How are energy-poor countries adapting to the energy transition?


In 2021, The Rockefeller Foundation released a report entitled ‘Transforming the Power System in Energy-Poor Countries’, which stated that if the world decarbonises without the 81 energy-poor countries – home to nearly half the world’s population – their Energy Poor Left Behind transition scenario illustrates that this group’s share of global emissions could grow from a quarter today to more than three quarters by 2050. Without a new global approach to supporting energy transition in these countries, this trajectory will make it impossible to avert the worst of climate change. 

And there are no signs of this disparity changing. A recent report from the International Renewable Energy Agency (IRENA) shows that investments throughout 2022 were concentrated in a few regions and countries. Regions home to about 120 developing and emerging markets continue to receive comparatively low investment and, across these regions, the bulk of renewable energy investments are concentrated in only three countries: Brazil, Chile and India. 

In other words, more than 50 per cent of the world’s population – mostly residing in developing and emerging countries – received only 15 per cent of global investments in renewables in 2022. 

Sub-Saharan Africa received less than 1.5 per cent of the amount invested globally between 2000 and 2020. Investments in the region have been on a downward trend, despite the widespread understanding engendered by the COVID-19 pandemic of the critical role energy plays in enabling healthcare, sanitation, telecommunications and resilient livelihoods. 

Additionally, disparities in per capita investments between North America (excluding Mexico) or Europe, and Sub-Saharan Africa have more than doubled between 2015 and 2021. 

Decentralised solutions 

The report goes on to say that decentralised, off-gird solutions have vital role to play in achieving universal energy access and improving livelihoods and welfare under the 2030 Agenda.  

Investment in off-grid renewable solutions reach a record high of $500 million in 2021 owing to strong investment growth in Africa, particularly West and East Africa; increased support from public finance institutions; and an increased concentration of investments among a limited pool of large companies driving the majority of investments. 

However, despite these record highs, overall investments are far short of the $15 billion needed annually between 2021 and 2030. 

One organisation attempting to scale up investments in this sector is the D-REC Initiative, which was established in 2020 to close the emerging gap in climate financing for developing countries. 

The initiative does this using ledger technology that facilitates the verification of clean power production of distributed, micro solar grids in isolated communities in developing countries. This verification is then used to create a new type of renewable energy certificate that may be sold to RE100 firms and other multinationals looking to offset Scope 2 emissions. 

Crucially, D-REC says that it goes further than other renewable energy certificates by using the investment from the sale of the certificate to provide capital to expand or build new solar projects or create new revenues for communities wishing to invest in wider development schemes or climate adaptation. 

“Where energy grids are rudimentary, or where settlements are increasingly remote and difficult to connect to energy grids, the off-grid approach makes a lot of sense,” says Gian Autenrieth, co-lead of the D-REC Initiative. “Both in terms of time and cost, it is a much more efficient way to bring clean electricity to those who would otherwise have no access and burn fuels for their energy needs. 

“It is important to bear in mind that places like Sub-Saharan Africa and India, where the off-grid approach represents high-value are subject to extreme weather conditions that not only tests infrastructure like energy grids, but also jeopardises the financing of grid development plans through local government funding. The fact is that over 750 million people do not have access to electricity and these people are also last in line to get connected onto a grid. Given that they are dependent on fuels for their energy, this presents a big problem for global net-zero plans – not to mention social development. Electrifying the margins with off-grid clean energy addresses this overlooked predicament.”  

Off-grid solar in Haiti 

A recent case study provides a good example. Solar development in Haiti has traditionally faced a number of barriers. Microgrid solar development is often excluded from private institutional finance as securing long-term returns at scale remains difficult. Therefore, addressing the decarbonisation needs of developing countries, like Haiti, required a new mechanism. 

In 2022, off-grid solar developer, Alina Enerji, was looking to increase the number of households in Dulagon, Haiti, supplied by microgrid solar initially from 35 to 335, and then an additional 700 households thereafter.  

While there existed some grant and debt financing for the project, both sources of income were unable to reach the critical mass required to bring the project to fruition. Without a source of additional capital, the project would be unable to be completed, leaving an isolated community relying on intermittent fossil fuel power. 

