This is a two-part series on expanding access to clean energy in developing countries. Check out the first installment.
Accessing reliable energy is one of the greatest obstacles the developing world faces. Globally, about 1.3 billion people go without electricity, while 2.7 billion lack modern energy services. Providing these populations with energy is difficult—ensuring that generation occurs in environmentally sustainable and cost-effective ways makes the task significantly more challenging.
Expanding clean energy access has been a big part of the conversations during this week’s Asian Clean Energy Forum, organized by the Asian Development Bank and USAID in partnership with WRI. The talks mirror discussions that clean energy project developers and financiers had at a March 2012 workshop that was organized by WRI and the DOEN Foundation. Knowledge from this group and demonstration of their business models showcase the key elements to in implementing successful clean energy projects.
Innovative Approaches to Implementing Clean Energy Projects:
Understanding the consumer: energy needs, preferences, and capacity to pay: Energy consumers are a diverse group that requires different products, services, and payment schemes depending on cultural practices, income, cost of existing energy services, geography, and other factors. Gathering this information and incorporating it into project designs is best accomplished through direct interaction with target consumers. Frontier Markets is one such enterprise that attributes its success to a solid understanding of consumer needs. Their business model contains a research phase, sales component, customer service, data analytics, and customer feedback. Frontier Markets also conducts focus groups to gather feedback on products’ benefits and limitations. Because of this approach, the enterprise expanded a new line of fans due to consumer demand for a means to cool off during hot days.
Demonstrating the value of a new technology or energy service delivery model: Impoverished energy consumers need to be savvy investors due to limited budgets. Many enterprises believe they must offer products and services that provide increased value or replace an existing service without raising a household’s energy budget. Though ideally the purchase of a new product or service will be based on economic considerations, energy consumers are also motivated by improvements to their quality of life, such as a cleaner or smoke-free homes, convenience, and time savings. For example, Frontier Markets demonstrates the value of its solar technologies in a very tangible way. The company brings mobile solar phone charging kiosks from village to village to raise awareness and prove that the technology works.
Building trust in the product and supply chain: Because low-income households tend to be risk-adverse, building trust in clean energy products and services is critical to reaching underserved consumers. Husk Power Systems builds consumer trust by conducting monitoring, checking in on its plants remotely to ensure smooth operations, and using smart meters to reduce the possibility of error with measuring energy consumption. Husk also employs and trains local personnel to manage and operate its power plants. In addition to engaging with and benefitting local communities, this practice saves money for Husk and its customers. Mali Folkecenter builds trust by implementing community engagement practices like leadership building and education. The company works with established farmer cooperatives to improve awareness of how the use of clean energy can add value to their work and lives. This process allows Mali Folkecenter to promote its reputation as a trustworthy partner among rural communties, not just as a renewable energy provider, but as a supporter of income generation and poverty reduction.
Replicating familiar energy payment schedules: Even modestly priced clean energy services can be prohibitive for low-income energy consumers, who are often used to purchasing energy in small increments. Simpa Networks aims to make energy more affordable by imitating mobile phone payment schemes, a pricing model that matches consumers’ energy consumption patterns and variable cash flows. A key to their approach is a “pay-as-you-go” model for solar power. Consumers make a small, upfront payment to have the system installed, and then pay for service as it is consumed. Much like a pre-paid cell phone, the system delivers energy when the consumer has an energy credit balance and shuts off when credits are exhausted.
How Governments and International Organizations Can Help
Socially oriented energy enterprises like those mentioned above have also identified a number of gaps and needs for expanding access to clean energy – many of which could be filled by national governments and the international community. We encourage international energy access efforts like Norway’s Energy+ Partnership and the United Nations Secretary General’s Sustainable Energy for All Initiative (SE4ALL) to learn from the experiences of these enterprises, incorporate on-the-ground voices into initiative designs, and support the set-up, start-up, and scale-up of energy solutions:
Set-up: International initiatives should work to develop an encouraging investment environment by facilitating access to enterprise capital and setting up enabling conditions, including support for energy sector strategies and institutional capacity building.
Start-up: Encourage energy service providers to enter the market by providing clear market analysis and risk assessment information, transparent policy information, and training of entrepreneurs. International initiatives should also create standards for product certification and labeling. These standards should be complemented with appropriate ways to measure progress and success, beyond just the number of households reached.
Scale-up: International initiatives can help develop a growth strategy that enables on-the-ground entrepreneurs to reach deeper into consumer markets (through consumer financing and producer financing), spread geographically, and create partnerships to overcome barriers.
The final aspect of growing the clean energy sector is to forge partnerships that bring together the knowledge, skills, and capacity of various stakeholders to jointly overcome remaining barriers. The international community can support this by funding a stable and unified platform for knowledge management and partnership-building. This week’s Asia Clean Energy Forum is a great start: With Energy for All as a central theme, 850 participants are networking and sharing ideas on how to address the energy access challenge. However, participants are expressing a desire for international actors to bridge the gap between investors and entrepreneurs and bring their voices into international policy. The UN’s declaration of 2012 as the Year of Sustainable Energy for All and the launch of the Sustainable Energy for All Initiative provide an ideal opportunity to organize a more formal association that can facilitate learning and partnerships, but also move the global policy agenda forward.