EN    EN  COMMISSION OF THE E UROPEAN COMMUNITIES 
Brussels, 26.10.2004 
COM(2004) 711 final 
  
COMMUNICATION FROM THE COMMISSI ON TO THE CO UNCIL AND THE 
EUROPEAN PARLIAMENT 
on the future development of the EU Ener gy Initiative and the modalities for the 
establishment of an Energy Facility for ACP countries 
 
EN 2   EN 1. INTRODUCTION  
Energy is critical for all human activity, and access to modern energy services is a 
prerequisite for social and economic developm ent. However, in today’s world access to 
energy is not evenly and fairly distributed. 
While OECD countries, representing 70% of gl obal energy consumption, have decreased their 
exposure to energy shocks, developing countri es are more and more exposed. They are 
generally more dependent on imported oil and use twice as much o il per unit of economic 
output. In addition, energy price fluctuations have a higher im pact on their economies due to 
their fragile financial situati on. Finally, access to modern en ergy services is most often 
limited to urban and industrial centres. Limite d access to high quality, reliable energy services 
is a strong barrier to the economic and soci al development of the poor. In addition, air 
pollution from traditional energy sources and p oor standards of modern  energy installations 
affect the health part icularly of the poor. 
Recognising the importance of improving energy  access for the poor, the EU launched the EU 
Energy Initiative for poverty eradication and sustainable developmen t (EUEI) at the World 
Summit on Sustainable Developmen t (WSSD). The objective of the EUEI is to contribute to 
the achievement of the Millennium Development Goals (MDGs) through the provision of adequate, affordable, sustainable energy services  to the poor. Ownership  by beneficiaries is 
critical to success.  
The EUEI is a joint effort of the Commissi on and the Member States creating synergies 
between their respectiv e development policies and activitie s. It is implemented through 
dialogue and specific partnerships with develo ping countries, including cooperation with civil 
society, the private sector a nd financial institutions. The EUEI has made progress since 
Johannesburg. The EUEI “Energy for Africa” conf erence, held in Nairobi in November 2003, 
contributed to African owners hip while outlining key prioriti es. Dialogue with developing 
countries has revealed a need for the EU to inve st considerably more re sources in this area. 
The purpose of the present Communication is to  explain how the EUEI can be made more 
operational in the future and respond to reque sts by ACP countries. To sharpen the focus and 
visibility of the energy and poverty agenda, th e Commission proposes the establishment of a 
€250 million ACP-EU Energy Facility, subject to a co-decision by the relevant EU and ACP 
bodies.  
2. T
HE ENERGY AND POVERTY CHALLENGES  
At present, nearly two billion people in the world – concentrated main ly in rural and peri-
urban areas of developing countries - do not have access to modern energy services. Sub-
Sahara Africa is a dramatic example of inequa lity in the energy field, with over 80% of the 
population having limited access to modern forms of energy. The social and economic 
development of poor communities is limited or ev en deadlocked by the present unsustainable 
use of wood and other forms of biomass for energy purposes, over and above the difficult and 
expensive access to other forms or energy, such as electricity and liquid fuels.  
Energy and poverty reduction:  Access to adequate, affordable and sustainable energy 
services is necessary to fulf il most development objectives, e .g. within health, education, 
 
EN 3   EN light, heating, transport, ag riculture, industrial produc tion and modern means of 
communication. This connection was recognised by the WSSD in the Johannesburg Plan of 
Implementation that established the link between access to energy and the MDGs, noting that access to energy facilitates th e eradication of poverty. 
Energy access:  Ensuring access to energy services is  a complex challenge which cannot be 
left to market forces alone to resolve. Concer ted action of the public sector is required. In 
addition, there is a large variety of stakehol ders, ranging from poor communities to local and 
national governments and trans-national compan ies, energy sources and technology options 
which vary according to location. There is no “ one size fits all” recipe for energy service 
provision.  
The global character of energy markets:  While OECD countries have managed to decrease 
their exposure to oil shocks, developing coun tries have increased theirs. On average, 
developing countries use more than twice as much oil per unit of economic output than 
OECD countries. Moreover, their financial situat ion means that they ar e less able to weather 
turmoil on oil markets. 
Energy finance:  Almost half of the globa l investment required to improve and replace supply 
capacity up to 2030 is attributed to developing c ountry needs. More than ever before, capital 
needed in the energy sector will have to be raised from private and foreign sources. However, the investment risk is perceive d to be prohibitive, in partic ular when it comes to improving 
access to energy for poor consumers. Public and ODA funding must explore new ways to 
catalyse and facilitate a sufficient fl ow of investment in this sector. 
See Annex for further details. 
3. T
HE EU POLICY BACKGROUND  
It is time to give increased attention to the critical role of energy in poverty eradication in 
development assistance. While WSSD achie ved much in putting energy back into 
international development debates, the energy n eeds have not been sufficiently addressed at a 
practical level. Energy sector commitments have  been decreasing for th e past decade and the 
present trend is not upwards. Grants to the ener gy sector of developing countries have halved 
in the last few years, compared with the amounts of the nineties. 
Nevertheless, several EU Member States en gage in energy in bilateral development 
cooperation programmes, based on policies that are currently in line w ith the aims of the 
EUEI. 
While energy itself does not figure among the si x sectoral priorities of the Community’s 
development policy, it is linked dire ctly or indirectly to every one of them. The Commission’s 
Communication “The European Co mmunity's Development Policy”1 acknowledges the 
importance of energy while focusing on the reduction of poverty. With regard to ACP countries, no African or Caribbean country directly addresses energy under the 9th EDF, 
while five ACP Pacific countries have energy id entified as a focal sector of cooperation in 
their Country Strategy Papers. 
                                                
