Addressing the Global Power Outage

As you read this, a power outage is affecting much of Africa and South Asia. It will not be over in a few hours or days: about 1.4 billion people live in a state of permanent blackout. More than two out of three people in sub-Saharan Africa and almost half of India's rural population have no access to electricity. They cannot light their homes, refrigerate their food or power their work. Governments can address this when meeting in Moscow for foreign aid negotiations from Dec. 16 to Dec. 17.

Donor governments and agencies have spent hundreds of billions of dollars on development aid for the energy sector. Their projects benefit urban middle classes and industrial consumers, but leave the rural poor high and dry. In the Democratic Republic of Congo, donors have poured billions of dollars into dams and transmission lines that bypass 99 percent of the rural population.

Donor agencies' energy strategies focus on centralized power plants. Their current pet project is the Grand Inga Dam on the Congo River, the world's largest hydropower scheme. At a cost of $80 billion, promoters claim, the project could supply electricity to 500 million African consumers. The World Bank has already expressed an interest in funding the Inga 3 Dam, the first stage of the Grand Inga scheme.

The problem is that most rural poor in Africa and South Asia are not connected to the electric grid. Given the low population density particularly in sub-Saharan Africa, grid-based electrification is not an economic way of reaching them. The rural poor will pay the price for the dams and gas fields that feed the national grids, but are unlikely to benefit from them.

Better solutions exist. The International Energy Agency found that 70 percent of rural areas are best electrified by local mini-grids or off-grid solutions based on solar, wind and micro-hydropower projects. Just as mobile phones have made landlines unnecessary, renewable energy technologies allow poor countries to leapfrog the centralized power systems that have electrified industrialized countries.

Private entrepreneurs, dedicated government agencies and local communities are developing micro-hydropower stations and solar home systems at prices that can compete with the kerosene lamps that currently light, and pollute, rural homes.

Successful programs such as the Lighting Africa initiative and Sri Lanka's micro-hydropower program are already being funded by the World Bank. Yet they only receive the crumbs from the donor table. Only 8 percent of the bank's energy sector lending was directed at the poor in 2013. As an internal report explains, "the high ratio of preparation and supervision costs to total project size is a considerable disincentive" for undertaking small but effective renewable energy projects. In other words, big is still beautiful for the business model of the World Bank.

At the invitation of the Russian government, donor countries will meet in Moscow to pledge their contributions for the International Development Association, the World Bank fund for the poorest countries. The Bank has already identified Inga 3 as a model of what it wishes to achieve with future IDA lending. Such an approach will not end the global power outage. Institutions such as the newly created Green Climate Fund and the Energizing Development consortium are better placed to promote decentralized renewable energy solutions.

The upcoming aid negotiations offer an opportunity to change course. As the chair of the Group of 20, Russia is in a strong position to take the lead. Russia and other donor governments should shift their energy dollars from the World Bank to mechanisms that focus on rural electrification. By doing so, they will send a message that the Bank's self-interest in big projects should no longer trump the interests of the poor. They will also provide additional resources for projects that reduce energy poverty while protecting the climate and local ecosystems.