Latest / Columbia Energy Exchange / Katie Auth on How the 'Modern Energy Minimum' Can Drive Economic Growth

Transcript

Katie Auth on How the 'Modern Energy Minimum' Can Drive Economic Growth · Columbia Energy Exchange

• 0:02
  Katie Auth: Thanks for having me, Jason. This is great.
• 0:03
  Jason Bordoff: Thanks. And this podcast is what? Eleven or 12 years old, I can't remember. But this- conversation feels like very much the spirit of it when it first started, which — I really enjoy talking to smart people and learning from them and asking lots of questions 'cause I'm curious. And if I was in DC, we might be having a drink, and if you were-- or I would ask you to have one and try to just talk.
• 0:03
  Katie Auth: Sure. So the Energy for Growth Hub is a small think tank, and we're based in Washington, DC, but we have people working for us and with us all over the world. And we are focused on global energy poverty, and we were really founded by our executive director, Todd Moss, to do two things. One is to bridge the gap between so much brilliant academic research and the work of deeply wonky energy practitioners that's taking place all around the world.
• 0:05
  Jason Bordoff: And that's great, and I wanna come back to that distinction between how much energy the world needs and how one defines electricity access. You guys have done some good work quantifying that. And how did you come to this work from working on climate, working on energy, working on development, working for McKinsey?
• 0:05
  Katie Auth: I've never worked for McKinsey. But so I wasn't originally an energy person. I actually started out... I knew I wanted to focus on foreign policy. I was incredibly interested in- modernizing the way that US policymakers approached Africa. I lived in Senegal for a little while. I was really interested in the ways that international development policy had both succeeded and failed over time.
• 0:07
  Jason Bordoff: And I want to come back to what you started with, 'cause I don't know that it's well appreciated. It's what you and Todd have done really important work, I think, highlighting. When people talk about these kinds of issues, I think there's often a conversation and groups organized like Sustainable Energy For All.
• 0:07
  Katie Auth: Yeah. So I think for most people who aren't living with energy poverty, they take the energy they consume every day very much for granted. In the US, we're thinking a lot about affordability and rising costs but we're never worried that the power system is just gonna fall apart or that we're not gonna have lights when we turn them on.
• 0:09
  Jason Bordoff: And you used the phrase a moment ago, they may not have reliable electricity even if they have access. And of course, the volume of energy, the amount, and we'll come to some of the modeling work you guys have done in a moment goes beyond electricity, right? The energy that the world needs includes most of the world is not electrified yet, the energy system.
• 0:09
  Katie Auth: Yeah, exactly. And the Energy for Growth Hub really focuses on the power sector specifically, so we don't focus a lot of time and attention on other forms of energy. But you're right. And in a lot of these countries, even beyond the power sector, they don't have access to clean cooking, for example.
• 0:10
  Jason Bordoff: And you guys have put together a helpful way to think about the amount of energy that modern life and some meaningful amount of prosperity really requires, which as I recall, is 10 to 20 times the amount of electricity that's typically defined with achieving access. But just A, explain that, and B, just so I understand what you just said, that sounds really big.
• 0:10
  Katie Auth: Yes, exactly. So what you're referring to is called the modern energy minimum, and this idea was born out of a recognition that the development community has a metric for measuring basically what it means to have, quote-unquote, "access to electricity." This is defined by the UN and by Sustainable Energy for All and IEA.
• 0:11
  Jason Bordoff: It's like charging cell phones or turning on light bulbs.
• 0:11
  Katie Auth: it's charging a cell phone, maybe you have a s- a light in your home. So there are two problems with this. One, that's a huge step forward for people.
• 0:12
  Jason Bordoff: how did you come up with 1,000? Where, where-- How should we think about that? Is that like profligate, wasteful, SUVs and suburbs? And why, is that a bit-- a number that big or not quite so big?
• 0:12
  Katie Auth: Oh, like what could 1,000 kilowatt hours get you in the real world?
• 0:12
  Jason Bordoff: Yeah. I'm just saying I, I know-- I think I know the answer to this question, but the idea that like more energy is better, and then everybody thinks about how wasteful we, in, in reality are in the US, and so you hear a number like 1,000, which I don't think includes lots and lots of wasteful — it's still a pretty small number relative to even what a country like Malaysia uses, nevertheless the United States. But just explain where 1,000 comes from and how we should think about how big that is.