 
1 COM(2000) 212 
 
EN 4   EN The EUEI was announced for the first time  in the Commission’s Communication on the 
external dimension of sustainable developm ent (COM(2002) 82). EU Member States have 
confirmed their support in various decisions of  the Council of the European Union and in the 
European Council, leading to the successful launch of the Energy Initiative for Poverty 
Eradication and Sustainable Deve lopment (EUEI) at the WSSD. 
The Commission’s Communication “Energy C ooperation with the Developing Countries”2 
established a framework for energy cooperation with developing countries, focusing on issues 
such as the necessary reforms of the energy  sector, technology tran sfer, demand and supply-
side cooperation, promotion of energy diversifi cation, facilitation of grid extensions and 
interconnections, etc. The Co mmunication highlighted the ro le of the EUEI in this 
cooperation. 
After Johannesburg, the Communication “The World Summit on Sustainable Development 
one year on: implementing our commitments”3 took stock of the EUEI development in late 
2003. The Communication recognised  the progress of the EUEI  and acknowledged the need 
for adequate financing for the Initiative. The scope for creating synergies between the EUEI 
and the Johannesburg Renewable Energy Coalition (JREC)4 was also recognised. 
In the Conclusions of the General Affairs Council (8566/04), April 2004, the EU Member 
States confirmed the need to provide adequa te financing for the Initiative. The Council 
furthermore recognised that greater involvement of the Commission and the Member States is 
needed to respond to the developing countries’ priorities as expressed at the EUEI “Energy 
for Africa” conference in Nairobi , and requested the Commission to take the lead in the 
follow-up to this conference. 
The proposal for establishing an Energy Facility for ACP countries  reflects this policy context 
and intends to bring the EU’s commitments fu rther towards implementa tion. It is suggested 
that the funds for the Energy Facility should be allocated from the “conditional billion” of the 
9th European Development Fund (EDF), pending a final decision at the Council meeting in 
March 2005. 
4. PROGRESS TO DATE - TRANSLATING POLICY INTO ACTION  
The EUEI has established a s ecretariat within DG Development to stimulate synergy and 
cooperation. The Advisory Group, composed of  Member States, Commission officials and 
experts, is the main forum for European dialog ue and coordination. In the European context, 
the EUEI dialogue has been unde rtaken with the active involve ment of EU Member States 
and the European Commission, and has also in cluded the European Investment Bank (EIB). 
EIB has expressed interest in ex ploring possibilities for combining EDF grants and EIB loans. 
Strong ownership from beneficiar ies being a key to success, the EUEI’s priority  after WSSD 
has been to engage in a dialogue w ith developing countries and regions. 
                                                 
2 COM(2002) 408 
3 COM(2003) 829 
4 As of June 2004, JREC counted 88 member governments, including 54 developing countries. Members 
signed up to the JREC Declaration committing to co-ope rate to“…with a sense of urgency, substantially 
increase the global share of renewable energy sources …”. 
 
