Photograph by Ron Nickel, Photolibrary

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Efforts to modernize electricity services in two villages about 12 miles (20 kilometers) away from Tasbapauni, Nicaragua, where this man works on a fence, yielded significant energy savings.

Photograph by Ron Nickel, Photolibrary

Fighting Poverty Can Save Energy, Nicaragua Project Shows

Modernizing electricity services in two rural Nicaraguan villages yielded major energy savings, showing how addressing poverty and climate change can go hand-in-hand, a new study says.

This story is part of a special series that explores energy issues. For more, visit The Great Energy Challenge.

In two small villages on Nicaragua’s Mosquito Coast, a project to improve electricity service had a remarkable side benefit—household energy use actually dropped nearly 30 percent. When efficient compact-fluorescent (CFL) lightbulbs were added to the mix, energy savings surpassed 40 percent.

The effort cut costs and brought longer hours of daily electricity service to the people of Orinoco and Punta Marshall, while demonstrating how improving energy access to poor people around the world can go hand-in-hand with reducing fossil fuel emissions, say the authors of a new study.

“It shows that you can meet development objectives for the poor and climate objectives for all of us at the same time,” said Daniel Kammen, chief technical specialist for renewable energy and energy efficiency at the World Bank, and co-author of an analysis published Thursday in the weekly journal Science.

The Energy Poverty Challenge

The study set out to demonstrate a method for measuring both the climate and financial benefits of making investments that improve delivery of reliable, affordable energy for poor communities. Mobilizing such investment is crucial, with 1.5 billion people around the world living without electricity. Another 1 billion people have unreliable electricity, and nearly half the global population relies on unhealthy and polluting wood, charcoal, and dung stoves for cooking.

The United Nations said in a report (pdf) co-written with the International Energy Agency earlier this fall that its goals for fighting extreme poverty will fall short unless nations also work to bring electricity and modern, safe cooking technology to the “energy-poor” people around the world.


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The village of Sandy Bay, about 30 miles (48 kilometers) away from Orinoco, is on the Mosquito Coast, where many homes have no electricity or rely on costly diesel generation.


But short-term costs often trump potential long-term benefits when governments and institutions consider energy improvement investments. For example, because of the low up-front capital costs and the ease of obtaining fuel supply, diesel generation is often the technology of choice in poor rural areas in the developing world. The study authors say that makers of energy policy who choose diesel don’t give sufficient consideration to the volatility of oil prices, and the resulting expensive generation costs.

That was certainly the case in the villages of Orinoco and Punta Marshall near the Caribbean Sea, where 172 homes, six churches, two health clinics, two schools, and a carpentry shop relied on a government-run diesel “microgrid.” The researchers don’t know how much the Nicaraguan government was paying for diesel, but they estimated the “marginal” cost of electricity on the system, the cost to provide each additional kilowatt-hour, based on average diesel prices at that time in Managua, was 54 cents per kilowatt-hour, more than five times the estimated cost for electricity on Nicaragua’s national grid.

Households did not have meters to measure how much power they used, but paid flat tariffs that differed house-to-house—the price reckoned by the government electric company based on assessments of how many appliances seemed to be in each home. This approach is “quite common” in the developing world, said Christian Casillas, of the Renewable and Appropriate Energy Laboratory at the University of California, Berkeley, co-author of the analysis in Science. “Rural electricity providers are often more concerned about the additional capital cost of installing meters, and are not aware of, or are indifferent to, the long-term savings that can result from consumer response to more accurate price signals, which we quantify in the study,” he said.

The energy improvements in Orinoco and Punta Marshall were made beginning in the summer of 2009, in a partnership between the Nicaraguan government and the nonprofit group, blueEnergy. Soon after the simple installation of conventional electricity meters in the homes, at a cost the study authors estimated at about $4,350, household energy use dropped about 28 percent. The pattern that the researchers observed—the greatest savings occurred in daylight hours—suggested that residents had taken steps such as turning off lights during the day. The resulting savings of an estimated 5,625 gallons (21,291 liters) of diesel fuel annually translated to a more than $22,000 reduction in fuel costs over the course of a year (based on $1.06 per liter diesel fuel). And, the study authors calculated, carbon emissions were reduced by 57 tons, with cost savings of $386 per ton.

