Do we need Big Energy to fight energy poverty?
Why small-scale infrastructure won't be enough.
I was pretty surprised to find an email in my inbox from Tisha Schuller titled, “Why I’m Not Talking Energy Poverty Any More.” Tisha is a board member of the Energy for Growth Hub, where our mission is to end energy poverty. My first thought: uh oh.
But since I always learn something from Tisha – that’s why I maneuvered to be in Tisha’s kayak on a recent Hub board retreat – my second thought was this is gonna be good. I was right.
Tisha’s day job is running Adamantine Energy, a consulting firm that started by mediating conflicts between local communities in Colorado and oil & gas companies. Lately, Tisha’s work has been advising energy company executives to credibly adapt to the energy transition. Key word here: credibly.
From her email:
I’m going to stop talking publicly about energy for development…. Why? Because nowadays, when oil and gas leaders talk about energy for development to climate-centric stakeholders — who include the moderate middle — it almost always exacerbates polarization.
Five years ago, things were different. Talking about energy poverty and how to solve it created common ground for new types of conversations between energy leaders and energy stakeholders. But today, the topic has morphed into a preaching-to-the-choir go-to for energy executives. If you want to make stakeholders who already support the oil and gas industry feel better, go for it. If you want to build bridges with a broad audience, set this topic aside.
She’s specifically talking to energy company executives and warning them against overusing poverty impacts to justify their business decisions. As she says,
Both of these things are true:
Energy for development will be central to both meeting increased global energy demand and transforming billions of lives around the world in coming decades.
This topic is no longer a great unifier—it’s divisive.
I’ve seen what she's talking about. Probably the worst example was coal giant Peabody’s utterly disingenuous energy poverty campaign. This stuff convinces no one.
But does that mean we should also be skeptical of claims that investments in Big Energy – infrastructure that’s built by large commercial developers and that usually serves large customers – will help poor countries and poor people? Some – I’ll choose not to call them out here, but you know who you are – seem to believe that the only development-friendly energy is offgrid solar. But what about utility-scale solar and wind farms, large hydro, or gas-fired power plants, all of which are built by international corporations and could be considered Big Energy too? I think the facts show they’re central to eliminating energy poverty.
What are reasonable development claims for Big Energy?
Let’s start with the caveats. Sizable power plants are almost always going to target cities or industrial zones because that’s where the anchor paying customers reside. But I’ve cringed when some companies make the leap from “775 million people lack modern energy” to “our energy project will help solve this.” Upstream gas production for export will provide an income stream to the host government, but it won’t deliver power or cooking fuel to the poor (at least not without complementary downstream infrastructure). Similarly, I’ve written positively about the prospects for nuclear power in developing countries, but the chances that any of those 775 million poor people will get their first lights from a nuclear power plant are pretty slim. Same for a large power plant to serve a mining operation. Or even for a big city or industrial park. The immediate beneficiaries of these projects are not likely to be the extreme energy poor. But are these investments still positive for fighting energy poverty? Yes. Here’s why.
Supply is good. Any country short on power needs more of it for all sectors of the economy. Just one-quarter of global electricity is consumed inside homes, the rest is used in industry and commerce. Kenya for instance has an access rate of 71% leaving some 16 million people without basic power at home. But the country’s entire non-residential per capita use is just 115 kWh per year, less than what a single laptop computer uses. The country needs to connect more homes but especially to boost power supply for business.
Energy poverty is more than lack of access. Many of those not counted among the 775 million without any power nevertheless live with a pernicious form of energy poverty. Nearly everyone in Africa suffers from expensive and/or unreliable power at home and at work. Any investment that makes electricity cheaper or more reliable in developing countries is helping fight energy poverty.
People are not fixed. The majority of those in extreme energy poverty are rural, while rural electrification is always more expensive because of low density and basic economics. (That’s why the wealthy and energy abundant United States is still subsidizing rural electricity customers.) But sometimes people gain access to power by not waiting for it to come to them but by moving to the power. And the region with the greatest energy poverty, Africa, also happens to be rapidly urbanizing. People are migrating into cities for all the same reasons that people have been doing so everywhere for decades: better opportunities, created in part by cheap abundant energy. So investing in dense urban power at scale will also help mitigate future rural energy poverty because so many of those people will be moving.
The grid vs. offgrid debate misses the point. One thing that drives me nuts is any argument that Option X is always the best or cheapest form of energy. We wouldn’t say a bicycle is always the best or cheapest form of transportation. Sure, it might be ideal for getting around your local neighborhood but it’s not for shipping cargo or visiting another continent. Kate Steel, formerly of USAID’s Power Africa who now runs offgrid financing platform Nithio so she knows all sides intimately, wrote one of my favorite blog posts where she coolly explains how offgrid options complement utilities by helping relieve financial pressure via a division of effort. Yes, exactly. We need both.
Most of all, new Big Energy investments can help make a power system financially sound. At the heart of every energy-poor economy is usually a bankrupt utility. Without solving the financial viability of the national power distributor, it’s going to be very hard to end energy poverty. A utility-free world of offgrid islands of solar power might sound romantic to some but not if people want jobs and higher incomes. Any country that hopes to create industries or be part of the global economy will need utility-scale power. Adding new power plants to the energy mix through a competitive open process can deliver the magic of economies of scale, drive down the costs of power, and drive up the viability of utilities. (Unless, of course, the utilities decide to sign secret contracts, which likely has the opposite effect.)
So, I'm with Tisha that energy companies should be careful not to oversell the direct development benefits of their investments. But I’m going to keep talking about it because if we’re going to solve energy poverty, we’re going to need Big Energy too.
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