When it comes to bringing affordable, reliable electricity to all people, opinions differ on the ideal problem solving approach. Energy specialists think a lot about energy density and quality/intermittency. Economists think about cost. Planners think about space. Each of these caricatures highlights an important consideration, but apparently the energy world needs more planners because space seems to have been somehow lost in the electricity access conversation.
By space, I mean where the people who lack electricity live and work. And by conversation, I mean the dialog between two schools of thought (summarized thoughtfully here, though with an emphasis on climate change): the first believing that anything less than a full connection to the centralized electric grid is insufficient, and the second espousing distributed solar power as the way of the future. Once you begin to actively consider space, however, this debate seems unnecessary –
Meeting energy needs in urban areas
Experts have focused increasing attention on the concentration of energy use in urban areas, which account for about 70% of global energy consumption. This share is only going to grow, since the global ‘urban’ population is projected to significantly outpace total population, with nearly 3 billion new people in cities by 2050.
Bill Gates’ blog post on energy access caused a stir late last June, and his argument for centralized power is reasonable in many urban areas. As data from The World Bank shows below, every country [in the dataset] with an urbanization rate of at least 86% also has an electrification rate of at least 95%; with at least 60% urbanization, none have less than 80% electrification. It is both cheaper and logistically easier (not ‘easy’ though, per se) to bring electricity to urban residents.
Source: data from The World Bank
Proponents of both centralized and distributed generation argue that their preferred technology is cheaper and provides improved quality of service, and both are right – sometimes. Transmission infrastructure to supply power from remote generation sources to central cities is more cost-effective simply due to the sheer number of sufficiently high-income customers that utilities can count on to purchase electricity. Distribution costs also come down with increased population density. When fuel costs are low these factors typically make centralized power generation cheaper, at least in cities.
This might be especially important to would-be fossil fuel generators, as with increasingly stringent pollution controls and public health awareness, coal- or oil-fueled power plants are unlikely to survive in densely populated urban areas. Most countries do not have policies in place to discourage power plant development in highly urbanized regions, though evidence of such plants’ adverse consequences continues to mount, with China (who, perhaps not coincidentally, just announced a planned national emissions trading system) providing the clearest example.
Meeting energy needs in rural areas
While more and more people are moving to cities, five out of every six people without electricity still live in rural areas. Getting electricity to these people requires bringing power to them by extending existing grid access and building new distributed generation, or (arguably) waiting for them to move to cities.
The latter does not make sense, because (1) we only believe that many of them will move to cities, and (2) we have no idea which ones will move to cities, from where, how quickly. The extension of a national electric grid can take several decades (see graph from the Global Energy Assessment, below) and requires large infrastructure investments. This does not justify delay but rather serves as a call to action: we need to find alternative means of meeting electricity needs on an accelerated time scale.
Transmission and distribution costs work against centralized power generation in rural areas. Pair this with low demand amongst poor populations, and it’s understandable that utilities operating on thin margins might be hesitant to invest in grid extension.
In many cases, this gives solar a cost advantage (though it might not need much help before long). This doesn’t solve the problem of power intermittency, but as Jigar Shah pointed out in his response to Bill Gates, centralized grid service is often neither cheap nor reliable (for any number of technical, political, or social reasons). In cases where reliability and affordability are low, new generation capacity also does not necessarily translate into new electricity access.
These cost and reliability arguments will be settled not by pundits but rather by markets, as consumers choose the best options according to their context. Where there is demand for distributed solar power generation, companies like Mera Gao Power and Devergy are going to capitalize on it. In Shah’s words, “…knowledgeable entrepreneurs who have invested their lives and limited dollars into this space are making rational business decisions. Those decisions are focused on the cheapest way to deliver energy.”
India seems to agree, having recently announced that solar will play a major role in its growth strategy, with an ambitious target to reach 100 GW of installed capacity by 2022. This complements a prior commitment to serve the basic electricity needs of every Indian household by 2019. Starting this year, the 100 GW target will require an average of more than 15 GW installed annually through 2021 (EPIA estimates that India installed 1.1 GW in 2013).
Providing power via microgrids should not lock rural populations into low energy lifestyles, especially when they are developed to be compatible with the possibility of eventual grid extension. And whether or not one favors centralized or distributed solutions, moving away from kerosene and other indoor polluting fuels common in rural areas is arguably as important a motivator for action as bringing electricity to those who lack it.
The soon-to-be-released sustainable development goals explicitly include both energy access and urbanization-related targets, reflecting the significant progress we have made in understanding the role of each in international development. Greater urbanization means cheaper electrification for those in urban centers, but cheaper doesn’t translate to affordable unless development is enabled in a host of other ways as well. And cheaper grid-provided electricity alone can’t and won’t translate to electricity access for all on the shortest possible time horizon, which is the one we need to aim for.
By thinking about this challenge spatially, we can see that different contexts will require different approaches. What is appropriate will be determined by cost, resource availability, financing availability, regulatory environment, sustainability concerns, cultural context, population density, demographics, and a host of other factors.
With what we know now about urban migration forecasts and the costs of grid extension versus solar microgrids, the burden of proof to justify large infrastructure investments should be relatively high, but in many cases doing so will still make sense. May the cheapest and most reliable electricity win – depending on where it needs to go.