[Scott] Coming up on "Energy Switch," what would it take for the world to become energy rich?

- In a lot of even energy poor countries, it's private companies coming in and actually building and owning the power plants and selling that electricity to public utilities.

You know, frankly, countries are wasting an opportunity if they don't embrace industrial investment and try to attract the types of businesses that can actually drive economic growth as long as they have the energy to do it.

- Ideology can be a major risk to our continued prosperity.

We had a party a few years ago that said, "we're only in favor of renewables and we're against fossil fuels."

Now we have the exact opposite.

"We're only in favor of fossil fuels and we're against renewables."

Neither of those extremes make sense.

Neither make us energy rich.

All of those are risks to our continued prosperity.

[Scott] Yeah.

Up next, the policies and investments required for the world to become energy rich.

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Shaping global leaders, driving innovation, and transforming the future.

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[upbeat music] - I'm Scott Tinker, and I'm an energy scientist.

I work in the field, lead research, speak around the world, write articles, and make films about energy.

This show brings together leading experts on vital topics in energy and climate.

They may have different perspectives, but my goal is to learn, and illuminate, and bring diverging views together towards solutions.

Welcome to the "Energy Switch."

Seven billion people live with less reliable, less affordable, or no energy compared to the one plus billion in the developed world.

We've talked about energy poverty on previous episodes.

We take a problem solving approach, asking, how could the world become energy rich?

For the poor world to have the same benefits that energy brings to the economy, food and water, healthcare, housing, and governance as we, the lucky one plus billion, do.

My guests are Katie Auth.

She's the deputy executive director of the Energy for Growth Hub, and formerly the Senior Development Finance Advisor for USAID's Power Africa program.

Arjun Murti is a partner at Veriten, an energy research and investing firm, a board member for ConocoPhillips, and on advisory boards for the Center on Global Energy Policy and ClearPath.

Coming up on "Energy Switch," how to create an energy rich world.

Let's start real, real high level, kind of just punchy things.

What does it mean for a country to be energy rich?

What is that?

- I think it means that a country has energy that's reliable enough, cheap enough, and clean enough that you take it for granted.

- Ah, okay.

- Every country gets to enjoy the kind of lifestyles we all take for granted here in America.

- Okay, you both said "take for granted," which is interesting for energy rich.

What percentage of the world today is energy rich?

- So it's less than you might think.

If you're talking just about electricity, 90% of the world has basic access, but only 60% of people have reliable electricity services.

- 60%?

That's even higher than I thought it might be.

So, things to add to that?

- I like to say there's the lucky one billion of us that live in countries like America, the European countries, and Japan, and then there are the other seven billion people on earth that use a fraction of the energy that we all take for granted.

- Okay.

What's it mean to be energy poor?

- You don't have reliable energy.

It is insecure.

And you turn on the switch; it may or may not be there.

- Yeah.

- I think it's hard for people in the United States to sort of imagine a world where so much of your daily life is constrained by the power that you do or do not have.

Jobs you can have, when you can choose to watch television or not.

I mean, basic things that make up quality of life.

- Right.

What about severe energy poverty?

What does that mean?

- It means you don't have anything.

And a lot of people use the phrase, "We're trying to reduce energy poverty."

My view is we're trying to make everyone energy rich.

It is not about giving them three light bulbs.

It's about ultimately people being able to enjoy the types of lifestyles we do, whatever that means for them.

- Right.

Any idea the fraction of the world that essentially doesn't have any energy?

- So it's about 750 million people that have zero.

[Scott] 750 million.

- Yeah.

- That's twice the U.S.

[Katie] That's twice the U.S.

- Okay.

- It's a huge number, but as Arjun said, I mean, that does not capture the people who might have basic electricity sometimes.

[Scott] Right.

- In any country that's energy poor.

We often talk about having access to electricity.

So a wire might come to your community.

Maybe even your house is connected to the grid.

But often that power's only on for a couple hours a day, or you can't afford it, or you don't have any appliances that use power.

So often households get connected, and they don't have a way to consume electricity.

- Right.

Who's gone from, you know, energy poor, a country or two, to sort of at least transitioning up toward energy rich?

- The most obvious success stories are probably in Asia.

