The Statistical Connection Between Electricity and Human Development

The extent of global energy deprivation (see Figure 1) is difficult for most Americans to comprehend. Almost a quarter of the world’s population lacks access to electricity and has no linkage whatsoever to the benefits such access brings to an improved quality of life. For more than another two billion people, availability of power is extremely limited and often accessible for only a few hours or days a week. This unequal distribution has the largest impact on the poor, especially women and children who spend their days gathering fuel. Because electricity is central to nearly all aspects of our lives, access to power is fundamental to a higher standard of living and directly related to socioeconomic development.


Figure 1. The scale of global poverty. Source: Developed from World Bank, 2009 and International Energy Agency, 2009 publications.

Nevertheless, energy policies have been proposed or adopted that run counter to this long established relationship. For example, some U.S. policymakers claim the higher electricity prices that would stem from a cap-and-trade scheme are actually beneficial because they promote the use of less power. H. David Nahai, Chief Executive Officer at the Department of Water and Power in Los Angeles, says he hopes the city’s newly-implemented tiered rate system, which increases the price per kilowatt-hour (kWh) when households use more energy, will send a “powerful conservation message…and people will use less electricity.”

The recent executive order forcing the U.S. Overseas Private Investment Corporation and other U.S. international aid agencies to reduce the greenhouse gas emissions associated with their projects by 30% over the next 10 years will undermine development in such electricity-deprived regions as Africa. “Telling Africans they can’t have electricity and economic development—except what can be generated with wind turbines or solar panels—is misguided at best and immoral at worst,” says Franklin Cudjoe, director of the Imani (Hope) Center for Policy and Education in Ghana.

The Importance of Electricity

Analysis of the environmental implications associated with society’s use of fossil fuels and the emission of greenhouse gases—particularly carbon dioxide (CO2) emissions—generally focuses on the potential for climate change impacts. But it is important, in the context of assessing the societal risk of CO2 emissions, to also focus on the reasons why CO2 is emitted. Carbon dioxide is the inevitable by-product of combusting fossil fuels such as coal, which generates over 40% of the world’s electricity. While this power generation results in CO2 emissions, it also yields significant benefits for the health and welfare of billions across the globe through access to electricity. The National Academy of Engineering has identified societal electrification as the “most significant engineering achievement” of the 20th century.

For the U.S., access to electricity brought about a sea change to the quality of life,  ranging from surviving childhood to drinking cleaner water to learning to read. The socioeconomic benefits of the Rural Electrification Act of 1936 alone demonstrate the scope of electricity’s importance to living a longer and better life. In addition, electrotechnologies enhance public health and welfare through greater efficiency, safety, and a cleaner environment.

These benefits are so extensive that it is unequivocal the world needs more electricity, not less. Unfortunately, regulation of CO2 will increase the cost of producing and transmitting electricity. Price increases to take electricity out of the reach of large segments of society will surely have adverse consequences. Global demand growth remains a steady drumbeat because electricity is a sine qua non of modern society. The U.S. Energy Information Administration expects global electricity demand to expand by 87% from 2007 to 2035. The cost of electricity is critical because higher prices discourage usage—especially in poorer nations.

United Nations Human Development Index

Since 1993, the United Nations Development Program has used a summary composite index, the Human Development Index (HDI), to measure, on a scale of 0 to 1, a nation’s average achievements in three basic dimensions of human development: health, knowledge, and standard of living. (1) Health is measured by life expectancy at birth; (2) Knowledge is measured by a combination of the adult literacy rate and the combined primary, secondary, and tertiary gross enrolment ratio; and (3) Standard of Living is measured by Gross Domestic Product (GDP) per capita (PPP US$). UN member states are listed and ranked each year according to these measures.

The International Energy Agency reports more than 1.5 billion people in the world have no electric power, and another 2 billion have extremely limited access. In essence, 3.5 billion people—almost 12 times the population of the U.S.—have either no electricity or only a constrained supply. Indeed, the disparity in access to electricity around the world is staggering. The average consumer in Germany, for example, uses 6,670 kWh of power each year; the average Indian uses just 444 kWh. In Europe, virtually no household lacks access to electricity. In India, over 400 million people have no electricity, 600 million cook with wood or dung, and over 900 million have no refrigeration.

The consequences of these differences in electricity access are stark. In Germany, a newborn can expect to live until age 79, in India, only until age 64. In Germany, primary completion and literacy rates are about 100%, in India, they hover around 70%. In Germany, the GDP per capita is $34,401, in India, it is $2,753. Consequently, Germany’s HDI is 0.947 and India’s is 0.612. Figure 2 illustrates a scatterplot of a random sample of 38 countries on the HDI rankings list and compares electricity use per capita and HDI. The U.S., China, and Germany, are illustrated for reference purposes only and are not included in the statistical analysis in the sidebar.

Figure 2. Access to electricity = A higher quality of life. Source: Data taken from United Nations, 2009 and Central Intelligence Agency, 2009 publications.

Conclusion

Electricity is good, and access to electric power is central to human development. There is simply no better indicator of a country’s level of development than its per capita use of electricity. The current push in some parts of the world to raise the price of electricity to decrease consumption stands at great odds with experience—higher prices discourage usage.

High rates, which are basically ensured by the regulation of CO2 and/or the forced deployment of relatively expensive alternative energy sources, will have adverse socioeconomic impacts. Indeed, the UN’s eight Millennium Development Goals center not only on electricity availability, but on affordably priced power. For the foreseeable future, mainstream generation technologies, typically based upon fossil fuels, will continue to be the least expensive sources of electricity in virtually every country in the world.

—Jude Clemente is an energy security analyst and technical writer in the homeland security department at San Diego State University.