Under-investment threatens to delay clean energy for poor 'by decades'

Investment in providing electricity and clean cooking to hundreds of millions of people is "orders of magnitude" below what is needed to meet a global goal for everyone on the planet to use modern, green energy by 2030, researchers said Thursday.

An estimated $41 billion is required each year to supply electric power to all homes worldwide, but in 2018 only roughly a third of that, $16 billion, was committed for this purpose in 20 key developing countries, an annual tracking report said.

Fossil fuels accounted for the largest share of electricity finance allocations for the first time in at least six years.

The trend was driven mainly by grid-connected coal and gas projects in Bangladesh, said researchers, calling for an end to backing for carbon-heavy power plants.

Finance for clean cooking to replace harmful energy sources such as kerosene and charcoal tripled to $131 million in 2018 - but is still just a fraction of the estimated annual $4.5 billion needed for universal access by 2030, they said.

Donor governments and development banks provided just under half of financing for electrification, with the rest coming from private investors. For cooking, public money accounted for 60%.

“As we deal with the ongoing challenges of Covid-19, and the ever-growing impacts of climate change, the need for modern, sustainable energy access has never been more important," said Damilola Ogunbiyi, CEO of Sustainable Energy for All (SEforALL) and co-chair of UN-Energy.

"Yet (the report) shows a chronic lack of investment in electricity and clean cooking for those that need it most."

In Chad, 88% of people have no access to electricity but researchers did not find even $1 of financing for power in the poor Central African country in 2018, said Olivia Coldrey of SEforALL, an international body that co-produced the research.

Today, an estimated 789 million people still live without affordable, reliable electricity sources, mainly in Africa and Asia, while about 2.8 billion use dirty cooking methods.

The report showed financing for grid-connected renewable energy declined for the first time since 2013, while the share of investment in mini-grids and off-grid solutions - often solar - was less than 1.5% of the total for electricity in 2018.

SEforALL said low investment in locally produced electricity was especially worrisome in the context of the pandemic as it is vital both for powering rural healthcare and to deliver planned Covid-19 vaccines, which must be kept at very cold temperatures.

In a statement, SEforALL warned the latest data suggested "the world will be delayed by decades" in meeting its 2030 goal for universal access to sustainable energy.

Green recovery

Researchers said the increased funding for fossil fuel projects - about 40% of it provided by China - contradicted global efforts to tackle climate change.

A move back to dirty energy in the push to boost economies slammed by the coronavirus pandemic is a risk, the report noted.

It cited India, which - despite rapid progress towards universal electrification driven by an ambitious renewable energy policy - has started auctioning more than 40 state-owned coal mines in response to Covid-19.

"We must prevent these types of policy reversals if we are to realise a long-term, green, resilient and inclusive economic recovery after COVID-19," the report added.

Barbara Buchner, global managing director of the Climate Policy Initiative, a think-tank that partnered on the research, said governments should put their stimulus spending into clean energy and end support for fossil fuels, including subsidies.

"What we really need... is to build our economies forward in a more sustainable way," she said.

She called for policies to support small and medium-sized local companies selling home solar systems or clean cooking stoves, as well as financial innovation to reduce the risks for larger private investors coming into these markets.

Renat Heuberger, CEO of sustainability company South Pole - which produced a complementary report showing delays in paying out nearly 60% of funds committed for energy access from 2002-2018 - said financing models were not well suited to realities on the ground.

Renewable energy deals in places like Nigeria or India, he said, have been held up or failed because of weak institutions, unfavourable feed-in tariffs and insufficient knowledge among local banks more used to backing fossil fuel projects.

Relief Fund

Energy access specialists, meanwhile, have expressed concern about the negative impact of economic lockdowns and resulting recessions on off-grid power companies in Africa and Asia.

Data from trade association GOGLA shows sales of off-grid solar products fell sharply in the first half of 2020, as the pandemic hit trade and incomes in developing nations.

But the sector, which had been growing at an annual rate of 10% in the previous three years, got a boost last week when the Green Climate Fund approved a $30-million investment in a fund to support off-grid energy firms through the pandemic.

The Energy Access Relief Facility aims to offer $100 million in loans over the coming year to help about 90 companies ride out the COVID-19 crisis.

Leslie Labruto, global head of energy at investor Acumen which helped develop the fund, said the impact of the pandemic, while severe, had seen customers continue to prioritise payments for solar energy services even though new sales stalled.

Relief loans now could shore up companies to start growing again in 2021 once COVID-19 restrictions ease and sales pick up, she told the Thomson Reuters Foundation.

"I am hoping we can make up ground in 2021 and beyond... (for) energy access to reach its full potential, which is to see rural thriving economies and power in every home," she said.