Share this article:

A New Nexus Approach to Powering Development

Measuring Demand and Working with Service Delivery Organizations

We urgently need new approaches to bring affordable, reliable, and clean energy to those who lack it. This commentary, from Davida Wood, proposes a fresh approach to providing sustainable energy for all.

Author’s Note: This commentary was researched and written before the COVID-19 virus became a global pandemic, and as such does not touch specifically on topics related to the crisis. Yet the issues discussed in the commentary – in particular, the critical need for healthcare providers to have access to right-sized, affordable energy solutions – are more relevant than ever in a changed world.


The World Resources Institute’s research on the impacts of small scale electricity in India and Nepal revealed a puzzling fact: the solar home systems installed were often too large for the purposes they were being used for. Households and small businesses were needlessly paying for systems that provided more capacity than they needed.  This mismatch turned up again in our scoping research in Tanzania: solar systems installed in health clinics were under-utilized. This time it was the donors that were not getting their money’s worth. Our findings seemed to be corroborated by the experiences of others. The UN Foundation’s study of health clinics in multiple countries discovered systems in disuse, sometimes more than one system in a single facility, each provided by a different donor. Why was this? Why were users – and funders – not choosing systems better matched to their needs?

There is an urgent need to address the challenge of extending energy access to the nearly 840 million people in developing countries who still lack electricity more than six decades after full electrification in Europe and the United States. The outlook for rapidly meeting their needs is not good: Sustainable Energy for All’s 2019 report concluded that the world is not on track to reach Sustainable Development Goal (SDG) 7, ensuring affordable, sustainable energy for all by 2030. According to the forecast, nine out of 10 of those left behind will live in Africa. The human and economic costs of this failure are high: in countries where access to reliable energy is elusive, health care will remain substandard for most, schools will struggle to offer world-class education, and agricultural and industrial enterprises will not be competitive.

While there has been some progress on extending the grid, establishing community-run mini-grids, and providing single-household solutions, impacts have not been as deep or as wide as hoped. We urgently need new approaches to bring affordable, reliable, and clean energy to those who lack it. The solutions on offer have focused on supply-side, technology-centric approaches. Relatively little attention is paid to demand-side user-perspectives.

This commentary proposes a fresh approach to providing affordable, sustainable energy for all. The approach has two parts. First, those who would extend energy access to the poor need more data on demand, especially small-scale demand, from the development sectors. As we show below, demand assessment is well established as a crucial starting point for increasing energy access, but big data on small-scale demand are scarce.  Second, we suggest an institutional approach to assessing and meeting demand. Service delivery organizations—government and non-governmental organizations that provide poor people with health care, skill building, and agricultural support services—have a central role to play in delivering power and catalyzing demand.

The focus on service delivery organizations is a newer idea that would complement the better-known efforts at the household and community level. Service delivery organizations, which exist to serve the poor and work in multiple sites, are often themselves constrained by a lack of access to reliable electricity. We posit that by integrating small-scale energy solutions into their programs, these organizations can increase their effectiveness and provide electricity to the poor. The challenge for those working to extend energy access is encouraging these organizations to take on this unfamiliar role and helping them build their capacity.

We call this a “new nexus approach” to achieving the SDGs. The idea that energy access is key to almost every other sustainable development challenge—health, education, food security, gender equality, poverty reduction, employment, and climate change—is hardly new. Indeed, it was already familiar to many in 2013 when the “nexus approach” was the theme of a regional UN conference in Addis Ababa. Our proposed approach builds on these ideas and takes them two steps further: focusing on gathering data to get a realistic picture of small-scale demand and placing development-oriented service delivery organizations at the center of the solution.

We believe that, taken together, these two missing pieces can rapidly extend sustainable energy access to hundreds of millions of people who lack a reliable supply of electricity, while at the same time catalyzing increased demand. WRI is testing this proposition, conducting research with partners in several institutions around the world. We still have much to learn and, as always, the devil will be in the details. Already, however, we are seeing promising signs that are worth sharing. This commentary explains the thinking behind the new nexus approach in the hope that others will join us on this journey. It ends with suggestions for new ways of working that draw upon these insights for three key actors in the energy access arena: the service delivery organizations, the donors who fund them, and organizations with energy expertise.

