Reuters Workers walk along wires as they inspect newly-built electricity pylons above crop fields in Chuzhou, Anhui province, China, July 9, 2015.
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Debunking Microenergy

The Future Lies With Urbanization

For over two centuries, rising energy consumption powered by coal, oil, natural gas, hydroelectric power, and nuclear energy—combined with modern agriculture, cities, and governance—has fueled a virtuous cycle of socioeconomic development. It has enabled people in many parts of the world to live longer, healthier, and more prosperous lives. Along with these material gains have come liberalizing social values, the ability to pursue more meaningful work, and environmental progress.

Yet roughly two billion people have still not made the transition to modern fuels and energy systems. These populations remain trapped in what we call “the wood economy.” Living in the wood economy means relying on wood, dung, and other basic bioenergy. In this economy, life choices are extremely limited, labor is menial and backbreaking, and poverty is endemic. There is little ability to produce wealth beyond what is necessary to grow enough food to meet minimal nutritional needs.

Although there is broad global agreement that everyone should have access to modern energy, there is no similar clarity about how best to achieve that outcome, how to mitigate climate change and other environmental harm associated with energy development, or even what actually constitutes energy access. Too often, initiatives to address energy poverty have fetishized very low levels of household electricity consumption—a light bulb and cell phone charger, perhaps a fan and a small television—without attending to the broader context that makes higher levels of energy consumption and modern living standards possible. As a result, contemporary efforts to expand access to modern energy have overwhelmingly focused upon the provision of small-scale, off-grid, and decentralized energy technologies that, while checking the box marked energy access, are incapable of serving the variety of energy end uses that are necessary to eliminate energy poverty.

Steam rises at night from the cooling towers of the Electricite de France (EDF) nuclear power station in Dampierre-en-Burly, March 8, 2015.

Steam rises at night from the cooling towers of the Electricite de France (EDF) nuclear power station in Dampierre-en-Burly, March 8, 2015.

Energy consumption, not energy access, is the metric that is strongly correlated with positive human development outcomes, and there is a strong bidirectional relationship between rising energy consumption and rising incomes. Modern energy infrastructure has enabled large-scale economic enterprise that creates opportunities for nonagricultural employment, higher labor productivity, and rising incomes. Rising incomes make modern fuels, electricity, and appliances affordable. For this reason, levels of energy consumed within households cannot be disentangled from energy consumed outside the household.

Historically, rising household energy consumption has come as a side benefit of industrialization, urbanization, and agricultural modernization. When most people are tied to low-productivity agricultural labor, there is not sufficient household income to support significantly higher energy consumption, nor is there societal wealth to subsidize it. That is why nations that have achieved universal electrification and access to modern transportation and cooking fuels have, without exception, moved the vast majority of their population off of the farm and into the city.

Rising societal wealth in the urban and industrial core has allowed extension of electrical grids to the periphery, usually with some form of state subsidy. But it is important to attend to the order of developmental milestones. Rural electrification has been the last step toward achieving universal electrification; it comes after most of the rural population has moved to urban and suburban areas, where economies of scale and population density allow electrification to be achieved at lower cost. And even then, rural electrification has proved sustainable only where it is targeted to raise agricultural productivity and hence produces incomes for rural populations consistent with rising consumption of energy.

To succeed, contemporary efforts to address energy poverty in developing nations will have to keep this history in mind. Decentralized renewable and off-grid energy technologies can play an important role in some contexts, particularly where they are targeted to increase agricultural productivity or otherwise support productive economic enterprises and are deployed in ways that augment expanding centralized grid electricity. They cannot, however, substitute for energy and other infrastructure necessary to support industrial-scale economic enterprise. Microfinance, microenterprise, and microenergy are no substitute for industry, infrastructure, and grid electricity.

Off-grid solutions, such as solar microgrids, will make sense in some places. But as a general rule, grid electricity will serve more people at lower costs than any other investment. The strong relationship between industrialization, agricultural modernization, rising incomes, and energy consumption has important implications. Distributing solar lanterns, clean cookstoves, and low-energy microgrids to poor villagers might make those handing them out feel good. But to end energy poverty, developing countries and multilateral institutions will need to prioritize energy development for productive, large-scale economic enterprises.

There is likewise no pathway to significantly higher levels of energy consumption without moving most people out of subsistence agrarian poverty and into higher-productivity off-farm employment in the formal knowledge, service, and manufacturing economies. Household electrification has, virtually everywhere, been an urban event. And so most countries around the world will need to urbanize to move their populations out of energy poverty, a great transformation that is already taking place at an unprecedented rate. To accelerate this transition, national and international efforts will need to prioritize resources toward cities and their infrastructure.

They will also need to prioritize investments in new energy infrastructure to bring the most energy to the most people. Off-grid solutions, such as solar microgrids and other decentralized technologies, will make sense in some places. But as a general rule, grid electricity will serve more people at lower costs than any other investment. A recent analysis by the Center for Global Development estimated that a $10 billion investment by the Overseas Private Investment Corporation in natural gas generation in Africa would serve three times as many people as the same investment in renewable energy technologies. Further, using geocoded data from western Kenya, UC Berkeley’s Catherine Wolfram and her colleagues have shown that many unelectrified homes are within less than 1,000 meters (0.6 mile) of an existing connection but remain off-grid for lack of access to credit and inefficient government connection policies. In short, great progress on increasing energy access and energy consumption might be made at relatively low cost simply by prioritizing connecting to the grid those who already live close to it.

