Page 22 - Oasys South Asia Research Project - Towards Scaling Up of Electricity Access
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16 Towards Scaling up of Electricity Access
of a centralized regulatory agency versus decentralized regulatory arrangements
will also need some consideration. Given the potential for a large number of
regulated entities, the nature of regulation and the most appropriate organizational
arrangement to manage this would have to be carefully considered. This assumes
greater importance given the limited size and coverage of most of the entities, and
the potential for an overwhelming amount of regulatory intervention in this newly
developing activity. The challenge in this respect has not yet been fully recognized.
2.5 Financing and Investment Challenges
Since the launch of the Sustainable Energy for All initiative in 2011, countries lacking
energy access are setting targets for achieving universal electrification by 2030.
Consequently, it is becoming evident that an unprecedented level of investment will
be required for financing electrification projects. The International Energy Agency
estimates that an annual investment of $48 billion over two decades will be required
to meet the objective of universal energy access by 2030, and almost 90 per cent of
this will go to electricity access. Additionally, it estimates that mini-grids and off-grid
solutions will be deployed in 70 per cent of the rural areas and will require an annual
investment of $26 billion. About 60 per cent of the investment will go to Sub-Saharan
Africa, where the electricity access is low at present. It is also reported that an estimated
$9.1 billion were invested in energy access in 2009 and that multi-lateral agencies
contributed 34 per cent of the above investment, followed by 30 per cent from the
developing country governments, 22 per cent from private sector, and 14 per cent of
the above investment came from bilateral official development assistance.
Traditionally, investments in the electricity infrastructure are funded from
internal sources, or through Foreign Direct Investment (FDI), Overseas Development
Assistance (ODA), and multilateral funding support. FDI has benefitted only a selected
set of countries and FDI flow to Sub-Saharan Africa has remained insignificant and
generally, large electricity supply projects have benefitted, making the funding less
relevant for energy access purposes.
Similarly, although ODA generally benefits the developing countries, only a small
share of it flows to the energy sector. Likewise, a small share of the energy access
funding from multilateral agencies like The World Bank was directed to countries
who need it the most and attention to energy access in Africa received attention only
recently. Moreover, despite its significant growth, the carbon finance market has not
really benefited the energy access agenda and it remains less accessible to small and
poor developing countries.
Based on the analysis of financial flows and investment needs for energy access,
the magnitude of the challenge becomes quite clear. For least developed countries
with a high level of energy access problem, even investing the entire amount of capital
of a centralized regulatory agency versus decentralized regulatory arrangements
will also need some consideration. Given the potential for a large number of
regulated entities, the nature of regulation and the most appropriate organizational
arrangement to manage this would have to be carefully considered. This assumes
greater importance given the limited size and coverage of most of the entities, and
the potential for an overwhelming amount of regulatory intervention in this newly
developing activity. The challenge in this respect has not yet been fully recognized.
2.5 Financing and Investment Challenges
Since the launch of the Sustainable Energy for All initiative in 2011, countries lacking
energy access are setting targets for achieving universal electrification by 2030.
Consequently, it is becoming evident that an unprecedented level of investment will
be required for financing electrification projects. The International Energy Agency
estimates that an annual investment of $48 billion over two decades will be required
to meet the objective of universal energy access by 2030, and almost 90 per cent of
this will go to electricity access. Additionally, it estimates that mini-grids and off-grid
solutions will be deployed in 70 per cent of the rural areas and will require an annual
investment of $26 billion. About 60 per cent of the investment will go to Sub-Saharan
Africa, where the electricity access is low at present. It is also reported that an estimated
$9.1 billion were invested in energy access in 2009 and that multi-lateral agencies
contributed 34 per cent of the above investment, followed by 30 per cent from the
developing country governments, 22 per cent from private sector, and 14 per cent of
the above investment came from bilateral official development assistance.
Traditionally, investments in the electricity infrastructure are funded from
internal sources, or through Foreign Direct Investment (FDI), Overseas Development
Assistance (ODA), and multilateral funding support. FDI has benefitted only a selected
set of countries and FDI flow to Sub-Saharan Africa has remained insignificant and
generally, large electricity supply projects have benefitted, making the funding less
relevant for energy access purposes.
Similarly, although ODA generally benefits the developing countries, only a small
share of it flows to the energy sector. Likewise, a small share of the energy access
funding from multilateral agencies like The World Bank was directed to countries
who need it the most and attention to energy access in Africa received attention only
recently. Moreover, despite its significant growth, the carbon finance market has not
really benefited the energy access agenda and it remains less accessible to small and
poor developing countries.
Based on the analysis of financial flows and investment needs for energy access,
the magnitude of the challenge becomes quite clear. For least developed countries
with a high level of energy access problem, even investing the entire amount of capital
