solar panels and turbines

SEforALL Energizing Finance – Understanding the Landscape 2018 report: Why research has an essential role to play

In its recent Energizing Finance – Understanding the Landscape 2018 report, Sustainable Energy for All (SEforALL) analysed finance flows for electricity and clean cooking access in countries across Africa and Asia in relation to the levels required to meet the UN’s Sustainable Development Goal 7 – affordable, reliable, sustainable and modern energy for all by 2030.

The report – the second in the Energizing Finance series – shows that some good progress has been made. In the 20 developing countries with the largest populations lacking access to energy (SEforALL ‘high-impact’ countries, representing 76 per cent of the global population without electricity access), there was a 56 per cent increase in overall electrification finance between 2013-14 and 2014-15 (US$19.4 to US$30.2b). Increases in private investment accounted for much of this rise. In India for example (one of the 20 high impact countries that saw a significant increase in investment over the period reviewed by the report), domestic private finance now represents roughly half of all energy access finance. Investment in renewables also increased over the period, which is good news for carbon emissions. Around 54 per cent of total electricity access funding provided in 2014/15 was channelled into grid connected renewables, with solar PV finance increasing 5-fold over previous year. 

However, the report also highlights some major issues that are still to be addressed. Despite the overall increase in electricity access finance, the global amount currently invested annually (US $32b) is only just over half that actually needed to reach the universal access goal of UN SDG7 (US $52b per year). Investments in energy efficiency (that could help countries get significantly better services from the power resources they already have), whilst increasing, remained tiny at just $0.3b (1%). Investments also heavily favoured industrial and commercial customers, with improvements to residential access accounting for only 28% of investment in the period reviewed.

Meanwhile, the construction of new fossil fuel plant means that carbon emissions from new generation capacity remain a worry, as does dangers of lock-in for the low and middle-income countries concerned. Investment in new grid connected fossil fuel generation still accounted for 27% of total investment over the period. Of particular concern is the fact 17 new coal fired plants were financed across the 20 high impact countries during the year under review, locking countries such as the Philippines, Bangladesh, India and Kenya into high carbon assets for at least 30 years, presenting a potential “stranded asset risk to the global financial system” according to SE4ALL.

Perhaps the most worrying finding of the report however concerned the geographical imbalance of investments. Bangladesh, India, the Philippines and (due to a large coal power plant investment) Kenya accounted for 86 per cent of investments made during the period reviewed. Meanwhile, of the 14 Sub-Saharan African countries in the high-impact category, eight saw significant declines in investment in energy access between 2013-14 and 2014-15, including the two most populous nations with the largest absolute deficits: Ethiopia (-67 per cent) and Nigeria (-50 per cent). To achieve Sustainable Goal 7, it is estimated that Sub-Saharan Africa needs around US$50b per year: this represents 95 per cent of all access investment, but it’s currently receiving only around 17 per cent.

With finance for energy access in Sub-Saharan Africa remaining constrained, it is critical for governments to be able to achieve the greatest possible value from the investments they are able to make – and research has an essential role to play. The EEG applied research programme aims to address this need by improving the quality and availability of evidence to support decision making. The commencement of our first research projects is imminent, with projects aiming to inform energy access investments by providing insights on a range of issues, including:

  • Improvements to national energy planning approaches

  • Unlocking and forecasting productive uses of electricity to improve economic returns on investments

  • The promotion of energy efficiency

  • Improvements to utility performance and supply reliability

  • Unlocking renewable potential, including modelling renewable energy integration to grids and best practice on renewable auctions to get best price for new large-scale renewables in Sub-Saharan Africa  

Read more about Simon’s work with EEG and his thoughts on the energy sector here.

By Simon Trace