Access to Energy for the Poor: The Clean Energy Option
Oil Change International, ActionAid International and Vasudha Foundation, India
June 2011

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Read the full report, Access to Energy for the Poor: The Clean Energy Option (PDF)

A dual focus on increasing access to energy services for the world’s poorest and promoting clean sources of energy is a win-win scenario for development and the environment. Thus far, initiatives to increase energy supply in developing countries have not necessarily reached the poor, while initiatives specifically to increase energy access for the poor have not fully taken advantage of clean energy technologies. It does not have to be this way. Energy access for the poor and an increase in clean energy technologies are mutually reinforcing goals.

The report highlights the following facts regarding clean energy access:

• Increasing access to energy is critical to supporting human and economic development, through the direct provision of energy services for basic needs, by supporting productive uses, and also by creating jobs.
• Fossil fuels and other conventional energy sources have negative externalities, including pollution and public health impacts, and fossil fuel extraction has been shown to correlate with higher levels of poverty, child mortality and malnutrition, civil war, corruption, authoritarian governance, and gender inequality. Clean energy
sources benefit ecosystems and the environment and help protect natural resources that poor communities often rely on.
• Clean, decentralized renewable energy is often the most appropriate means of providing holistic energy services in rural areas that support both economic and social development, and these decentralized energy services can be more reliable than conventional grid based energy for providing energy access.
• Clean energy for access is economically feasible in comparison to conventional technologies, particularly for areas at a distance from the grid. The cost of decentralized, renewable energy can be less expensive than conventional, grid-powered electricity for areas at a distance from the grid.
• Improving demand-side, or end-use, energy efficiency (for example, by using more energy efficient lighting or appliances) can be one of the most cost effective ways of providing energy services.
• New research in India shows that people living in rural communities are able and willing to pay for clean, reliable energy services.
• While there is increased interest in expanding energy access in a number of countries, to date, large-scale initiatives in developing countries focused on increasing energy access could take greater advantage of the opportunities of decentralized renewable energy and energy efficiency.

The multilateral development banks could play a significant role in funding the transition to a healthier energy future – both in terms of increased energy access and a transition to clean energy. As an influential development bank, the World Bank, in particular could play an important role in an energy transition, but only if the institution truly embraces the idea that it should focus on closing the gap in financing clean energy options and make a commitment to increasing energy access.

The report’s findings on the World Bank’s energy access portfolio include:

• Only 9 percent of the World Bank Group’s energy portfolio in FY 2009 and 2010 targeted increasing energy access for the world’s poorest. Forty percent of the financing labeled energy access by the World Bank Group in the FY 2009 and 2010 did not meet the study’s metrics for energy access.
• Of the 9 percent of World Bank projects that the analysis found targeted increased access for the poor, 76 percent of those utilized clean energy in the form of new renewable energy or energy efficiency.
• Not a single World Bank greenfield, or previously undeveloped, fossil fuel project targeted energy access for the poor.
• With less than one tenth of the energy portfolio targeting access and only 30 percent of its energy portfolio funding new renewables and energy efficiency, the Bank is not in fact prioritizing energy access and clean energy in its lending at the moment.

The World Bank Group is currently revising its Energy Strategy, which serves as a guide for the institution’s energy investments, and the two pillars of the Bank’s new energy strategy are set to be energy access and low carbon growth. While these pillars could orient the Bank in the right direction, a strong Energy Strategy document will need to include clear metrics that will lead the institution to shift its portfolio towards clean energy and energy access projects.

Our recommendations for the World Bank Group include:

• The World Bank Group’s energy lending should focus on increasing energy access for the poor through clean, decentralized energy sources.

• The Bank should clarify its definition and criteria for ‘energy access,’ focusing on the world’s poorest and increase its level of ambition with regards to funding energy access projects with the aim of reaching the poor.

• The World Bank Group should stop lending for fossil fuels except in extreme cases where there is clearly no other viable option for increasing energy access to the poor.