EN 5   EN Africa: an urgent priority 
It seems clear that Sub-Saharan Africa will have difficulty in reaching the MDGs unless 
substantial extra efforts are undertaken, including in the energy field. A number of Member 
States are active in the energy sector in S ub-Saharan Africa, and have built up valuable 
experience and capacity, both in the policy and strategy development as well as in 
implementation. In these countries they act as  EUEI facilitators. African governments are 
gradually addressing energy issu es into their poverty reducti on strategies, increasing their 
capacity to plan and implemen t energy-related activities. 
The EUEI “Energy for Africa” conference held in Nairobi in November 2003 represents a 
milestone in EUEI dialogue with Africa a nd was attended by government representatives 
from about 40 Sub-Saharan Afri can countries. The main objective was to identify priority 
actions at national and sub-regional level.  Conference recommendations reflect African 
country ownership of this agenda an d suggested the following priorities: 
– Rural energy in general and in particular rural electrification 
– Energy for households, biomass and substitutes 
– Strategies and policies for the sector, both at national and at regional level 
– Capacity building at all levels. 
Follow-up EUEI workshops will be organised to  help identify successful energy service 
delivery models and how they can be financed  and implemented on a wider scale. Other 
Commission-funded activities will further stimulate dialogue and c ontribute to the creation of 
a framework for action: 
– Regional projects are to be financed by the intra-ACP allocation to energy. 
– The COOPENER component of the Intellig ent Energy-Europe programme, managed by 
DG Energy and Transport, co-finances projects aiming at creating the institutional conditions for improved access to energy in Sub-Saharan Africa. 
– Similarly, DG Research supports a renewable energy partnership for poverty eradication 
and sustainable development in Africa (“Part ners for Africa”) involving a number of 
European and African partners. 
– DG Environment sponsors several projects in the context of the Johannesburg Renewable 
Energy Coalition which support and enhance the EUEI dialogue, including the work on 
innovative financing mechanisms (i.e. the Patie nt Capital Initiative), and on databases for 
renewable energy policies and measures and databases. 
The Caribbean and Pacific 
Small island countries ar e particularly sensitiv e to energy issues. The high cost of shipping 
fuels to dispersed islands mean s that electricity costs an av erage 20–50 €c/kWh, compared to 
international costs of 5 €c/kWh while ther e is untapped potential for increased energy 
efficiency and renewable energy use. 
 
EN 6   EN The island states in the Caribbean and the Paci fic took an early interest in the EUEI, and 
participated actively in the dialogue before WSSD. Follow-up EC and Denmark engagement 
with regional organisations in ACP Pacific island states led to the establishment of a 
partnership with the Pacific Island Countries, while the EC and Germany initiated similar 
activities in the Caribbean. 
See Annex for further details. 
5. THE FINANCIAL CHALLENGE AND THE NEED FOR INNOVATIVE MECHANISMS  
Since WSSD there has been a recognised need for a significant increa se in funding for energy 
and poverty in order to achieve  the Millennium Deve lopment Goals. So far, provision of 
energy services to the poor has been able to  attract only marginal private investment. 
Innovative and flexible funding mechanisms are urge ntly required to use the leverage effect of 
public resources and ODA and attract more res ources from the private sector, development 
banks and financial institutions. Pu blic-private partnerships (PPPs) are a core instrument in 
the EUEI strategy, and the energy sector offe rs numerous possibilities for the EU and its 
developing country partners to work together in  such partnerships with the private sector, 
financial institutions and civil society. However, greater efforts are needed at the political level to provide adequate, faster and more flexible resources and instruments, including the provision of seed capital. 
Since Johannesburg the EUEI has built a solid ba se for specific actions and is now ready for a 
quantum leap. To maintain the momentum an d to actually deliver on the ground, substantial 
additional resources are needed. Such res ources should be provided by the EU as a 
demonstration of its commitments to th e MDGs and the Johannesburg Plan of 
Implementation. 
See Annex for further details. 
6. A
N ENERGY FACILITY FOR ACP  COUNTRIES  
The Commission proposes that the first step in this direction should be the allocation of 
significant funds for an ACP-EU Energy Facility. It is suggested that, in a first phase, an 
amount of €250 million would be appropriate, c onsidering the available EDF resources and 
the first results of the dialogue with stakeholders . The Facility will be a flexible instrument, 
open to joint financing with Member Stat es and other donors and capable of adopting 
innovative ways of implementation. Th e Facility will be, on the one hand, a catalyst  
promoting initiatives, providing information, acti ng as a clearing-house, building research and 
management capacity in ACP c ountries and, on the other hand, an instrument  which can 
provide the missing link in financing su stainable projects and activities. 
6.1. Key Principles 
Targets:  The Energy Facility should be directed towards the achievement of the WSSD and 
MDG targets and should concentr ate its activities in those ACP countries which already have 
a sound national energy policy or those which are strongly committed to developing such a policy, based on good governance principles and as  part of a Poverty Reduction Strategy or 
similar. The Energy Facility will, among other things, assist countries to establish their 
institutional and regulatory framework and to at tract additional financial resources for public-
 
