Tuesday
June 26
2012

Sanjoy Sanyal

Is A Clean Energy Access Market Finally Emerging ?

More than 1.3 billion people do not have access to electricity. And about double that number for people who do not have access to modern cooking fuel– 2.7 billion.

These numbers are daunting, but as Bikash Pandey, director Clean Energy at Winrock International, pointed out at last month’s Asian Clean Energy Forum (ACEF), enterprises have had a lot of success in deploying de-centralized renewable energy solutions. In Bangladesh, Nazmul Haque, director and head of Investment at IDCOL informed that 50,000 solar home systems are sold every month. IDCOL, a Bangladesh government-owned organization, provides wholesale financing to organizations which in turn provide customers credit to purchase these systems. Govind Raj Pokharel, executive director at Alternative Energy Promotion Center in Nepal, was sitting next to Haque, and he quickly ran the numbers: 50,000 systems at about USD 400 per unit is about a USD 20 million a month market, or nearly a USD 250 million a year market.

The fact that the poor are willing to pay for clean energy has been known for some time. The WRI-New Ventures Power to the People had estimated the Indian market for clean energy at about USD 2 billion a year. The IFC(W) report From Gap to Opportunity that estimates the total worldwide spend of the poor at about USD 37 billion on poor-quality energy solutions.

Enterprise solutions are key to solving this market conundrum. The ADB Energy for All Investor Forum was held on the very first day of ACEF. New Ventures, a NextBillion managing partner, partnered with ADB Energy for All to host the Investor Forum. The Energy for All initiative is an action-oriented partnership of organizations with a goal to provide access to energy to 100 million people in Asia and the Pacific region by 2015.

The Investor Forum showcased several enterprises, innovating around either technology or business models.

Simpa Networks, which has developed smart hardware and cloud technology to allow rural users to purchase pre-paid amounts of energy. Simpa Networks has been partnering with solar product manufacturers and going forward will partner with both mini-grid and mobile players. Another company showcased at the event, T-Files of Indonesia has developed a marine turbine that can work at low speeds and can power remote island areas.

In terms of business models, the key issue is of course marketing and distribution, costs, and service. GMN of Indonesia is an already existing player in setting up de-centralized renewable energy systems and sales of solar home products in remote areas of Indonesia. Frontier Markets, provides product developers professional marketing and product services. They have been working in the state of Rajasthan India. In some ways, Illumination Solar does exactly the opposite: focusing on making the products as inexpensive as possible by using carbon credits and centralising the manufacturing in China. They have tied up with distributors across the world.

The early-stage investment ecosystem is forming. Hanna Ebeling, of LGT Venture Philanthropy, talked about their commitment to bring mentoring and talent to social entrepreneurs in order to close what she called the “human capital” cap. Karan Gupta of Insitor Fund discussed the interest to fund companies that create social impact at a stage before commercial VCs come in. Tao Ren, an investment officer at the Global Energy Efficency and Renewable Energy Fund, talked about his organization’s investment in both funds and technical assistance programs which include Barefoot Power and Solar for All among its recipients. Innovation is also strong in the area of end user financing of energy products. Chris Neidi of Arc Finance and Shahid Mustafa of Tameer Micro Finance Bank are attacking this problem. Arc Finance works with micro-finance organizations that work with clean energy access companies while Tameer is developing a direct portfolio in small clean energy loans.

Jiwan Acharya, the senior climate change specialist with the Asian Development Bank, who himself grewn up in Nepal without electricity, spelled out ADB’s Energy For All strategy: support pioneers to develop incubation programs for other entrepreneurs, project development (in particular to help existing enterprises to expand to new countries), investor engagement and facilitation. He emphasised that ADB was committed to creating the market space for enterprises to thrive.

The forum also highlighted three key market-creating initiatives aimed at building an effective market space for clean energy access enterprises. Robert Kraybill, managing director of IIX, Asia’s first Stock Exchange for social enterprises, talked about how his organization has engaged family offices and high net-worth individuals as investors. Representing New Ventures, I talked about my experience in investment facilitation with the larger companies such as Greenlight Planet, Husk Power (in India) and Helee and SBST (in China), which are now getting in a position to expand to other countries. SELCO Chief Operating Officer Ashis Sahu announced a new incubation center for South Asia with the target of recruiting and training 25 non-English speaking entrepreneurs (the initial technology focus would be solar). The main advantage for entrepreneurs going into this program would be an intensive introduction to the operational processes of SELCO.

The pieces of the puzzles are clearly coming together. What is needed is an as an effective market place for companies to deploy various technological and business solutions and consumers to access credit to purchase these solutions. There is confidence among entrepreneurs and acknowledgement by investors that this is a real market place. The important thing is to involve practitioners and entrepreneurs as high level programs are designed. Action on the ground needs voices from the ground.

Categories
Energy, Entrepreneurship
Tags
entrepreneurship, investment fund, profits, renewable energy, World Resources Institute