A second step was to distribute 330 high-efficiency compact-fluorescent (CFL) lightbulbs to the communities, with each household given the opportunity to exchange up to two of their incandescent bulbs for CFLs. Representatives of the government energy agency and blueEnergy visited each household to explain that CFLs consume 25 percent of the electricity of incandescents while providing the same level of lighting and lasting much longer. They also explained that the bulbs need to be disposed of by returning them to the government agency, due to the small amount of mercury in each CFL. The cost of the program, including labor, was estimated by the researchers to be about $1,030. The energy load on the system fell by 50 kilowatt-hours per day, or a 17 percent drop on top of the savings due to the meter installations. That reduced diesel fuel needs by about 2,460 gallons (9,310 liters) per year, translating to a 25-ton reduction in carbon emissions, at a cost savings of $374 per ton.

Nicaraguan energy authorities used the fuel savings to extend the hours of electricity service to the communities by two hours each day, for a total of 12 hours. And 37 percent of the households saw lower electricity bills; for the poorest households, costs did not fall with their drop in energy use because the regressive tariff structure required that the smallest consumers pay a fixed rate, the researchers noted.

Renewable Energy Opportunity

The researchers underscored the even greater potential to reduce carbon emissions in the community, now that the electricity load has been slashed. They calculated that downsizing the diesel fuel electricity generator could save a further $5,760 per year (or $147 per ton of carbon reduced). And adding renewable energy to the system would also be a net benefit: Replacing a portion of diesel fuel generation with biogas, produced locally through anaerobic digestion of animal dung and agricultural residues, could save $4,012 per year ($271 per ton of carbon reduced), and installation of a 10-kilowatt wind turbine could save about $7,767 per year ($34 per ton of carbon reduction.)

The only emissions-reducing improvement the researchers considered that would actually cost money was adding a 10-kilowatt solar photovoltaic installation to the system; the cost would be $9,501 annualized, or $322 per ton of carbon reduced. But with savings of more than $1,600 per ton possible for all of the other energy improvement measures the researchers catalogued, as well as likelihood that diesel fuel will cost more in the future, a solar system for further cutting carbon emissions could begin to look affordable to authorities managing the system.

It’s an important finding for countries such as Nicaragua, Central America's largest nation, and and among its poorest. A 2007 World Bank report said that although Nicaragua has great potential for renewable energy at a competitive price, the majority of its electricity generation is from petroleum.

“This is really a prescription to think about energy systems holistically,” said Kammen. “It was hard to do that in the past. It does require data, which can lead you to some really important observations.”

The analytical method outlined in the paper is “very helpful for certain contexts, particularly for looking at how increasing energy efficiency can help support energy access," says Richenda Van Leeuwen, senior director on energy and climate for the the United Nations Foundation, a nonprofit that supports the work of the UN. She said she especially sees potential for the approach to be adapted for addressing the global problem of primitive cookstoves. Inefficient wood and waste stoves, used by 3 billion people around the world, create black carbon particulate emissions, a large contributor to climate change, and have a devastating impact on health—especially for women and children.

“There is really room for more research in this area for both traditional cooking and kerosene-based lighting, which both emit smoke,” Van Leeuwen said. “You could begin to monetize the savings of fewer trips to clinics, and fewer treatments for acute pneumonia and other respiratory illnesses that are common among people breathing in cookstove smoke day in and day out.”

Van Leeuwen said the approach is among those being weighed by the new public-private partnership, the Global Alliance for Clean Cookstoves, launched earlier this fall by the UN Foundation in conjunction with the governments of the United States, Germany, Norway and Peru; the United Nations; global energy company Shell* and its Shell Foundation; investment bank Morgan Stanley; and the nonprofit SNV-Netherlands Development Organization.

The type of analysis that Casillas and Kammen did, called a “marginal cost abatement curve,” has been done before to show the benefits of energy efficiency for the developed world—with the most notable example in climate change literature a 2007 study by the consulting firm McKinsey and Company. But Kammen said his new study underscores the importance of doing a similar analysis for the world’s poor, who can spend more than 30 percent of their income on energy services. In wealthy countries, only 2 to 3 percent of Gross Domestic Product is spent on energy. “Because energy services are often expensive,” said Kammen, “finding ways to provide them more efficiently benefits the poor more than the rich.”

* This report is produced as part of National Geographic’s Great Energy Challenge initiative, sponsored by Shell. National Geographic maintains autonomy over content.