• 0:12
  Katie Auth: So if you think about — if you correlate income per capita with energy consumption per capita, there's a very close correlation between those two things, and so you see countries on this trend line up. 1,000 kilowatt hours is pretty much right in line with where a middle-income country stands.
• 0:13
  Jason Bordoff: And examples of middle income. I would imagine a country even like India is using more than a thou- maybe I'm wrong, but when you say middle income, what countries are you-- what's roughly 1,000 kilowatt hours?
• 0:13
  Katie Auth: So I wish I had it in front of me, but I don't wanna speak out of turn and name a country name that I'm not sure about, but but yeah, you're talking about countries like Indonesia maybe. Like a country that has some industry.
• 0:13
  Jason Bordoff: And in terms of what-- Just to give a sense of what that is the kind of number you get to, I think, if you have some amount of industry, mechanization of agriculture, you have an air conditioner, you have a refrigerator. This is not 10-bedroom suburban homes and SUVs.
• 0:14
  Katie Auth: Yeah, exactly. So that's really the important thing about the modern energy minimum is only about a third of that energy is being consumed within the home. The rest of it is being consumed in hospitals manufacturing, industrialization. So in order to reach the modern energy minimum, a country has to have both individual people connected to power, but it also has to have power that's going towards some level of industry and economic activity.
• 0:14
  Jason Bordoff: And why is that concept, in your view, important for people to understand? How does it affect the conversation about global aid and development and multilateral finance for energy, about climate change what you just described?
• 0:14
  Katie Auth: I think there's a couple things. Number one, I think we want people to be more ambitious, more audacious in how we imagine a global future of energy, and we want to put the expectation out there that we should be driving toward a world not where we only ensure that everybody has a light at home, but where we're really pushing for people to be able to have the power they need to start a business, to run a competitive garment manufacturing firm if they want to.
• 0:16
  Jason Bordoff: Yeah, I wanna come back to how to reconcile this with the need to decarbonize the planet very quickly, which obviously we are not yet doing. And what you just said, which is you kinda answered the question I was gonna ask before I asked it, but just to stay on the topic for a moment, the sense of urgency that we do need to do something about climate change.
• 0:18
  Katie Auth: Yes. And a lot of people don't, and I don't fault them for this, not many people have traveled to really low-income countries. It's not a context that a lot of Americans think about on a daily basis. But I think as a result, people have no idea what the depths of energy poverty actually look like.
• 0:19
  Jason Bordoff: And when you hear people, I assume sometimes you might say you're-- that view imposes Western values on low income and developing countries. We wear sweaters indoors and, put-- set the air conditioner to 65 degrees Fahrenheit so that we have a view of prosperity that maybe others in the world view differently, and that's a good thing, not a bad thing.
• 0:19
  Katie Auth: We do hear that sometimes. I think I have a couple responses. One is, if you look at polling in African countries or across any of these economies in Southeast Asia, Africa, electricity is by far constantly at the top of the policy priority list. It's top of mind for policymakers, for citizens in this country.
• 0:21
  Jason Bordoff: Yeah, and I think maybe it is, tell me if I'm wrong, maybe — I don't think quite the focus of the work you and Todd do, but, we we have some great people here At the Energy Center and at Columbia doing work on energy poverty in the United States, which is a larger issue than I think many realize.
• 0:21
  Katie Auth: Yeah. And I know you're in New York. I'm in DC now, but I used to live up in New England, and affording heating oil for New England homes in the winter is a huge issue, and I think that was an interesting thing in the energy poverty conversations globally was during the start of the Ukraine war when suddenly you were seeing, massive concern about fuel in European countries.
• 0:22
  Jason Bordoff: Yeah. I think a lot -- Not that I wish an energy crisis on countries, but the current energy shock we're living through, I think, is reminding people about the fragility of access to affordable energy even in today's world and in advanced economies. Everything you just said resonated with — I don't know if you happened to hear the conversation, but I had Raj Shah, the head of the Rockefeller Foundation, on this podcast a few weeks ago.
• 0:23
  Katie Auth: Rockefeller has been an amazing partner of ours in this. I'm excited to see where you guys take that conversation with them.
• 0:23
  Jason Bordoff: Yeah, I'm excited to work with you on it. You and your colleagues have also advocated for the use of energy security compacts modeled on things like the Millennium Challenge Corporation, how it enters into compacts with recipient countries. Tell me-- And I think there's legislation that's been sponsored by senators like Chris Coons who focus a lot on Africa.