So China over the past half century, amazing transformational change.

Even a country like Kenya has made huge strides in electrification.

India, same thing.

So it's countries making huge strides with still a long ways to go.

- Other countries you would think of?

- My favorite example is South Korea.

When I was born in 1969, they were a poor country using very little energy, about one and a half barrels of oil per person, if we just stick to oil terms.

[Scott] Yeah.

- Within-40 years, they're using the same types of oil penetration.

We are about 20 barrels of oil per person.

So they've gone from poor to rich within hopefully half my lifetime, but certainly within about 40 years.

- Right.

Yeah, that's incredible pace.

Let's just list some things.

What's needed to be energy rich?

- You need some form of energy resources.

[Scott] Okay.

- It's one-to-one with economic growth and development.

[Scott] Okay.

- You need a stable regulatory environment so the private sector has the confidence to come in and actually spend money and build out infrastructure.

- Okay.

- A favorable business and investment climate that stimulates jobs and commerce.

- Yep.

- You need capital.

It's very expensive.

It can be public capital, it can be private, it can be a mix, but you need the money to come from somewhere.

- Got it.

- You need either your own resources or to import resources from other countries, and that is a big question in how you go about developing.

- Related to that, I would say there's no country that is really doing this without being involved in global trading networks.

- Yeah, yeah.

- Well, I think the answer starts lending itself more towards economic development.

- Yeah.

Yeah, I'd throw in infrastructure.

[Arjun] Yeah.

- I think you guys mentioned it in different ways.

Your top word that prevents it.

- Bad policy.

- Chicken and egg trap.

I think a lot of the countries that struggle with energy poverty are trapped in a cycle where, because they don't have that consumption, they don't have revenue coming into the utility, and the utility has no money to invest in building out infrastructure.

And it's very hard for countries to break out of that cycle.

- Absolutely.

I guess my word would be corruption.

- Corruption.

That was going to be my next word was corruption.

- What are the most important things?

What's really needed for a country to become energy rich?

- My focus is on energy's natural hierarchy of needs.

And I would observe that all anyone anywhere cares about is, if I turn on a light switch or if I want to move a car forward, does that happen?

And then, ideally, it's affordable.

Countries and governments want it to be geopolitically secure for the reasons of, will it be available and will it be affordable?

And then lastly, and it is last, are the environmental and climate considerations.

It's not that we don't care about them.

It's not that countries don't care about them, but you got to satisfy the basic needs first.

And as you become richer, you will become environmentally cleaner.

- Yeah.

- I think one thing is a lot of countries have succeeded, including the U.S., in starting by powering industrial, densely populated urban centers.

Cities, places where there's manufacturing, big energy demand.

Private capital can be hugely helpful there.

And then, by the time you expand out into rural areas and start providing power to lower income households, you need public money to come in and do that.

- The classic development steps would be a country will start with trying to make things that richer countries want to buy.

So it could be basic goods such as steel or cement and so forth.

It could be t-shirts.

It could be any of these types of things.

And so, as you establish these businesses and grow them, they require energy.

So the energy usage goes hand in hand with the basic building blocks of creating an economy.

- Yeah, yeah.

- In a lot of, even energy poor countries, it's private companies coming in and actually building and owning the power plants and selling that electricity to public utilities.

You know, frankly, countries are wasting an opportunity if they don't embrace industrial investment and try to attract the types of businesses that can actually drive economic growth as long as they have the energy to do it.

- Right.

Okay.

What about labor?

People?

What's a labor force need to look like for becoming energy rich?

- Healthy economies have healthy labor pools.

And that's not cheap labor, actually.

It's labor that they can generate earnings and live on, that women's rights are expected, that respected, that other rights are respected, that they're at least minimal, if not more than minimal, safety standards.

- And you could see it in the data.

So if you survey businesses and firms operating in countries across Africa, lack of reliable power is consistently rated as the top constraints on them creating jobs and growing their operations.

So it's a virtuous cycle of good power system and job creation that sort of feeds on itself.

- Right.

Different regions, different countries have different energy resources.

How does your access to your own resources play in becoming energy rich?

- I think diversity is key, right?

So countries have whatever resources they have domestically, but for a resilient, prosperous energy system, you need a mix of things.