EN 7   EN private partnerships. The active participation and parallel contribut ion by Member States 
already working in the country would strengthen the Facility. 
Ownership:  The concept of ownership is central to  the approach of the Energy Facility. A 
number of ACP countries give priority to th e energy and poverty agenda and have asked to 
become partners in the EUEI. EUEI actions should be coherent with national policies and 
commitments, and ideally result from the ongoing Poverty Reduction Strategy process. Some 
countries are fairly advanced in developing the policy framework and would be ready for 
implementation. In other countries  there is still a need for po licy and strategy development. 
There is a growing awareness of the fact that energy has not b een sufficiently recognised as 
an important element in the poverty reduction pro cess and that there is a need to incorporate 
the energy dimension in Povert y Reduction Strategies. At natio nal level, actions will be 
geared towards delivering energy services to  the poor. At cross-boundary-ACP level the 
Facility will foster dialogue w ith African institutions and initia tives of a global nature, such as 
New Partnership for African Development (NEPAD) and African Union (AU). Similar 
processes are being develope d in the ACP Island regions. 
Flexibility: In order to be effective, it is essential that the Facility has a flexible approach to 
financing and is open to joint financing with Memb er States active in the sector, and is able to 
cooperate with lending institutions, the private sector, public utilitie s and civil society. 
The Facility would primarily provide grant fu nding, which, by nature, has a high leverage 
factor, and could attract additi onal capital from the EIB and other EDFIs and International 
Financial Institutions (IFIs), in particular the African Development Bank (AfDB), the World Bank Group (including International Financia l Corporation and Multi lateral Investment 
Guarantee Agency) and other regional international financial institutions. 
A maximum leverage effect s hould be obtained through combin ations of grants and other 
sources, supporting preparation of projects and development of an enabling environment for 
investment, playing a dynamic role in crea ting new partnerships between communities, 
NGOs, public and private sector s, and providing informatio n and support to local and 
European energy service providers inte rested in investing in the sector. 
Innovation:  The Facility intends to gi ve innovative answers to th e challenges of delivering 
sustainable energy services to th e poor, including new types of financing with various sources 
of funding (local/international, private/public), special atten tion to the use of energy for 
production and income generation, and new and cr oss-sectoral approaches applying a menu of 
institutional and technical options, adapted to the specific target area . These include rural 
electrification; decentralised  energy systems; increased use of renewable energy; and 
enhanced energy efficiency, including cleaner  and more efficient use of fossil fuel 
technologies, efficient appliances and more effici ent use of traditional biomass. In this context 
possible synergies between the Energy Facility  and the Water Facility will be thoroughly 
explored, as will any opportunities of synergies with other initiatives in the field of energy. 
The synergies with the Water Facility are partic ularly interesting, sinc e both facilities address 
the poor, and there is ample scope fo r combined energy-water programmes. 
6.2. Priority Activity Areas to be funded under the Energy Facility 
The long-term objective of the Facility is a significant increase in th e use of sustainable 
energy services for productive and social pu rposes for the targeted population in ACP 
countries, and that significant and measurab le steps towards achieving the Millennium 
 
EN 8   EN Development Goals, in particular the goal on poverty, have been taken. In line with the 
outcomes of the EUEI dialogue with ACP countri es, the backbone of the Facility will support 
activities focusing on increasing the access to modern  energy services in rural areas in Africa. 
In the Island ACP states, the F acility will deliver outputs in the fields of energy efficiency and 
renewable energy. The distribution of funds be tween the ACP regions will follow the general 
principles of the Cotonou Agreement. 
6.2.1.  Priority Activity Area 1: De livery of Energy Services 
The largest financial contribution from the Faci lity will be designed to reach a substantial 
number of rural people and to improve their access to modern energy services. Priority will be 
given to those currently un-served, living in scattered settleme nts, villages, rural towns, peri-
urban areas and remote islands. The Facility  will support the joint financing of delivery-
oriented investment projects, leveraging funds from Member States, other donors, IFIs and 
the private sector. This component of the Facility  is intended to assist those countries and 
regions which have in place or are in the pr ocess of implementing a sound national energy 
policy, based on good governance principles and giving prior ity to energy and poverty, e.g. 
within their poverty reduction strategy. Proposa ls should ensure the economic, social and 
environmental sustainability of the investme nt, if needed, through possible financing of 
institutional support and strengthening of mana gement skills measures. Innovative approaches 
could be triggered, in order to address energy n eeds, for example, in an integrated and cross-
sectoral way. Proposals will have to be particul arly mindful that investment into long-term 
energy infrastructure will lock pa rtner countries over the next d ecades into a certain path in 
terms of energy mix determining their future  security and their greenhouse gas emission 
paths. 
6.2.2.  Priority Activity Area 2: Cr eating an Enabling Environment 
Where governance conditions are not in place for delivery-oriented intervention in the field, 
up to 20% of the Facility will support the developm ent of an enabling environment for the 
energy sector based on good governance principl es. Activities will depend on the level of 
policy development and institutional framewor k, which vary among ACP States. The Facility 
will assist countries in which improvements are needed to develop or implement sound national energy policies and stra tegies, e.g. in support of povert y reduction strategies, to 
improve the institutional, legal and regulatory framework, to st rengthen the capacity of key 
stakeholders, in particular for the implemen tation and management of delivery-oriented 
energy programmes, and to improve monitoring and evaluation capacity. 
6.2.3.  Priority Activity Area 3: Facilitating Fu ture Large-Scale Investment Programmes 
Up to 20% of the Facility will be devoted to prep aratory activities requir ed to facilitate future 
essential investment plans fo r cross-border interconnections, grid extensions and rural 
distribution, preparing them for financing by IFIs, in particular the EIB and EDFIs as well as 
working together with the World Bank, the Afri can Development Bank and the private sector. 
In the African context, due cons ideration will be give n to African Union/NEPAD priorities. In 
this way, the Facility can contribute to th e future mobilisation of significant additional 
investment in the energy sector of Sub-Saha ra Africa and the Island regions. There is ample 
scope for the Facility to act as leverage to in crease net amount of capital going to energy and 
development. 
 
