Top energy aid donors

Often cited as the missing Millennium Development Goal, energy poverty has rapidly moved up the global aid agenda since U.N. Secretary-General Ban Ki-moon — flanked by development leaders — unveiled his vision of “sustainable energy for all by 2030” two and a half years ago. According to the International Energy Agency, more than 1.3 billion people around the world lack access to electricity — a major barrier to the achievement of the MDGs in 2015. In May 2013, the highly anticipated report from Ban’s high-level panel of eminent persons recommended sustainable energy as one of 12 universal goals for a post-2015 development framework. Weeks later, U.S. President Barack Obama unveiled the $7 billion Power Africa initiative — his marquee second-term development initiative — just as the World Bank was launching an aggressive new lending strategy for its multibillion-dollar energy portfolio. “Energy is fundamental for every area of development — from creating jobs and boosting growth to improving health care and enabling people to cook safely,” Andris Piebalgs said recently. Piebalgs is the commissioner for development at the European Union, another major donor that has elevated energy assistance in its portfolio. For years now, energy poverty advocates have made the same case and urged foreign aid donors to scale up and prioritize energy investments, particularly in sub-Saharan Africa, where seven out of 10 people live without access to power. While official development assistance for energy has increased markedly over the past decade, energy still accounts for only a modest portion of ODA — 8 percent in 2012. At the same time, progress toward increasing the share of renewable energy in energy ODA — a commitment previously made by most major donors — has been uneven. In 2012, ODA for renewable energy sources such as solar, wind, hydroelectric and geothermal power dropped to 25 percent of energy ODA, its lowest share since 2008. Ban has called for the international community to double the share of renewable energy in the global energy mix by 2030. Below, Devex ranks the leading ODA donors to energy for 2012, and assesses their energy assistance policies and priorities. Our analysis reveals that some donors — including from the Arab world — seem far more reluctant to bolster the renewable energy share in their energy ODA. Moreover, middle-income countries such as Vietnam, India and Kenya have commonly emerged as priority countries for energy assistance — perhaps an indication that aid donors believe there are more pressing development challenges in lower-income nations. Japan Historically the largest bilateral donor to energy, Japan disbursed $2.1 billion in energy ODA in 2012. That year, 56 percent of Japan’s energy ODA financed nonrenewable energy programming, its highest level since 2009. In its 2013 strategy paper for the energy sector, the Japan International Cooperation Agency revealed plans to press ahead with its support for oil, gas and coal-fired power plants, even as it explores renewable energy options for its energy programming. JICA channels the vast majority of Japanese energy ODA. Vietnam, India, Bangladesh and Indonesia were the largest recipients of Japanese energy ODA in 2012. JICA is currently soliciting proposals for a power distribution network development project in Papua New Guinea. European Union The European Union disbursed $1.7 billion in energy ODA in 2012 — the same year that it set its ambitious target of helping developing countries provide 500 million people with access to sustainable energy services by 2030. While Brussels has also pledged to ramp up its support for renewables, only 4 percent of EU energy ODA in 2012 financed renewables — its lowest level over the past decade. EU energy assistance is channeled through both EuropeAid and the EU’s development bank, the European Investment Bank. In July of last year, EIB announced plans to curb loans to coal-fired power plants. EuropeAid is currently accepting bids for an energy efficiency project in Turkey, the second-largest recipient of EU energy aid after Egypt. World Bank In 2012, the World Bank disbursed $1.2 billion in energy ODA through its lending arm for poor countries, the International Development Association. Last year, the World Bank signed off on a new energy strategy that would limit its financing of coal-fired plants to “rare circumstances.” The move came three years after the bank controversially approved a $3.75 billion loan for a coal-fired power plant in South Africa — the bank’s only loan for a coal-fired power plant ever since. Even before the approval of its new energy strategy last year, the nonrenewable share of the World Bank’s energy ODA had been in sharp decline — down from 38 percent in 2004 to 14 percent in 2012. Vietnam, Bangladesh and the Democratic Republic of the Congo were the largest recipients of the World Bank’s energy ODA in 2012. Germany In 