The Unhappy Marriage of Supply and Demand

The misalignment of supply and demand that we observed in India, Tanzania, and elsewhere is not limited to small-scale systems. My native South Africa provides a vivid example of how the supply-demand conundrum has also plagued grid extension programs. In South Africa, one of the first things the post-apartheid democratic government did was to direct the state-owned utility, Eskom, to provide electricity to the historically disenfranchised communities. Eskom embarked on a large-scale grid extension program and rapidly connected households that had never before had electricity in their homes. It was a remarkable success, except for one thing: Eskom did not adequately anticipate the very low demand from people living in poverty. Accustomed to serving households fully equipped with modern appliances, Eskom was surprised that its new customers used electricity mostly for lighting and continued to cook on paraffin stoves, managing without refrigerators, electric stoves, washers, dryers, and air conditioning, as they always had. Eskom soon turned to the national budget to shoulder the financial implications of these non-revenue producing customers. Thirty years later, Kenya Power faces a similar predicament. Striving to meet SDG 7, the company rapidly extended access to the grid, nearly quadrupling the number of Kenyans with access to power between 2010–17.1 But these new customers consume 30 percent less power than the previous customer base; unwelcome news for Kenya Power’s financials.

The argument that low consuming users might be better served by small scale systems was intended to solve just this problem. With the cost of solar dropping and new technologies for pay-as-you-go emerging, the opportunity to create a new market around lower levels of consumption presented itself. But what if small scale systems are still over-kill relative to demand? The market that has developed has been very supply-side oriented, driven by the promise of new technologies. Even as it became clear that the gap between what it cost to provide these services and what the poor actually need was going to persist, potential solutions have focused on how to shave off the costs of supply in an immature market. Innovative financing approaches were offered to soften the terms of investment or loans. These variously try to lengthen loan horizons, provide working capital, offer financing for debt servicing or reduce exposure to currency-exchange fluctuations. With this infusion of concessional financing, the off-grid sector grew fast.2 But the need for concessional financing has not gone away,3 and some star performers are pulling up stakes.

WRI has been part of this supply-focused effort, establishing the pioneering New Ventures project in 1999 to be a hub of environmental entrepreneurship, and providing research in support of improved financing for clean energy entrepreneurs. For example, Sanjoy Sanyal, a senior associate for Clean Energy Finance at WRI, has explored how financing for local entrepreneurs in Kenya and Tanzania could be improved. We have, however, been increasingly skeptical that the answer to the energy access puzzle lies in finding the optimal financing terms for energy suppliers. If the real problem is a lack of demand, can it be solved by increasing supply?

In Arua, Uganda, a wood-fueled fire is used for baking sweet potato cookies. Renewable energy could provide a cleaner, more reliable alternative, and WRI is partnering with organizations like Dann Church Aid to explore clean energy options to improve lives in Uganda. Photo: Davida Wood, WRI

Growing Interest in a Demand-Driven Approach to Increased Energy Access

WRI isn’t alone in stressing the importance of assessing demand. Practical Action’s Poor People’s Energy Outlook has, for example, done valuable primary research to quantify the energy needed for specific energy services, considering poor people’s circumstances. These range from basic lighting and small household appliances, to the needs of rural schools and health care facilities, to the energy needs of small-scale farmers and non-farm businesses. The concept of energy services on a continuum from one (lighting) to five (reliable grid service) has informed the World Bank’s Multi-tier Framework (MTF) for evaluating off-grid service provision against a standard. This has helped shift the energy access movement from a binary view—people either have access to energy or they don’t—to a more sophisticated understanding of tiers of service, including hours per day and quality of service.

Other important breakthroughs include SELCO Foundation’s work to understand the circumstances in which the poor can improve their incomes using appliances like solar-powered refrigerators, sewing machines, and bread makers. SELCO Foundation’s insights into the importance of finance and market linkages have informed our understanding of what is known as the ecosystem of energy services. Its appliance-focused approach is one way of bringing to life conceptual arguments about the interdependence of energy and development to drive change.

The Italian NGO CEFA has approached the relationship between supply and demand from a community perspective, coupling mini hydro projects with income-generating activities that boost demand. One example of CEFA’s success highlighted by our research on mini-grids was the Lumama hydro mini-grid in Tanzania. But the Lumama story is not about the success of a mini hydro plant, but about how the poultry farmers and sunflower producers received support for their businesses and were able to grow with the availability of energy as one of the inputs. The hydro plant, in turn, was viable because it had customers who needed the energy it produced. In India, the Mlinda Foundation uses a similar approach, offering the services of a business development team to support rice farmers to grow their businesses. These growing businesses drive the demand for energy, enabling a transition from diesel to hydropower.

