By Justin Guay, Sierra Club
In recognition of the tremendous importance of energy for achieving the Millenium Development Goals, the United Nations General Assembly has designated 2012 as the International Year of Sustainable Energy for All. With more than 1.4 billion people worldwide lacking access to electricity, 1 billion more only receiving a few hours a day, and some 2.7 billion more – almost half of humanity – relying on traditional biomass for cooking and heating, delivering on energy access is indeed critical.
Richenda sat down to discuss the way forward for the campaign, and how we solve the dual challenges of delivering energy for all, and combating climate change.
What is the SEFA campaign?
2012 has been declared the International Year of Sustainable Energy for all. It is a platform for beginning the global effort to address energy access and engaging the public and policy makers to enable greater understanding of the world’s needs. It’s not just about combating climate change through expanded use of renewables, or about harnessing the great payoff from increased efficiency – half of the world still lives with energy poverty. That makes it an equity and justice issue. We need to work in a concerted manner internationally to solve this.
The SEFA campaign is focused on delivering sustainable energy for all. We have a broad global goal to ensure three objectives by 2030: 1) Ensuring universal access to modern energy services (including both electrification and cooking), 2) Doubling of the rate of improvement in efficiency globally; and 3) Doubling the share of renewable energy in the global energy mix.
As far as the campaign goes, UN energy has been engaged from the get go. They are the umbrella collaboration of more than twenty UN agencies that focus on energy issues.
Rio+20 will be a seminal moment, a milestone, but overall we have goals that are long term. We are already seeing bi-lateral initiatives announced – countries taking the initiative to a new level. We are hoping that it leads to a number of new initiatives either private sector or at a country level.
So how do we achieve the electricity access goal?
The IEA has put some numbers in place (http://www.iea.org/weo/universal.asp) – 30% will need to come from grid extension and 70% from a combination of mini-grid and off grid solutions. The World Bank has different numbers. What we need is a global consensus that allows us to really drive change.
Clearly there is a large role for the private sector which has been emphasized by the Secretary-General. It’s about building markets, providing for investment needs, and securing needed infrastructure. At the same time, the United Nations Foundation is developing a practitioner network to help feed in to that process – both formally and through other venues. We are focused on supporting practitioners involved on-the-ground with mini-grids and off-grid solutions to ensure they are incorporated in the overall direction of the campaign.
What are the practitioners saying needs to be done to improve energy access?
We’ve been working with them on identifying the barriers arising from their end. It’s a large and complicated issue but we are seeing commonalities emerging. Investment in this sector is very different from a traditional private equity model. There is a recognition that this sector requires ongoing investment, new financial models, and the delivery of consumer financing to support ground level activities.
We’re also seeing a need for policy making that is supportive of this environment – it’s one thing to look at feed in tariffs for grid connection but we need policy support for mini-grid and off-grid solutions.
Policy tends to be focused on grid extension and not enabling environments for other methods of electricity delivery. Some important elements of enabling environments include an elimination of import duties for components or systems that are being used by a particularly country for energy access solutions. A harmonization of duties across countries would also be helpful.
Jigar Shah told us that public money should support private capital through risk guarantees and other forms of insurance products. What do you see as the role for public money?
Jigar’s right, that is one piece. But this is a broad question and there is a recognition that there is a role for smart subsidies to get the sector to scale. An example are the Bangladesh subsidies which have enabled the delivery of one million solar home systems. Structuring subsidies well can help to grow and expand the market without distorting it.
It’s also important to recognize that delivering services in these communities is not always a high return commercial proposition – providing early stage business with concessionary financing is necessary. High return expectations can hurt these companies.
If high return expectations hurt social entrepreneurs, how do we support a sustainable transition?
Essentially, I hope we soon have robust quality standards in place, which is an area where there is work in process. We are still seeing lower quality products that are unfortunately undermining the market. There is one challenge that results from the simple drive to achieve the lowest possible price point.
We need to ensure quality through the design process because it’s not just a question of low up-front costs, but a question of low lifetime costs. What you want to see is companies in that space that have the capability to offer strong products at scale. We are not always there yet.
In terms of investment returns, my ideal would be seeing some of the larger consumer products companies working in joint ventures with some of the earlier stage companies so they can provide capital without losing the social focus.
What’s your final message?
Editor’s Note: This interview comes to us as a cross post courtesy of Sierra Club. Author credit for this interview goes to Justin Guay.