The U.S.

is fortunate in that we have hydropower, geothermal, solar, wind, natural gas.

That is a huge advantage.

One of the struggles that poor countries have is often they are much smaller, both geographically and in terms of their market size.

They may have one resource.

And I think that's where geopolitics and sort of international trade issues really become interesting.

- Yeah, a lot of the progress, if I go back to the UK, Germany, the U.S., China, Vietnam now, India, the progress with electricity has been through the coal path.

Is that required?

Do we have to kind of go through coal to get to electricity richness?

- I don't think so.

I think the countries that developed through coal did so because coal was cheap to pull out of the ground.

It was cheap to transport and store, and they happened to have a lot of it.

And it provides stable, sort of available on-demand power and energy, which is a huge advantage.

But if you look across Africa, I mean, there are a couple countries that are dependent on coal, South Africa, Mozambique, but largely it's not really a major resource, and I don't think it will be.

- Yeah.

Okay.

So not a requirement necessarily.

- No.

- Thoughts on that?

- I agree it's not a requirement.

I think, though, if you do have a lot of coal, and especially if you're a really large country like India, I think they're likely to use it.

- A lot of us move ourselves around with oil or oil-based fuels.

Is that going to continue to play a major role, you think, oil?

- The idea that anyone knows when oil demand is going to peak, let alone plateau.

I mean, I push back hard on that.

So that doesn't mean it's going to grow for the rest of time.

But at least as we can look out the next 25 to, so I'm going to say 50 years, I expect oil usage will continue to grow, hopefully, because we have the kind of economic growth that stimulates its usage.

[Scott] Right.

- I would also add that personal vehicles are only a really fairly small share of the energy that's used for transportation.

So most of it is things like shipping, long-haul trucking, things that are much harder to electrify.

So I think, especially in lower income countries, you know, oil's going to be important for a long time, especially for those types of activities.

- Right.

What other energies?

We've talked about quite a few.

What other things to get to energy richness are important?

- I think solar is going to be huge.

A lot of these countries are solar rich.

You're seeing a huge boom in distributed solar.

A lot of countries are discovering natural gas resources for the first time.

And then I think hydropower is going to continue to be really important.

Surprisingly, a lot of African countries have grids that are much cleaner than the U.S.

because hydropower is such a major component of their power system.

- We spend a lot of time thinking about and studying the new technologies, and, you know, there's massive upside if you kind of crack the code on one of these things.

We've suffered from this all or none.

"I only like this and I don't like this" type of mentality, especially in the United States.

But perhaps other rich countries as well.

I actually don't like the term "all of the above" either.

I think it can get a little lazy.

It's going to be "some of the above," depending on where you are.

So what makes sense for India might not make sense for Northern Germany, might not make sense for the United States or an African country and so forth.

You have to do what is right for your country.

- Sure.

Let's dive into the role of governments a little bit, starting with poor nations, the ones who are trying to get up to this, through this spectrum.

What role do their governments play in the process of launch?

- I would say three things.

So first, they can be really helpful in setting sort of an overall vision, helping rally resources and people around a plan.

Two, they can set up the policy and regulatory environment that is stable enough and predictable enough and conducive to private sector investment to sort of cultivate investors who want to come in and work with them.

And then the third one is subsidizing things like rural electrification that are harder for the private sector to do on its own.

- What happens when some of the populous leaders in poor countries get elected?

And they're all about the people, and then suddenly they're not, it seems.

What's the reality on the ground of government's role?

- First, I'd say that the politicians of those countries are not the only ones who might be only thinking of themselves.

I think there's plenty of example of that.

It's unfortunate.

But whether you want to call it corruption, whether you want to call it not creating the conditions by which an economy can break out and kind - Yup.

- Of start making progress, I think that's where these countries run into challenges.

- The challenge to launch, is there a role for the wealthier nations there?

I've seen decades, really, of aid.

Is it durable?

Does it last?

- So there are different forms of aid.

I worked for USAID for a long time.

Most of what USAID did in the energy sector was specifically on sort of the enabling environment for investment.

So USAID would go into a country and help that government design a procurement process or help set up an independent regulator that would help give private companies confidence in the market.

