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.-

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K_\
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Lack of clean, affordable energy is part of the poverty trap. Pollution
from indoor use of harmful fuels for cooking and lighting leads to sig-
nificant health problems. Gathering biomass fuels takes time that
could be better spent—in school or at work. And the higher cost of
inefficient energy-using devices and the lack of access to modern
energy sources such as electricity become part of the BOP penalty—the
added cost of being poor.
Together, private sector solutions and public institutional reforms are
working to close the energy gap. Innovative approaches and new business
investments are bringing energy services to BOP markets. While earlier
efforts to extend grids beyond major urban centers often
met with difficulties and even failure, rural electrification 9FGjg\e[`e^fe\e\i^p
initiatives in Latin America suggest that creative solutions +**%+Y`cc`fe
can be found. Where publicly regulated grids cannot reach,
off-grid solutions are becoming more widespread—using
hydropower, solar photovoltaics, and hybrid solutions.
New technologies, such as light-emitting diodes (LEDs),
and modern improvements of old ones, such as biomass-
burning cookstoves, are increasingly available at afford-
able prices to both urban and remote rural populations.
3 < 3 @ 5 G  j  B 6 3  < 3 F B  "  0 7 : : 7 = <
?fncXi^\`jk_\dXib\k6
The measured BOP household market for energy is $228
billion, representing the annual spending of 2.1 billion
people in 34 countries. The total BOP household energy
market in Africa, Asia, Eastern Europe, and Latin America
and the Caribbean is estimated to be $433 billion, repre-
senting the spending of 3.96 billion people (see box 1.5 in
chapter 1 for the estimation method).
Asia has the largest BOP energy market, with measured
annual spending of $177 billion by 1.5 billion people. The
estimated total BOP energy market in the region (includ-
ing the Middle East) is $351 billion (2.9 billion people).
 Y`cc`fejGGG
Latin America’s measured BOP energy market is $25 bil-
8]i`ZX )-%- ..
8j`X *,'%0
<Xjk\ie<lifg\ ),%+
CXk`e8d\i`ZX *'%,
<XZ_jhlXi\i\gi\j\ekj
Xggifo`dXk\cp(9`cc`fe
 9FG_flj\_fc[j[\mfk\XeXm\iX^\f].f]k_\`i
\og\e[`kli\jkf\e\i^p%@edfjkd\Xjli\[Zfleki`\j#k_\
j_Xi\f]_flj\_fc[jg\e[`e^[\mfk\[kf\e\i^p[f\jefk
Z_Xe^\j`^e`]`ZXekcpXj`eZfd\ji`j\%

lion (269.5 million people), and its estimated total market $31 billion
:k\[Ë@mf`i\ (360 million people). While Africa has the smallest measured BOP en-
KFK8C<E<I>PJG<E;@E>9P@E:FD<J<>D<EK ergy market, at $12 billion (253.3 million people), its estimated total BOP
9FG*''' energy market is $27 billion (486 million people). Eastern Europe, with
9FG),'' a Soviet-era legacy of cheap and reasonably universal electricity, shows
9FG)''' BOP energy spending of $14 billion (138.9 million people) and an esti-
9FG(,'' mated total BOP market of $25 billion (254 million people).
9FG(''' In Africa, Eastern Europe, and Latin America energy ranks third in
9FG,''
BOP household expenditures, trailing food and housing. In Asia energy
@e[fe\j`X ranks second, surpassing housing, because of the high levels of energy
KFK8C<E<I>PJG<E;@E>9P@E:FD<J<>D<EK spending reported in India.
9FG*''' In national energy markets the BOP represents a significant share
9FG),'' in virtually all 34 countries for which standardized survey data exist.
9FG)''' It accounts for more than 90% of recorded spending in such populous
9FG(,'' countries as Indonesia, Nigeria, and Pakistan—and more than 50% in
9FG(''' Brazil, India, Sri Lanka, Uganda, Peru, and Bolivia (case studies 7.1 and
9FG,'' 7.2). The BOP share falls short of 50% in only 7 of the 34 countries: FYR
Macedonia (20%), Paraguay (30%), Colombia (35%), South Africa (41%),
LbiX`e\
KFK8C<E<I>PJG<E;@E>9P@E:FD<J<>D<EK Russia (44%), Ukraine (47%), and Mexico (48%).
The smallest BOP market shares by region are recorded in South
  %  j  E = @ : 2  @ 3 A = C @ 1 3 A  7 < A B 7 B C B 3

