How a More Integrated Approach Could Help to End Energy Poverty
This piece first appeared on the World Economic Forum’s blog on May 14, 2019, and re-posted here with permission.
With almost four years completed since the United Nations adopted the 2030 Sustainable Development Goals (SDGs), we face a narrowing window of opportunity to mobilize the disruptive solutions and ambitious partnerships needed to bend the curve and improve the lives of billions within that timeframe, or indeed sooner. Nowhere is a sense of urgency greater than with SDG 7 (“Ensure access to affordable, reliable, sustainable and modern energy access for all”) – which addresses an area that is both lagging, and simultaneously, viewed as one of the most solvable.
The Rockefeller Foundation is working to apply the lessons from our decentralized rural electrification initiative, Smart Power India, to markets across sub-Saharan Africa. The renewable energy mini-grids supported by the Smart Power initiative in the Indian states of Jharkhand, Bihar and Uttar Pradesh are now powering micro-enterprises and homes in more than 200 villages. Improved energy access has transformed the lives of over 160,000 people, including thousands of small businesses. A joint report, Rural Electrification in India, Customer Behaviour and Demand, launched in February 2019 in partnership with Johns Hopkins University, contributes to a growing body of data that shows low-income, rural consumers are ready and willing to pay for reliable electricity access. Smart Power India mini-grid partners average 97–100% on-time revenue collection, and 80% of household users and 90% of enterprise users report themselves “satisfied” or “very satisfied” with their mini-grid connections.
The mini-grid sector has also proven that reliability is key to unlocking latent demand and achieving the full economic potential of energy access in underserved regions. Only with access to reliable power are enterprises likely to employ relatively expensive appliances for productive purposes. When this happens, we observe a triple-win of improved household incomes, increased enterprise productivity and stronger revenue for mini-grid operators. This was captured in a third-party impact report on the Smart Power India effort, which revealed that, from September 2016 to January 2019, connected businesses experienced an average 49% increase in monthly revenues, with 43% of enterprises purchasing new appliances and equipment to grow their businesses.
Reliability is key to unlocking latent demand and achieving the full economic potential of energy access in underserved regions.
While significant reliability and affordability challenges remain, India is on the cusp of achieving universal grid access at the household level. For sub-Saharan Africa, however, with approximately 600 million people still not connected to the grid, we have a unique opportunity to combine the strengths of grid and off-grid distribution solutions via integrated electrification strategies to recognize and serve a huge unaddressed market. This will require a dramatically enhanced commitment to collaboration, backed by new tools, incentives and capabilities to roll out electrification more quickly and more cost-effectively.
Easing the gridlock
Combining grid and off-grid solutions requires utilities to work with off-grid providers to incorporate business models better tailored to the needs and wallets of a poorer rural customer base. For their part, off-grid companies must see themselves as partners of, rather than alternatives to, grid electrification. Only with a paradigm shift, where utilities and off-grid companies work collaboratively to address the challenges of last-mile electrification, will we see real progress towards ending energy poverty in sub-Saharan Africa. And this is where African governments can play a catalytic role by embracing the potential of the off-grid sector, supporting electrification strategies that integrate the best mix of solutions, and aligning investment and other policies to unleash a new wave of last-mile electrification.
To advance this effort, the Rockefeller Foundation has partnered with Power for All on its Utilities 2.0 report. Bringing together Uganda’s largest utility, Umeme, and private sector, off-grid companies for the campaign’s first project in Africa, Utilities 2.0: Integrated Energy for Optimal Impact, was launched by Power for All at African Utility Week in Cape Town, South Africa. This project will provide a concrete example of the kinds of public-private partnerships needed to fundamentally transform the trajectory of energy access in Africa and worldwide.
There are still 800 million people living in extreme poverty, most of whom lack access to reliable, affordable electricity. With increasingly integrated economies, energy has become a major requirement for participating fully in economic life – whether it be for irrigation, harvesting, storage or processing in agricultural value chains, or for off-farm service and retail activities. Never before have we seen the end of poverty so dependent on ending energy poverty. And so, never before has it been more essential to disrupt and accelerate the process of achieving universal electrification.