The energy ladder and poverty alleviation

Thinking around the role of energy in poverty alleviation has evolved over time, and is now becoming a distinct field of study and interrogation. The Industrial Revolution, when societies went beyond solar-based energy flows, has been at the core of the mainstream economic history narrative of the energy-development relationship (Barca, 2011). During this time, energy access was considered a vital catalyst, and a measure, of economic growth. The narrative has since changed to take account of equity issues and socio-environmental costs (Gunningham, 2013;

Hahn, 2009). While there is continued evidence of strong correlation between energy and economic growth (see Ferguson et al., 2000), the causality within the relationship is much more contested (Carley et al., 2011, Zachariadis, 2006; Payne, 2010). However, in a development context, energy access, especially when delivered in an integrated manner with other development initiatives (Schäfer et al., 2011), is seen as a key enabler providing pathways to transition from poverty to increased prosperity (Kirubi et al., 2009; Barnes, 1988; Pearce &

Webb, 1987).

A central theme to poverty alleviation, and the role of energy, is that of equity. A frequently-cited early work that introduced these concepts is Meadows et al. (1992). This work, a follow-up to the authors’ 1972 publication on the limits of growth, calls for increased equity in the use of resources as the principal ethos of a sustainable future, assisted by technological innovations.

The authors advocate to eliminate poverty through the equitable distribution of materials and energy. The lack of equity is manifest in the developing world today and usually occurs concurrently across a number of dimensions. For example, areas of the world lacking energy access are generally impoverished in other dimensions (Barnes & Toman, 2006). The multi-dimensional nature of poverty is reflected in development frameworks, such as the Human Development Index (Cecelski, 2005). More recently, countries have adopted Sustainable Development Goals across dimensions, including an explicit goal of ensuring access to affordable, reliable, sustainable and modern energy for all (UN, 2015).

Fundamentally, energy is an enabler of utility and function. Within residential households, basic levels of energy fulfil functions such as heating, lighting, cooking and hygiene. This level can be provided by biomass, but the accompanying health and socio-environmental costs are very high. With more modern forms of energy, additional services can be provided to improve living standards and quality of life, such as communication and improved health, education and community services. Perticas & Gheorghe (2012) focus on the enabling function of energy, that is, the value that it provides humans to be warm, cool, clean and healthy, and drink water and eat hot food.

Table 3.1 shows a new portrayal of the energy ladder concept, bringing together both demand and supply sides of the energy equation. One combined diagram helps contribute to the overall understanding of the energy system. The left side of the diagram describes the key energy demand levels commensurate with changing economic development. Barnes & Floor (1996) were among the first to develop this concept, which was also considered by Chakravarty &

Tavoni (2013). As this thesis focuses on electrification, the right side of the diagram shows electrification technologies that might provide supply to meet these demands, based on the classifications of Alstone et al. (2015). It is pertinent to echo Bhattacharyya’s (2012) message that electrification is one part of the energy access puzzle, which includes the complex issues associated with the culturally-entrenched use of biomass fuel for cooking and heating in developing countries.

Demand and supply side improvements are generally not linear transitions and can frequently leapfrog stages (Barnes et al., 2004). Also, given the broad range of energy demand and supply represented at each stage, a corresponding supply side technology may not be commensurate

with a given demand. Also, in individual household contexts, more advanced electrification technologies can be used simultaneously with biomass-fuelled fires for cooking, which are relied upon by approximately 2.7 billion people, almost 40% of the world’s population (IEA, 2016).

Numerous sources have defined “basic human needs” level of energy consumption at a maximum of 5GJ/capita/year (Pachauri, 2011; AGECC, 2010; Chakravarty & Tavoni, 2013). A key energy consumption behaviour that is omni-present with basic needs is that of mobile phone charging. Mobile phones are a critical piece of technology to all but the very poorest of society – in 2011, ownership was estimated at 72% in low to middle income countries (World Bank, 2012), and that has most certainly increased. Significant time and money is spent recharging mobile phones, and thus it is a significant consumption trend at the BoP (Alstone et al., 2015).

Table 3.1 Energy ladder based on consumption and generation levels

(Source: Consumption levels: Chakravarty & Tavoni (2013) based on AGECC (2010); generation levels: Alstone et al. opportunity for community based services with higher power requirements, eg water pumping or grain milling.

10 – 1000 W Solar home systems

In addition to below, televisions, fans, additional lighting and communications, limited motive personal lighting, radios, mobile phone charging)

Basic incumbent systems Fuel based lighting, biomass for cooking, dry cell batteries, fee-based mobile phone charging.

People may move up the energy ladder as their incomes grow, perhaps eventually switching to electricity from the grid, while in industrial and agricultural settings, engines and electricity replace manual and animal power (Rai et al., 2015). Higher levels of energy use can lead to more immediate, income-generating effects: pumping and refrigeration, for example, may produce increases in productivity and yield, employment, incomes and business growth.

Modern energy can, in turn, facilitate the creation of greater economic opportunities that contribute to the alleviation of poverty (Cabraal et al., 2005; Gaye, 2007). While it is tempting to consider that energy use at lower rungs of the energy ladder may not be contributing to the

“productive use” of energy, it is, in fact, quite the contrary. Even low levels of energy use, such as to charge mobile phones, foster income-generating effects that flow through the economy, thus contributing to sustainable poverty alleviation at the BoP.

In terms of energy supply, and in the context of poverty, the “basic human needs” level of energy is usually satisfied by incumbent environmental resources, including biomass (such as wood and animal dung) for cooking, sunshine for drying and human effort. Burning of biomass has a number of health impacts as a result of inhaling hazardous smoke, posing unacceptable morbidity and mortality rates (Yadama, 2013). There are additional social impacts on communities, especially among women and children; and there is generally a high impact on the ecosystems from which biomass is sourced (Cabraal, et al., 2005). This energy supply level may improve through the use of fuel-based lighting and batteries. There are potential market opportunities at this level of energy consumption for substitution with cleaner energy sources, e.g. substituting kerosene lanterns for solar lanterns, which may also charge mobile phones.

As outlined in Table 3.1 above, there is a range of electrification technologies currently serving the electricity access market. Pico-power systems allow small scale lighting, such as solar lanterns, with some systems additionally providing mobile phone charging. The next level up, solar home systems, provide single but usually multi-room lighting at a household level and can also power high-efficiency appliances. Further up the ladder, community based micro- or mini-grid³ systems can provide a cluster of households with energy by effectively managing supply and demand, providing not only power for lighting and household appliances but the potential for community-based or business-based higher-intensity power uses. Finally, the electricity grid

3 Micro-grids range in power capacity from 1 kW to 1MW, although most are generally in the 2 to 25 KW range (with those larger than 10 kW often being referred to as mini-grids) (The Climate Group, 2014).

can power the full range of electric appliances, although reliability and quality of supply can severely limit its usefulness (Aklin et al., 2016). These electrification levels provide the basis for examining effects in adding value that flow through the economic system, discussed in greater detail in the next section.