenge in providing energy to their people. Oil import bills in sub-Saharan Africa increased by $2.2 billion last year, outpacing gains in development assistance funding, the IEA said.

Using Export Revenue

Oil exporters on the continent such as Nigeria and Angola could better use their revenue to end energy poverty, according to the report. The capital cost of providing modern energy services to all deprived households in the 10 largest oil and gas exporting countries of sub-Saharan Africa is about $30 billion, or about 0.7 percent of those governments’ cumulative income from oil and gas exports, IEA data showed.

Wind, sun and hydro power are most likely to solve energy poverty for people living in rural areas in Africa because the power sources can be tapped without requiring construction of large transmission grids, Birol said.

Microfinance institutions may be able to help distribute and fund the purchase of low-cost sun-powered lamps, according to a report by the Washington-based Center for Financial Inclusion. Solar lamps cost between $10 to $100, a significant expense for many in Africa, said David Levai, an author of the report.

WillowTree, a Dubai-based investment company, sees business opportunities in providing solar lamps and stoves in Africa, according to managing partner Nadine Kettaneh.

“The market opportunity is driven by low grid penetration, large and growing populations, high energy prices and very low- income populations,” Kettaneh said. “These are all factors that contribute to a very attractive market for solar portable lighting.”

Back in Kenya, solar power is still a dream for Mirangoh.

“I would like to have a solar lamp,” she said. “I have seen one in a friend’s house.”

--With assistance from Nguyen Dieu Tu Uyen in Hanoi. Editors: Stephen Voss, Raj Rajendran

To contact the reporters on this story: Simon Clark in London at sclark4@bloomberg.net Lananh Nguyen in London at lnguyen35@bloomberg.net

To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net


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