D-REC had been in partnership with microgrid solar equipment and installation business, Okra, since its inception. Together, both parties recognised that Okra’s mesh grid technology for solar would ideally support the addition of AI technology to verify and aggregate generation data from individual households. 

In the case of the Dulagon project, D-REC and Okra worked with Alina Enerji to design an electrification project that would generate verifiable power that could be certified at a distributed level. By creating and issuing advanced D-RECs, and subsequently selling these certificates to a third-party buyer – low-carbon company, South Pole – the revenue from the sale was able to provide enough capital investment to meet the shortfall needed to develop the project and connect an additional 1000 households. 

Is ESG criteria colonialism 2.0? 

Still, some remain sceptical. In an article for the Washington Examiner, N.J. Ayuk, executive chairman of the African Energy Chamber, states his opinion that Western powers are weaponising investment via environmental, social, and governance (ESG) criteria, designed to impose unrealistic ideologies on an unwilling but still desperate continent. Rather than green energy, he argues that African nations desperately need cheap, reliable energy, and that fossil fuels are the answer. 

“Imposing environmental standards on African nations that are still in the early stages of development artificially maintains millions of Africans in poverty, unable to enjoy the economic empowerment that comes with cheap energy,” says Ayuk. “A growing number of Western countries are making their aid packages contingent on going ‘green’ when African nations simply cannot afford it. In such a situation, the West cannot be surprised if such nations begin turning to countries like China and its Belt and Road Initiative for cheap capital with no environmental strings attached.” 

However, Autenrieth says that these accusations are not necessarily built on solid foundations and read as industry spin coming from the fossil fuel lobby – a lobby serviced by the African Energy Chamber in its role as “the only advocacy organisation representing all facets of Africa’s energy, oil, and gas industry”. 

The cornerstone of the argument, continues Autenrieth, is that if Africa does not exploit its natural resources, then its people will not experience economic and social development at the rate they currently do, and as the West historically has. That contention collapses, however, when you consider that it is not the cost or reliability of generating energy that deprives many Africans of electrical energy – technology exists that can reliably and affordably empower those with little or no access to electricity – but limited grids that do not have the resilience to serve customers.  

“To be clear, even if drilling for oil did not directly have a climate impact, there is not the grid infrastructure to adequately serve communities with the benefits the author speaks of,” states Autenrieth. “To this end, the debate over whether to pursue fossil fuels or renewable energy in Africa distracts from the key issue: grid infrastructure.” 

“To add to this, the author’s economic calculations omit to mention the wider cost, both financially and socially, of environmental degradation and the worsening effects of climate change. Many African countries are among the worst-affected by global warming caused by carbon emissions, so exploiting more natural resources that perpetuate this problem is neither a short-term nor long-term solution, contrary to the author’s argument. 

“In short, encouraging foreign investments that provide resources to protect degrading environments is not a new form of colonialism, but rather a collaborative effort to address climate change.” 

New financing initiatives 

In January 2023, the U.S. Department of State, The Rockefeller Foundation, and the Bezos Earth Fund announced the next steps in developing the Energy Transition Accelerator (ETA), a joint initiative to catalyse private capital to accelerate the transition from dirty to clean power in developing countries. 

Introduced at COP27, the ETA aims to help keep a 1.5°C limit on warming within reach by driving private investment in comprehensive energy transition strategies that accelerate the deployment of renewable power and the retirement of fossil fuel assets in developing countries. Their guiding principles call for an inclusive, comprehensive, high-integrity approach that mobilises new climate finance, supplementing other sources, to promote ambitious efforts to rapidly reduce emissions in this critical decade. 

The High-Level Consultative Group helping to inform the ETA’s development will include leading experts across a wide range of regions and constituencies representing civil society organisations, standard-setting initiatives, private sector coalitions, and intergovernmental bodies. This includes experts from institutions such as the Center for Climate and Energy Solutions and the Environmental Defense Fund. Additionally, the ETA announced that it will seek broad alignment with evolving best-practice standards, including those of the Science Based Targets Initiative, the Voluntary Carbon Markets Initiative and the Integrity Council for the Voluntary Carbon Market

Given the need for rapid change in global energy procurement, it is a welcome sign to seen high-profile organisations collaborate in this way. For continued positive action through this decade, however, there is much more work left to do. 

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