Olivia Coldrey, Lead Finance Specialist from Sustainable Energy for All (SEforALL) writes on the SDG Knowledge Hub website of the International Institute for Sustainable Development (IISD) about the new investment that is urgently needed to achieve universal energy access by 2030.
New SEforALL Research Shows Urgent Investment Needed to Achieve Universal Energy Access by 2030
Finance is critical if the world is to meet Sustainable Development Goal (SDG 7) – access to affordable, reliable, sustainable and modern energy for all – by 2030.
Yet new Energizing Finance research released by Sustainable Energy for All (SEforALL) shows that public and private financial institutions are not responding adequately to dynamic global energy markets as finance, particularly in Sub-Saharan Africa, remains drastically below levels needed to meet global energy goals and deliver universal access.
The Energizing Finance report series, now in its third year, tracks finance flows across twenty developing countries in sub-Saharan Africa and Asia with large energy access deficits. Together, these countries represent nearly 80% of those living without access to electricity and clean cooking. The new data show that without urgent attention, financial innovation and substantial investment, we will fail to achieve SDG 7.
By examining supply and demand for finance for electricity supply and clean cooking solutions, Energizing Finance helps show us where the international community must focus its efforts.
This year’s findings on electricity show a slightly positive trend, with USD 36 billion in finance committed in 2017 – the year for which most up to date data are available. The last report tracked USD 30 billion. However, only USD 12.6 billion of total tracked finance commitments for electrification benefits residential customers, representing just one quarter of the estimated annual investment of USD 51 billion required to achieve universal access.
The clean cooking story remains much bleaker. An estimated annual investment of USD 4.4 billion is required to close the clean cooking access gap internationally, yet in 2017 only USD 32 million in finance commitments for clean cooking solutions were tracked to twenty countries with some of the largest access deficits. This represents less than 1% of the estimated finance required for universal clean cooking access by 2030. The lack of progress is now a major environmental and public health issue and an escalating challenge for the international community.
In the midst of a global climate emergency, the data also highlight ongoing investment in new fossil fuel electricity generation capacity. Finance commitments for grid-connected fossil fuel fired power plants, specifically coal, decreased from USD 8.1 billion tracked in last year’s report to USD 6.6 billion. However, Energizing Finance strongly reinforces that coal will not reach vulnerable, remote populations who are often best served by decentralized, renewable energy powered electricity. Any financing of new, coal-fired electricity generation is incompatible with the Paris Agreement, meeting the SDGs or responsible investing.
Further key findings from this year’s research include:
- Sub-Saharan Africa is getting left behind in the energy transition: The gulf in electrification and clean cooking finance is putting the continent’s status as an upcoming economic powerhouse on hold. With population increases outstripping levels of new access, Sub-Saharan Africa is at risk of being left further behind.
- 573 million Africans currently lack access to electricity. Despite this, four of the 13 Sub-Saharan African countries tracked reported an absolute decline from last year’s report, and ten of the 13 each received less than USD 300 million in 2017.
- We’re still off track on off-grid: Only 1.2% of all finance tracked went to decentralized, off-grid electricity solutions – a stunningly low proportion for a solution that in many markets delivers electricity more quickly and at lower first costs than the central grid. Off-grid electricity powered by renewable energy offers much promise in providing access to remote populations and in supporting countries to increase their energy security and climate resiliency.
- Women and displaced persons are disproportionately impacted by poor access to energy: For the first time, Energizing Finance this year tracked finance for energy access for some of the world’s most vulnerable people and communities. We found that, on average over the past ten years, only 6% of total overseas development assistance (ODA) for energy activities in developing countries was specifically targeted to benefit women. Women at the last mile and displaced people face unique and often severe barriers in their ability to access finance to purchase energy services. Finance solutions must be structured and targeted to address these communities if we are to achieve SDG 7.
- While China and India have significantly reduced domestic fossil fuel expansion, they have continued to invest in overseas coal plants, mainly in Africa, Bangladesh and the Philippines.
- 60% of all coal financing tracked in 2017 was sourced from the Export-Import Import Bank of India (USD 1.6 bn) and the Export-Import Bank of China (USD 1.7 bn) for projects in Bangladesh.
As the world enters the final decade of the SDGs with major shortfalls in investment required to meet them, coupled with a lack of political urgency, Energizing Finance’s stark findings and the lack of progress towards achieving SDG 7 underscore the need for innovative, targeted action.
- Meeting the SDG 7 targets requires the international community to overhaul its current approach to financing clean cooking solutions. We recommend that the international community take a refreshed, holistic approach to the issue – one that affects ~3 bn people globally. The sector requires risk taking, grants and concessional funding to stimulate market demand and foster private sector engagement in supply. Government commitments, target-setting and allocation of domestic budgets, as evidenced in Uganda, Madagascar and the Philippines, are needed to enable households to afford high quality, cleaner solutions.
- The overall decline in international public finance for energy access must be addressed urgently and strategically. International public financial institutions must fully exercise their mandates to fill clear financing gaps for electricity access with a focus on serving the most vulnerable populations, especially women and displaced people.
- Policy makers, particularly in Sub-Saharan Africa, must prioritize emissions free, non-coal fired electricity as part of their integrated energy plans. This should be underpinned by fiscal and other incentives as necessary, possible and appropriate to give private investors the confidence required for long-term investment in sustainable energy infrastructure and assets.
As part of our Energizing Finance series, SEforALL released two reports this year, including: Taking the Pulse – developed in partnership with Catalyst Off Grid Advisors and E3 Analytics – which looks at projected financing needs for universal energy access by 2030 in three focus countries, Madagascar, the Philippines, and Uganda; as well as Understanding the Landscape – developed in partnership with Climate Policy Initiative – which presents an overall view on SDG 7 finance by tracking flows into the 20 largest energy access deficit countries.
Read more on the SEforALL website here. Follow #SDG7finance for the latest news and to share your thoughts.