Why is the global energy access debate so confused?
15 facts about energy and how people use it
Every day I see people throwing around numbers and arguments about energy that create confusion rather than insight. For instance, I’m obviously a fan of nuclear power but bemused by advocates pushing the technology as a way to provide initial access for the extreme poor. I think off-grid solar is a smart way to get basic power to people quickly and relatively cheaply, but it’s misleading for charities, companies, and journalists to equate the arrival of lighting with ending energy poverty. And I’m puzzled that people so often still think about modern electricity as serving mainly homes rather than an entire modern economy.
So here are fifteen stylized facts that I think are all true and entirely consistent with each other.
1. Electricity is good for people.
Everyone should have electricity at home, even if it starts very small. We absolutely need to deliver universal basic access as soon as possible.
2. Household connections don’t always lead to higher incomes.
People (mostly) use electricity at home for living better lives rather than earning a living. So we should not expect the sudden availability of power for lighting or a phone charger to make poor people richer. By definition, poor people won’t use much electricity because they can’t afford it – or the appliances that run on it. They might save a little bit from not having to buy kerosene and kids might be able to study at night. But we should not expect to transform livelihoods with small home power systems or with physical connections to grids that go out regularly. (And if you’re a hard-headed economist who thinks that the lack of direct short-term income impact means we therefore can’t justify investing in electricity connections, please see #1.)
3. Most electricity is not used at home.
According to IEA, only about one-quarter of the world’s electricity is residential, with the rest consumed by industry, commerce, and agriculture. The benefit of a power plant is often explained in terms of how many homes it serves because it’s easy to understand, but it’s misleading about where electrons are mostly used.
4. Electricity for business is an absolute prerequisite to job creation and economic growth.
It’s hard to imagine a modern economy without cheap consistent power. Surveys of firms across Africa consistently point to electricity as a top constraint on productivity.
5. Conversely, outages are job killers.
If your business has to regularly shut down, run on a costly generator, or keep replacing damaged equipment from voltage surges, it’s pretty hard to stay competitive and grow. The evidence of the impact on jobs is striking.
6. If we expect more energy to help people earn more money, we should target work, not home.
The feedback loop of electricity 🔁 development depends largely on boosting non-residential use. This might sound cold-hearted to people living without power at home, but in a world of limited resources, choices matter. Countries that have grown very quickly, like South Korea or China (or the US in the early 1900s) prioritized power for industry before rural homes.
7. Local politics usually mean emphasizing household connections.
Bringing electricity to new places is a common election promise. Governments, for good and less-good reasons, want to connect everyone as quickly as possible.
8. International politics are also emphasizing household connections.
If the goal is to spur prosperity and industrialization (rather than mitigate the worst effects of extreme poverty) global efforts are probably too focused on household electricity. Yes, I love Mission 300, the ambitious new World Bank & African Development Bank effort to connect 300 million people by 2030. Let’s do it. But if the push only achieves household connections without at least a parallel effort for affordable, reliable industrial power, it could wind up making the structural energy poverty problem worse. That’s because…
9. Extending the grid may be good for politics but it usually hurts the national utility.
If a utility loses money on every new customer (and nearly all African utilities do), then extending coverage means bigger losses. Compelling data from Kenya by UMass prof Jay Taneja show pretty clearly that each round of additional new customers are even poorer and use even less power – and thus the utility losses are even greater as the grid expands. So the downward financial spiral is getting worse as countries move closer to 100% access.
10. Poor reliability can push the best customers to quit the grid.
When power is unreliable, larger commercial or industrial customers have strong incentives to just build their own power sources. Kenya’s utility relies on only about 700 commercial customers for the majority of their revenue, and each one now has alternatives that are more costly but can offer better service.
11. The compounding effects of grid extension plus commercial exits are a massive squeeze on utilities.
More loss-making small customers plus the exit of its large highest-paying customers is an existential challenge for utilities.
12. Off-grid solutions are the quickest and cheapest way for initial household connections.
A grid connection is typically >US$1,000 while a solar lantern can be bought for <US$15 or a modest solar home system for $150.
13. Off-grid solutions have limited uses.
While initially cheap, small home systems don’t last very long, do not scale as consumer demand grows, and can only be used for very basic energy services. They’re great for fans and TVs. Not so much for air conditioning or heavy machinery.
14. The debate over grid vs off-grid is false.
I like to think of off-grid home systems like bicycles: they are low cost, easy to use, and super useful for getting around your neighborhood or having fun. But they won’t deliver cargo. At the same time, it’s dumb to drive an 18-wheeler semi to pick up your home groceries. Like transportation, different energy systems provide different services. People and economies need both. And for all the financial reasons above, utilities do too.
15. Finally, scale matters: If countries want to industrialize, they need industrial power.
As I type this, I’m sitting in an air-conditioned building, using the cloud, and surrounded by manufactured materials embedded with abundant energy. I take that all for granted. Everyone on earth should be able to take it for granted too.
One of my favorite graphics says it best:
I hadn’t put two and two together like this. Residential electricity does not generate development improvements. And each residential customer makes the grid more unreliable and less profitable. I guess Zambia has done it right. Lots of power production, but mostly for industry and mining.
One of the most honest reads on energy I have come across in a while—and no surprise, it’s Todd, my favorite writer on the topic!!
It’s high time we cut through the noise and reframe the conversation—not as grid versus off-grid, but as a deeper discussion about what kind of access actually drives development and who needs it most. If we want economic transformation in the global south, we have to center reliable power for firms, not just households. Household access is absolutely necessary, but it’s not sufficient on its own. Thanks for pulling these facts together.