July 20, 2016
In the past decade, renewable energy growth has broken records year after year, and 2015 was a remarkable one for developing countries. For the first time in history, according to the United Nations Environmental Program, total investment in renewables exceeded that in developed economies, driven in part by national policies and the improving cost-competitiveness of renewable technologies. Investors, multinational energy players, and renewable developers are actively pursuing new business opportunities in these electricity-thirsty markets.
Even so, the increase in renewable capacity, which is most often integrated into national and local grids, is very unlikely to electrify disconnected areas. Grid connection can carry high costs for building infrastructure and low investment attractiveness for private-sector utility players, and state budgets for electrification are often limited. According to the International Energy Agency, 95 percent of the 1.2 billion people who lack access to energy today live in sub-Saharan Africa and developing Asia, and, due to very limited conventional grid connections in remote areas, they are predominantly located in rural communities (around 80 percent).
But conventional grid connection is not the only option available. Projections from the International Energy Agency show that of the 315 million people in rural areas who are expected to gain access to electricity by 2040 in sub-Saharan Africa, around 65 percent will be connected through unconventional means, such as off-grid and mini-grid systems. And as we wrote in a previous blog, the unconventional grid market is booming: The roll out of well-designed systems can provide electricity to a large number of people, as demonstrated in successful models in many developing countries.
In the era of the Sustainable Development Goals (SDGs), particularly Goal 7—ensuring “access to affordable, reliable, sustainable, and modern energy for all”—it’s time to close the energy-access gap. Business is well positioned for leadership in this area through partnerships, community investment, and stakeholder engagement.
Different Off-Grid Solutions for Different Needs
To drive access to energy, companies, governments, and civil society partners first need to define what off- or mini-grid solutions are available and most appropriate to address the needs of remote communities, and then they can move to how to use investments, partnerships, and more to make access possible.
The quickest win is household-level solutions such as LED-based solar lanterns. These lanterns provide basic light for individual households and can be a cheaper and cleaner substitute for kerosene lanterns, which require families to buy fuel and can cause indoor pollution. Solar lanterns can help families save money, provide illumination at night for students to do their homework, and improve health and air quality, among other benefits.
However, solar lanterns clearly cannot respond to all the energy-related needs of families and communities. Standalone, off-grid applications, such as solar photovoltaic technologies backed up by battery-storage systems, can provide reliable supply to houses or facilities disconnected from the main grid. At the household level, this means that families will be able to power additional appliances, increasing access to communication and information, such as television, mobile phones, and the internet.
Standalone, off-grid technologies can also power facilities offering essential services, like healthcare. For instance, 1 billion people in the world are served by health centers that completely lack electricity. Healthcare facilities need round-the-clock, reliable electricity to power lights, refrigerators for perishable medicines and vaccines, and sterilization equipment.
The third option is mini-grids, or community-based network systems with small-scale, locally connected electricity production facilities, which can serve the village or community level. Mini-grids connect and power community services and buildings, households, and local businesses. According to REN21, mini-grids are an attractive option: They can be quickly deployed, encourage private-sector growth, and are efficient and flexible. When powered locally by renewable sources, they can also guarantee energy security: In disconnected rural areas, local power generation usually relies on diesel fuel, often imported over long distances and carrying high costs for the communities and the environment. Yet, as shown by a recent study, these costs can be reduced by hybridizing mini-grids with solar photovoltaic or other renewable power sources.
Access to Energy Partnerships for Corporate Social Investment Strategies
Once they have identified which solutions are best for communities, companies with operations in or near rural communities that lack access to grid connection should consider including programs on access to energy in their social investment strategies. In particular, extractives, energy players, renewable developers, and multinational utilities that operate in such markets could invest in or finance systems like standalone or mini-grid installations.
Local stakeholder engagement is an essential element to identify the right scale and solution for community energy needs. In particular, renewables developers and utilities have the opportunity to provide tangible demonstrations of the local benefits that they can bring—and at the same time build good neighborly relations.
Access-to-energy programs can be designed and implemented through a range of models, from direct investments and project implementation, to co-ownership with local partners and incubation support. By building partnerships among donors or for-profit investors that have funding, community-based organizations or nonprofits that have experience or networks to reach and engage communities, and organizations or businesses with technical expertise, companies can ensure scalable, successful solutions to help close the energy gap.
There are also opportunities, particularly for utilities and energy players that have in-house expertise, to provide capacity-building trainings on how to run and maintain appliances once they have been installed. This would allow effective knowledge transfer and also create job opportunities and enhance local skills.
A multitude of stakeholders across different geographies, sectors, and industries are already contributing to Goal 7 and are pioneering innovative models built or financed in partnership with companies like Total, Engie, Enel, EDP, and other funders, such as national development banks. Model partnerships include those with Barefoot College (active in India and in 76 other countries with its solar programs), Powerhive in Kenya, Devergy in Tanzania, and Egg Energy in East Africa. These initiatives, however, need more business leadership to reach scalable impacts.
The rallying cry of Goal 7 is mobilizing efforts to ensure access to affordable, reliable, sustainable, and modern energy for all. It is now time for companies to fully connect to this movement.
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