IEA expects world energy demand to grow briskly to 2030

A future that encompasses a global "sustainable development" cannot come to pass without a massive effort to make low-cost, conventional energy available to the world's poorest people. That was the case the International Energy Agency made at the United Nations World Summit on Sustainable Development at Johannesburg, which concluded last month.

In a new study, "Energy and poverty," IEA found that a lack of electricity and a heavy reliance on traditional biomass -- wood, agricultural waste, animal dung -- for cooking and heating are hallmarks of poverty in developing countries. The study also concluded that any significant relief from energy poverty in the developing world will have to be provided mainly by conventional fuels and the development of a conventional energy grid in those countries. Non-traditional renewable energy sources will provide only occasional, off-grid solutions.
"Today 1.6 bn people have no access to electricity; 2.4 bn rely on primitive biomass for cooking and heating,"the IEA study said. "What is more shocking, in the absence of radical new policies, is that 1.4 bn will still have no electricity in 30 years time and 2.6 bn will still be using traditional biomass. This is not a sustainable future.”

The study's aim is to provide and make available hard information about global poverty and energy use. According to Fathi Birol, author of the IEA's 2002 World Energy Outlook from which the chapter on "Energy and Poverty" was presented in Johannesburg, the groundbreaking study dominated the Johannesburg summit's energy agenda.
"Before it came out," he told, "people were talking in general terms about the subject. With the specific information given, the study provides reliable figures. By defining the problem, we can help governments deal with it. "The call to increase renewable energies that was advocated by the summit implied that non-commercial energy like biomass must not be pushed for home use. The World Health Organization revealed that 2.5 mm people, mainly women and children, have died of diseases brought on by wood stoves," he added.

The study makes the point that the lack of electricity and the limited availability of modern fuels restrain economic and social development. In addition, use of biomass energy also reduces agricultural productivity, because agricultural residues and dung are also widely used as fertilizers. Lack of electricity Lack of electricity, insists the study, exacerbates poverty and contributes to its perpetuation, as it precludes most industrial activities and the jobs they create. Modern energy services improve the life of the poor in countless ways, IEA noted.
The main challenge is the access to electricity, the study found. This does not imply simply extending existing networks to rural areas: Because 95 % of population growth in developing countries will occur in urban areas, there is the huge task of bringing electricity to the urban poor.

Urban concentration of energy, IEA contends, will mean large-scale, centralized power stations fuelled either by fossil fuels, nuclear power, or by renewables. Mobilizing the huge investment needed over the next 30 years is going to be a major problem, the IEA study found: $ 2.6 tn just for power generation alone, excluding transmission, and $ 1 tn for oil and gas development.
However, electrification and modern energy services do not, by themselves, guarantee alleviation of poverty because the basic problem will remain: Even if the massive capital is raised, the urban poor will most likely not be able to afford the cost of being connected up.
And even if were affordable, notes the study, the transition from traditional biomass use to full dependence on modern energy forms is not a straight-line process: Electricity does not substitute for biomass but is often used in conjunction with fossil fuels such as LPG and kerosene.

Most of the people without access to electricity in 2030 will still be in sub-Saharan Africa (650 mm) and South Asia (680 mm). In all other regions -- China and the rest of East Asia, North Africa, Latin America, and the Middle East -- the overall electrification rate will exceed 96 % and most likely be close to 100 % in urban areas. On average, states the study, 75 mm people will gain access to electricity each year over the next 30 years.
These projections, however, are highly dependent on assumptions about incomes and electricity pricing, which together determine the affordability of electric power. They also depend on the rate of investment in expanding electricity supply.

The average cost of connection varies greatly among countries, ranging from $ 240 in 2001 in South Africa to $ 1,000 in rural Kenya. Private investment in electricity projects in developing countries is concentrated in power generation, rather than in transmission and distribution. It is also concentrated in a small number of countries; little foreign direct investment in energy goes to South Asia and Africa.
Providing electricity to the 230 mm unelectrified in those two regions willmost likely start with the urban areas, as it is much less costly than providing for the rural poor. In many countries, points out the study, strenuous efforts will be made to reduce transmission and distribution losses due to unauthorized connections, non-metering, non-payment of bills, and technical malfunctions.
In rural areas, investment will most likely focus on harnessing indigenous sources, including fossil fuels, to drive productive, income-generating activities. The study indicates that renewable energy such as solar, wind, and biomass may be cost-effective options for specific off-grid applications. In remote areas, decentralized micro projects are an option.

Conventional fuels and established technologies will be preferred for on-grid capacity expansion. It stands to reason, points out the study, that private utilities will not extend networks where it is unprofitable, unless government subsidies make up for financial losses and provide a fair margin of profit. The study does admit that, in some cases, systematic subsidization for a limited period may be more desirable than trying to charge full economic prices overnight.
"As energy industries in the developing world face these challenges, a degree of public support may be essential," the study said, concluding that "International lenders and major financial institutions have learned many lessons the hard way," for there is now a switch away from energy projects to energy programs and sector reforms aimed at paving the way for private-sector participation and competition as well as introducing the proper sequencing of reform steps.