As global energy access improves, cost and reliability lag

Progress continues to be made on global energy access, with the latest report from the International Energy Agency finding that 89% of the world’s population is connected to electricity.

The big picture: These impressive, rapid gains have kept the world on track toward the UN’s Sustainable Development Goal 7 (SDG7): modern energy access for all by 2030. As household access improves, the agenda to combat energy poverty is shifting to affordable and reliable access for business.

Where it stands: The number of people living without electricity has dropped to 840 million, from 1.2 billion in 2010.

• Kenya and Bangladesh made the fastest progress over the past 8 years, driven by aggressive government investments in last-mile connections.
• The greatest challenges will soon be limited to sub-Saharan Africa, where the report projects that 90% of the world’s 650 million people still without electricity access will live in 2030.

But, but, but. Residential electricity accounts for only 5% of global energy consumption.

• Electricity at home has benefits, but impact studies from India and Kenya show that neither off-grid solar home systems nor on-grid connections for the very poor increase incomes.
• Meanwhile, many middle-income countries at or near universal access still suffer from dysfunctional power systems. Business surveys across Asia and Africa frequently cite high energy costs and unreliable power among the greatest constraints to business productivity and, by extension, job creation.
• A new World Bank report on electrification argues that policymakers need to shift strategy to center on the “productive use” of electricity at affordable rates.

Between the lines:

• High relative energy costs make it harder for firms in regions like sub-Saharan Africa to compete globally.
• Lack of reliability is even more damaging. Lost output from outages — in addition to the costs of backup systems — can be devastating for competitiveness.
• Building an energy system for residential and business customers should be mutually reinforcing. But the push for universal access in Kenya and other countries has at times strained electric grids and ended up undermining reliability.

What to watch: As more countries approach universal access, they'll have more latitude to set energy targets around cost and reliability that will have a stronger impact on economic growth.

Todd Moss is executive director of the Energy for Growth Hub and a visiting fellow at the Center for Global Development.