The biggest challenge for the energy industry in the next 100 years involves more than just discovering where the resources are.
It’s also about where they aren’t.
Energy poverty affects populations around the world. According to a World Bank study released in April, more than a billion people have no access to electricity.
Another 3 billion without access to fuel rely on dung, wood or other biomass for cooking and heating, resulting in indoor and outdoor air pollution that causes about 4.3 million deaths each year.
The problem is “typically defined as a lack of access to modern energy services, but there are degrees of energy poverty,” said Kenneth Medlock III.
Medlock is a fellow in energy and resource economics and senior director of the Center for Energy Studies at the Baker Institute for Public Policy at Rice University in Houston.
At the extremes, energy poverty can deprive communities of sanitation, of heating and cooling systems, of safe lighting, of accessible transportation, of water purification.
“All of this together — especially the indoor air quality from burning biomass — is horrible for human health,” Medlock said.
In the global picture, energy poverty appears to be both concentrated and widespread, immediate and extremely long-term in complexity.
Nearly three-quarters of the global population without clean cooking facilities live in just ten countries, according to the International Energy Agency.
Most people in energy poverty live either in sub-Saharan African or developing Asia, and around 80 percent are in rural areas, the IEA reported.
“We’re not talking about something that’s fixable in 10 years,” Medlock observed.
He described the energy poverty problem as “decadal,” in the sense that it will take decades — probably many decades — to address the full scope of the challenge.
How to Get from Here to There
With no quick-fix solution in sight, there’s plenty of debate about how to get fuel, electricity and other forms of energy to the world’s most impoverished areas.
“You get into discussions of rule of law, of institutional and regulatory frameworks, of the existence of markets,” Medlock noted.
“One model is to think about how it occurred in the developed world. What institutions were in place to attract capital into energy infrastructure? The developed world didn’t just jump into capital inflows and infrastructure investment,” he said.
Medlock identified three basic requirements necessary for countries to alleviate energy poverty:
- An energy infrastructure backbone
- A proper regulatory environment
- Supportive government involvement
Infrastructure backbones allow the build-out of laterals and extensions to bring energy to wider areas, Medlock said. An electricity backbone might be a grid or even a primary transmission line, a natural gas backbone a main pipeline.
The role of government should be to facilitate energy development, to create and sustain an effective and non-limiting regulatory environment, and to enforce the rule of law.
“You need infrastructure backbone, the proper regulatory environment and government involvement to ensure adequate long-term investment,” Medlock said.
“Once the backbone is in place, it should create demand pull as accessibility rises, and that’s a signal for more capital investment. That’s where you get a ‘virtuous circle’ going,” he added.
Energy investment is key, and governments have a critical role in fostering the right environment for capital inflows, Medlock said.
“If you aren’t earning revenues from the delivery of energy, you aren’t earning a return on investment. This is important to attract capital and it requires institutions in place that allow for bill collection. For this you need, at the end of the day, the ability to enforce the rule of law,” he said.
Progress So Far
An infusion of foreign aid can help jump-start energy development, but aid doesn’t replace the need for ongoing, substantive and successful investment in energy services, according to Medlock.
“Aid can’t ever be a crutch. Government has to say, ‘This aid is good. It helps us move down the path, but it’s only a first step,’” he noted.
Despite the challenge of funding, the world has made some progress in alleviating energy poverty in recent years
The United Nations has set a goal of universal access to electricity by 2030. The World Bank reported that an estimated 200 million people in energy poverty gained access to energy services between 2010 and 2012, although such successes are tempered by the growth of global population.
“The amount of people getting access to energy services is actually going up. This is positive news,” Medlock noted.
And the oil and gas industry has brightened the picture with recent discoveries near under-served areas, especially in east Africa and in Pakistan and other parts of Asia.
“At this point it really gets into educated opinion-making. Kenya is a great example. In Kenya they had a very specific goal of eliminating energy poverty and bringing electricity to 100 percent of the population,” Medlock said.
By contrast, he described failed attempts at energy development in India. The large segment of India’s population in need of access to electricity enticed investment in power build-out for the country, he said. But at the time, India lacked the governmental and regulatory systems that might have facilitated development of extensive energy infrastructure and brought power to poor rural areas.
“If those institutions had been in place, a lot of those people would have reliable electricity today,” Medlock said.
India’s government now has adopted a “Power for All” objective that aims to bring electrical connections to some 50 million rural households without electricity.
The outlook for alleviating energy poverty varies around the world, according to Medlock.
“It depends on where you are. If you’re in sub-Saharan Africa, it’s pretty bad,” he said.
Severe economic poverty, often hand-in-glove with energy poverty, complicates attempts at a solution.
That creates a dilemma where the poorest need access to energy to rise out of poverty, but remain in energy poverty because of their economic impoverishment.
“Too often people will focus just on energy poverty, but to address that you need to focus on poverty in general,” Medlock observed.
“I tell my students, if you want to be against something — if you want to stand up and be against something — be against poverty,” he said.
When the focus shifts to addressing poverty, Medlock said, “everything else falls by the wayside.”