In the world of the 21st century, the number of people living without electricity in their homes is 1.3 billion. Even among those who have access, many do not own basic assets such as refrigerators, motorized transport, or washing machines. However, it is anticipated that over the next several decades, wide-scale poverty alleviation programs, as well as continued economic growth, will lift the incomes of many of the world’s poor. As incomes increase, families formerly living in poverty will for the first-time purchase energy-using assets.

How will the global demand for energy rise as a consequence? To answer that question, Dr. Alan Fuchs, Senior Economist in the Poverty and Equity Global Practice of the World Bank, made a presentation at ISET on October 5th.

Based on the example of Mexico, it appears that while between 1992 and 1996, most of Mexico’s growth was concentrated at the middle consumption levels, between 2004 and 2008, new acquisitions were most prevalent among households with the lowest consumption. In other words, in the mid-1990s, incomes among the poorest Mexicans were still too low to support refrigerator acquisition, but as incomes grew and real refrigerator prices fell, the mass of refrigerator purchasers shifted toward poor households. What lowers the income levels further at which households can acquire appliances is that retailers are beginning to sell appliances on credit in some parts of the developing world.

Understanding the relationship between income and energy use is of critical importance to be able to prevent energy shortages and related price increases. Moreover, energy use is a key contributor to climate change, as beyond ongoing use, energy is spent on manufacturing and distribution of energy-using assets.

Special thanks to Dr. Alan Fuchs for providing a very interesting, topical and timely presentation.