We can take for granted our energy supplies and the services that they provide, especially if we don’t struggle to pay our bills. But for many people, energy is some combination of rare, expensive, complicated and unreliable. Lack of energy limits access to basic utilities (lighting, cooking, heating/cooling, refrigeration, transport, etc.), let alone more advanced services (communications, entertainment, banking, shopping, etc.). The assumption is that access to energy in the developing world will give access to utilities and services, but the links between energy and development are complex.
The Department for International Development (DfID) is researching these links in its Energy & Economic Growth (EEG) applied research programme, a five-year programme run by Oxford Policy Management (OPM). The EEG programme is summarising the first year of research in a series of State-of-Knowledge Papers, focusing mainly on electricity (and mainly on-grid customers), and is developing its research proposals for the next four years. The team has been consulting with a wide range of experts, and asked ERP to convene a seminar to provide a private sector perspective. The event hosted by ERP on 9th March considered important issues for researchers, policy makers and industry, including the following:
Data is limited for understanding national needs and strategies
- Macro-economic models have consistently under-estimated energy demand growth in developing countries, and forecasts have had to be raised repeatedly.
- Extension of main power grids into previously off-grid rural areas does not necessarily lead to customers becoming on-grid, with many unable to pay connection charges and hence remaining “under-grid”.
- Initial data suggests that the immediate socio-economic benefits of investments in rural main power grids are small (one contributing factor could be regressive tariff structures), and that electrification of workplaces can be a more effective driver of socio-economic benefits than electrification of homes.
Stand-alone solar “mini-grids” offer power to remote villages
- Costs of infrastructure (even on this small scale, typically 6-15Amp systems) depend hugely upon the geography, i.e. the nucleation of customers and their distances from existing infrastructure.
- Demand for electricity can be hard to predict, with no clear reasons for large ranges between households and between different communities.
- Energy demand is reflecting demographic trends (in particular the movement of populations from rural to urban settings), as well as governments’ policies, but does not necessarily reflect local energy resources (e.g. natural gas, renewables).
Power system (un)reliability inhibits development
- Power outages (“on/off” reliability) deter customers from investing in appliances that would contribute to socio-economic benefits, and/or they require customers to invest additional funds for back-up generation.
- Quality of power (e.g. power spikes) cause damage to appliances, and hence deter customers from purchasing appliances that would bring benefits, and in particular deter purchases of (more expensive) energy efficient appliances.
- The impacts of outages and poor power quality can be so significant that a greater overall benefit could perhaps be achieved by improving reliability for existing customers than by extending grids to new customers.
Restructuring of power markets can benefit the poorest and can account for renewables
- Power sector reform can leverage external investment to improve reliability and/or capacity with the aim of extending access to poorer customers, but can face challenges from political influences and existing power customers.
- Power markets do not have to be complicated, e.g. Lowest Cost Model can work well.
- Power markets can foster investment in renewable or non-renewable power sources, and can have features that help to manage different generation mixes, e.g. Multi-Settlement Locational Marginal Pricing.
- Regulations and market rules do exist in some developing countries but tend to lack the features needed to make best use of resources, including significant renewables.
- African cross-border power pools have existed for several years, but are not used as much as might be expected, partly due to political decisions about national energy security and the locations of interconnectors.