• 0:24
  Katie Auth: Sure. So energy security compacts was an idea we put forward first a couple of years ago, and really it was designed to do two things. One is conceptual and one is very structural. So the conceptual piece is to say, in this political context that the US is living through right now, we wanna make the case, backed up by clear evidence and specific examples, that investing in energy security in lower income countries is pivotal both for their economic development, but also is directly in the US security interest.
• 0:27
  Jason Bordoff: Tremendous. I wanna ask you, you said a moment ago, this agenda does not need to be in tension with the need to rapidly decarbonize and address climate change. And I just wanna come back to that because obviously some people hear that. You're talking about massive amounts of energy.
• 0:29
  Katie Auth: Oh, man. So this is yeah, it's the tension at the heart of this work. So a couple things. I think I like to push people whenever I'm in this conversation, or encourage people to really separate out, okay, which countries are we talking about? And let's think about the specific challenges that each of these countries are facing.
• 0:30
  Jason Bordoff: And just to be clear, that's because they're in on coal already, or coal is a very significant share of the economy in terms of jobs created, so it is also harder to think about moving to other fuels.
• 0:30
  Katie Auth: All of the above. Plus, Liberia is dramatically poorer. And so I think morally and diplomatically, there's a question about it's a different case when Liberia is struggling to procure the power they need to keep a hospital running versus someone seeking to do cheaper power for industry.
• 0:32
  Jason Bordoff: Yeah, that resonates, and that messy middle sounds a lot like where I think a lot of people at the Center on Global Energy Policy feel like they live and spend time. So that definitely resonates. As you said, I think often in the climate community, the idea that we do it with clean energy.
• 0:33
  Katie Auth: So on the first part of your question, I think the cost argument of renewables being the cheapest option can be very deceptive, and it sounds really great, and in some places is true. But I think the thing to think about in especially lower income countries is that they have very old and dilapidated grid systems.
• 0:36
  Jason Bordoff: And you understandably focused on gas, which has much less local pollution and if you manage methane, less greenhouse gas emissions also. Is there a role for coal in poor countries, or should that just be off-limits and is a distraction?
• 0:36
  Katie Auth: From a US policy perspective, I don't see a significant rationale for supporting coal. I don't... I think there are really overblown, actually, concerns about the future of coal in Africa in particular. If you-- we have something called the Coal Death Watch, which is a silly name for a tracker that looks at where are the viable coal projects being built in Africa.
• 0:37
  Jason Bordoff: And what is the role of US policy in this work, and how would you characterize where it is today? You worked for USAID. That doesn't exist anymore. At the same time, DFC, the Development Finance Corporation, has, is being reauthorized with, I think, an expanded lending cap and has support from this administration.
• 0:37
  Katie Auth: So by and large, I think we do have the tools that we need, which is great. As you mentioned, DFC has just been reauthorized with a significantly larger ability to lend around the world. They can lend capital directly to private sector projects. They can provide guarantees. They can take equity stakes in projects for the first time at scale, which is potentially very impactful.
• 0:40
  Jason Bordoff: And how do you think about the role of US energy in this? So when you hear, some in the oil and gas industry, for example, or in this administration say we need to dramatically expand, which by the way we are already and we have been US natural gas exports, LNG exports, because there are so many poor people in the world.
• 0:40
  Katie Auth: I think it's some of both. I think there are well-meaning people in the US LNG industry who legitimately see the importance of energy poverty and the good that US gas can play in that. But I... What bothers me is when that starts to as we talked about before, like that can't be the only solution.
• 0:41
  Jason Bordoff: Another way for them to get cheap energy, I presume, is to buy a lot of stuff from China. And can you talk about the kind of broader geopolitical context in which this agenda plays out? Have you seen China stepping in to fill the gap left by USAID? China's narrative, to which I-- there is some truth, but the idea that it is dramatically lowering the cost of clean energy solutions like solar, and that's helpful to countries like Pakistan or even lower income countries in Africa that wanna buy up as much as they can.
• 0:42
  Katie Auth: So it's undeniable that China is and has played a huge role in this space, and I think your reference to Pakistan is this really striking data set that emerged at some point in the past year about you can actually see the imports of Chinese solar PV sort of skyrocketing in countries like Pakistan, South Africa, and elsewhere.
• 0:43
  Jason Bordoff: As I understand it, the government had worked with China to build coal plants 'cause that's where cheap electricity would come from, and consumers and businesses said this solar stuff works even better.
