With communities previously lacking electricity having reported improved lighting, wellbeing and safety – not to mention reduced kerosene usage – after the arrival of off-grid renewable energy systems, a report has outlined hurdles to the sector achieving its full potential.
‘Technology-enabled social impact company’ 60 Decibels interviewed more than 35,000 customers of 49 off-grid energy companies in 17 nations over three years to compile the study. The publication was sponsored by 60 Decibels parent company, U.S. development investor Acumen; U.K. government development finance body the CDC Group; energy efficiency alliance the Efficiency for Access Coalition; and the Shell New Energies natural gas and renewables unit of the oil giant.
Despite the increasing availability of finance, 60 Decibels found only 37% of its respondents live in poverty, limiting progress towards United Nations Sustainable Development Goal (SDG) number seven.
Development goal shortfall
That UN ambition concerns “access to affordable, reliable, sustainable and modern energy for all” by 2030 and potential shortfalls have been highlighted by five other global agencies. The International Energy Agency, International Renewable Energy Agency, United Nations statistics division, World Bank and World Health Organization last year estimated 650 million people would still be without electricity in ten years’ time at the current rate of progress, with 90% of them in sub-Saharan Africa. The 60 Decibels survey chiefly concerned respondents in Southeast Asia and sub-Saharan nations.
As the number of companies offering off-grid renewable energy systems – with solar the most popular solution – rises, 60 Decibels said businesses are moving upmarket, away from an initial focus on low-income customers.
There is also room for improvement in product quality and customer service, the study found. The percentage of customers reporting challenges in using off-grid energy products was relatively high, at 34%. Add inadequate after-sales support and customer frustration is the result, according to 60 Decibels. “Since most sales come via word-of-mouth, poor customer experience negatively affects both the top and bottom lines,“ the Why Off Grid Energy Matters report stated.
Bang for your buck
Despite such headwinds, however, the authors of the report found the social impact of energy access is real. Around 88% of people surveyed said their quality of life had improved thanks to the energy product or service they bought.
The report highlighted the potential of mini-grids to benefit the low-income families they are more likely to serve compared to the vastly more numerous solar lanterns and solar home systems. The 60 Decibels report argues mini-grid deployment should be supported by partnerships between businesses, investors and the public sector and supported by concessionary capital for the hardest-to-reach customers and communities.
The study cited the Rockefeller Foundation’s Smart Power for Rural Development initiative, which is being scaled up in partnership with Indian utility Tata Power, part of the Tata conglomerate. Seeded by grant capital from the foundation set up by the owners of U.S. giant the Standard Oil Company, and now led by the TP Renewable Microgrid entity established by the foundation and Tata Power, the program aims to install 10,000 mini-grids in India to serve 5 million households and 25 million people.
Oil company backing
In January last year, the Rockefeller Foundation and the development foundation set up by fellow oil giant Shell helped establish the Cross-boundary Energy Access (CBEA) fund to finance mini-grid deployment. The aim was to unlock $11 billion to bring electricity to 100 million people in sub-Saharan Africa. In July, the CBEA announced its first investment, of $5.5 million, for the development of 60 mini-grids in Tanzania. That cash pile was tasked to the PowerGen micro utility developer owned by Shell New Energies, which was mandated to sell on the resulting infrastructure to recycle the capital invested.
The Rockefeller Foundation and the Shell Foundation are both members of the Efficiency for Access Coalition which sponsored the 60 Decibels report.
Home PV systems, described by 60 Decibels as the “engine of the sector”, performed “well across the board in terms of customer experience and social impact” the report found, with solar lanterns found to have the greatest impact factor among such systems. The distributors of such single-household systems have amassed lots of capital in recent years, due in part to the perceived value of the datasets they are able to accumulate by analyzing the energy consumption and payment pattern data of their customers.
Solar accounted for around 85% of off-grid solutions, according to 2019 figures. Solar home systems and lanterns and other lighting systems accounted for around 50% and 35% of last year’s off-grid renewables installations, respectively, followed by rechargeable batteries (10%) and mini-grids (2%).
A fifth of the customers surveyed by 60 Decibels harnessed off-grid energy to generate income but there has been criticism from some quarters the price paid is too high. According to the report, over-indebtedness is a small but significant issue, with 4% of the respondents saying their energy payments were a “heavy burden” and 5% forced to regularly cut back food consumption to make payments.
The 60 Decibels report also highlighted the off-grid sector could do more to serve women, with 68% of the users of such systems that were surveyed being men. In 58% of the households concerned, it was a man who had first heard about the product or service, the report added.