Mitra - thanks for sharing your example. Where can people find out more?
Mitra Ardron said:
Finding business solutions is key, we (Lumeter Networks) work on addressing the payments challenge, so that if you are working with either of TIm McNeil's first two categories (Individual appliances, or Mini-grids) the payment can be collected from the customer over a period of time. Getting paid - along with finding the working capital while getting paid, are IMHO far higher challenges than the energy generation/distribution technicalchallenges now.
Ashden would very much agree that central utilities are not the sole solution in closing the energy access gap. We have seen real progress in business-based approaches to distributed electricity - such as Off Grid Electric in Tanzania. But financing remains a major challenge, particularly access to working capital and flexible loans.
Christopher Camponovo said:
Christian - I'm one of those people who argues that central utilities are not the sole solution...and, as you say, there are a number of challenges with smaller distributed generation projects. One of the biggest problems is one you haven't mentioned -- that is, coming up with commercially viable models that can be financed. The challenge is that the traditional project finance model isn't working for these smaller projects in Africa -- due largely to actual and perceived risk on the part of lenders....
I guess this is where business can be part of the solution...by developing innovative financing models and promoting distributed generation to close the Africa energy gap.
Great discussion - and great to see over 170 people in the Forum right now! Let's turn to our third question:
3. What building blocks need to be put in place by governments and other development partners to harness the potential contribution that business can make to closing this gap, and by doing so helping unlock the Continent’s potential?
Thanks for joining the discussion, Ellen. Can you share a link to where people can find out more?
Ellen Dobbs said:
Ashden would very much agree that central utilities are not the sole solution in closing the energy access gap. We have seen real progress in business-based approaches to distributed electricity - such as Off Grid Electric in Tanzania. But financing remains a major challenge, particularly access to working capital and flexible loans.
Christopher Camponovo said:
Christian - I'm one of those people who argues that central utilities are not the sole solution...and, as you say, there are a number of challenges with smaller distributed generation projects. One of the biggest problems is one you haven't mentioned -- that is, coming up with commercially viable models that can be financed. The challenge is that the traditional project finance model isn't working for these smaller projects in Africa -- due largely to actual and perceived risk on the part of lenders....
I guess this is where business can be part of the solution...by developing innovative financing models and promoting distributed generation to close the Africa energy gap.
Mitra - thanks for sharing your example. Where can people find out more?
Mitra Ardron said:
Finding business solutions is key, we (Lumeter Networks) work on addressing the payments challenge, so that if you are working with either of TIm McNeil's first two categories (Individual appliances, or Mini-grids) the payment can be collected from the customer over a period of time. Getting paid - along with finding the working capital while getting paid, are IMHO far higher challenges than the energy generation/distribution technicalchallenges now.
Governments should let go running the energy sector, it is the biggest bottle neck to the efficient delivery of power in Africa. There is also need for deregulation, more players need to play in the market in any given country. That will be a good start.
Mitra - thanks for sharing your example. Where can people find out more?
Mitra Ardron said:
Finding business solutions is key, we (Lumeter Networks) work on addressing the payments challenge, so that if you are working with either of TIm McNeil's first two categories (Individual appliances, or Mini-grids) the payment can be collected from the customer over a period of time. Getting paid - along with finding the working capital while getting paid, are IMHO far higher challenges than the energy generation/distribution technicalchallenges now.
Governments: should really be making it as easy as possible for business to close the energy gap, by removing red tape, major market distortions and creating a stable and predictable policy environment. Essentially reducing the risk of operating in the energy environment in Africa.
Development partners: should absorb some of the transactional costs of building a business and work on the policy environment with governments to lower the costs and risks of doing business in the energy sector. Supporting businesses through the business cycle (as they test ideas, start-up, grow and expand) is important (such as DFID’s REACT, EEP and Flexible Funds) as well as working on the broader policy side (such as the Uganda Get-FiT programme working on tariff reform and reg. frameworks)
Clearly the energy gap has terrible consequences for so many people. Despite that, in some ways not having a large (carbon based and centralised) infrastructure for energy is an opportunity. It means Africa can engage the most advanced technologies and generate its power more efficiently (and therefore cheaper).
It also means that every farmer can be a generator of electricity - and therefore earn from it.
Mobile phones offer a great model. Kenya and other countries have shown the world that not having cable telephones has enabled it to move beyond landlines and that in turn has advanced mobile money far faster than in the rest of the world.
Clearly the energy gap has terrible consequences for so many people. Despite that, in some ways not having a large (carbon based and centralised) infrastructure for energy is an opportunity. It means Africa can engage the most advanced technologies and generate its power more efficiently (and therefore cheaper).
It also means that every farmer can be a generator of electricity - and therefore earn from it.
Mobile phones offer a great model. Kenya and other countries have shown the world that not having cable telephones has enabled it to move beyond landlines and that in turn has advanced mobile money far faster than in the rest of the world.
We looked at this question in our recent conference on the Business of Energy: Enterprising Solutions to the Energy Access Challenge, and also in a report with Christian Aid on ‘Lessons on Supporting Energy Access Enterprises. These are the main findings:
Governments - Need to show political will (strong regulatory and policy framework, conducive tax and subsidy regimes). More than 30 countries have put together energy access plans under SE4All – which is a very positive start.
Need to review incentives - Global subsidies to the energy sector are in the trillions of US Dollars per year and can be a barrier to developing the off-grid market.
Governments and regulators need to understand what existing enterprises are already doing successfully and provide space and support for innovation.
NGOs - Collaborative models between NGOs and socially driven businesses can work very well. NGOs can use their resources and trusted brand to leverage working capital for energy enterprises, for example through loan guarantees.
