LISBON, Portugal — The effort to reach Sustainable Development Goal 7 on “affordable, reliable, sustainable and modern energy for all” is being hampered by an overemphasis on renewables, according to the head of the OPEC Fund for International Development, or OFID.
The development finance institution was established by the Organization of the Petroleum Exporting Countries — a coordinating body for some of the biggest oil producing countries — in the 1970s, and says it has dispersed $22 billion to thousands of projects since then.
Speaking to Devex at the Sustainable Energy for All Forum in Lisbon, Portugal, this month, Suleiman Jasir Al-Herbish, director-general and chief executive officer of the fund since November 2003, said the difference in terminology is no accident.
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“When Ban Ki-moon convened the first meeting of high-level experts in September 2011, he put me with them,” Al-Herbish said, referring to the start of the Sustainable Energy for All initiative. “He started talking about the 1.3 billion [people] deprived of electricity and then he said, ‘Energy for All.’ I told him, ‘Mr. Secretary-General, if you are addressing the needs of the 1.3 billion people then you are actually talking about Energy for the Poor, like us.’”
Al-Herbish said OFID’s concern today is “about giving the public the right signals. Don’t exaggerate them, don’t give them false information. Sometimes, when you talk to people who are not in the business, they think that renewables are solving the whole thing. Well, probably in 50 years’ time it will. But now, everybody is saying that in the near future, fossil fuels will still take 80 percent of the demand.”
A spokesperson said that since its inception in 1976, OFID has committed $22 billion in total, including $5 billion to more than 400 energy projects. Of that, 27 percent, or $1.4 billion, has gone to 165 operations with a renewable energy component. Among the largest renewables projects in a selection provided to Devex were $61 million in private sector support approved this year for the Nachtigal Hydropower Company in Cameroon, and $45 million last year for a solar energy development project in Cuba.
Many attendees at the SEForAll Forum, which included entrepreneurs, NGOs, and policymakers, were keen to get closer to OFID, with some telling Devex they have begun exploratory talks about the prospect of securing funding. But despite its deep pockets, little is known about the fund. Al-Herbish reminded the audience — “for the benefit of those who’ve never heard of us” — that it is headquartered in Vienna, as is OPEC.
Devex sat down with Al-Herbish, a Saudi national who began his career in the country’s oil ministry before spending more than a decade as its governor to OPEC, to find out more about the development fund. The conversation has been edited for length and clarity.
How did OFID come about?
In the mid-1970s, when the oil prices were jumping, the oil-exporting countries in OPEC found themselves responsible to consumers and the whole world, including developing countries, instead of the oil companies. So they felt that they had these political and social responsibilities and they started establishing many financial institutions: National, like the Saudi Fund and the Kuwaiti Fund; regional, like the Arab Monetary Fund and the Islamic Development Bank; and international, like OFID.
OFID was established as a temporary facility, or “OPEC Special Fund,” from 1976 to 1980, and then they decided to convert it into a permanent organization. That’s why it was located in Vienna, because it was part of OPEC, but actually now, it is an independent organization run by the finance ministers [of its member countries, most of whom are OPEC members], not by the oil ministers. It is an organization like the World Bank, with a difference in size. Now, it’s working through four windows — the public sector, private sector, trade finance, and grants — and serving more than 130 countries.
How are you working on energy?
As we converted the communiqué from OPEC’s Riyadh summit in November 2007 into action, we had three approaches. First, advocacy — organizing seminars and workshops etc. Second, doing projects on the ground. We understand and believe, like anybody, that to solve energy poverty in sub-Saharan Africa you need huge capital, logistics, time, and so on. We started doing mini-grids, off-grids, and small solutions. We did it in Rwanda, Kenya, Tanzania, in all these countries, with the Shell Foundation by the way. The third approach is to establish alliances with the energy companies, like Schlumberger, Total, Shell, OMV in Austria, and the gas companies.
In 2012, I went to Rio+20 [the U.N. Conference on Sustainable Development] and I delivered the OFID Ministerial Declaration on Energy Poverty [including a minimum of $1 billion to finance the Energy for the Poor initiative] in a meeting attended by [then-U.N. Secretary-General] Ban Ki-Moon.
The fund has since become a revolving one [whereby once it is empty countries pledge again to replenish it.] That means that, at any point in time, I have this $1 billion to spend on Energy for the Poor, soft loans or grants. It's part of my resources. I don't have a ceiling. The $1 billion is like a window which I can open widely.
What proportion of projects that OFID supports involve renewable energy?
We talk about “technology neutrality,” meaning we should give poor countries any kind of modern energy — not clean, modern; including LPG [liquefied petroleum gas], fossil fuel oil. Why? Because these countries need any kind of energy. Any kind of energy is superior to wood and animal droppings. We give a lot of attention to renewables, we have had a lot of projects. You can say 3 out of 10 energy grants or loans that I sign go to renewables.
“We should give poor countries any kind of modern energy — not clean, modern.”— Suleiman Jasir Al-Herbish, director-general of OFID
Renewables, in terms of wind and solar, are coming. They are there. But we don’t really exaggerate their role at this point. The cost of renewables has dropped, so they are now penetrating. One point I’d like to clarify: We are not worried about renewables entering the market; we aren’t worried about the market share. Because the share of oil in power generation has dropped drastically from more than 20 percent in 1973 to less than 3 [or 4] percent now. So it’s not a market share.
We work as a demand-driven organization. We receive requests from our partners. We don’t impose anything on them.—
There is a difference between the Europeans who are designing and implementing their own policy and us: We work as a demand-driven organization. We receive requests from our partners. We don’t impose anything on them. We tell them that we have a $1 billion revolving account for energy for the poor, whether it is conventional energy, or renewables. And then they can come to us and ask us for business. We don’t impose anything. This is part of the Busan agreement, aiming to put the partners in the driver’s seat.
What are you doing to improve energy efficiency?
We believe that efficiency is another source of energy actually, because when you save energy you are adding supply which is not coming from the oil producers or the energy producers; it’s coming from the consumers. So we definitely believe in it and we are willing to finance anything that we can do. We will look for this. Most projects in energy efficiency start from consumers themselves, from the recipients themselves, but we encourage them if we can.
What about clean cookstoves? This was highlighted as a particular stalling point during the conference. Why is it taking so long to see progress in this area?
This is part of what we are doing with our Energy Access Platform. We are doing our best, but the political will is lacking. People are not cooperating, some of our partners, even here [at the conference]. If you look at the 17 Sustainable Development Goals, one of them is about energy and one is about climate change. But people sometimes, when they talk about SDG7, forget all about Energy for All and start talking about the Paris Agreement on climate change. When we discuss SDG13, then let’s talk about Paris and climate change, but don’t change the rules in the middle of the game. Don’t forget what SDG7 means.
Will OFID still be in action in 50 years?
I think if we continue doing what we are doing now, yes. I’m very optimistic. Energy poverty exists even in rich countries. We are working with China as a middle-income country, and there are still people there who don’t have electricity [so there is much more to do].
Update, May 17: This story was updated for clarity.