Bridge India

Providing energy access to the poor

The IEA estimates that one in five people or 1.3 billion around the world lack access to electricity. There are two ways of changing that: expanding the grid around a classical centralized power generation system or creating distributed solutions around either appliances (e.g. solar lanterns), homes systems (typically also solar) or mini-grids (from different fuel sources, including e.g. solar, biomass, wind, storage and diesel gen-sets). While China has shown how to successfully expand the grid, in India, South-East Asia and Africa, distributed models might be more successful, as a very interesting new report by the Sierra Club on “Clean Energy Services for All” shows. The report can be downloaded here.

  • Tomorrow will be different than today, because progress in distributed and renewable power generation has been much faster than in centralized power generation and grid infrastructure
  • Providing energy access to all is much more affordable, if efficiency gains are considered
  • We are seeing more and more proven, scalable, investable business models

Governments in developing countries have promised grid extensions for decades. Many of them have failed to deliver. And even when a grid reaches a village, it often does not reach each household and often fails to provide electricity. In the past, people simply had to wait in the dark. This is changing now. While grid and centralized power generation technology evolves at the gradual pace of a mature market, there is a rapid development in distributed power supply options. This is driven by the fast reduction in the cost of renewables (mainly solar), by the mobile phone revolution (offering functionalities around payments, monitoring or controls), and by the Chinese manufacturing scale (for applications, modules or batteries). Add to that the sheer need for power, entrepreneurship and a large body of “impact money” and we see a fundamental shift: new, distributed energy access models.

Off-grid energy demand is, of course, a moving target. There is a basic demand for e.g. lighting, mobile phone charging, fans, TVs, irrigation pumps, food storage and processing. This could be fully or partially met by smaller systems ranging from solar lights to solar home systems. However, as people climb the energy ladder, their demands will naturally increase: they might want ACs, mobility solutions or refrigerators. Household electricity demand will grow from around 50 kWh per year (for simple lighting) to almost 2,500 kWh per year (see the model by Sierra Club below). Mini-grids are more suitable to provide these quantities. At a later point, perhaps, the central grid will also be extended to reach such mini-grid areas, in which case the distributed generation will help to stabilize the grid. In the end, there might well be a highly asymmetric energy landscape, where household systems, bottom-up utilities and traditional utilities will interact.

Blog_Energy access for all_image 1Source: Sierra Club – Clean Energy Services for All

The IEA estimated in 2011 that providing energy access to all would cost $640 bn over the next 20 years.[1] This is 300-500% above the current investment trajectory and around 30% of all current development aid, of which 1-2% goes into energy access.[2] The Sierra Club has now presented an analysis with a much lower, more achievable figure of $200 bn. The game-changer is an assumption that energy efficiency technologies (such as LEDs), will make much less generation capacity necessary to provide the same amounts of energy-related solutions (e.g. light).

Today, the Sierra Club estimates the distributed energy access market at $200-250m. It will grow by 26% per year until in 2030, it will be a $12bn market. Solar lanterns will be a small chunk of that – while home systems and mini-grids make up the major part.

Blog_Energy access for all_image 2

Source: Source: Sierra Club – Clean Energy Services for All

In order to kick-start the market, Sierra Club estimates that around $500m is needed – $400m of which is for the energy solutions providers. Over the past five years, the industry has prepared itself well for take off: there are hundreds of entrepreneurial companies offering different variations of technology use as well as ownership, payment and maintenance models. Bangladesh today, adds around 80,000 solar home systems every month with Grameen Shakti being a leader. In India, Gram Power, Mere Gaon Power and Selco are well known. A look at the Ashden website gives an inspirational selection.


[1] IEA: Energy for all (http://goo.gl/6lNVvO)

[2] Sierra Club: Clean energy services for all (http://goo.gl/0hiyBk)

Tobias Engelmeier is the Director and Founder at BRIDGE TO INDIA. Twitter: @TEngelmeier

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