Progress in least developed countries hinges on access to modern energyStaff Writer | November 23, 2017
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.
Energy The Least Developed Countries Report
The report puts the cost at $12 billion to $40 billion per year. Transformational energy access would cost still more
“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 on Tuesday.
“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.”
Dr. 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.
Hydroelectricity also plays a major role, currently providing half of all the electricity generated in LDCs
While on average 10 percent of people in other developing countries lack access to electricity, this remains the case for more than 60 percent of the population in LDCs. And LDCs as a group have around just 8 percent the capacity of other developing economies to generate electricity per person, and barely 2 percent that of wealthier nations.
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 percent 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 7 percent of the value of their sales.
Achieving universal access to modern energy in LDCs by 2030 will be costly. Based on previous global estimates, the report puts the cost at $12 billion to $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 $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.
Better still, the report says, would be for international donors to honour their long-standing commitment to provide at least 0.15–0.20 percent of their national income in aid, as part of the Istanbul Programme of Action for the Least Developed Countries for the Decade 2011–2020 of the United Nations.
Current aid levels to LDCs fall short of this target by $33 billion to $50 billion per year.
Renewable energy sources, such as solar and wind power, could have a revolutionary effect in rural areas, home to 82 percent of those without power in LDCs, and help to overcome the historical obstacles to rural electrification.
fossil fuels will also have a continuing role in many cases, with a progressive shift towards less carbon-intensive technologies
Utility-scale renewable technologies capable of feeding the grids and mini-grids necessary not only to power homes, but also to grow businesses and industries, need to be deployed rapidly. But to achieve this, LDCs must overcome important technological, economic and institutional obstacles. This will require both the right national policies and stronger international support.
Despite remarkable potential in LDCs, wind and solar power alone cannot meet their needs. Hydroelectricity also plays a major role, currently providing half of all the electricity generated in LDCs; and fossil fuels will also have a continuing role in many cases, with a progressive shift towards less carbon-intensive technologies such as natural gas.
Because energy technologies, and particularly renewable technologies, are constantly evolving, it is critical that LDCs gain access to the technologies suited to their particular conditions and circumstances, and that they strengthen the capacity of their energy sectors to absorb such technologies.
The recently created Technology Bank for the Least Developed Countries could help, but developed countries could help even more by living up to their technology-transfer obligations under the United Nations Framework Convention on Climate Change and the Kyoto Protocol. ■