There are many places where the private sector and even governments fail to reach (see the parts of north-west Pakistan where 2015 Ashden winner Sarhad Rural Support Programme is working) where NGOs still play a crucial role in providing electricity and economic opportunity.
Investors - need to respond to energy enterprises’ need for debt for working capital and allow flexible terms. There is a need to target social investment at small and medium sized energy enterprises, helping them to improve their chances of securing commercial finance in future.
Funders and donors have to realise that experimentation is still needed. Need balance between investing in what works and new innovations
In terms of the third question - building blocks I would suggest each sector has areas to make things happen for example:
on the business side is the payments infrastructures - something we work on at Lumeter.
the financing institutions need to lend to energy entrepreneurs (local banks in effect are useless and international entities cant think SMALL enough to work with the local entrepreneurs doing the best work. We are collaborating with investors on a program called SEAL (Scalable Energy Access Loans) focused on those entrepreneurs.
Philanthropy/Development Aid also has its place, but instead of funding a cute picture of a kid with a lamp, (with an incidental energy solution that will stop working as soon as the grant is paid) look at how to fund catalytic solutions and parts of the ecosystem with the potential to scale.
And governments - main thing I believe is figuring out how to get out of the way, for every pro-energy program there are at least 10 other programs making life difficult, for example import duties; regulatory barriers; permits (with associated corruption); and importantly the uncertainty of when the grid will arrive that causes massive barriers to investment.
Robert, comprehensive, holistic, sustainable change designed at the village level enhancing what industry and natural resources are currently available by building a village, incorporating alternative energy production and storage, commercial agriculture production indoors, water sourcing and purification, communications access with the world for on-going support and educational programs in a school facility, incorporating scalable health care facilities all within each village. This provides the stability industry needs to establish and thrive. Check out the background, http://www.aweconline.org/#!thevillageofhope/c1am0. Contact me any time.
Robert Laporte said:
We have established a financial model that works in Canada and can be easily applied anywhere in the world. The risk factor lies in the technology rather than the borrower. It is such a simple solution and we are now applying it across the country. We need to expand our network in Africa in the coming months and seeking like minded partners.
Christopher Camponovo said:
Christian - I'm one of those people who argues that central utilities are not the sole solution...and, as you say, there are a number of challenges with smaller distributed generation projects. One of the biggest problems is one you haven't mentioned -- that is, coming up with commercially viable models that can be financed. The challenge is that the traditional project finance model isn't working for these smaller projects in Africa -- due largely to actual and perceived risk on the part of lenders....
I guess this is where business can be part of the solution...by developing innovative financing models and promoting distributed generation to close the Africa energy gap.
Tim makes a couple of very good points of how governments and development partners can facilitate expanding energy access in Africa. Indeed, a number of governments are doing just that -- whether it be DFID and USAID support for governments, developers and civil society or others, such as OPIC or AfDB, taking on private sector transaction costs.
However, there's a real question as to whether this assistance represents a subsidy with a different name. Why would it be necessary if these business models could stand on their own, independent of any assistance? What are the structural inefficiencies or obstacles that prevent these businesses from taking off without the assistance? That's ultimately where we need to focus our efforts - whether governments, civil society or the private sector. Ultimately, even with the "subsidies," these business models run the risk of failure when the subsidy runs out....
Certainly - Ashden case studies on a variety of energy access enterprises can be found at https://www.ashden.org/winners
Zahid Torres-Rahman said:
Thanks for joining the discussion, Ellen. Can you share a link to where people can find out more?
Ellen Dobbs said:
Ashden would very much agree that central utilities are not the sole solution in closing the energy access gap. We have seen real progress in business-based approaches to distributed electricity - such as Off Grid Electric in Tanzania. But financing remains a major challenge, particularly access to working capital and flexible loans.
Christopher Camponovo said:
Christian - I'm one of those people who argues that central utilities are not the sole solution...and, as you say, there are a number of challenges with smaller distributed generation projects. One of the biggest problems is one you haven't mentioned -- that is, coming up with commercially viable models that can be financed. The challenge is that the traditional project finance model isn't working for these smaller projects in Africa -- due largely to actual and perceived risk on the part of lenders....
I guess this is where business can be part of the solution...by developing innovative financing models and promoting distributed generation to close the Africa energy gap.
Governments first need to give greater priority to investment in the power sector. Most of the investment in energy is for extraction and export, resulting in years of underinvestment. Governments and organisations in the power sector need to be held more accountable. Utilities need to be made financially sustainable, with more business-like incentives and cost-recovering tariffs. International public finance can help realise this change.
Secondly, the risks to investors need to be mitigated, through guarantees, pre-project subsidies, etc.
That brings us to the end of the live chat segment of this discussion. We'll leave the discussion open, so please do continue to post your comments and ideas.
A huge thank you to our panel, all those who posted comments, and to all of you for joining us today.
If you'd like to read more about this topic, take a look at the report we have just published with the Initiative for Global Development, and the accompanying blog series:
Thanks everybody - any further questions to me, or about DFID programmes on energy access in sub-Saharan Africa, feel free to contact me through the BFP portal.
Renewable energy also means that African countries will not be endlessly having to import fuel - and draining so much money away in endlessly paying other countries for the fuel. Most European fuel generation is based on imported coal, gas and diesel. African countries have an opportunity to avoid this drain on their economies.
Thank you for the great discussion. African's problems will mostly be solved by African people themselves, but as you can observe from this discussion it mostly non-Africans trying to figure the answers for Africa. I urge more Africans to join forums like this and learn from it.