Economic development is impossible without access to affordable and reliable energy, which is why in 2015, the United Nations included energy for all as one of the Sustainable Development Goals. While there has been significant progress over the past decade, the world is by no means on track to achieve universal access to energy by 2030.
The International Energy Agency projects that 700 million people will still lack access to energy by 2040, even with the adoption of new policies that accelerate electrification. This scenario would be an unmitigated failure for the global economy and for the hundreds of millions without equal opportunity to participate in the global economy. Ultimately, this would mean another generation of poverty, conflict, and lost opportunity globally.
Grid electrification of rural areas typically takes decades; raising electrification from 80-90% to 100% took approximately 20 years in Brazil, China, and Thailand, for example. For most who lack access to energy, distributed energy will be the best solution. In most cases it’s cheaper than extending the central grid, can provide reliable, 24/7 electricity from day one, and can be deployed in months rather than years.
Myanmar is an excellent example of this opportunity: The average cost per connection is $1,250 for a mini-grid, compared to $2,200 for a grid connection, according to an upcoming study by Smart Power Myanmar. Even communities that are connected to the grid don’t have reliable power for homes and enterprises; more than 50% of grid-connected customers lose power at least three times each week, often for two hours or more, according to the World Bank’s multi-tier framework study.
Like all infrastructure, distributed energy systems are expensive — although they are becoming increasingly more affordable, thanks to the declining cost of components such as solar panels and batteries. But the revenue from rural households is low, meaning that serving these customers will not be profitable in the near term. Emerging markets and unstable foreign currencies create additional risks for investors. Building infrastructure, therefore, requires significant amounts of long-term, patient capital.
A Guest editorial