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Peter Bosshard

The World Bank's new energy strategy: a dead-end street?

As you read this, a power outage is affecting much of Africa and South Asia. It won’t be over in a few hours or days: about 1.4 billion people live in a state of permanent blackout. More than two out of three people in Sub-Saharan Africa and almost half of India’s rural population have no access to electricity. They can’t light their homes, refrigerate their food, or power their work. 

 

The global power outage is not for a lack of trying. Donor governments, the World Bank and other institutions have spent hundreds of billions of dollars on development aid for the energy sector. Their projects benefit urban middle classes and industrial consumers, but leave the rural poor high and dry. In the Democratic Republic of Congo, donors have poured billions of dollars into dams and transmission lines that bypass 99 percent of the rural population. 

The energy strategies of governments and donor agencies are not likely to end the global power outage anytime soon. They focus on centralized power plants that feed the electric grid. Yet most rural poor in Africa and South Asia are not connected to the grid. Given the low population density particularly in Sub-Saharan Africa, grid-based electrification is not an economic way of reaching them. The rural poor pay the price for the dams, coal mines and gas fields that feed the national grids, but are unlikely to benefit from them.

 

Better solutions exist. The International Energy Agency found that 70 percent of rural areas are best electrified by local mini-grids or off-grid solutions based on solar, wind and micro-hydropower projects. Just as mobile phones have made landlines unnecessary, renewable energy technologies allow poor countries to leapfrog the centralized power systems that have electrified industrialized countries.

Private entrepreneurs, dedicated government agencies and local communities are developing micro-hydropower stations and solar home systems at prices that can compete with the kerosene lamps that currently light (and pollute) rural homes throughout Africa and South Asia. Training programs, technology transfer and micro-credit schemes are needed to jumpstart self-sustaining supply chains for these technologies.

Successful programs such as the Lighting Africa initiative and Sri Lanka’s micro-hydropower program are currently being funded by the World Bank. Yet they only receive the crumbs from the well-provisioned donor table. 

 

Only 8 percent of the World Bank’s energy sector lending was directed at the poor in 2013. As an internal report explains, “the high ratio of preparation and supervision costs to total project size is a considerable disincentive” for the institution to undertake small but effective renewable energy projects. In other words, big is still beautiful for the business model of the World Bank. 

The International Development Association (IDA), the World Bank fund for the poorest countries, illustrates the bank’s bias towards large-scale projects. Officially the fund, which is currently being replenished by donor governments, aims to foster “inclusive growth” by expanding opportunities for “the poorest, women and disadvantaged groups”. Yet its energy sector lending continues to target the better off. 

The World Bank has announced that it plans to increase its support for large hydropower projects in Africa and South Asia. It has identified Inga 3 and Mphanda Nkuwa – two proposed mega-dams on the Congo and Zambezi rivers – as models of what it wishes to achieve with future IDA lending. The projects will be built at a total cost of at least 10 billion dollars in the Democratic Republic of Congo and Mozambique, countries where the large majority of the population has no access to electricity. Yet both schemes will benefit the mining industry and the South African export market, not the rural poor. 

 

How to avoid a dead-end street

Donor governments will meet in Moscow on December 16-17 to pledge their contributions for the replenishment of the IDA fund. If they are serious about ending the global power outage, they should relinquish the World Bank’s role as the leading energy sector financier in poor countries. The Green Climate Fund (GCF), which was recently created through the UN climate negotiations, is better placed to promote decentralized renewable energy solutions that benefit the poor.

The GCF will need to be capitalized next year. By shifting resources for global energy finance from IDA to the GCF, donor governments can reach two goals. They will send a message that the World Bank’s self-interest in big projects should no longer trump the interests of the poor. And they can provide additional resources for projects that reduce energy poverty while protecting the climate and local ecosystems at the same time. 

 


Peter Bosshard is the Policy Director of International Rivers.