9FG*'''
Africa, Thailand, FYR Macedonia, and Paraguay. The largest are in
9FG),''
9FG)'''
Nigeria, Tajikistan and Pakistan (a virtual tie in Asia), Uzbekistan, and
9FG(,'' Jamaica.
9FG('''
9FG,'' ?fn`jk_\dXib\kj\^d\ek\[6
Developing-country energy markets are predominantly in the BOP.
:fcfdY`X Moreover, nearly a quarter of all recorded energy spending occurs in
KFK8C<E<I>PJG<E;@E>9P@E:FD<J<>D<EK
the bottom two BOP income segments—BOP500 and BOP1000, where
9FG*''' per capita income is $1.50 and $3 a day.
9FG),''
Market concentration in these two income groups is most pronounced
9FG)'''
in Asia and Africa, where bottom-heavy BOP markets predominate. In
9FG(,''
Indonesia, for example, where the BOP accounts for 95% of national en-
9FG('''
9FG,''
ergy spending, 50% of the spending occurs in the BOP500 and BOP1000
segments. In Burundi, where the BOP carries similar weight, at 89% of
the national energy market, the BOP500 and BOP1000 segments ac-
count for 62% of this market.

./
 @e[`X
J?8I<F=?FLJ<?FC;JG<E;@E>FE<E<I>P 

9FG*''' ('%/
9FG),'' ((%(
9FG)''' ((%,
9FG(,'' ((%/
9FG(''' ()%,
9FG,'' (+%)

K_X`cXe[
J?8I<F=?FLJ<?FC;JG<E;@E>FE<E<I>P 

9FG*''' +%'
South Africa has a different market segmentation than other measured
9FG),'' +%)
countries in Africa. While the BOP makes up 74% of the population, it ac-
9FG)''' +%*
counts for only 41% of total energy spending. Distribution of the BOP en-
9FG(,'' +%,
ergy market across income groups is more balanced, split evenly between +%,
9FG('''
the lower three BOP income segments and the upper three. The more 9FG,'' *%0
dominant mid-market population segment outspends the BOP popula-
tion by 32%.
Top-heavy BOP energy markets and larger mid-market spending are
found in much of Eastern Europe and Latin America. In Ukraine the top
three BOP income groups account for 90% of BOP spending, while the
mid-market segment, 40% of the national population, slightly outweighs Iljj`X
the BOP market. In Colombia the top three BOP income groups represent Gif]`c\f]kfkXc\e\i^pjg\e[`e^
73% of the BOP energy market, while the mid-market segment, 42% of
the national population, accounts for an energy market nearly twice the
size of the BOP market.
?FLJ<?FC;JG<E;@E>9P@E:FD<J<>D<EK 
9FG*''' *+'
N_Xk[f_flj\_fc[jjg\e[6
9FG),'' )..
Across measured countries BOP households devote an average of 9% of
9FG)''' )*-
their expenditures to energy. Asia shows the largest share, at 10%, with 9FG(,'' )')
all other regions clustering around the average. In most measured coun- 9FG(''' (-)
tries, the share of household spending devoted to energy does not change 9FG,'' ()(
significantly as incomes rise. 8m\iX^\
Households in the BOP500 income group spend an average of $148 a _flj\_fc[jg\e[`e^

3 < 3 @ 5 G  j  B 6 3  < 3 F B  "  0 7 : : 7 = <

fe\e\i^p
year on energy, equivalent to around $0.40 a day. In the BOP1000 group ),)
the average rises to $264 a year ($0.72 a day), and in the BOP1500 seg- D\o`Zf
ment to $379 a year ($1 a day). Gif]`c\f]kfkXc\e\i^pjg\e[`e^

