Access to energy must for LDCs to escape poverty: Report

  • 60 per cent people in LDCs lack access to electricity

Kathmandu, November 23

Expanding access to adequate, reliable and affordable sources of modern energy is essential if the world’s poorest nations are to escape the poverty trap, says The Least Developed Countries Report 2017: Transformational Energy Access of UNCTAD.

According to the report published today, the world’s 47 least developed countries, including Nepal, are falling far behind the rest of the developing world in terms of getting power to homes and businesses. While they have made great strides in recent years, achieving the global goal of universal access to energy by 2030 will require a 350 per cent increase in their annual rate of electrification.

“Achieving Sustainable Development Goal 7 is not only a question of satisfying households’ basic energy needs,” UNCTAD Secretary-General Mukhisa Kituyi said in Geneva ahead of the report’s publication today.  “That in itself has valuable welfare implications, but we need to go beyond for electrification to transform LDC economies, modern energy provision needs to spur productivity increases and unlock the production of more goods and services.” The launching ceremony of the report was also held in Kathmandu.

Kituyi added, “The productive use of energy is what turns access into economic development, and what ensures that investments in electricity infrastructure are economically viable. But that means looking beyond satisfying households basic needs to achieving transformational energy access – satisfying producers’ needs for adequate, reliable and affordable energy.”

This two-way relationship between the productive use of energy and economic development, which the report dubs “the energy-transformation nexus, remains very weak in LDCs. More than 40 per cent of businesses operating in these countries are held back by inadequate, unreliable and unaffordable electricity. On average, they suffer 10 power outages per month, each lasting around five hours, and this costs them seven per cent of the value of their sales.

While on average 10 per cent of people in other developing countries lack access to electricity, this remains the case for more than 60 per cent of the population in LDCs. And LDCs as a group have around just eight per cent the capacity of other developing economies to generate electricity per person, and barely two per cent that of wealthier nations.

Achieving universal access to modern energy in LDCs by 2030 will be costly. Based on previous global estimates, the report puts the cost at US$12 billion to US$40 billion per year. Transformational energy access would cost still more.

This far exceeds the resources currently available, the report says. Total official development assistance to the energy sector is just US$3 billion per year, domestic resources for public investment are scarce in most LDCs and most also face serious limits to borrowing without risking an unsustainable debt burden.

Private investors show little enthusiasm for investments in electricity infrastructure in LDCs, which entail large irreversible costs, long project cycles and slow payback. Most LDCs are also seen as relatively high-risk environments – although the availability of de-risking instruments, such as insurance and guarantee products, might help to bolster confidence.

Governments could raise extra capital by developing domestic debt markets or tapping into alternative sources of funding, such as impact investors, infrastructure funds and, in some LDCs, the population living abroad, the report said.

Renewable energy sources, such as solar and wind power, could have a revolutionary effect in rural areas, home to 82 per cent of those without power in LDCs, and help overcome the historical obstacles to rural electrification.

But non-hydro renewable energy in these countries has so far come mostly from small-scale technologies, such as solar lanterns and stand-alone home systems.