A policy trilemma for energy access?
Rapid technological change and cost reduction has transformed the drive towards increasing access to clean and affordable energy in recent years. The increased availability of efficient lighting and appliances combined with the falling cost of solar energy have resulted in the proliferation of increasingly affordable off-grid energy access solutions, most notably a wide range of solar home systems. At the same time, developments in energy storage hold out the promise of filling one of the remaining technological gaps on the way to decarbonising the energy sector, regardless of where the balance lies between centralised and decentralised technologies.
But there are important policy trade-offs. Most contentiously for many policy-makers, there is a perceived and often real difference in the quality of service provided by different energy access technologies. For example, a reliable grid-based connection might accommodate a higher maximum load and a wider range of appliances than a solar home system. Some policy-makers might argue that there is therefore an equity problem in offering different solutions to different communities. This view can of course be challenged: the choice that this argument is premised on is often a false one. In reality, the choice will often be between a basic energy access solution and no energy access – the grid would take time and (more) money to reach many communities. The potential of a grid connection is also likely to be meaningless to many households whose energy needs are basic and who lack the economic means to fully exploit a more sophisticated energy access solution. But the trade-off is real. Policy-makers should set out minimum standards for energy access (for example, using ESMAP’s multi-tier framework) so that their access targets are unambiguous.
And some technologies are not yet perceived to be bankable, increasing the complexity of policy-making. In theory, the growing role of electricity storage might mean that the same continuous service can be delivered through renewable energy powered decentralised solutions as through a reliable, centralised grid. Long-duration storage could be critical in addressing this gap. Battery technologies, such as vanadium flow technologies, as well as non-battery energy storage technologies are being developed, but most have not yet been financed at scale. Many governments are committing R&D funds to tackle this challenge (see, for example, the UK’s government’s competition for long duration energy storage).
Then add affordability into the mix: who should pay for what? So, we have a range of technologies: some centralised, some decentralised. Back when the centralised grid was the primary means of delivering energy access, economic regulation was straight-forward (at least in theory!): the costs of running the electricity system were spread across all system users. In most countries, this means that there is in effect a cross-subsidy from energy consumers in densely populated, urban areas to consumers in less populated rural areas. For the centralised grid, this system remains largely unchanged. But the introduction of new energy access technologies means that consumers sometimes pay very different charges depending on the energy access solution deployed. Arguments can be made in favour of this model, but rightly or wrongly it leaves many policy-makers deeply uncomfortable, undermining the principle of a universal electricity tariff. This is a subject we have explored in previous blogs and articles (here and here), so I won’t dwell on it here, but there does exist a further equity challenge.
These trade-offs can be expressed as an energy access trilemma. In many countries (including the UK) we have often referred to a trilemma in energy policy-making: between affordability, decarbonisation, and security of supply. In a growing number of countries, decarbonisation is now rightly in pole position, but policy-makers have to engage in a constant juggling act so the other policy objectives are also met. We could express some of the policy trade-offs outlined above in a similar way, as a trilemma for energy access:
Affordability earns a place in our trilemma too. All policy-makers want to deliver electricity as the lowest cost possible. But there are trade-offs with quality of service, and the most affordable energy access policy might not be the most equitable.
Quality of supply is increasingly important in the energy access debate. Different solutions offer different levels of access, but policy has not caught up in many countries. What does a government mean when it commits to a universal energy access goal? What do energy consumers want, or need?
Equity is perhaps the most nebulous dimension of this trilemma. It means different things to different groups of stakeholders. But maybe that’s the point. There are clearly trade-offs between equity, the technologies deployed, and the tariff models that utilities and energy service providers deploy.
Decarbonisation goals are assumed to be a given.
Is this trilemma only temporary? Continued technology advances will mean that energy access solutions can provide increasingly sophisticated ‘connections’ to rural communities. Perhaps the grid will never have to reach these communities for them to have high quality Tier 5 access, as capable as anything we have in developed countries. And regulation also has a role to play in tackling equity challenges, for example, through the redistribution of tariff revenues, as has been the norm in fully grid-based electricity systems. Either way, maybe this trilemma can help to facilitate a few of those debates!