Development Banks Failing on Energy Access for the Poor

Today, Oil Change International and the Sierra Club released a report finding that none of the major multilateral development banks are succeeding in reaching the world’s poor with their energy projects.

The banks are neither putting significant proportions of their energy portfolios towards energy access for the poor, nor are they investing substantially in distributed clean energy solutions, despite the important role these technologies can play in delivering energy access.

The report, “Failing to Solve Energy Poverty: How Much International Public Investment is Going to Distributed Clean Energy Access?” gives each of the four banks reviewed – the World Bank Group, the Inter-American Development Bank, the Asian Development Bank, and the African Development Bank – a failing grade of ‘F’ for their efforts to promote energy access for the poor, for the period 2011 to 2013.

The Banks were evaluated on five criteria: 1) percentage of financing for energy access as part of the overall energy portfolio; 2) percentage of financing for distributed clean energy as part of the energy access portfolio; 3) whether the bank has a goal of increasing energy access; 4) whether the bank has a program dedicated to distributed clean energy; and 5) whether the bank has increased financing for distributed clean energy over the last 3 years.

With the exception of the African Development Bank, which targeted access in 38 percent of its energy financing, the banks’ overall energy portfolios failed to prioritize energy access for the poor.  Energy access projects comprised only between 5 and 21 percent of overall energy financing at the other banks over the three years reviewed.

All of the banks’ current approaches to energy access are dominated by large-scale centralized generation and transmission. The banks have failed to align their energy financing practices with the International Energy Agency’s conclusion that in order to achieve universal energy access, 64 percent of future energy financing should be directed toward distributed energy solutions.

Notably, of the fossil fuel-based projects across the four multilateral development bank energy portfolios, only one percent (by dollar amount) included provisions aimed at increasing access for the poor.

The report makes three main recommendations: 1) the banks should increase their energy access financing to 50 percent of their energy portfolios; 2) the banks should increase off-grid and mini-grid investments to 64 percent of energy access investments; and 3) the banks should establish clear definitions and criteria for what count as “energy access” and measure project outcomes to determine whether they have succeeded in providing energy access for the poor.