Rafael Echechipia Fontana, BBA student and Winner in the CoBS 2023 Student CSR Article Competition at FGV-EAESP, contends that access to electricity and energy transition cannot be dealt with by purely developed economies alone – and that increased social and economic development in the Global South will provide a much-needed boost towards adopting greener energies.
Powering Change: Electricity, transition and development by Rafael Echechipia Fontana.
Data from the latest Energy Progress Report carried out by the World Bank Group in 2020 revealed that electricity infrastructure has yet to reach 9.6% of the world’s population. In other words, roughly 733 million people live without proper access to lighting, heating, refrigeration or general electronics, especially in Sub-Saharan Africa and South Asia.
Aside from the clear human and economic development issues, electrification also plays a huge role in climate change, and thus is a high-priority topic among international forums, having earned its very own SDG. However, as most of the developed countries begin to raise the discussion and act towards an energy transition to cleaner sources, part of the world is still left behind.
A century of electricity
More than a century ago, society relied heavily on labor- and pollution-intensive energy sources, such as coal to power machines and firewood for domestic heating. However, by the end of 1930, electricity had already surpassed other sources and quickly became the standard in households of the Global North (O’Connor, 2010).
This was only natural, as the reason for the rapid growth lies in its compatibility with a wide range of appliances, the elimination of manual labor by its users, as well as the ability to be distributed over long distances. As technology continued to evolve, it would only take a switch or a plug to allow access to an entire universe of devices.
Today, if asked to imagine how daily life would be without electricity, it would not take more than a second for the average person in a developed or developing country to realize how utterly unpleasant it would be. After all, the longest we have probably gone without electricity was during an occasional but newsworthy power outage. Nonetheless, it is often overlooked that electricity is also what enables much of the infrastructure needed for healthcare, education, transportation, communication and adequate housing. Simply put, by any modern criteria, electricity is a requirement for meeting decent living standards.
Access to electricity: A human right?
We are then left with a question to which there is no simple answer: If electric power is such a basic necessity, then why is it still not considered a human right? Even without much literature concerning the topic, two main positions are defended by researchers.
First, there is the stand on electricity as a derived human right, which is supported by the claim that something may be considered a right if essential to fulfill the basic right for a dignified life (Donelly, 2013). This stand leans on the proposition that there are not many states which would be able to grant its citizens minimum living conditions without the use of electric power. Nonetheless, this view is often criticized because seeing electricity as universal for every society is considered too broad. By this conception, it would also have to include almost everything favorable to different lifestyles, dimming the spotlight of truly universal needs.
The second viewpoint is that there is no obvious way to perceive it as a right simply by comparison to other basic rights. For instance, there would be no basis to justify placing electricity on equal footing to water as it is possible to survive without the former but certainly not the latter (Löfquist, 2019). However, still on the example of water, there was once a time when access to water and sanitation was not considered a human right — a time as recent as 2010. So there may certainly be hope for the elevation of electricity to the status of human right, but hardly in the near future.
Even if not considered a human right, it is no secret that access to power plays a crucial role in economic growth, for any industry or service-based economy. In this sense, energy poverty, defined as a lack of access to modern (and comparably cleaner) energy sources, is a serious ball and chain to developing countries (Ahmad et al, 2021). However, the correlation between electric power and growth is not so clear cut.
One interesting perspective to analyze this relationship is the notion of “development as freedom” conceived by Amartya Sen, Indian economist and Nobel Prize winner. Under his conception, development should be seen as the process of expansion of a person’s freedoms, which includes economic decisions, political choices, and diversity of opportunities. In other words, the notion of “development” should extend beyond traditional measures such as GDP growth, industrialization, or average household income.
Examining this viewpoint allows us to understand access to power, and in particular electricity, as an essential tool for enabling national and individual development. Not only does its access address traditional economic activities like working longer hours with greater efficiency, but it also provides opportunities for individual development and better living conditions through access to amenities, comfort and leisure. Thus, power can play a leading role in a country’s growth if the necessary efforts and investments in infrastructure are made for its expansion.
The current global energy system: Hiding in plain sight
The existing energy system and the rationale behind it has remained largely frozen in time since it was popularized nearly a century ago. As a result, the existing logic is mostly market-based and fails to properly consider the environmental and social externalities associated, shaping to this day the patterns of electricity usage and expansion (O’Connor, 2010). For instance, much of the first energy grid infrastructures were financed by companies merely seeking to sell power to a larger customer base and the areas deemed unprofitable were left to wait for government subsidies — or simply forgotten.