There's also other forms of aid that are really more about investment in countries and economies and businesses.

- Yeah.

- We are not "long," to use the Wall Street term, everything that our country needs.

Some of it's going to come from other countries.

So to have our leading companies, and again, some of our smaller companies involved in other parts of the world.

Now, as companies, you don't want to go there just on your own.

- Right.

- You want to have a relationship with the U.S.

government, the State Department, not to support you, not to bail you out, but to help work through what are always both challenges and opportunities of working with foreign governments.

A lot of that needs to happen at a state to state level.

So there's always going to be some notion of a quote "partnership" between the U.S.

government and its companies.

And I will say, look at how high the stock market is today in the U.S.

That is in large part a function of a lot of our companies are global in nature, so we benefit from interacting with the rest of the world.

- Absolutely.

What's the U.S.

DFC?

And how does that help?

- So the DFC stands for the Development Finance Corporation.

- Okay.

- It's an independent federal agency that invests in private sector projects around the world.

So not just energy, all sorts of infrastructure, all sorts of businesses.

But historically, they've tried to target investments that are going to have a very positive developmental impact in the countries where they're situated.

So they're going to drive growth, they're going to drive job creation.

So it's not what people think of as a traditional aid program.

It's really about investment.

- Yeah, so lending.

- So it's actually not concessional lending.

- Okay.

- It's commercial lending.

[Scott] Okay.

But it's designed to sort of crowd in private capital.

So it's designed to support other private investments that are trying to come in.

[Scott] I gotcha.

- And I think, at its best, it sort of represents this recognition that the U.S.

benefits from engaging in the world and supporting both public and private sectors in other countries.

- Yeah.

- There's a real false perception that Katie is helping dispel: that all notions of aid are simply handouts that are going from Americans to foreigners.

And that is not the case.

Perhaps there are examples where that is the case.

But at least some large portion of these organizations help companies, help the local companies as well invest in their country to have lift off, to have a better economic life.

- Do you want to talk about the World Bank at all?

- Sure.

So the World Bank does a couple of really important things, in my opinion.

First, it provides concessional lending.

So really low cost loans to countries, especially to build out public infrastructure.

- Okay.

- They can also provide commercial loans to private companies.

They have a private lending arm.

And they help countries think through and assess their options as technologies change.

So just recently, the World Bank opened up to helping countries think through nuclear for the first time.

And it's a recognition that technology is changing so fast.

Countries are struggling to figure out, how should we be positioning ourselves as these new technologies potentially come online in the coming decades?

The World Bank can be really valuable in providing them with that sort of expertise and support.

- Sure.

Africa, we've mentioned many times, who's going to lead, or who is leading, really, in Africa with becoming energy rich?

And then how long does that take, and how does that set up other nations within Africa to follow?

- There's a lot of really interesting stuff happening.

So Morocco, for example, has done great things, really diversified its portfolio, and they've sort of used their geographic position to try to be a bridge between Europe and Africa.

Kenya has made itself a hub of really innovative startup culture.

So a lot of really interesting innovation around electric two-wheelers and, you know, mobile payment systems.

That's happening in Kenya.

- Yeah.

- And in other parts of East Africa as well.

And then there's countries, again, I mentioned, like South Africa, where they are by far the largest energy consumer on a per capita basis in Africa.

And they have domestic industry that's going to drive consumption.

And if they can figure out the political side, they could be a global player.

- We haven't talked much about South America, Central America.

- What do you see in that region in terms of the progress along from energy poor to energy rich?

- A lot of them are rich in natural resources: oil, gas, coal.

So it's really not about necessarily not having access to energy.

I think it's about those investment conditions of what type of economy do you have?

- Yeah.

- So I think it goes back to the question of, what are the incentives for either their companies or foreign companies to help develop it?

What types of economies do they aspire to?

And they're still working on that.

- Yeah.

Forces that work against this in general, the forces that work against this progress, both within the country or external to the country, what are some of those that we need to be aware of?

- So I think one of the things for the work that I do, which is focused on African economies, is that perceived investment risk is incredibly high, even when, in reality, the risk may be much lower.

So a lot of what we need to do is sort of not only create better regulatory environments, but actually also help companies understand the actual risk and get comfortable with working in these markets.

