Energy Storage: New Business Opportunities for Emerging Markets
By Sean Ong, Peter Mockel, Florian Mölders, and Thomas Rehermann
Closing the digital divide in emerging markets is critical to boosting labor productivity and increasing living standards. One reason the divide remains prevalent in emerging economies is the limited access that rural areas have to affordable and reliable electricity, which is used to power information and communication technologies. Fortunately, recent cost declines in solar photovoltaics and energy storage technologies are making micro-grids an increasingly viable strategy to digitally connect these remote communities to the outside world.
The rise of battery production for electronic devices and electric vehicles has resulted in falling prices in recent years. The battery industry expects continued declines as major battery production facilities come online to meet demand, such as Tesla’s Lithium-Ion Gigafactory.
Coupled with persistent price declines in solar photovoltaics and other renewable energy technologies, energy storage for micro-grids and other off-grid applications is becoming a lower-cost alternative to traditional diesel generation. As a result, new opportunities are emerging to power information and communications technology infrastructure in remote areas of emerging market nations.
Synergies exist between the need to power Internet and communications infrastructure and the need to provide power to populations without access to the electrical grid. The “community power from mobile” model is an opportunity for energy service companies to build “solar + storage” micro-grids that can power telecom towers and serve homes, businesses, and “energy hubs” for charging mobile phones. The GSMA (Groupe Speciale Mobile Association), the leading trade group representing mobile operators, estimates that the market potential for these energy service companies in East Africa alone is $155 million annually (in 2015), with the internal rate of return ranging from 22 percent to 31 percent.
In addition to providing energy services to local communities, there are also economic benefits of increased access to Internet and communication technologies. Using diesel generation to power off-grid telecom towers may be logistically challenging and cost-prohibitive in some remote regions.
However, using energy storage and solar lowers the cost of expanding communications networks in rural areas and provides Internet and mobile phone access to underserved populations. Increased access offers emerging markets a promising way to boost productivity and share prosperity without relying solely on demographic factors such as population growth or natural resources. It is also an opportunity for established companies to reach new populations and potential customers. Expanded access will also foster local innovation and will contribute to entrepreneurship and new business opportunities in local communities.
Peter Moeckel is a Senior Industry Specialist, Climate Strategy and Business Development, Climate Business Department (pmockel.ifc.org).
Florian Mölders is an Operations Officer in the Office of the Chief Economist (Thought Leadership Unit) at the International Finance Corporation (firstname.lastname@example.org).
Thomas Rehermann is Senior Strategy Officer in the Office of the Chief Economist (Thought Leadership Unit) at the International Finance Corporation (email@example.com).
About the author of the EM Compass Note:
Sean Ong has more than eight years of renewable energy analysis and consulting experience and has advised utilities, governments, and private organizations. He has published dozens of reports on a variety of energy topics, including energy efficiency, solar, wind, and storage technologies. (firstname.lastname@example.org)