Elsewhere in the world, organizations like the Catholic Agency for Overseas Development (CAFOD) and the International Institute for Environment and Development (IIED) have used the Energy Delivery Model (EDM) to stimulate demand using a bottom-up participatory process to assess community priorities. Oxfam’s focus on complementary services as well as PRODUSE have contributed to our knowledge of the field.

Demand, then, is at the core of many successful energy solutions. With SELCO Foundation, we see encouraging success stories with micro businesses. With the community approach, we have evidence that village-level solutions can increase livelihoods. So why do these solutions remain at the project level? Is it possible to create a demand-driven market for energy services at scale? Only in such an environment will energy enterprises be able to thrive and grow beyond the need for unsustainable concessional financing, extending energy access in the context of building prosperity.

Can Demand from the Development Sectors Drive Clean Energy Markets?

The abovementioned examples show that stimulating demand for energy by supporting productive uses is a sensible approach. Much of this effort, however, has overlooked the role of development service organizations that are already supporting agricultural enterprises, non-farming businesses, and health and educational facilities. Growing evidence suggests that assessing energy demand from these government and non-governmental institutions and building their capacity to shape solutions can result in rapidly extending energy access in unserved and underserved areas. This is the core of our proposed new nexus approach to energy.

In our 2017 report, Strategies for Expanding Universal Access to Electricity Services for Development, my colleague Lily Odarno, a senior associate with WRI’s Energy Program and Governance Center, proposed a framework for linking energy and development efforts so that they can be mutually reinforcing. Since then, we have worked with both energy planners and development service organizations to understand more deeply how this could work.

In our engagement with energy planners, we have focused on the data on demand needed to better integrate small-scale solutions into energy planning. Anticipating economic and demographic growth is an integral part of planning for utility scale grid expansion. However, distributed solutions are typically not well integrated into these computations, partly because of the lack of data on small-scale demand and other geospatial factors.

Planning efforts that indicate where off-grid solutions such as mini-grid and stand-alone solar might be more appropriate are usually based on costs associated with a particular technology rather than data on actual demand in specific locations. This lack of data on current and future consumption makes it difficult to plan distributed systems, resulting in solutions that are often too large or too small.

 

 

Where to get this data, then? WRI’s Energy Access Explorer (EAE), led by Dimitrios Mentis takes on this challenge. EAE maps geospatial demand data to align with supply options. It provides data to help strengthen the links between energy access and livelihoods by combining more than 20 data sets on energy potential, population density, topography, income distribution, and more. EAE is designed to bring together fragmented research efforts using a common set of tools and metrics. These may include academic research models that predict energy consumption, or energy needs assessments conducted by government and non-governmental service delivery organizations.

<p>Before and After: On Energy Access Explorer, datasets showing Global Horizontal Irradiation (GHI), locations of health care facilities, distribution lines and substations and population density are overlaid to provide an analysis of energy access potential in Uganda.</p>

Before and After: On Energy Access Explorer, datasets showing Global Horizontal Irradiation (GHI), locations of health care facilities, distribution lines and substations and population density are overlaid to provide an analysis of energy access potential in Uganda.

Service Delivery Organizations are Key to Assessing Demand

Working with academic institutions to assess demand data is the easy part. Engaging with service delivery organizations has proven to be more challenging.

Local governments responsible for delivering agricultural extension services, enterprise development, or social services like health and education typically do not plan for the energy needed to deliver these services. Where grid service is poor or nonexistent, local governments tend to default to budget lines for diesel or kerosene, without considering whether cheaper, cleaner, and less noisy solutions might be more effective. Data on diesel consumption in far-flung places is hard to come by.

This may be changing. Kenya’s 2019 Energy Act, for example, directs county (subnational) governments to plan for enterprise development powered by small-scale energy. County energy planners are required to consider local resources available (e.g., grid reliability, solar intensity, wind potential) and the energy needs of the enterprises, such as small-scale farmers and non-farming small- and mid-size enterprises.  These county energy plans will be crucial links between project-level resource mapping, like the Kenya Off-Grid Solar Access Project (KOSAP), and strategic planning processes at the local and national levels.