These amounts may be small, but the large populations in the bottom
three income segments create big markets. In the 34 countries for which
standardized data on energy spending are available, energy expenditures
?FLJ<?FC;JG<E;@E>9P@E:FD<J<>D<EK 
total $9.5 billion a year in the BOP500 segment, $60.5 billion in BOP1000, 9FG*''' ,.(
and $64.0 billion in BOP1500. 9FG),'' ,(,
Differences in access to electricity between rural and urban areas cre- 9FG)''' +/-
ate different patterns of energy spending. In Brazil, for example, the 6.5 9FG(,'' +(,
million rural BOP households spend $661.3 million a year on energy, or 9FG(''' )-0
$102 per household—while the 25.3 million urban BOP households spend 9FG,'' (('
$10.1 billion, or $397 per household. On average, an urban BOP household 8m\iX^\
_flj\_fc[jg\e[`e^
in Brazil spends 289% more on energy than its rural counterpart. fe\e\i^p
++0 .0
 :8J<JKL;P.%(E@><I@81
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8]i`ZXËj %K_\[`jki`Ylk`fef]k_\dXib\kZcfj\cpkiXZbjk_\[`jki`Ylk`fef]k_\gfglcX$
k`feÇYfk_jb\n_\Xm`cpkfnXi[k_\cfn\jk9FG`eZfd\^iflgj%K_\9FG,''`eZfd\
j\^d\ekXZZflekj]fi*-f]eXk`feXc\e\i^pjg\e[`e^#k_\9FG(''']fi+'#Xe[
k_\9FG(,'']fi(-%9lib`eX=Xjf`jk_\fecpfk_\id\Xjli\[Zflekip`eXepi\^`fe
n`k_dfi\k_XeXk_`i[f]`kjeXk`feXc\e\i^pdXib\k`ek_\9FG,''j\^d\ek% 
E`^\i`X_Xjdfi\_flj\_fc[j`ek_\9FG,''`eZfd\^iflgÇ(*d`cc`fe#+0f]k_\
eXk`feXckfkXcÇk_XeXepfk_\i8]i`ZXeeXk`fe_Xj`e`kj\ek`i\Zflekip%@e[`X#n`k_e\Xicp
e`e\k`d\jk_\gfglcXk`fef]E`^\i`X#_Xjc\jjk_XeXk_`i[XjdXep_flj\_fc[j`ek_\
9FG,''j\^d\ekÇ*%-d`cc`fe%
E`^\i`XËj9FG,''_flj\_fc[j\XieY\kn\\e(Xe[)X[Xp`eg\iZXg`kX`eZfd\%
P\kk_\pjg\e[XeXm\iX^\f](+'Xp\Xife\e\i^p#fijfd\'%+'X[XpÇ]fiXkfkXc
f](%/Y`cc`feXp\Xi]fik_`j`eZfd\j\^d\ek%
K_`jjg\e[`e^Yp9FG,''_flj\_fc[j`jjgc`kifl^_cp\m\ecpY\kn\\eliYXeXe[
iliXcdXib\kj1,)0+'d`cc`fe `eliYXeXi\Xj#+///*d`cc`fe `eiliXcXi\Xj%
K_\eXk`feXc\e\i^pdXib\k`jjfd\n_Xkdfi\_\Xm`cpliYXen\`^_k\[1-*liYXe#
*.iliXc% IliXc9FG,''_flj\_fc[ji\gfikXm\iX^\\e\i^pjg\e[`e^f](*'Xp\Xi#
_Xc]k_Xkf]k_\`iliYXeZflek\igXikj#Xk)-.%9lkiliXc9FG,''_flj\_fc[jflkeldY\i
liYXefe\je\Xicpknfkffe\#\hlXc`q`e^k_\dXib\kj`q\j%
Fecp *, f] 9FG,'' _flj\$
_fc[j`eE`^\i`Xi\gfik_Xm`e^XZ$
E`^\i`X
9FGkfkXc G\i_flj\_fc[
Z\jjkf\c\Zki`Z`kp#Ylkk_`j`jjk`cck_\ \e\i^pdXib\k jg\e[`e^fe\e\i^p
9FG*'''
j\Zfe[_`^_\jkiXk\`ek_`j`eZfd\ 9FG),''
^iflg Xdfe^ jlim\p\[ 8]i`ZXe 9FG)''' 9FG(,''
Zfleki`\j%K_\j_Xi\f]_flj\_fc[j 9FG('''
9FG,'' 8m\iX^\
n`k_XZZ\jjkf\c\Zki`Z`kpZc`dYjkf LI98E ILI8C (0)
  %  j  E = @ : 2  @ 3 A = C @ 1 3 A  7 < A B 7 B C B 3

