Wednesday
May 6
2015

Susie Wheeldon

Ending Energy Poverty? The Solutions Already Exist

Last week the charity SolarAid announced that it had hit a milestone ensuring that 10 million people have access to clean, safe light. The social uplift this will bring is extraordinary – solar lights impact poverty, health, hunger, education, enterprise and the environment. At the same time, the announcement shows much more; that the potential of solar to empower rural African off-grid communities is beginning to be realised.

Whilst SolarAid has, through its social enterprise SunnyMoney, sold 1.7 million solar lights – helping African families save over £200 million and creating an extra 2 billion hours of illuminated time for study or work – it is also indicative of an even greater growth in the nascent off-grid solar market. In October last year, Lighting Africa, a joint World Bank and International Finance Corporation (IFC) initiative, calculated that around 5 percent of the African population was using modern LED solar lighting, a dramatic rise from less than 1 percent just five years earlier.

SolarAid’s research indicates that across the continent the sector is now benefitting around 50 million people. (Editor’s note: The author is the campaigns manager at SolarAid.)

Although there have been huge leaps forward, even in 2015, 20 percent of the world’s population still live without electricity. As SolarAid’s CEO, Andrew Webb, said:

“The off-grid sector reaching 50 million people is fantastic, but there are over half a billion people in Africa still reliant on dangerous and very poor light sources like kerosene. In 2015, this is simply not acceptable. We need more support so that we can continue to give people across the continent the chance of a brighter future.”

Given the right support, solar entrepreneurs and decentralised energy solutions could change all that.

In 2011, the International Energy Authority (IEA) estimated that to provide Sustainable Energy for All $640 billion is needed over the next 20 years. This represents a 300 to 500 percent increase on current investment. It’s an astronomical figure – likely to be beyond the customer, government and aid agency collective abilities to pay for and provide. Yet in the footnote of last year’s Africa Energy Outlook, the IEA noted that:

“Grid-connected renewable projects require a more robust governance framework to succeed, but some smaller-scale and off-grid projects have greater potential to sidestep institutional weaknesses.”

Despite huge challenges, we are seeing that some of these smaller-scale initiatives are certainly not waiting for the huge investments needed by larger energy projects, but forging ahead as fast as they can. Incredible customer demand for solar products and the year-on-year growth of the sector is showing that, given access to clean energy products, millions of African people have stopped waiting for grid lines that may never come, and are investing in their own futures.

As one such customer, Imelda Mpiluka from Tanzania, explained, not only did she buy a solar light, but she is sharing the news with her whole community.

“I use my time to educate other people about solar lights because it is a good product for home use. I saw it from my neighbour and I decided to buy it. It helps to reduce kerosene expenses,” she said.

Indeed, SolarAid’s research shows that over 90 percent of solar light customers recommend them to someone else. This increasing awareness of the benefits of solar energy has enabled a number of solar entrepreneurs to prosper, such as Stanley Rogut, or “Solar Stan.” Rogut’s success means that he has now begun to appoint sub-agents to reach even more customers. And while he is rightly proud of the benefits the lights bring to his community – improving education, home-life and the income of his neighbours – he describes them quite simply as “a good investment.”

Above: Young school children in Zambia with solar lights (PHOTO: Patrick Bentley / SolarAid)

These good investments are the first step on the “clean energy ladder” and have the potential to catalyse a distributed renewable industry that could provide universal energy access at a fraction of the cost of IEA estimates. Alternative reports, such as the Sierra Club’s “Clean Energy Services for All: Financing Universal Electrification,” estimate that by focussing on Clean Energy Services, the IEA’s figures could be reduced by as much as 71 percent.

Financial institutions and development organisations are beginning to take note. For example, in February, the Triple-A rated IFC and Cordiant Capital invested $7 million in Off Grid Electric, a solar leasing company in Tanzania (adding to the $23 million it received last year). Meanwhile, the Swiss asset manager ResponsAbility announced a huge boost to off-grid financing last month: the first dedicated debt fund, totalling around $30 million. Increased financial backing of solar manufacturers, such as Greenlight Planet and d.light, is also enabling the extension of product lines and new innovations, such as larger home systems and pay-as-you-go technologies. In total, the rapidly developing off-grid sector saw about $90 million of publicly announced investment in 2014, with the rate of investment accelerating in early 2015.

This growing support for off-grid solutions means that for many living in off-grid in Africa, the future is looking decidedly brighter. Yet for millions, the chance to switch to solar has yet to come. While the successes are many, the challenges remain. Much of this rapid growth has been concentrated in a few countries, with Lighting Africa data showing that 78 percent of unit sales on the continent between July and December 2014 came from just three countries: Kenya, Ethiopia and Tanzania. Launching into new – and potentially more complex – markets will require not only more philanthropic and investment finance, but more support for the policy and advocacy work needed to unlock the sector’s extraordinary promise.

SolarAid’s news is another reminder that the solutions already exist to lift families from energy poverty, improve education and catalyse enterprise in some of the world’s poorest regions.

The challenge now, though, is how the market for these solutions can reach its potential – enabling millions to reach theirs.

Susie Wheeldon is the campaigns manager at SolarAid, a London-based international charity that believes in business-based solutions to poverty and climate change.

Categories
Energy, Entrepreneurship
Tags
energy, impact investing, solar