‘Access to energy is so important in the fight against poverty’

Thank you for inviting me to speak at this important summit. It is good to be in Indonesia and it is good to be in Bali.

It is inspiring to speak to you. You are young, you are educated and you are on the verge of making critical choices – personal and professional. So let me use my speech today to give you some advice.

Yes, this is the privilege of my generation. People like Sri Mulyani can tell young people like you how best to direct your efforts. 

You may ask yourself: Where will I live? Will I have a partner? Maybe children? Where do I want to work? And for which organization?

Whatever your answers are going to be, don’t underestimate the power you have when you make choices. Not just in your private lives. You have the option to give back, to promote change and to make a difference, by striving for technical expertise and using a strong moral compass.

It is difficult for me to think of a more important field than the one you will work in: because you are going to be the experts who can help bring about access to affordable, reliable, sustainable and modern energy for all.

In fact, you can help us at the World Bank to achieve our goals of ending extreme poverty by 2030 and ensuring the prosperity is shared across all societies. We won’t be able to do this if we don’t bring more electricity to more people in a sustainable way.

Today, I want to focus on three questions that I hope will help frame this summit: First, why is energy access so important in the fight against poverty? And, second, why do we have to do this in a sustainable way? Third, and finally, how can we overcome the challenges?

Energy Poverty

So why is access so important? The energy sector has a very high potential for reducing poverty.

Around 1 in 7 – or 1.1 billion people – on the planet lack access to electricity and almost 3 billion still cook with polluting fuels like kerosene, wood, charcoal and dung. Without electricity women and girls have to spend hours fetching water, clinics can’t store vaccines, children cannot do homework at night, people cannot run competitive businesses, and countries cannot power their economies.

In Africa, the electricity challenge can be daunting. Take a country like Ethiopia with a population of 91 million people of which about 68 million people are living in the dark. Even countries with access often have highly unreliable service. One in three developing countries experience at least 20 hours of power outages a month.

And in some parts of the world there have even been dramatic instances of total grid failure, such as (until recently) in Nigeria and in 2012 across Northern India. Even when power is available it can be prohibitively expensive: many countries in SubSaharan Africa face electricity costs as high as 20-50 US cents per kilowatt-hour against a global average close to 10 US cents.

Inclusive economic growth is the single most effective means of reducing poverty and boosting prosperity. Yet most economic activity is impossible without adequate, reliable and competitively priced modern energy.

When you don’t have electricity, there are no sewing machines or rice mills or pumps for irrigating crops. Without electricity, you can’t run a business at night and it’s close to impossible to attract companies to your area that could provide jobs and opportunities to young people like you.

In Liberia – a country in West Africa where just 2% of the population has regular access to electricity – anyone will tell you that you can’t create jobs and opportunities without energy.

We find that energy poverty means two things: poor people are the least likely to have access to power. And they are more likely to remain poor if they stay unconnected.

This is why access to energy is so important in the fight against poverty.

Energy Sustainability

My second point is sustainability. Energy and the way we use it needs to be efficient, sustainable and whenever possible, renewable.

There is good news: According to latest data, more poor people are gaining access to electricity at a faster rate than ever before. But the share of renewable energy is not growing at the same speed.

And we are lagging behind in improving energy efficiency.

Consider this: The International Energy Association says that in high-income countries, energy efficiency is now the largest source of energy because energy saved is energy that can be used elsewhere.

This means we can cut the link between economic growth and energy demand just by improving energy efficiency.

Over the past 20 years, a number of countries have made enormous strides in reducing their energy intensity. China is the giant in this regard, saving as much energy as it consumed between 1990 and 2010. Although when you consider that China’s economy is still about twice as energy intensive as Japan’s, you can see that there is still room for improvement.

If we fully applied all the energy efficiency technologies that are already available today, we could cut energy consumption dramatically by about a third, but only a fraction of this potential is being realized.

Through a combination of energy efficient technologies, smart building design and new renewable roof-top energy technologies, it is already possible to produce buildings that are zero net energy users. In many cases, they are generating solar energy that is going into the grid for others to use.

Of course beyond energy efficiency, policy reform and removing energy subsidies, we also need to see countries shifting from fossil fuels to renewable forms of energy.