Efforts to end energy poverty are successful when they are pursued not piecemeal but through strategic government industrial and agricultural policy, strong institutions, public utilities, and regulated monopolies. Large-scale electrification has never been achieved without substantial involvement by the public sector, whether through regulation of private energy utilities or the direct provision of energy services through public utilities. Once access to electricity has been achieved by most sectors of society, privatization and deregulation of energy services can sometimes bring greater efficiencies and lower costs. But in the early stages of electrification (and so long as energy consumption is well below modern levels), market-based policies to reform energy services have the potential to impede the growth of energy access and consumption because the profit margins are too low and the return on investment too long when large infrastructure investments are required. 

Modern living standards and modern levels of energy consumption and energy service provision simply cannot be achieved in subsistence agrarian economies. Meanwhile, it is important to remember that energy and electricity are not the same. Most high-profile efforts to address energy poverty focus on electrification. But many important energy services are not electrified, particularly within the transportation and farming sectors. Of all the energy used globally in 2012, only 18.1 percent was consumed in the form of electricity, with less than half of all electricity going to residential use. Another 66 percent of final energy demand is satisfied directly by coal, oil, and natural gas. Most of this is for transportation and industry.

Efforts to address energy poverty must therefore include provisions for transportation fuels and infrastructure and for fertilizer production and mechanization of agriculture. The latter are critical to raising on-farm productivity and incomes, freeing up labor to move to higher-productivity urban employment, and creating sufficient agricultural surpluses to feed large urban populations. The former are critical for giving farmers access to markets, providing urban populations with access to food, and, more generally, creating opportunities for economic integration and the growth of the formal economy.

Achieving modern levels of energy consumption for the two billion people who are locked out of the modern energy economy will come with environmental tradeoffs. That is why it has become popular among many environmental nongovernmental organizations to argue for policies that limit the development of energy infrastructure to a narrow set of renewable energy technologies. But faced with a choice of a low-energy renewable future or a high-energy, high-carbon future, the last two decades of global energy development make clear the path that developing economies will choose. The growth of global greenhouse gas emissions has accelerated over that period, as emerging economies have built out a massive new fossil energy infrastructure.

People cross a street in Mong Kok district in Hong Kong, October 4, 2011. Mong Kok has the highest population density in the world, with 130,000 in one square kilometer.

People cross a street in Mong Kok district in Hong Kong, October 4, 2011. Mong Kok has the highest population density in the world, with 130,000 in one square kilometer.

The tradeoffs between ending energy poverty and mitigating climate change, however, are not nearly so zero-sum. Mitigating them will also require a better understanding of the history of energy modernization and its attendant impact upon the environment. Energy modernization has historically been associated with the move toward more efficient, higher-density, lower-carbon fuels and technologies. As such, new fuels, energy technologies, and energy infrastructure should be judged based on what they replace. Where fossil fuels replace wood and dung, as in China and India, they are decarbonizing and positive; where they replace nuclear energy, as in Germany and Japan in recent years, they constitute recarbonization and are negative. What is most important is the direction of travel: always up the energy ladder, toward denser, more efficient, and lower-carbon sources of energy.

In some cases, progress up the energy ladder may “leapfrog” steps along the way, skipping over some high-carbon fuels and technologies. Brazil achieved universal electrification almost entirely through the development of hydroelectric power, skipping over heavy reliance on coal, oil, and gas as fuels in its power system. In Africa, hydropower and natural gas may represent the lowest-cost path to large-scale electrification, allowing modernization and industrialization without heavy reliance on coal. As in the past, the right mix of fossil and zero-carbon energy technologies for any given economy will largely be determined by local endowments, technological and institutional capabilities, geopolitical considerations, and a range of other factors.

Although some steps on the energy ladder can be skipped along the way, key steps in the development process cannot. Modern living standards and modern levels of energy consumption and energy service provision simply cannot be achieved in subsistence agrarian economies. Urbanization, industrialization, and agricultural modernization cannot be bypassed. Energy technologies that cannot support these processes, no matter what their carbon footprint, cannot significantly advance human development and well-being.

Moving up the energy ladder toward lower carbon energy sources can help lower the carbon footprint associated with greater global energy use. However, given current low-carbon options, no practical path to modern levels of energy consumption for all is consistent with limiting global atmospheric concentrations of carbon dioxide to 450 ppm, the level that is believed to be consistent with keeping global warming under two degrees Celsius. Exceeding that target comes with higher risk of catastrophic climate change. But it is important to recognize that stabilizing emissions below 450 ppm is no guarantee that the world will avoid catastrophic impacts, nor does exceeding that threshold assure them. A world of 500 or 550 ppm still brings significantly lower climate risk than 700 ppm. And although stabilizing emissions below 450 ppm has become increasingly implausible, stabilizing at 500 or 550 ppm still remains possible.

For this reason, securing a high-energy, low-carbon future will require continuing innovation toward cheap, clean, and scalable alternatives to fossil fuels. Current-generation zero-carbon technologies cannot rival the low cost, abundance, or versatility of fossil energy. Although there are some important exceptions, economic modernization still for the most part depends on fossil fuels. This is even truer in transportation and industry than in the electric power sector. As such, innovation must take center stage if all the world’s inhabitants are to enjoy secure, free, prosperous, and fulfilling lives on an ecologically vibrant planet.

Achieving that future will require pairing efforts to end energy poverty with long-term commitments to energy innovation and deep decarbonization. Climate change represents a profound challenge to human societies. But the effort to mitigate that challenge must not be balanced upon the backs of the poorest people on earth, particularly given that energy development generally increases societal resilience to climatic extremes and natural disasters of all sorts. Lifting everyone on earth out of energy poverty is a moral imperative that we must pursue without qualification.

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