Macro Forum: The Street View
Guest View: Sustainable Energy for All
Transitioning to a net zero carbon future in a way that is fair and just for everyone in the world was always going to be a challenge, even before the pandemic struck. That challenge is particularly acute in parts of Africa, where high levels of energy poverty still exist and many places depend on fossil fuel generation to meet the demand for electricity.
So how can the transition be brought back on track, and what is the role not only of governments, but of international bodies like the G7? And what policies are required to make change happen? Lucy Heintz, Partner and Fund Head at Actis talked to Damilola Ogunbiyi, CEO and Special Representative of the UN Secretary-General for Sustainable Energy for All (SEforALL), and Co-Chair of UN-Energy, about how to address the challenges, and the role that investors can play.
Lucy Heintz: Overall, how do you feel about the energy transition in 2021? Are you optimistic?
Damilola Ogunbiyi: Globally, almost 760 million people lack access to electricity, and 570 million of these people live in Africa. In addition 2.6 billion people lack access to clean cooking solutions. This lack of access to electricity and unreliable supply forces people to rely on fossil fuel powered generators, which typically produce the power equivalent of up to 1,000 coal-fired power stations.
It is simply unacceptable that this is the state of energy access in 2021. And it’s clear that the energy transition, which is a pathway to net zero emissions by 2050, is nearly impossible while energy poverty still exists.
Renewable energy solutions can support our global net zero ambition, but we also need inclusive planning approaches and policy measures that support these technologies in order to provide electricity and associated energy services to meet human needs and contribute to sustainable development.
Sustainable Development Goal (SDG) 7 – affordable and clean energy for all – is truly the golden thread that will unlock all of the other United Nations Sustainable Development Goals, and put us on the pathway to net zero by 2050.
But we are far behind. In order to deliver SDG7 by 2030, it is critical that we push governments, businesses, and the global development community to make ambitious, action-oriented, and transformative commitments to sustainable energy systems.
Lucy Heintz: How do you see the role of G7 and policymakers in creating a framework for a Just Transition that works for everyone?
Damilola Ogunbiyi: Even before the pandemic, the world was struggling to eradicate poverty and inequality. And energy poverty further exacerbates this as access to energy is essential for providing healthcare, empowering women, and growing economies.
At the same time, the energy sector is responsible for the majority of global carbon emissions. The pandemic has thrown us even farther off track in our work towards achieving the Sustainable Development Goals. Understandably, and with full support from global multilateral bodies, fiscal headspace has been drawn down to protect populations today.
The pandemic recovery efforts offer us an opportunity to change course and make bold commitments to recover better and leave no one behind, effecting a Just Transition to clean and sustainable energy while also providing energy access to the 760 million people globally currently living without electricity, and the 2.6 billion without access to clean cooking solutions.
More than ever, though, given the fiscal resources spent in the last 18 months, this requires capital and effective investment frameworks.
The G7 can and must play a significant role in making this happen, building consensus around key issues to be addressed and highlighting a fundamental reality: that modern energy access is about more than just enough electricity to power a few lights.
It’s about development, jobs, opportunity, and equality. Energy access will not be useful unless it can be used by everyone to improve health, well-being and prosperity.
It is great to see the G7 committing to lead a technology-driven transition to net zero to build back better and make the future greener and more equitable.
Commitments to increase efficiency and accelerate renewables and other zero-emissions energy solutions, phasing out new direct government support for carbon-intensive fossil fuel energy as soon as possible, to clean cooking fuels and technologies, and policy action to ensure a Just Transition for affected workers and sectors so that no one is left behind will result in a just, resilient and more healthy world for all.
Lucy Heintz: How do you see the role of gas in emerging markets vis a vis transition and economic development?
Damilola Ogunbiyi: It is critical that the energy transition is equitable and inclusive. The role of natural gas in the energy transition is a sensitive topic, but an important one to consider. Here’s an example: historically, Africa as a whole is responsible for less than 3% of cumulative global carbon emissions.
Sub-Saharan Africa is responsible for a mere 0.55%. If all of Sub-Saharan Africa tripled its electricity consumption overnight using only natural gas, the additional carbon emissions would still be just 1.2% of global emissions.
One thing that has become clear is that the energy transition will look different for individual countries. Rather than merely locking out certain fuels, the focus should be on enabling solutions where renewables are the best option. This will be essential to make the energy transition at scale.
Lucy Heintz: A growing percentage of global capital has made net zero commitments. What do you think that will mean in practice – short term and long term?
Damilola Ogunbiyi: More than 130 countries, in addition to companies, cities, and institutions have set or are considering a target of reducing emissions to net zero by 2050. This is a critical goal for us in order to keep global warming to no more than 1.5 °C and ensure long-term planetary sustainability.
This, along with the Nationally Determined Contributions (country-level plans for emissions reductions and climate adaptation) required by the Paris Agreement, still leaves us much more work to do in order to meet our goals. We need bolder ambition, in the short term as well as the long term, in order to make this happen.
Making these commitments is just the first step. What needs to follow are concrete actions, the policy support, availability of sufficient financing, as well as the political will to stay the course and achieve the target. And all of this needs to be backed by an understanding of the specific issues of the country or region, a clear plan and roadmap backed by data, science, and an assessment of the challenges and risks involved.
Lucy Heintz: What could we do to improve clarity around net zero? What do you think the “fair share” concept that is emerging will mean in future?
Damilola Ogunbiyi: We are often made to think net zero is a simple pathway to stop using fossil fuels, and that developing countries are the ones who need to action this.
An inordinately high percentage of global emissions come from just a few countries. The top 3 greenhouse gas emittors contribute 16 times the emissions of the bottom 100 countries. So, while commitments to net zero are needed and welcome, a lot more needs to be done and these commitments need to be backed by the right policies, funding, and support in order to be actioned.
When we talk about commitments to net zero, we need to understand that we have to allow for different realities and pathways to net zero. African countries are committed to a net zero future, especially given their vulnerability to the effects of climate change, but they need support and financing.
The clean energy offer has to include ensuring we won’t leave anyone behind, and that the access to energy also supports development.
Lucy Heintz: How do you see the role of Actis in shaping this? What advice would you give investors?
Damilola Ogunbiyi: The energy transition is a challenge without historical precedence and this can make financing appear risky to investors. But with such a great need and everything to lose if we don’t achieve our goals, we need investors to step up and support sustainable development.
It is estimated that by 2030 we would need an investment of at least US$ 45 billion annually to achieve universal energy access. This volume of finance requires a deep understanding of the current financing landscape – what type of projects currently receive finance, as well as an assessment of the gaps in terms of energy access deficits and the countries that need it most urgently. Fair and consistent regulation is essential to attracting these flows.
One of SEforALL’s core pieces of work on energy finance offers sustainable energy stakeholders a reality check on where financial commitments for sustainable energy stand and how they can be enhanced to ensure the world achieves SDG7.
Building a strong foundation for a range of stakeholders, including policy makers, the finance sector, industry and civil society will help increase deployment of appropriate finance for energy access globally.
Investors like Actis and its partners can be a part of the solution in ensuring that adequate and timely capital is directed to local and innovative energy access solutions and helping shape the regulatory and investment landscapes.
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