EN 9   EN 7. MANAGEMENT OF THE ACP-EU  ENERGY FACILITY  
The management will have to reflect the overa ll political approach underpinning the Energy 
Facility. In the first place, ownership of the ACP partners and their right of initiative is crucial 
in this process. Secondly, the implementation procedure should adhere to the overriding objective of promoting access of the poor to m odern energy services. This requires that, 
thirdly, optimum use be made of grant funding a nd that a maximum leverage effect be aimed 
at, including utilising in novative mechanisms of bl ending financial resources. 
Management of the Energy Facil ity will be within the Commission, staffed with officials and 
with the possibility of attract ing outside expertise, such as Seconded National Experts, 
Contract Agents or similar. The existing de cision-making processes es tablished between the 
EU and ACP institutions will apply. 
Member States will be involve d in the development and overall guidance of the Facility and 
will be able to ensure the necessary coordination of their own bilateral activities with those of 
the Facility. The present governance structure of  the EUEI, including its Advisory Group, will 
be further developed into a main advisory body of the Facility, to which Member States will 
send their representatives. Member  States will also be involve d through the work of the EDF 
Committee. As for water, a multi-stakeholder fo rum, providing interactive information to the 
wider constituencies of all the participants in the functioning of the F acility and channelling 
their inputs into the process, will be fo rmalised under the umbrella of the EUEI. 
Modalities for the implementation of the Energy F acility will be developed along the lines of 
the Water Facility. Principles will have to incl ude sustainability of actions, leverage factor, 
support available from stakeholders  already present in the field (M S, other initiatives, etc.). 
The instruments to be used will include: 
– Calls for proposals (mainly for investment pr ojects on a national and sub-national level). 
The EDF Committee will be consulted on calls fo r proposals before thei r launch. Selected 
projects and programmes will have to be coherent with national sector policies where they 
exist. It is expected that Me mber States already present in the field, the private sector and 
other initiatives on energy will assist either in the facilitation of project proposals or in the 
necessary accompanying activities. EC Delega tions will have to advise on the project 
proposals and take charge of th e monitoring of implementation. 
– TA projects, mainly for studies and capacity  and institution building projects. Requests 
from ACP countries will be analysed with the assistance of partners in the field. Requests 
aimed at enabling a proper environment for a subsequent focus on delivery-oriented projects will have priority. 
– Studies and other activities required for increas ing the future pipeline of financial flows by 
EIB, EDFIs, WB and the priv ate sector will be undertaken  following requests by the IFIs 
and agreement of the beneficiary countries. 
A small percentage of the Ener gy Facility will be used to contribute to  the financing of 
administrative expenditures for the management  of the ACP/EU Energy Facility, including 
recruitment of external experts and promoti on activities, organisa tion of seminars and 
workshops, monitoring and evaluation, etc. 
 
EN 10   EN 8. CONCLUSION  
With a view to the decision of the Council on the mobilisation of the remaining €500 million 
of the “conditional billion” of the 9th EDF, and in order to ensure delivery of the EU’s 
Johannesburg commitments, the Commission as ks the Council of the European Union to 
agree to the creation of a €250 million ACP-EU Energy Facility, and on the position to be 
taken in the future by the Community in the ACP-EC Council of Ministers on the creation of 
an ACP-EU Energy Facility. 
 