But how have we as a society allowed such a system to operate for so long virtually unchanged? While there is no single reason, the key culprit may be hiding in plain sight. Electricity is by nature invisible, meaning that its end users are allowed to stay alienated to its production and distribution processes (Chomsky, 2022). Hardly any thought is put by us, the end consumers, on the implications of the oil or natural gas burned to power our air conditioners or phone chargers. Even if we are aware and satisfied with our country’s public policy on coal mining labor and environmental practices, power plants may just as easily import foreign fuel from dubious origins.
From a managerial perspective, energy and utility companies still operate under traditional shady practices, like the anti-climate change lobbying in the US (Meng & Rode, 2019). And there are still insufficient incentives to adopt ESG-friendly practices like executive remuneration tied to decarbonization or greater transparency on outsourcing policies (Energy and Policy Institute, 2020). In addition, the transmission and distribution segments of the industry are markets with high entry costs and need for economies of scale, which spell natural monopolies.
These structures, when operating under privatization in countries or regions with weak local regulatory agencies, will often lead to unfavorable competitive outcomes (OECD, 2022). This susceptibility to market manipulation hurts both end users, who have to deal with higher costs, and electricity generation companies that become hostage to such operators. And that begs the question, in such a rigged game, who will pay the price?
Energy systems and climate action
When energy systems are observed through a climate change lens, two key roles stand out. Up first are the different sources it can be obtained from, that are often classified as low-carbon, like solar, wind and hydro-power; or high-carbon, like coal, oil and natural gas. Historically, the world has primarily relied on finite resources. As of 2021, more than 80% of the world’s power is supplied by carbon intensive processes, which correspond to approximately 3/4 of greenhouse gas emissions.
An increase in demand driven by the quick growth of the global population will further escalate its externalities. Some consequences are relatively well known to the wider public such as temperature variation, rise of sea levels along with the prominence of extreme weather events. However, there are entire subsets of costs easily forgotten, including health-related increases in cases of respiratory diseases linked to air pollution or devastation of ecosystems for coal mining or oil extraction infrastructures.
From a different perspective, the second key role is the inefficiency and over-consumption associated with energy use. Emissions are propelled by outdated technologies — think of the incandescent versus LED light bulb debate — and by lack of consumer austerity, often motivated by lack of information (Cao, 2003). When discussing climate change, electricity itself is not the issue so much as how it is produced, distributed and consumed. With this put, a shift towards renewable sources seems like the only path forward.
Energy transition: No one left in the dark
At its core, the energy transition widely discussed aims to diminish the world’s dependency on finite fossil-based energy, replacing it with a variety of renewable and cleaner sources. Alarmingly, it is now less of a question of “if” than it is of “when”. The 2018 IPCC report on global warming revealed that as a basic scenario, by 2050, renewables must make up 70% to 85% of the world’s electricity. Furthermore, it is reasonable to assume that the more the transition is delayed, the bigger the irreversible environmental consequences and the slower the global financial market’s adaptation.
Transforming the existing matrix will require considerable efforts, both in disinvestments in existing production methods, and in building new and innovative infrastructures appropriate for different kinds of renewable sources. Alongside a valuable chance of aligning long-term environmental targets and economic development, we are also faced with difficult changes regarding how and by whom the industry is run (Cantarero, 2020). So maybe it is time to reshape the energy playing field to better fit concepts of sustainable development.
That said, the star players are certainly the developing countries. Their expected energy demand growth and ability to avoid total fossil-fuel dependency by halting its still small investment in this type of infrastructure hold a unique potential for change. However, we cannot forget about countries with extremely limited access to power and electric energy. While it is not fair to demonize these nations if their only option to expand access is by using carbon intensive methods, there is no silver bullet. As Ngai (2012) puts it, in such cases, the right to energy should ideally be the right to renewable energy to the greatest extent possible. With such a framework in sight, the energy transition as a global process may be seen and understood locally according to the reality of each country.
Energy transition and the future ahead
As our deadlines for climate action slowly but surely approach, new initiatives have risen up to the challenge. Initiatives that stimulate competition and innovation in sectors such as the electricity free market are already becoming popular. Alternative systems that decentralize generation and favor renewables such as the distributed generation technologies are also in the forefront of discussion. However, the base scenario still remains.
In essence, access to electricity and energy transition are topics that cannot be dealt with from a purely developed country’s perspective. Economic and social development in the Global South will necessarily translate into an increased energy demand, where renewables represent great opportunities but face even greater obstacles. So, as we hope governments and businesses are able to make the shift in time, it is probably best to start thinking about the universe behind each flip of a switch.
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