• 0:43
  Katie Auth: Yeah. So it's this fascinating situation of a very bottom-up driven move that C&I customers are making in a lot of these countries, and all of that's coming from China. And so I think it does, it is wrapped up in the tensions between the US and China as the US thinks about its diplomatic and investment goals in these countries.
• 0:44
  Jason Bordoff: But what are those technologies? That comes up sometimes when you hear concepts of a Green Marshall Plan or something, and that the US should be doing that, and you're like we're-- what-- we're gonna, we're gonna be the leader in carbon capture technology or advanced nuclear, and these are way out in the future and really expensive."
• 0:45
  Katie Auth: I think your point is fair. I think those are all long-term plays, but I do think we need to be thinking long term and short term. So I don't think that just because... I think if we look at the example of China, the position that we're in right now is because they thought incredibly long term about the future of energy markets and about the technologies that they wanted to dominate and be competitive in.
• 0:45
  Jason Bordoff: I was think- he's a good friend and just brilliant. I was re- thinking about the article Brian Deese wrote in Foreign Affairs about that concept and, kinda making the case for investment in emerging technologies like hydrogen power and carbon capture and storage. And I bet that is both appealing but also almost like an acknowledgment of failure that how far away those things are.
• 0:46
  Katie Auth: Correct. But you know what? We also show up and we talk way too much about new generation. For a lot of these countries, generation assets is not actually what they need. Really as a... When I was at USAID, the more embarrassing conversation to have with an African official as a US government representative was you'd walk into a room and say, "We can provide loans for gas to power, for solar, for wind."
• 0:47
  Jason Bordoff: And the capital, like there's, the global infrastructure funds, Global Infrastructure Partners, Blackstone, all the big infrastructure funds that are looking to deploy capital on transmission lines, on offshore wind, on y- on natural gas projects too. But as and maybe you could talk a little bit about it, like the barriers to that investment political risk, currency exchange risk, it's just harder to invest in lower income countries and as a commercial proposition, which is why the capital is not yet flowing there.
• 0:47
  Katie Auth: especially when you think about transmission infrastructure and distribution infrastructure, in most of these countries, that's all public. So the US' entire investment platform and approach is built on the private sector. So we can provide loans and guarantees only when projects are driven by a private developer.
• 0:48
  Jason Bordoff: Yeah, how do we get better? If you describe this problem often to policy people, and the answer may be different from people who are actually putting the capital to work in the private sector, you know the answers will be we need public-private partnerships and blended finance and some set of buzzword concepts that...
• 0:48
  Katie Auth: So I would argue that we have, and by we, US government, but also the development finance community in general, the approach that we've taken for the last twenty years is very, reactive and very late stage. So we sort of wait for good projects to come to us and to be bankable, and then we say, "Oh, great, we'll throw in a public guarantee so that the private sector can do what they do."
• 0:50
  Jason Bordoff: I was a little dismissive a few minutes ago when oh, advanced nuclear is some magical solution down the road. And I don't actually think that's fair. I'm actually pretty optimistic about the advances we've seen in nuclear technology, even though it is still the case that financing is a challenge, costs are high in places like the US.
• 0:50
  Katie Auth: Yeah, I think it's a really good question. A couple things. One is that our position in getting the World Bank to drop the ban was not to say, "Oh, great, this means that the World Bank should be financing nuclear projects everywhere across Africa tomorrow." That's not at all what we're saying. I think my position on nuclear is basically we should be...
• 0:53
  Jason Bordoff: So I started this conversation by reminding people about the origin of this podcast, which is just an excuse for me to talk to super smart people and ask a lot of questions I'm interested in and learn a lot. So that has-- We have exceeded that bar from my standpoint. Hopefully, people listening will agree.
• 0:53
  Katie Auth: No, I don't think so, Jason. Just thank you so much for having me and I jump at any chance to talk about these issues with smart people, so it's awesome to have the platform.
• 0:53
  Jason Bordoff: Yeah. Thanks for the work that you and the organization do and Todd and everyone else. And for the work, and thanks for making time to be with us today.
• 0:53
  Katie Auth: Same to you. Thanks, Jason.
• 0:53
  Jason Bordoff: Thank you again, Katie Auth, and thanks to all of you for listening to this episode of "Columbia Energy Exchange." The show is brought to you by the Center on Global Energy Policy at Columbia University. The show is hosted by me, Jason Bordoff, and by Bill Loveless. Mary Catherine O'Connor, Caroline Pitman, and Kyu Lee produced the show.