Energy is a basic need, yet in many places around the world, people go without access to reliable energy in their homes and common neighbourhood spaces. In Africa alone, over 590 million people were without reliable electricity access in 2020. It may seem like a given, but the longer people are without access to energy, the wider the digital divide grows, leaving countries, economies and innovation behind.
But how do we solve for it?
To start, we know that solar is the cheapest and cleanest energy to produce and that it provides longevity as we shift towards a net zero economy. But there’s still a need for the infrastructure to support it, and that’s where investors willing to get creative and willing to take risks can step in to create smarter, more connected economies.
With distributed, rather than centralised power, comes huge opportunities. Who benefits? The micro-businesses, the small mom and pop shops, the tiny local businesses that suddenly get to participate in a much bigger way in the economy. These villages suddenly become smart villages, and not just with traffic and streetlights, but with access to the rapidly growing and expanding IoT (internet of things). Suddenly people have the digital infrastructure to build upon, grow their business, and enter the commercial sector.
There’s a snowball effect, and energy and connectivity effectively provides a segue way to so many other things, from basic services, to increasing safety through better lit streets, improved access to water pumps, and even energy for running small cookstoves in homes.
It has to start somewhere, though, and while some may consider funding clean energy risky, it should really be viewed and applied as catalytic risk taking, a partnership between investors and those benefitting on the ground, and an opportunity to shift the industry into the future, leapfrogging over decades of outdated technology.
Funding Energy Access
When it comes to funding energy access globally, putting money behind traditional energy grids will not be enough to provide universal access. Traditional models, while important, require extensive infrastructure installations and can be expensive, especially when bringing energy via hardwiring to remote areas of the world, and are almost never profitable endeavours. It’s all about finding the right mix between grid extension, mini-grid and solar home systems – to accelerate access to energy in the most efficient way. But for homes with low energy needs, a distributed model is a far more affordable and pragmatic solution.
Take for example, Togo, where the government mapped out the 300 of the poorest villages with no electricity, and put out a call for companies that could provide distributed energy services. Keeping in mind the fact that once a household has access to energy, their income gradually increases over time, the joint venture offered financed services over 18 months. A subsidy covered the rest for 3 years and by that time, the hope is that households could afford to pay the full cost of the energy access.
In this case, the customer simply paid for the infrastructure with mobile money, be it a solar-powered cell tower or solar home units, while the funding from government subsidies and private finance covered the rest. The subsidy and mobile money mean that the process is completely transparent, and the technology associated with it mean that it’s easier than ever to track how much power is being used and measure the performance of the hardware and creating a credit history for the end-user.
Projects such as these are proving that there’s an opportunity to scale transformative impact and financial terms for the people locally, while still creating profit on the other end.
Economic inclusion, which is, in turn, fuelled by digital inclusion, cannot be based only on investments backing up traditional infrastructure, it will only occur when we begin making more ‘risky’ investments in small companies on the ground that are working to provide innovations that close the digital divide and truly make a difference in their local communities.
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