EN 11   EN ANNEX  
THE ENERGY AND POVERTY CHALLENGES  
At present, nearly two billion people in the world – concentrated mainly in rural and peri-
urban areas of developing countries - do not  have access to modern energy services. A 
modern, sustainable energy service means that th e energy needed to deliver essential services, 
such as lighting, cooling, h eating, cooking, pumping, motive pow er, telecommunication etc., 
is provided in a way that is safe, affordable, efficient, reliable, equi table and environmentally 
sound. On average, per capita electricity consum ption in developing countries is barely one-
tenth of the consumption in the EU. Sub-Sahara Africa is a dramatic example of inequality in 
the energy field, with over 80% of the population having limited access to modern forms of energy. Large populations in Asia , particularly South Asia, a nd in Latin America live under 
similar conditions. The social and economic de velopment of poor communities is limited or 
even deadlocked by the presen t unsustainable use of wood and other forms of biomass for 
energy purposes, over and above the difficult and expensive access to other forms or energy, 
such as electricity and liquid fuels. 
Energy and poverty reduction:  Energy is a sine qua non of the action to combat poverty. 
Access to adequate, affordable and sustainable energy services is necessary for a good life and 
to fulfil most development objectives - within  health, education, light, heating, transport, 
agriculture, industrial production a nd modern means of communication.  
The critical connection between energy a nd poverty alleviation was recognised by the 
international community at the WSSD in 2002 in Johannesburg. More specifically, the 
Johannesburg Plan of Implementation (JPOI) es tablished the link between access to energy 
and the Millennium Development Goals, in cluding the goal on poverty, noting that access to 
energy facilitates the eradication of povert y. Among the most important links are: 
– MDGs 1 and 7:  Reduce poverty and hunger, and improve  access to safe drinking water. 
Access to energy services f acilitates economic development and creates incomes and 
employment e.g. in agriculture, shops and sma ll enterprises. Energy services can improve 
access to pumped water for drinking and irrigation of gardens and fields. And energy is needed to cook nearly all human food. 
– MDGs 2 and 3:  Achieve universal primary education a nd eliminate gender disparity at all 
levels of education. Improved access to en ergy services allows women and children 
(especially girls) to reduce time on gatheri ng firewood, fetching wate r and cooking food. 
Electric lighting enables home st udy and evening classe s, and electricity is needed to use 
educational media and modern communi cation (ICT) in schools and homes. 
– MDGs 4, 5 and 6:  Reduce child mortality, improve maternal health and combat major 
diseases. Access to energy is needed for a mode rn health system, e.g. for refrigeration of 
vaccines, sterilisation and lighting operating theatres. Cleaner fuels for cooking will reduce 
indoor air-pollution and the rela ted respiratory diseases, that, according to WHO, kills 1.5 - 
2 million women and children every year. 
– MDG 7:  Ensure environmental sustainability. Improved energy efficiency and the use of 
cleaner and renewable sources of energy can he lp to achieve a more sustainable use of 
 
EN 12   EN natural resources, such as w oodlands and other types of bi omass, and reduce emissions, 
thus protecting the local a nd the global environment. 
The important role of energy in  poverty alleviation is  increasingly recognised also by African 
governments, e.g. in the context of poverty reduction strategies. 
Energy access:  Ensuring access to energy services to poor communities is a complex 
challenge, and, as experience over the past years has shown, it cannot  be left to market forces 
alone to resolve. Concerted action of the public s ector is required. Energy, like water, is not a 
commodity comparable to, for example, indust rial or agricultural products. Provision of 
energy services depends on a multitude of  economic and social preconditions, policy 
frameworks, political circumstan ces and international, national or local market situations. 
Many stakeholders are invol ved, ranging from poor communities to local and national 
governments and trans-national companies. En ergy services can be delivered from many 
sources and technologies. Geogra phical conditions are different, even within a country. There 
is no ‘one size fits all’ reci pe to provide energy services to a particular community.  
The global character of energy markets:  Internationally traded hydrocarbons have been and 
still remain the overwhelming mainstay of  energy economies of most developed and 
developing countries. While OECD countries have managed to decrease their exposure to oil 
shocks, developing countries ar e more directly exposed to their negative macroeconomic 
impacts. In addition to being dependent on imported hydrocarbons, their economies are also more energy-intensive than those of deve loped economies. On average, oil-importing 
developing countries use more th an twice as much oil to pro duce a unit of economic output as 
do OECD countries. Moreover, their financial situ ation (high levels of debt, fragile balances 
of payment) means that they ar e less able to weather turmoil on oil markets. Current sustained 
high prices on oil markets, price volatility and in security of supply affect developing countries 
more than others. Some of these countries spen d up to 50% of their trad e surpluses on energy 
imports – with devastating results for their na tional economies. A mere 10 US$ per oil barrel 
price increase can result in a 3% loss of GDP in some Sub-Saharan countries in the first year 
after the hike. 
Energy finance:  Energy demand is rising fast in deve loping countries. Almost half of the 
global investment required for improving supply capacity and replacing existing and future 
supply facilities in the period up to the year 2030 is attributed to th e needs of developing 
countries (including China and I ndia). The required investment for Africa alone is approx. 1.2 
trillion US$, as calculated by the IEA. And this  is a conservative estim ate which would still 
leave 1.4 billion people without access to electricity in the year 2030. Financing is a huge 
challenge for the sector, with a marked trend away from financing energy investments from 
public and ODA budgets. More than ever before, the capital needed in the energy sector will 
have to be raised from private and foreign sour ces. However, most invest ors perceive the risks 
of energy investment in developing countries as being prohibitive, in particular when it comes 
to improving access to energy for poor consumer s. Public and ODA funding must explore 
new dimensions and design new approaches if th ey are to catalyse and facilitate a sufficient 
flow of investment including the risk capital. 
PROGRESS TO DATE - TRANSLATING POLICY INTO ACTION  
Since WSSD, the EUEI has made progress on th e organisational front a nd in establishing a 
dialogue with key stakeholders, in particular developing countries. 
 