The risk is nowhere near as high as it is, I think, in many Western people's minds when they think of quote unquote "Africa."

They're not aware of the dynamism and the innovation that's actually taking place.

- Other forces working against?

- I'll pick one here in the U.S., where I think ideology can be a major risk to our continued prosperity, which we should not assume can be taken for granted, if I keep to energy.

You had a party a few years ago that said, "we're only in favor of renewables and we're against fossil fuels."

Now we have the exact opposite.

"We're only in favor of fossil fuels and we're against renewables."

- Right.

- Neither of those extremes make sense.

- Yeah.

- Neither make us energy rich.

I think all of those are risks to our continued prosperity.

- Yeah, when you think about countries becoming, let's say, energy rich, maybe we'll even use the word energy secure, just secure energy, affordable energy.

What gives you hope, Arjun?

- I get hope that the rest of the world is increasingly getting to where they're not being controlled by the U.S.

or Europe.

So this right to self-determination, to basic human freedom.

And I think that, to me, means their economy's going to do better and they're going to be using more energy for the benefits of their people.

- Yeah, and that helps us all.

- It helps us as Americans to have the rest of the world doing better.

- Yeah, very well said.

Katie?

- I think, for me, getting to a low carbon global energy system is an integral part of energy security.

It's not going to happen right away, but we need to get there as fast as we can.

And for me, what's hopeful in that is that we continue to innovate and the costs of these technologies continue to come down.

And I also find hope in the fact that more and more people are talking about, in the context of lower income countries, not just power for basic access, but for economic development.

And the more that we focus on that problem, I think we'll all make more progress.

- Yeah, great point.

Well, we got a big audience and one or two things that you want to make sure they've taken away from our conversation.

- One is that electricity access does not equal electricity rich.

We need to think much more about making sure that energy is affordable and reliable and actually gets to the people who need it.

And then the second thing I would say is that energy richness is not a "set it and forget it" type of thing.

You can become energy rich, and the world's going to continue to change.

Technology, geopolitics, energy markets, all of these things are going to continue shifting.

It's going to be a continuous process of iteration and experimentation and changing the way that we do business for as long as we use energy.

- Those are great takeaways.

- The reason I wanted to come on this show is I believe so strongly that there's need for energy education.

That we're in a world that gets, you know, limited to sound bites and rhetorical talking points that simplify whatever side you're on: "this is the answer" or "that's the answer."

"This is bad, this is good," and vice versa.

And that is not what energy is about.

[Scott] Right.

- Most people do not understand the basics of energy.

They do not understand the economics.

They do not understand the trade-offs and how the trade offs vary depending on country and region and what you have and what you don't have.

We all have the basic desire to not be poor.

[Scott] Yes.

- And to ultimately be what I'm going to say, energy rich, to enjoy the kind of lifestyles and have the opportunity that we all, again, take for granted.

- Yeah, yeah, I appreciate you saying that.

And so impressed and appreciative of your both being here - Yeah, thank you.

- Today and sharing your time and your expertise, your knowledge.

Scott Tinker, "Energy Switch."

Katie, thanks so much.

- Thanks.

[Scott] What will it take for emerging and developing countries to become energy rich?

My guests outlines several key points.

To begin, industry.

Powering large electricity consumers like factories, ports, and cities provides utilities the revenue to build power plants.

These large power consumers fill large contracts, which can attract private investment.

Long distance power lines to rural areas can follow, but often require public money.

Speaking of funding, my guests emphasized investment and loans over aid.

And to create a reliable investing environment, countries need regulation and policies to eliminate corruption and to protect workers so a labor force can grow, prosper, and afford the benefits of energy.

But it's a chicken and egg problem: how to get started when there aren't existing energy consumers, infrastructure, or laws?

International organizations and governments can help chart a path.

Healthy, growing economies and societies make good trading partners in a safer, energy rich world.

[upbeat music] ♪ ♪ ♪ ♪ ♪ ♪ [Announcer] Major funding provided by Arizona State University.

Home to the Julie Ann Wrigley Global Futures Laboratory, addressing critical challenges toward a future in which all living things thrive.

Arizona State, The New American University.