,.`e9FG('''#.+`e9FG(,''# -* *-

Xe[/)`e9FG)'''%JkXib[`]]\i$
\eZ\jj_fnlgY\kn\\eiliXcXe[liYXeXi\Xj1fecp(+f]iliXc9FG,''_flj\_fc[j
i\gfik_Xm`e^XZZ\jjkf\c\Zki`Z`kp#ZfdgXi\[n`k_.)f]liYXefe\j%
=fiiliXc9FG,''_flj\_fc[jn`k_flk\c\Zki`Z`kp#b\ifj\e\`jk_\[fd`eXek]l\c
jfliZ\]fic`^_k`e^1.0i\gfik`kXjk_\`igi`dXipjfliZ\#ZfdgXi\[n`k_fecp),f]
liYXe9FG,''_flj\_fc[j%=fiZffb`e^#]`i\nff[`jk_\gi`dXip]l\cjfliZ\]fiYfk_
liYXeXe[iliXc9FG,''_flj\_fc[j#i\gfik\[Yp/'feXm\iX^\%8dfe^9FG)'''
_flj\_fc[j]`i\nff[lj\]Xccjkf*(#i\gcXZ\[Ypb\if$
8ZZ\jjkf\c\Zki`Z`kp j\e\]fi,0f]_flj\_fc[j%
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'
9FG 9FG 9FG
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/'
 GXkk\iejf]]l\clj\mXipXZifjj`eZfd\^iflgjXjn\cc
XjY\kn\\eiliXcXe[liYXeXi\Xj%@e8]i`ZX#8j`X#Xe[
CXk`e8d\i`ZX]`i\nff[`jk_\dX`e]l\cjfliZ\lj\[
]fiZffb`e^`ek_\cfn\i9FG`eZfd\^iflgj%

Patterns of fuel use vary across income groups as well as between K_X`cXe[
G<I:<EKF=?FLJ<?FC;J9PGI@D8IP:FFB@E>=L<C
rural and urban areas. In Africa, Asia, and Latin America firewood is the
(''
main fuel source used for cooking in the lower BOP income groups. In
/'
Thailand firewood is reported as the primary source by 79% of house- GIFG8E<
-'
holds in BOP500, 45% in BOP1000, and 27% in BOP1500.
Far more rural than urban BOP households—in all income seg- +'

ments—use firewood as their primary fuel source for cooking. In Gabon )' =@I<NFF;

48% of urban households in BOP500 report firewood as their primary '

9FG 9FG 9FG 9FG 9FG 9FG
fuel source, while 86% of their rural counterparts do. Across all BOP in- ,'' (''' (,'' )''' ),'' *'''
come segments, however, only 20% of urban households use primarily
firewood, compared with 76% of rural households—a share nearly four >XYfe
G<I:<EKF=?FLJ<?FC;JLJ@E>=@I<NFF;
times as large. 8JK?<GI@D8IP:FFB@E>=L<C
In higher income segments propane or liquefied petroleum gas (LPG) (''
becomes the most common substitute for firewood. In Bolivia this is the /' ILI8C

primary fuel source for 87% of households in BOP2500, 87% in BOP3000, -'
and 93% in the mid-market segment (compared with 13% in BOP500). +'
LI98E
Use in Nepal is reported by 60%, 75%, and 94% in the same groups (<1% )'
in BOP500). In African countries fuel sources used in the mid-market '
segment are more varied, with the most prevalent being propane or LPG 9FG 9FG 9FG 9FG 9FG 9FG
,'' (''' (,'' )''' ),'' *'''
in Cameroon, Côte d’Ivoire, Malawi, and Rwanda; kerosene in Burundi,
Djibouti, and Nigeria; and electricity in Malawi and Uganda. DXcXn`
For lighting, kerosene is the predominant fuel source in lower BOP G<I:<EKF=?FLJ<?FC;J9PGI@D8IPC@>?K@E>

income groups in Africa and Asia. In Malawi 89% of households in the (''

3 < 3 @ 5 G  j  B 6 3  < 3 F B  "  0 7 : : 7 = <

BOP500 segment report it as their primary lighting fuel, compared with /' B<IFJ<E<
only 7% in the mid-market segment. In Bhutan the share for BOP500 -'
households is 64%, while there is no recorded use in the mid-market seg- +'
ment. )' <C<:KI@:@KP
Electricity replaces kerosene in the mid-market segment, where it is '
predominant across regions. In Burkina Faso electricity is the primary 9FG 9FG 9FG 9FG 9FG 9FG
,'' (''' (,'' )''' ),'' *'''