EN 13   EN The EUEI has established a secretariat within DG Development to stimulate synergy and 
cooperation. The EUEI Advisory Group, made  up of Member States and Commission 
officials and experts in energy and develo pment, is the main forum for dialogue and 
coordination of the Ini tiative. Working groups are establis hed under the Adviso ry Group, such 
as the Finance Working Group, which has compile d the strategic paper “Development Capital 
for Energy Access: Opportunities to Reach the Energy-Poor”. 
In the European context, the EUEI dialogue ha s been undertaken with the active involvement 
of EU Member States and the European Com mission, and has also included the European 
Investment Bank (EIB). 
In this dialogue, EIB has expressed interest in exploring possibilitie s with the EUEI for 
combining EDF grants and EIB loans, e.g. wh ere the grant element would be used for 
identification and preparation of projects, and/or for the drafting of Master Plans and 
provision of Technical Assistance in support of local administration for the management of 
EIB financed projects. 
In line with the partnership approach a nd recognising the importance of strong local 
ownership, the immediate priority for the EUEI after WSSD has been to  engage in a dialogue 
with developing countries and regions that have  expressed an interest in the EUEI. A short 
summary of the progress of the EUEI in differe nt developing country re gions is given below. 
Africa: an urgent priority 
Nearly ten years before the MDG time target, it seems clear that Sub-Saha ran Africa will have 
difficulty in reaching the MDGs unless substant ial extra efforts are undertaken, including in 
the energy field. 
ACP Africa is a major priority area for the EUEI, and conditions for increased action are 
improving. A number of Member States are active in the energy sector in Sub-Saharan Africa, 
and have built up valuable experience and capacity, both in the development of policies and 
strategies and in actual implementation. Some of these Member States pl ay the role of EUEI 
facilitators in the countries where they ha ve energy programmes. Likewise, the World Bank 
and non-EU donors are active in a number of c ountries, also with a poverty focus. After 
Johannesburg, African governments are gradually integrating energy issu es into their poverty 
reduction strategies. And there is an increas ing, albeit still limited, capacity in African 
institutions, NGOs and private sector to pl an and implement ener gy-related activities. 
The EUEI “Energy for Africa” conference held in Nairobi, Kenya, in November 2003 was a 
milestone in EUEI dialogue between Africa and the EU, a nd was attended by government 
representatives from about 40 countries from Sub-Sahara Africa. The main objective of the 
event was to identify priorities for actions at  national or sub-regional level in Africa. In 
preparation for the conference, the EUEI unde rtook scouting missions or  desk studies in 
several African countries, which prepared the ground for further action. The debate in Nairobi 
was stimulated by a keynote statement by Comm issioner Nielson, linking energy to poverty 
alleviation and development, and highlighting the problems relating to the traditional use of biomass and the need for rural electrification.  
In the Nairobi recommendations, adopted at the conclusion of the conference, the African 
countries took ownership of this agenda and su ggested the following priorities for the EUEI: 
 
EN 14   EN – Rural energy in general and rura l electrification in particular 
– Energy for households, biomass and substitutes 
– Strategies and policies for the sector, both at national and at regional level 
– Capacity building at all levels. 
In order to continue the dialogue and make  the Nairobi recommendations operational in a 
number of countries, sub-regional EUEI workshops  will take place in Southern Africa and in 
West Africa during the coming months. The wo rkshops will focus on successful models for 
delivery of energy services to rural areas an d on how such models can be financed and 
implemented on a wider scale. 
A number of Commissi on-funded activities further stim ulate the EUEI dialogue and 
contribute to the creation of a framework for act ion in Africa. These in clude regional projects 
to be financed by the intra-ACP allocation to energy with SADC and ECOWAS, as well 
EUEI-linked projects supporte d by other Commission servic es. The COOPENER component 
of the Intelligent Energy-Europe programme, managed by DG Energy and Transport, co-
finances projects aiming at creating the institu tional conditions for improved access to energy 
in Sub-Saharan Africa with a special emphasis on renewable energy and demand 
management. COOPENER projects are implemen ted by consortia of African and European 
partners. Similarly, RTD supports a renewable en ergy partnership for poverty eradication and 
sustainable development in Afri ca (‘Partners for Africa’) involv ing a number of European and 
African partners. 
The Caribbean and Pacific 
Their remoteness and small markets make small is land countries particularly vulnerable in the 
energy field. The further developm ent of their societies depends to a large extent on access to 
transportation, ICT and energy. The high cost of sh ipping diesel oil to di spersed islands brings 
electricity production costs up to an averag e of 0.2–0.5 €/kWh, compared  to international 
costs of 0.05 €/kWh. Some islands spend over 75%  of their foreign currency earnings on fuel 
imports. At the same time there is untapped potential for increased energy efficiency and the use of renewable energy. 
The island states in the Caribbean and the Pacific took an early interest in the EUEI, and 
participated actively in the dialogue before WSSD. The “Sustainable energy seminar for ACP 
Island States within the framework of EC de velopment co-operation”, held in June 2001 in 
the Dominican Republic was an early opportunity  to exchange views and establish dialogue. 
After WSSD the EC and Denmark engaged in active and positive follow-up dialogue with 
regional organisations in ACP P acific island states, leading to the establishment of an EUEI 
partnership with the Pacific Is land Countries. Parallel-financed activities by Denmark and the 
Commission (the Danish part is  already under implementation) w ill help to establish national 
energy policies and action plans and will improve the efficiency of national electricity utilities. 
A dialogue with the Caribbean  Island Countries , through their regional organisation 
CARICOM, was also initia ted, in cooperation betwee n the EC and Germany. The 
development of a regional energy policy a nd support for the executio n of the Caribbean 
 
