As world financial leaders gather in Washington DC for the annual joint strategy meetings of the World Bank and International Monetary Fund, the international churches' development agency Christian Aid is calling for an urgent rethink of the World Bank’s approach to tackling energy poverty.
Not only is the privatisation model the World Bank endorses failing to deliver more energy to the world’s poorest people, but it is also locking them into a dependence on polluting and increasingly expensive fossil fuels, says Christian Aid.
On the agenda in Washington DC this week is the World Bank’s Investment Framework for Clean Energy and Development (CEIF). The CEIF has initiated various schemes designed to enhance investment in energy access, renewable energy and adaptation to climate change.
Yet when Christian Aid conducted an in-depth study of electricity reforms in Nicaragua and planned changes in Nigeria, "we found that the reality on the ground bore little relationship to the clean development rhetoric", it says.
“Unfortunately, there is a large gap between the World Bank’s stated goals of promoting clean and affordable energy and the real life outcomes of the energy policy it has promoted in several developing countries,” said Andrew Pendleton, Christian Aid’s energy expert.
In Nicaragua, electricity privatisation was rushed through in 2000, with a promise to increase coverage and lower tariffs. Seven years later, the small gains in coverage have been overshadowed by bills escalating by up to 400 per cent and daily blackouts lasting up to seven hours in many neighbourhoods. It is also heavily reliant on imported oil-based electricity generation.
“Given the catastrophic outcomes of some of its policies in the energy sectors in poorer countries, the World Bank should urgently reform its approach so that it’s based on what works for poor people, not on the assumption that the market has all the answers,” said Claire McGuigan, a Christian Aid economic analyst.
Julio Alberto lives in Ciudad Sandino, a barrio in Nicaragua’s capital, Managua. He set up a corner shop just before the blackouts began. Since then his refrigeration unit was destroyed by a surge, ruining his meat stock and requiring a costly repair.
“They told us we would have a cheaper service, which was more reliable and with more people connected to the grid. None of this has happened,” said Mr Alberto, “We are paying higher bills for much less electricity and hardly any new connections have been made.”
It doesn’t have to be this way, says Christian Aid. Neighbouring Costa Rica has become a world leader in renewable energy. In 2004, the country was generating 98.6 per cent of its electricity from renewable sources. At the same time Costa Ricans enjoy the lowest prices and highest electricity coverage in Central America.
Around the world, some 1.6 billion people have no access to electricity. A further 800 million people lack any sort of modern fuel for cooking and heating. They might have some electricity, but only enough to power light bulbs and small domestic appliances.
It is part of the World Bank’s remit to address this problem. However, Nigeria is about to embark on an electricity privatisation process which bears a worrying resemblance to the Nicaraguan model. The key problem is that building infrastructure to connect poor people living in remote areas to a national grid is rarely cost-effective for private investors, who require a return on their capital, claims the agency.
The Nicaragua example demonstrates that privatisation alone is insufficient and sometimes inappropriate to ensure provision of affordable energy to the poorest citizens, says Christian Aid.
The full report (in .*PDF format - Adobe) can be found here.