Informing the Financing of Universal Energy Access: An Assessment ...

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ELECTR-5744; No of Pages 26Figure 4: Development Finance for the Energy Sector by Purpose; Commitments, 1980-2008, Using 3-Year Moving Averages [constant2000 USD]T here has been an almostcontinuous increase inelectricity-related ODF in non-OECD countries during recentyears. However, ODF to LDCs hasvaried widely over the years; it isnonetheless also on an increasingtrend (Table 3).D. Relationship betweenGFCF, FDI, and ODA/FA number of scholars havelooked into the relationshipbetween ODA/F, FDI, and GFCF.Obviously, the effect of FDI oncapital formation largely dependson whether FDI is directed togreenfield projects as opposed tocross-border mergers andacquisitions. Several authors haveinvestigated the relation betweenFDIs and Official DevelopmentAssistance. UNCTAD notes that,especially in least developedcountries, FDIs tend to concentrateon the primary sector (mining)until a sufficient level of capabilityand infrastructure are built. In thiscontext LDCs could leverage ODAfor improving the conditions intheir respective economies toattract more FDI and enhance theirimpact (UNCTAD, 2010, p. 62).W hile empiricallyexamining FDI and GFCFfor the economies in transition,Krkoska (2001) found that a 1percent increase in FDI flowstranslated into 0.7 percentincrease of GFCF in the recipientcountry. FDI represented anTable 3: Overview of ODF for Energy Generation and Supply (USD billion) [constant 2000 USD].2000 2001 2002 2003 2004 2005 2006 2007 2008LDC 0.74 1.11 0.87 0.88 0.81 1.34 0.72 1.84 1.56Other non-OECD 5.63 7.60 7.33 7.51 8.43 8.58 10.02 12.15 9.07Global 6.44 7.80 7.48 7.56 8.69 8.72 10.73 12.40 9.678 1040-6190/$–see front matter # 2011 Elsevier Inc. All rights reserved., doi:/10.1016/j.tej.2011.07.006 The Electricity JournalPlease cite this article in press as: Bazilian M, have surnames. Informing the Financing of Universal Energy Access: An Assessment of Current Financial FlowsElectr. J. (2011), doi:10.1016/j.tej.2011.07.006
ELECTR-5744; No of Pages 26average 15 percent of the GrossFixed Capital Formation(UNCTAD, 2010), but its sharecan be higher for somedeveloping countries (the averagefor African countries is above 20percent). The relationshipbetween ODA/F and gross fixedcapital formation is much moreambiguous. First, ODA/F canfinance a variety of activities thatdo not necessarily translate intoany increase of fixed assets.Secondly, ODA/F statisticsmeasure the declarations of thedonor countries rather than actualflows (both for commitments andfor disbursements). During thelast couple of decades, FDIincreased while ODA decreasedin 13 LDCs (UNCTAD, 2011).W hile still below the level ofODA flows, FDI inflowsfor energy appear to haverepresented the major externalprivate capital flows for LDCs inthe past decade (UNCTAD, 2011).Our analysis suggests that morethan one-third of the energyrelatedinvestment in LDCs stemsfrom foreign sources, mainly fromODF. Although that share is high,the flow in absolute termsremains low (about 1/10th withrespect to other non-OECDcountries, or 4 percent ofthe estimated world total)compared to other groups ofcountries.V. Energy PovertyOur interest in exploring macrofinancial flows is to set a contextfor finance for energy access.Energy poverty, the lack of accessto modern, reliable and affordableenergy services, affects billions ofpeople. More than a fifth of theworld’s population does notbenefit from access to electricity. Itis well recognized that energy is anecessary ingredient for humandevelopment and theachievement of the MillenniumDevelopment Goals (Modi et al.,2005). Projections indicate thatthese issues will persist or worsenin the foreseeable future withoutdedicated action (IEA, UNDP andUNIDO, 2010).In 2010 the UN SecretaryGeneral’s Advisory Group onEnergy and Climate Change(AGECC) suggested two bold, yetachievable global objectives, oneof which urges the internationalcommunity to work towardachieving universal energyaccess by 2030 (AGECC, 2010).While, at the regional, national,and local levels, significantefforts are underway toaddress the lack of energyaccess, the issue of ‘‘unlocking’’the requisite financing isparamount.A. Energy inequalityPoor data make it extremelydifficult to determine the fractionof energy-related investment thatgoes to expanding access ratherthan to, say, increasinggeneration. One approach tobetter understanding therelationship between overallinvestment in expansion of accessis to develop Lorenz curves andGini coefficients, which arewidely used in economics toestimate income inequality(Gastwirth and Glauberman,1976). These metrics can help toestimate distributions of energyconsumption. The Lorenz curve isa ranked distribution of thecumulative percentage of thepopulation of recipients plottedagainst the cumulativepercentage of the resourcedistributed. The Gini coefficient isa numeric measure of inequalitythat reveals the differencebetween a uniform distributionand the actual distribution of aresource. 32Figure 5 shows the Lorentzcurves and energy Ginicoefficients (inset) for fivecountries computed by Jacobsonet al. (2005). The curve for Kenya,where energy access is mostinequitable (and where gridbasedenergy access is lowest atabout 20 percent of thepopulation) highlights thedifferences in services andconsumption in nations withlarge fractions of the populationusing biomass as their primarymeans of energy. We canpostulate that, ceteris paribus,Aug./Sep. 2011, Vol. 24, Issue 7 1040-6190/$–see front matter # 2011 Elsevier Inc. All rights reserved., doi:/10.1016/j.tej.2011.07.006 9Please cite this article in press as: Bazilian M, have surnames. Informing the Financing of Universal Energy Access: An Assessment of Current Financial FlowsElectr. J. (2011), doi:10.1016/j.tej.2011.07.006
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