EN 15   EN Renewable Energy Development Programme, co-fin anced by Germany, are the targets of this 
cooperation, which is currently under preparation. There is also increased interest to convert 
existing central energy generation systems towa rds a decentralized renewable-based energy 
system to reduce is lands’ vulnerability. 
Other Regional Components in  the EU Energy Initiative 
The EUEI is also generating interest outside th e ACP area. In the Sustainable Energy Systems 
programme, DG RTD stimulated a strong North Afri can participation in research related to 
the quantification and awareness raising of energy external cost s, particularly concerning the 
impacts of energy pollution on human health. Th e Finnish-sponsored programme “Energy and 
Environment Partnership with Central America” is the first EUEI activity outside the ACP 
area, and Austria, through cooperation with the Austrian-sponsored “Global Forum on 
Sustainable Energy”, has involve d the EUEI in district hea ting activities in the Western 
Balkans. The Global Forum is also involving the EUEI in its activities in Himalayan 
countries. 
THE FINANCIAL CHALLENGE AND THE NEED FOR INNOVATIVE MECHANISMS  
Since WSSD there has been a r ecognised need for a significant  increase in funding for energy 
and poverty in order to achieve the Millen nium Development Goals. Work done by the 
International Energy Agency and the EUEI Finance Working Group has shown that public 
funding from governments and the international donor community is not sufficient to cover 
investment needs. And so far, the provision of en ergy services to the poor has not been able to 
attract private investment. Innov ative and flexible funding mechan isms are urgently required 
to use the leverage effect of ODA and attract more resour ces from the private sector, 
development banks and financial institutions. Wh ile the creation of an enabling environment 
through, for example, regulatory reform and government capacity building remains a key to attracting more energy investment, there are already concrete opport unities to blend public 
and private capital and make delivery of ener gy services for the poor happen. These include: 
energy infrastructure funds, SME support and/ or consumer credit programmes, smart 
subsidies, rural energy funds, market and produc t development, etc. Furthermore, developing 
renewable energy sources and tr ansfer of state-of-the-art technologies will considerably 
contribute to the financial sustainability of actions. 
Public-private partnershi ps (PPPs) are considered to be a pr omising instrument for growth and 
economic development in developing countries, and are a core instru ment in the EUEI 
strategy. Infrastructure and espe cially the energy sector offe r numerous possibilities for 
blending public and private f unds. A feasibility study for the creation of an innovative public-
private financing mechanism is being finalized  by the Commission together with interested 
Member States and other stakeholders
5. PPPs will enable the EU and its developing country 
partners to work together  in partnership with th e private sector, financia l institutions and civil 
society towards effective delivery of energy services to the poor. 
However, with no resources of its own and no significant energy-sector allocations in the 
development cooperation budgets of the Communit y, the roll-out of th e EUEI may prove too 
slow to maintain momentum and make a real  contribution towards the MDGs. Unless greater 
                                                 
5 This feasibility study is commonly referred to as the JREC Patient Capital Initiative 
 
EN 16   EN efforts are undertaken at the pol itical level to provi de adequate, faster and more flexible 
resources and instruments, the impact of th e EUEI will be limited to the possibilities for 
tapping into resources already allocated to other sectors. This will prev ent it from reaching its 
objectives in the foreseeable future. 
Since Johannesburg the EUEI has built a solid base  for specific actions and is now ready for a 
quantum leap. To maintain the momentum and to actually deliver on the ground, substantial additional resources are needed. Such res ources should be provided by the EU as a 
demonstration of its commitments to th e MDGs and the Johannesburg Plan of 
Implementation.