In many locations, non-governmental service delivery organizations may also be important sources of demand data. In Kenya, Uganda, and Rwanda, 40–60 percent of health care facilities are owned by private or non-governmental organizations (NGOs). NGOs and farmer associations provide technical assistance and market linkages in agriculture, while multilateral organizations such as UNHCR and UNICEF work with governments to provide health, education, and humanitarian relief services.

Our preliminary engagements suggest that there is an appetite for a platform that could incorporate bottom-up needs assessments of such facilities. For example, UNHCR has mapped the sites of the refugee camps and host communities where it works in Uganda. The UN Refugee Agency has the capacity to conduct needs assessments of these sites, but recognizes that these infrastructure needs should be properly analyzed along with other data sets on energy potential, population density, topography, financial means, and more, before developing the most appropriate solutions.

By contributing assessments of the needs of schools, hospitals, and farms that are currently unserved or underserved by the grid, UNHCR and other development institutions can dramatically increase understanding of small-scale needs and in turn understand the energy options available to them.

Energy needs must be incorporated into development strategies in order for them to be successful. In India, a woman is able to work after nightfall thanks to a solar powered lamp. Photo Credit: The Climate Group/Flickr

Working with service delivery organizations in health, agriculture, and livelihoods can help to generate much-needed data on demand for small-scale services, adding a new dimension to energy planning. Integrating development load data, including small-scale needs, is a missing piece of the energy access puzzle.

Figuring Energy Needs into Business Models and Development Strategies

In our initial work with development service organizations, we gained insight into the need for support to integrate energy into their strategic planning and business models. When energy access experts talk about “business models,” they mean discovering the best approach for charging for energy services using available technology, financing, and revenue—that is, they are focused on supply. But service delivery organizations also need business model support to advise farmers’ associations and health networks on how to strategically use clean energy—that is, support for understanding demand. Examples of demand-related questions include:

  • Which part of the value chain should be prioritized to align with production plans?
  • Which services in health care facilities could most benefit from a solar option?
  • How can the avoided cost of diesel be built into financing for clean energy and investing in improved service delivery?

Analysis of how these questions are being answered (or not) needs to be gathered in order to ensure that investing in alternatives to the grid makes sense for these entities. Initial experiences with clean energy solutions—many of them driven by donors—could be analyzed for valuable insights. However, even where these evaluations take place, the lessons learned rarely bring about change. The focus on supporting energy enterprises has missed an opportunity to learn from the experiences of the institutions that would benefit the most.

This gap in business model support for development actors makes it difficult to scale these investments. For the clean energy market to be truly demand-driven, service delivery organizations must shape solutions that make business sense for them and design approaches aligned with their needs. We hypothesize that offering such support will enable organizations to make better use of clean energy solutions and accelerate adoption of small-scale technologies in areas that are currently unserved or underserved.

How Could This Work? Population Services Kenya

Our case study of Population Services Kenya’s efforts to integrate clean energy with its network of health facilities, led by WRI’s Chen Chen, shows how this could work. Population Services Kenya (PS Kenya) is the Kenya chapter of Population Services International, a nonprofit global health organization. Its Tunza network provides family health care services to low-income and underserved populations. The network is supported by a business advisory program that helps small- to micro-scale clinics, providing advice on attracting customers, expanding service areas, and improving financial sustainability.

Our study revealed that when PS Kenya implemented a grant from the UK Department for International Development (DFID) to pilot solar solutions for the Tunza network in 2016, it had mixed results. The clinics that benefitted the most were those that incorporated business advice for using solar power to improve their operations. Although technical factors played a role in the success or failure of solar solutions, we identified five important “non-energy” factors. Successful clinics:

  • were enrolled in the business advisory program;
  • kept good financial and patient records;
  • were small- to mid-sized, working to meet immediate medical needs of neighboring communities;
  • used the procured systems to increase the number of patients, boosting profits; and
  • had plans to use newly procured energy to expand services.

PS Kenya’s business advisory program was not set up to help clinics better use the electricity systems, but that is what happened thanks to the advisory services aimed at improving business impacts. While technical challenges remain, the study demonstrated that savvy business people can make good use of solar power to become their communities’ favored provider.

