Access to electricity is paramount to ensuring sustainable development, be it through its benefits to education by ensuring the lights are always shining or its improvements to health by seeing that clinics can operate appropriate equipment, writes Paul Gambin. However almost one fifth of the global population still does not have access to electricity, and 80% of this alarming number lives in rural areas, which are often challenging and expensive to connect to with grid power.
In March Afrobarometer released a report on the state of electrification in Africa which further exemplified some of the challenges with solely grid-focussed solutions to energy poverty. The report shows that grid access does not necessarily lead to grid connection, and even where homes are grid connected, this does not always lead to power supply. Indeed the ageing grid infrastructure in many countries is struggling under the weight of demand and long term under-investment. Even when households are connected to the grid, supply is often temperamental. Only 69% of houses connected in Africa have electricity that works “most of the time”, a figure which is an order of magnitude lower in rural regions. The developing world has a massive electricity deficit which cannot be solved through reliance on a national grid alone.
Power for All
Today, however, there are alternatives. Ones which are bringing light and power to over 100 million households worldwide (IRENA) and have been rapidly accelerating in recent years: decentralised renewables. A number of different companies and NGOs are working to enhance the off-grid sector in order to achieve universal electrification, but, rather unsurprisingly, there are a plethora of obstacles to overcome.
These obstacles can be encompassed into three distinct, yet intricately connected, themes: policy, finance and technology; and whilst there are a number of issues within these categories which are slowing the proliferation of renewable energy to the poorest communities in the world, the solutions to such a dilemma have incredible potential.
To look further into these solutions, Salt took the opportunity to talk to members of Power for All, a campaign made up of social enterprises, NGOs, associations and other organisations working in the off-grid space. The campaign, launched this time last year, aims to profile how distributed renewable technologies can rapidly and affordably bring sustainable power to hundreds of millions of people living in rural parts of the developing world.
“Power for All aims to showcase best practice in terms of energy policy, to demonstrate what is possible at a local and national level,” says Susie Wheeldon, Power for All Senior Manager of Communications. These include, for instance, showing how the reduction or complete removal of taxes and tariffs for solar imports in East Africa has led to a great uplift in the number of people reached by solar solutions. “For social enterprises, reductions in tariffs send a clear market signal that the government is supporting the expansion of decentralised renewables and making it more affordable for companies to operate.”
Other key examples of policies helping to catalyse renewable energy markets include the creation of financial instruments or the setting of national targets. This can be seen in the cases of IDCOL (Infrastructure Development Company Limited), a state-owned financial institution in Bangladesh, which through significant government support offers competitive loans to finance solar home systems across the country; or in Rwanda which by setting national renewable energy and electrification targets is rapidly expanding its off-grid electrification program and aims to bring power to 22% of its population with decentralised solutions by 2018.
By reducing the taxation on renewable energy systems, implementing positive financial solutions, supporting quality and standards and setting the right national targets, developing countries are helping to create markets which would otherwise have struggled to flourish. In so doing they are “attracting the interest of private social enterprises as well as donor agencies, and helping to create an environment in which it is possible to provide rural communities with sustainable and affordable energy”.
Plenty still needs to be done to ensure the best energy policies are in place, but by showcasing best practice and their impacts to decision makers, Power for All and its partners are encouraging other developing countries to follow suit, whilst ensuring that private sector players are aware of the radical changes occurring.
Alongside their support of beneficial energy policy, Power for All are also “showcasing the investment potential (of renewable energy projects in developing countries)…to highlight those businesses which are operating well and getting reliable returns, as well as the innovation that is pushing the sector forward”.
A key development in recent years has been the emergence of mobile banking in countries such as Kenya. This evolution has brought mobile finance to millions of previously ‘unbankable’ customers. Renewable energy companies are now making use of this technology to leapfrog past land lines. By integrating a mobile payment system into their energy service provision, they are able to offer their customers mobile enabled pay-as-you-go style financing – opening up the opportunity for many more customers to purchase energy directly from their phones.
Companies such as M-Kopa, based in Kenya, have now reached 300,000 households with mobile enabled solar home systems and have cited customer default rates of only 5%. These enterprises “recognise that customers are able to repay, as they are usually paying even higher prices for the dangerous sources of energy they are currently forced to use (kerosene and candles). By enabling customers to get a strong credit history they are also beginning to be able to extend financing to other products and services like bicycles, watertanks, and televisions”.
As well as at the solar home system level, organisations such as SteamaCo and Powerhive which provide mini-grid services are also using more sophisticated financing and mobile enabled systems for customer payments. Moreover, some mini-grid operators are also looking holistically at their programmes and engaging and supporting the communities in which they locate. By offering other services and support, such as the hiring of power tools or irrigation equipment, as well as renewable energy, these companies are “one: increasing welfare and productivity; and two: increasing the amount of people who are using the mini-grid to ensure that they have long-term demand for the power it produces. A win-win scenario”.
Data is also proving valuable in attracting investors. Not only do companies have an intricate understanding of their customers energy use, needs and demand profile, enabling them to build a rapid track record, they are also able to demystify what was often considered an unmanageable market to potential investors.
Given their success at coupling innovative technology with smart modes of finance, the companies involved are increasingly able to attract more capital, a lack of which has been a frustrating bottleneck in the dissemination of renewable energy systems. However, while investment has risen rapidly, there is still a huge chasm between what is needed and what is currently available, with reports conservatively estimating a $1.3 billion immediate funding need. These increasing levels of data, as well as a better understanding of the sector by investors could, however, help to propel the industry forward in coming years.
As could efficiency. Improvements have been one of the key drivers of the success of renewable energy in recent years, and the situation is just as apparent in developing countries. Substantial efficiency improvements in both renewable energy systems and general appliances have made these products more affordable for communities and individuals of the developing world. Recent technological advancement has ensured that super-efficient off-grid appliances are able to consume 50-70% less energy than mainstream appliances, and are expected to consume 80% less by 2020.
And the sector is not stopping there. Berlin based Mobisol are currently testing the use of zero-carbon drones to transport spare parts to the most rural communities in East Africa. By using the growing network of renewable energy communities across the region, Mobisol could provide those areas which have already invested in renewable energy systems with another source of income by paying them for charging the drones along their journey to their destination. Building ‘drone infrastructure’ could seem a bit of a dream, but in regions where distribution is a huge issue due to a lack of infrastructure, what might such a breakthrough lead to: quicker access for vaccines and medicines? Wider distribution of resources?
While these kind of developments give hope that Power for All can achieve its goal, Wheeldon tells me that “although there is huge innovation going on, and there have been policy and finance shifts, we need to do far more to keep increasing the pace if we are to get products and services to those who need them most.”
A Big Challenge, an even Bigger Opportunity
Power for all is a megaphone hoping to provide that extra “oomph” to the voice of the off-grid renewables sector and rural communities across the developing world, by profiling the huge potential of the sector and calling for greater support.
The campaign is due to release a report showcasing just how quickly people could be equipped with electricity should the off-grid sector see more investment and support. As Christine Eibs-Singer, Global Advocacy Director at Power for All told me: “the sector is increasing the levels of delivered energy access and thriving companies are attracting more mainstream private capital; the problem is that there are not enough of them and finance is not flowing fast enough. We need thousands more enterprises and 100 or more new business models to reach the 1.1 billion living without modern energy services. It is a big challenge, but it is an even bigger opportunity”.
PLEASE SHARE YOUR EXPERIENCES AND VIEWS IN THE COMMENT SECTION BELOW