2012, Germany disbursed $790 million in energy ODA, the bulk of which was channeled through the German development bank, Kreditanstalt für Wiederaufbau, or KfW. Over the past decade, Germany has consistently channeled the vast majority of its energy ODA to renewable energy programming — peaking at 76 percent in 2010. The German government considers the promotion of renewable energy — including solar, geothermal, wind and hydroelectric — as well as energy efficiency to be the two priorities of its energy aid policy. Kfw is currently accepting bids for a hydropower project in India, the single-largest recipient of German energy aid. Georgia, Kenya and China were also among the largest recipients of Germany energy ODA in 2012. United Kingdom In 2012, the United Kingdom disbursed $462 million in energy ODA, of which 44 percent was channeled toward renewables — its highest share since 2009. The United Kingdom has decreased its aid spending on energy policy and administrative management over the past five years, in favor of both renewable and nonrenewable energy generation. In November 2013, it also announced plans to curb funding for coal plants overseas. The Cameron administration mainly channels its energy aid through the Department for International Development, the Department of Energy and Climate Change, and the U.K. development finance institution, the CDC Group. In 2012, Nigeria, India, South Africa, Nicaragua and Guatemala ranked as the five-largest recipients of U.K. energy ODA. DfID has since announced plans to withdraw from both India and South Africa by 2015. United States In 2012, the United States disbursed $445 million in energy ODA, of which three-quarters came in the form of policy and administrative assistance. The front-line states of Afghanistan and Pakistan were the largest recipients of U.S. energy ODA that year. U.S. energy aid to sub-Saharan Africa is slated to increase substantially over the remainder of U.S. President Barack Obama’s second term, however, following the launch of the administration’s Power Africa initiative. The Obama administration has pledged $7 billion in ODA and development finance for Power Africa, which will be channeled through a roster of U.S. development agencies, including the U.S. Agency for International Development and the Overseas Private Investment Corp. While Obama announced last year that the United States would curb financing for coal plants overseas, Power Africa is still expected to fund oil and gas-fired power plants, in addition to renewables. France In 2012, France disbursed $427 million in energy ODA, of which 29 percent was directed toward renewables — more than double its share a decade ago. According to the French Development Agency, which channels nearly all of French energy ODA, it does not provide assistance for projects that are not climate-neutral, including coal-fired power plants. AFD is currently accepting bids for a rural electrification project in Cambodia. In 2012, Jordan, Mexico, Kenya and Mauritania were the largest recipients of French energy ODA. Norway In 2012, Norway disbursed $362 million in energy ODA, of which 68 percent was channeled toward renewables — the highest share among the main energy aid donors. Over the past decade, Norway has directed the majority of its energy aid toward hydroelectric power. Renewable energy is one of four key investment areas for the Norwegian Fund for Developing Countries, or Norfund, Oslo’s developing country private sector investment fund, which disbursed more than 60 percent of Norway’s energy ODA in 2012. Norfund’s $141 million equity investment in Brazilian hydropower made Brazil the single-largest recipient of Norwegian aid that year. Arab Fund for Economic and Social Development In 2012, the Kuwait-based Arab Fund for Economic and Social Development disbursed $354 million in energy ODA. A regional development finance institution jointly established by Arab countries, AFESD has historically channeled the bulk of its lending toward the energy and electric power sector. Since 2008, the first year that AFESD began reporting figures to the OECD-DAC, the fund has reported only one renewable energy investment — an $800,000 grant for a solar energy project in Morocco in 2012. AFESD’s single-largest energy investment that year was a $74 million loan for a gas pipeline project in Egypt. Kuwait Fund for Arab Economic Development Founded by the State of Kuwait to provide loans for Arab and other developing countries, the Kuwait Fund for Arab Economic Development disbursed $175 million in energy ODA in 2012. Energy is one of five priority lending sectors for KFAED. In 2012, KFAED directed only 7 percent of its energy ODA to renewable energy, half its share the year before. Egypt accounted for 63 percent of KFAED’s energy ODA that same year. Sudan and Pakistan also received tens of millions in energy ODA from KFAED in 2012. 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