Our study enabled PS Kenya to understand the results of the solar pilot (why some clinics thrived while others did not), and decide to scale the pilot to the full complement of 400 clinics in the Tunza network. WRI is partnering with PS Kenya to use the lessons learned from the study to overcome both energy and non-energy challenges.

Vaccine storage is much more reliable with solar-powered refrigerators – and now this clinic in Kenya has access to them, thanks to a loan program from PS Kenya. Photo by Chen Chen/WRI

Agency Is at the Heart of the Demand-Driven Approach

Our concept of the “demand-driven approach” goes beyond looking at demand-side data to consider the people who need this energy. Ranjit Bharvirkar, principal and India program director at the Regulatory Assistance Project (RAP), has pointed out that when consumers are referred to as “loads” they are stripped of agency and reduced to an energy circuit that consumes power. But distributed systems work best when consumers have a say in shaping supply solutions and deciding how to leverage available resources towards specific objectives.

Yes, clean energy enterprises need development loads to thrive, but those loads will only appear with concerted business model support for small businesses and development institutions in agriculture, health, and education—both public and non-governmental.

The PS Kenya story is an example of clean energy use shaped by health practitioners’ needs rather than donor-defined priorities. Future WRI studies will focus on how energy options can be linked to strategic planning in other sectors. For example, to expand small-scale agriculture, we argue that demand-driven approaches to clean energy—ones that are motivated by farmers’ investment choices and strategic decisions—will result in the most appropriate solutions. This means not paying for either oversized or undersized systems, but ones that are fit for the purpose.

New Ways of Working

The institutional approach has important implications for rapid scaling. Local governments and non-governmental service delivery organizations have the structures to reach smaller actors working in health, education, and small farming and non-farming enterprises. They already provide strategic planning and business support to improve service delivery and increase incomes. As a result of the scale at which they work, these institutions also have market shaping power. A demand-driven approach at this scale can send loud signals to policy makers and investors, driving the market for clean energy and spurring innovation, efficiency, and cost reduction.

This proposition suggests some new ways of working.

  • Local service delivery organizations can be market drivers for small-scale solutions, not just because of their loads, but because they will demand more input into the product to make it better sized and better aligned with their strategies and more efficient. Outsiders can help by providing assessment tools and standards that such entities can use to estimate demand and communicate their needs to policy makers and energy providers.
  • Donors who fund these entities can be enormously helpful in integrating assistance for energy planning into their programs in areas that lack energy access or suffer from unreliable service. While cross-sectoral approaches are starting to emerge, much more could be done. Our preliminary research found that of 55 non-energy projects supported by multilateral and bilateral donors in East Africa between 2015–18, only 15 mentioned outlay for energy needs.
  • Organizations with energy expertise, such as think tanks, multilateral organizations, and social enterprises, can help local service delivery organizations build their capacity to integrate clean energy into their plans, for example, by helping conduct energy needs assessments. In this way energy expertise can be integrated into development support that is already being provided, rather than a siloed “energy project.”

While engaging with service delivery organizations is a promising approach, there is much to be learned. Efforts to support these organizations to become leaders of sustainable energy will need to be systematically evaluated.

WRI is currently implementing a program of work that will generate more knowledge exploring the new nexus approach to linking energy and development. We hope this commentary and our forthcoming research can help catalyze a movement that will put demand-driven approaches and development actors at the center of efforts to increase energy access. If the approach works, hundreds of millions of people in Africa and Asia could have access not only to clean energy, but to a more prosperous future.


  1. The Global Tracking Framework 2018 report shows the number of Kenyans with access to power increase from 19.96 percent (7,939,229) in 2010 to 64 percent in 2017, which translates to 31,714,212 persons. ↩︎

  2. GOGLA’s 2018 global report cites around 60 percent compound annual growth rate (CAGR) since 2010; Wood Mackenzie show investments growing 37 percent from 2016–17, and 22 percent from 2017–18, with cumulative disclosed transactions approaching US$1.7 billion. ↩︎

  3. Shell Foundation’s analysis finds that US$31 billion is needed for solar home systems and min-grids to achieve SDG 7. The Shell Foundation report used two different models to determine financing needs for the off-grid sector in sub-Saharan Africa. Both require significant concessional capital. Acumen, the non-profit impact assessment fund, finds that for mini-grids, in particular, the largest share of capital will need to come from grants. Both Acumen and Shell’s reports note that even debt will need to be on concessional terms lower than market rate. ↩︎

Stay Connected