/(
 :8J<JKL;P.%)@E;@81
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 8]i`ZXj9FG\e\i^pdXib\kjdX`ekX`eXifl^_cp\m\ejgc`k
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lighting source for 8% of households in the BOP; in the mid-market seg-
ment this share rises to 78%.
N_\i\`jk_\dXib\k6
Measured BOP spending on energy splits ap-
proximately 40% urban, 60% rural. But rural
BOP households spend on average 44% less
on energy than do urban BOP households. The
larger populations in rural areas balance out the
markets—and represent significant market op-
portunities for energy to power lighting, cook-
ing, and productive enterprises (case studies
7.3–7.6).
Africa’s BOP energy markets, at 55% urban,
maintain a roughly even split between urban
and rural areas. Yet rural BOP households
spend only a third as much on energy as their
urban counterparts on average, the largest such
discrepancy among regions. In Malawi, for ex-
ample, while the BOP energy market is 55%
rural, rural BOP households spend only 15% as
much on energy as their urban counterparts.
Asia’s BOP energy markets, in contrast, are
decidedly skewed toward rural areas (Indonesia
is the lone exception). In Cambodia the BOP en-
ergy market is 82% rural.
Eastern Europe’s BOP energy markets are
predominantly urban. This region, where ac-
cess to electricity is nearly universal, has the
smallest gap between rural and urban energy
spending. In Ukraine, where the BOP energy
market is 67% urban, urban BOP households
spend only 17% more on energy than their rural
counterparts.
Latin America’s BOP energy markets also tilt
decidedly toward uban areas (with Guatemala
:XdYf[`X
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the lone exception). In Mexico urban areas ac-
count for 76% of BOP spending on energy, with
urban BOP households spending roughly 50%
more on energy than their rural counterparts.
@jk_\i\\m`[\eZ\f]X9FGg\eXckp6
Income is clearly related to access to energy and
to the type of energy source used for different
purposes. The BOP consistently has less access
to electricity than the mid-market segment. And
access increases as BOP incomes rise, a consis-
tent pattern across countries and regions.
Rural areas show a larger and more persis-
tent BOP penalty in access to electricity across
income groups: in any income group access is
invariably lower in rural than in urban areas. In
Bangladesh 37% of urban households in BOP500
have access, compared with only 4% of their rural
counterparts. Among households in all BOP in-
come segments in Bangladesh, the share is 81%

Iljj`X in urban areas, 20% in rural.

KfkXc9FG\e\i^pjg\e[`e^ Overall, 36% of BOP households lack access to electricity—while
Yp`eZfd\j\^d\ek# only 6% of mid-market households lack access. Reported access rates
liYXeXe[iliXc
are 51% in the BOP500 income segment, 63% in BOP1000, and 74% in
-- *+
LI98E ILI8C BOP1500.
But these averages conceal marked differences across regions. In
9fc`m`X Eastern Europe access to electricity is virtually universal. FYR Macedonia,
/, (, Russia, and Ukraine all show 99% access in the BOP and at least 95% in
BOP500. Latin America and Asia show access rates similar to one an-
other across the lowest BOP income segments, albeit lower than Eastern
LI98E ILI8C

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Europe and with higher variance across measured countries. High access -' ILI8C
rates occur in Brazil, where coverage in BOP500 is 85%, and in Indonesia, +'
with 82% in the same segment. )'
Africa, in contrast, has severely depressed rates of access to electric-
'
ity. Gabon has the largest share of BOP500 households reporting access, 9FG 9FG 9FG 9FG 9FG 9FG
at 54%. But only 16% of all BOP households in Sierra Leone have access ,'' (''' (,'' )''' ),'' *'''

to electricity, and less than 10% in Burkina Faso, Malawi, Rwanda, and L^Xe[X
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of BOP households with access to electricity in rural areas is only a fifth (''

that in urban areas. /' LI98E

Bringing electricity to low-income communities involves inherent dif- -'

ficulties. But new solutions are emerging for at least some of the problems +'
related to the BOP penalty (case study 7.3). )' ILI8C

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1. Reported household expenditures in a given country should be regarded as a minimum estimate of actual
expenditures, because surveys may not have collected information on all types of energy-related spending.
2. For more on these entities, see http://www.shellfoundation.org, http://www.arti-india.org, and http://www.devalt.
org.
3. BSH (Bosch und Siemens Hausgeräte GmbH), “BSH Presents Ecological Plant Oil Stove for Developing
Countries,” http://www.plantoilcooker.org (accessed January 13, 2007).
4. Selco, “What We Provide,” http://www.selco-india.com/what-we-provide.html; Solar Electric Light Fund, “Solar
Technology,” http://www.self.org/shs_tech.asp (accessed January 13, 2007).
5. E+Co, “E+Co Enterprises,” http://www.eandco.net/enterprise_home.php (accessed January 13, 2007).
6. IDEAAS (Instituto para o Desenvolvimento de Energias Alternativas e da Auto Sustentabilidade), “Projects,”
http://www.ideaas.org.br/id_proj_luz_agora_eng.htm (accessed January 13, 2007).
7. Portable Light Project, “Portable Light,” http://www.tcaup.umich.edu/portablelight/portable.swf (accessed
January 13, 2007).
8. Economist, “Lighting Up the World,” September 21, 2006, http://www.economist.com/science/tq/displayStory.
cfm?story_id=7904248.
/.