The good news is that it’s happening. Rapid technological progress is bringing down the cost of renewable energy for everyone. We are now seeing massive new investment in well-known types of renewables – like hydropower – as well as cutting edge technologies like geothermal, solar and wind.

The drop in the unit cost of solar photovoltaics alone to around one third of what they cost in the year 2010 has helped put solar energy on a cost-competitive basis with traditional forms of energy in an increasing number of places.

Between 2010 and 2012, we saw a 4% increase in the uptake of modern renewable energies globally – three quarters of which were supplied by wind, solar and hydropower.

East Asia led the world in this regard, representing 42% of new renewable energy
generation.

Since 2010, more than half of new power generation capacity built around the world has been renewable. Still, the developing world has barely scratched the surface of what’s possible in terms of renewable energy generation. For example, across Africa and Asia only 10-20% of hydropower potential has been harnessed, and solar potential is only just beginning to be fully understood.

Challenges

But there are also political, economic, and technical challenges: Many countries continue to subsidize fossil fuels as a way of reducing costs for consumers and encouraging economic growth. But untargeted subsidies are very costly and undermine energy conservation efforts.

In 2013, nearly $550 billion of public money was spent worldwide on these direct fossil fuel subsidies which mostly benefited the wealthy who use more than the poor.

In January this year, the Indonesian Government took the decisive step of implementing a new fuel pricing system which has dramatically reduced gasoline and diesel subsidy costs. This reduces fiscal risks and could shift resources towards development priorities.

Another key economic challenge for many countries is that renewables are capital intensive and this capital can be difficult to raise in risky environments. Many countries have adopted policy incentives to overcome these barriers. Countries – such as Brazil and India – are having success with renewable energy auctions.

Some countries are also finding that small-scale solar power can dramatically accelerate energy access. Low-cost solar home systems have helped countries like Bangladesh and Mongolia to bring energy to low-income households who would otherwise be living in the dark. Bangladesh now has the largest national off-grid electrification program in the world. Starting in 2003, with connections for around 11,000 households, the program is now connecting over 850,000 households to safe solar power every year.

And there are technical hurdles: For large-scale, grid connected renewable energy, the key challenge is intermittency. Solar energy is only generated during the day and wind energy varies in intensity with different weather patterns. This makes it hard to integrate into the grid. But in countries like Denmark and Ireland, these issues are being overcome too through sophisticated systems of transmission lines, micro-weather forecasting and advanced grid management systems. They are showing the way forward for others.

The big breakthroughs are coming now in the form of energy storage. New battery storage technology could see the world moving much more rapidly to at least 50% renewable energy – or even greater.

I look at you, the energy experts of tomorrow to take on some of these challenges. And
solve them for the benefit of everyone.

The World Bank’s Role

At the World Bank Group, we take the issue of sustainable energy very seriously. We know that getting there will entail tripling historic capital flows to access and clean energy projects.

Our energy lending to low and middle-income countries is also focused on these goals. Last year, two thirds of our lending went to countries in South Asia and Sub-Saharan Africa where the majority of people without energy access live.

Over 90% of our power generation lending goes to clean forms of energy: natural gas, hydropower, solar, wind, and geothermal. We do not lend for new coal power generation except in very rare circumstances.

We also play an important role in working with countries to ensure a strong enabling environment is in place that encourages greater investment – especially in renewable forms of energy.

We strongly believe that ending energy poverty is a goal that deserves our full attention. We are hopeful that among the new sustainable development goals that the global community will agree on this year energy poverty will receive special attention.

That’s why we co-chair the Sustainable Energy for All initiative with the UN Secretary General. Jointly we focus on three goals: ensuring universal access to modern energy services; doubling the share of renewable energy in the global energy mix; and doubling the rate of improvement in energy efficiency.

All of you will see in your lifetime the negative impacts of pollution and climate change. But as students and energy experts of tomorrow, you can play a role in delivering on the new energy sustainable development goal. The world will need smart people like you with the right motivations.

With your help and dedicated work, we can see an end to energy poverty in our lifetimes. 

You are in the driver’s seat. Let’s make this happen. – Rappler.com

Editor’s note: This was the keynote speech delivered by World Bank Managing Director and Chief Operating Officer Sri Mulyani Indrawati at the International Student Energy Summit in Bali, Indonesia, on June 10, 2015.