How Much Is Being Spent on Energy Poverty?

Regular readers of this blog know that I wish that delivering greater access to modern energy services were higher up policymakers’ priority list. In a paper last fall, several coauthors and I estimated the cost of delivering universal access to electricity at $12-$134 billion (best guess: about $60 billion) over the next couple decades.

In a new FEEM working paper, many of the same coauthors (with a few changes) and I ask a second question: how do these needs compare with current financial flows? We’ve published this for now as a working paper, rather than in a journal, because our answers are pretty crude and preliminary. That’s the result of a mix of incredibly poor data and, I’m sure, methodological limitations. We more than welcome feedback, both general and detailed, as we further refine the paper.

So, what does the paper reveal? I’ll pick out a few interesting tidbits – I encourage you to read the rest.

To me the most striking number is the amount of money invested annually in electricity and gas distribution infrastructure in least developed countries (LDCs): $2.6 billion in 2009. That’s double the figure from 2000, but it’s still pathetic. Remember, some of that money goes to increasing deliveries to those who already have electricity, so the amount spend on expanding access is even smaller. Note that this is not just development assistance – it’s all spending, including private capital.

We also took a look at a few subsets of the energy investment figures, in order to get a sense of how much of this investment was foreign. We started with FDI; here, perhaps the most interesting fact is that there seems to be relatively little correlation over time within countries between total and energy-related FDI. We then looked at official development assistance for energy (ODA), which has consistently totaled in the neighborhood of $10 billion annually over the past few decades. A big fraction of this turns out to go into policy development; the next biggest slice goes to electricity transmission and distribution. Of particular note, most of the money does not go to LDCs: in 2008, only $1.56 billion of the total $9.67 billion went to the poorest countries. All in all, we found that about one third of investment in electricity and gas distribution infrastructure in LDCs was external.

The (perhaps unsurprising) bottom line of the analysis is that the scale of investment in energy infrastructure in those countries with the biggest energy access challenges (ex-India) is totally incommensurate with the requirements for universalizing access. The challenge is not merely one of directing resources to those who need it most – it is one of scaling up financing in general. The toughest question, of course, is how to make that happen.