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close this bookRural Energy and Development: Improving Energy Supply for Two Billion People (WB, 1996, 132 p.)
View the document(introduction...)
View the documentForeword
View the documentAcknowledgments
View the documentAbbreviations and acronyms
View the documentExecutive summary
View the documentThe new agenda
View the documentThe role of the world bank
Open this folder and view contentsChapter one - Introduction
Open this folder and view contentsChapter two - The rural energy situation
Open this folder and view contentsChapter three - Emerging practices and policies
Open this folder and view contentsChapter four - Options for rural electrification
Open this folder and view contentsChapter five - Innovations in renewable energy
Open this folder and view contentsChapter six - Cooking fuels: toward more sustainable supply and use
Open this folder and view contentsChapter seven - The role of the world bank group
Open this folder and view contentsAppendix
View the documentNotes
View the documentBibliography

Executive summary

It is hard not to be daunted by the scale of the problem of providing modern energy service to the world's rural population. There ate nearly two billion people without access to modern forms of energy. such as electricity and oil. This report describes in detail the plight of these two billion. Its message however, is that there are now many ways in which their situation can be improved. For though the problem is daunting. practical and affordable prescriptions are available

To understand the possible solutions. consider first what is known about the problem. Around a third of all energy consumption in developing countries comes from burning wood. crop residues, and animal dung. Such biofuels are mostly used in rural areas. though wood is also used as a fuel by the urban poor Biofuels produce the equivalent of twice the energy of the coal mined in China or the United States in a single year They produce energy. however, in a seriously inefficient way.

For a start they help trap the user in poverty Gathering fuelwood and dung takes time - thee that could be devoted to more productive activities such as farming A recent study in the hill areas of Nepal showed that even in areas with fairly good supplies of wood. women need to spend over an hour a day collecting fuels In areas where wood was mote scarce. the chore lasted about 2.5 hours a day Moreover. most biofuels need to be collected in large quantities They are a highly inefficient means of cooking compared with fuels - such as liquid petroleum gas (LPG) - used by wealthier households. A kilogram of wood. for example, generates a mere tenth of the useful heat for cooking delivered by a kilogram of LPG

Biofuels can also damage people's health. because they give off smoke that contains many hazardous chemicals. Studies of rural areas show that smoke levels inside dwellings often fat exceed safe levels recommended by the World Health Organization Cooking with biofuels does not cause health problems everywhere. but in houses that have poor ventilation it can be as dangerous as smoking cigarettes A study in The Gambia. for example examined the health of 500 children under five years old. It found that children v ho were carried on their mothers' backs as they cooked in smoky huts were six times more likely to develop acute respiratory illness than other children. Studies of women in Nepal and India exposed to biomass smoke - but who did not smoke themselves - found that their death rate from chronic respiratory disease was similar to that of male heavy smokers.

The use of biofuels can also damage the environment. The search for fuelwood often involves chopping down local trees. As trees disappear, fuelwood has to be sought further and further away. Using dung and crop residues as a fuel reduces the amount available for use as a fertilizer for growing crops. Such problems are avoidable. As the report shows. farmers in many areas use biofuels in sustainable ways. But in many other areas the gathering of biofuels ranks together with logging. and the clearing of land for agriculture. as a cause of deforestation. In the northern Chinese county of Kezuo for example, people have already cut down most of the trees around the term lands. Poorer households are now turning to even less efficient fuels such as straw and dung.

Without electricity, moreover, poor households are denied a host of modern services such as electric lighting and refrigeration. To an extent, some of these problems are being alleviated. Electricity supplies have been extended to over 1.3 billion people in developing countries over the last twenty-five years. Yet most of these connections have been in urban areas. In many regions of the world, including sub-Saharan Africa and South Asia. populations have grown even taster (figure I). With the total population of developing countries expected to grow by more than 3 billion in less than four decades, the problems of rural energy are likely to become more pressing than ever. So what can be done to solve them?

Figure 1 Rural Electrification, Increases in the Number of People with and without Service. Selected Countries and Regions, 1970-90

The problems of rural energy should certainly not be dealt with in isolation. Poverty and dependence on biofuels go hand-in-hand. As household incomes rise, people normally switch to modern fuels, if these are available (figure 2). Higher-income countries also depend much less on biofuels than do poor countries. The best schemes for improving rural energy may therefore fail if other policies prevent economic growth.

Figure 2 The Use of Biomass in Relation to GNP per Person in Eighty Countries

Provided the background conditions are right, one of the most powerful ways to improve energy supplies is to ensure that the energy market is determined by consumers' choices. In particular that means both that the price of energy should reflect its cost and that regulation of energy industries should encourage competition and choice. Governments should concentrate on ensuring that there is a level playing field for different investors in energy. whether they are public utilities. private firms or enterprises set up by the local community.

The opposite has been true in most developing countries. Rules and regulations have strangled the emergence of firms other than the state-run utility. For example, it is illegal in many countries for local private or cooperative nongrid-connected generation and distribution enterprises to enter the market. Many government programs have attempted to extend energy supplies to rural areas. But too often the result has been unsustainable public institutions promoting technologies that are unsuitable for rural consumers.

Subsidies for electricity consumption are a particular problem. In the early 1990s average electricity tariffs in developing countries were less than US¢4 per kilowatt hour (kWh). even though the average cost of supply was around US¢ 10 per kWh. Such subsidies are harmful in a host of ways. They constitute a huge financial drain (revenues from electricity supply in developing countries tall short of costs by some US$ 100 billion every year). As a result utilities are often economically crippled, unable to finance the extension of set-vices to rural areas Where supplies have been extended to rural areas. subsidies often undermine the efforts of businesses to provide cheaper ways of generating electricity. In remote rural at-east for example. diesel engines or solar photovoltaic (PV) systems may provide electricity at a lower cost than grid supplies. But consumers will not opt for them if grid supplies are subsidized, not will investors come forward to develop least cost options to set-ye rural consumers.

Overall subsidies on energy consumption tend to benefit rich people more than the poor. A recent World Bank study of seven countries showed that high-income households benefit disproportionately. largely because they use more electricity. In Malawi. for example. a poor consumer on average receives a mere US¢4 a year in electricity subsidies, while a rich one gets US$6.60. Some subsidies may be justified - but only if they are limited to specific and affordable goals. such as providing cheaper rates for very poor households for a fixed maximum consumption per month (which can be achieved by charging wealthier households a little more than the cost of supply).

Hefty subsidies tot modern cooking fuels. such as kerosene and LPG. are also common in a number of developing countries. As with electricity. the results are often counterproductive. In Indonesia, for example, kerosene used for cooking and lighting is subsidized. But richer households reap a disproportionate share of the benefits because they can afford to buy more energy than the poor The government of Ecuador also subsidized kerosene until recently. But the poor received little of the fuel because retailers could make more Money selling it for use in vehicles. Even if subsidies reach the poor they often become unsustainable financial burdens on the state budget. Senegal's annual subsidies for LPG. for example. rose from US$2 million to US$10 million between 1990 and 1994 - an increase that could have paid for thousands of desperately needed teachers.

Market-opening reforms can be dramatically effective. as shown by the experience of Hyderabad in India. In 1980 only the richest 10 percent of households in Hyderabad used LPG. The proportion has since risen to over 60 percent. Meanwhile fewer households are using fuelwood even though the city's population has doubled since ] 980. The main cause of the change was the liberalization of energy markets In particular the Indian government relaxed restrictions on the production and import of LPG. As a result more middle-class households could buy LPG. a more efficient fuel than kerosene. That in turn allowed the poor to graduate up the fuel ladder from wood to kerosene.