Q&A with Smart Power Myanmar CEO Richard Harrison: Part 1
This interview was first published on the Myanmar Energy Monitor by FMR Research and Advisory.
Since the beginning of the year, Smart Power Myanmar (SPM) has announced a number of new initiatives aimed at supporting mini-grid developers and fostering growth in the country’s renewable off-grid electrification market.
These initiatives include the launch of a new data analytics function, a series of energy-related financing facilities, a partnership with the Private Financing Advisory Network (PFAN) to connect companies with private investors, and the country’s first-ever infrastructure financing facility targeted at mini-grid developers.
SPM also announced a new Mini-Grid Accelerator Program developed in a unique partnership with the Miller Center for Social Entrepreneurship, part of California’s Santa Clara University. The program connects leading mini-grid developers in Myanmar with mentors who will help them strengthen the foundations of their companies.
Recently, Myanmar Energy Monitor spoke with CEO Richard Harrison about SPM’s work to get his perspective on the country’s off-grid energy market.
We note that the interview was completed before Pact Myanmar, SPM’s parent company, announced the signing of a new MoU with the Department of Rural Development (DRD).
Can you tell us about Smart Power Myanmar? How was the organisation established?
SPM is currently a non-profit business unit of Pact, the international NGO — and one of the largest integrated NGOs active in Myanmar. SPM was established in May 2018 with core funding from The Rockefeller Foundation to end energy poverty in Myanmar and transform the long-term economic potential of millions of people currently without access to electricity. In doing so, SPM contributes towards the achievement of the United Nations Sustainable Development Goal 7: ensuring access to affordable, reliable, sustainable and modern energy for all. SPM is in many ways a “sister” organisation to the Rockefeller Foundation’s wholly-owned subsidiary, Smart Power India, which has been supporting India’s mini-grid expansion efforts for several years and which is now in a major partnership with Tata Power to support the development of 10,000 mini-grids.
SPM was born out of Pact’s early work in rural communities providing solar home systems from 2014 to 2017 under the successful Ahlin Yaung program, which was co-funded by ABB, Chevron and Shell. In around 2014, Pact’s extensive data from thousands of rural communities started to indicate not only that average household expenditure on energy-related costs was climbing, but that households wanted more than solar home systems. They desired productive electricity to power household items such as irons, rice cookers, and hot plates, as well as for productive uses, such as irrigation pumps to increase crop yield and big freezers to keep products fresh.
As Pact began to explore ways to increase access to energy for productive use, we were lucky enough to be able to work together with the Rockefeller Foundation to form SPM and build a strategy that would support the National Electrification Project (NEP) together with the DRD and technical partners such as GIZ. In order to amplify our reach and impact, we took the step of establishing SPM with a group of founding members, which today include the Rockefeller Foundation, the World Bank, USAID, Yoma Strategic Holdings and Shell.
Can you talk more about SPM’s goals and how you are approaching the effort to give communities access to more power?
SPM exists to support the Myanmar people in achieving universal access to energy and realising the transformative opportunities that electrification can have for communities. Our goals are closely aligned to the Rockefeller Foundation’s global goals for energy access, and also with Pact’s global energy strategy: connect the unconnected, help build the grid of the future, and promote the productive uses of energy that drive economic activity and growth. We believe that increasing access to affordable energy is the single most important step Myanmar can take to improve the country’s economic potential and its resilience.
Only around 50% of people in Myanmar have access to the national grid and, of those, most live in urban areas. The government of Myanmar’s NEP sets out to achieve 100% electrification by 2030. As our “Decentralised Energy Market Assessment” demonstrates, other countries on a similar path have struggled to achieve universal electrification in a similar timeframe. Prohibitive costs, coordination difficulties such as planning, insufficient manpower and the remote locations of many villages all serve as obstacles. So, the challenge in front of SPM and others is to answer the question: what needs to be done to take decentralised electrification to scale?
There are certainly a great deal of unmet needs and also great potential for off-grid energy in Myanmar. Our research has shown that the potential market for mini-grids in Myanmar is between 8,000 and 16,000 systems. In the next few years, a target of around 2,500 mini-grids is viable and realistic, assuming political buy-in and the right kind of investment. The potential economic impact of this is compelling: a successful strategy to promote decentralised energy could create over 50,000 jobs and contribute around $250m to GDP growth.
SPM’s support to realise this potential can broadly be divided into three categories that, combined, lead to impact at scale: data and business intelligence for improved decision-making; financial and technical services to catalyse innovations and speed up project development, last-mile connections and productive use; and thought leadership and convening, to promote Myanmar’s opportunities in the right way in the right places.
We generate data and business intelligence to inform decision-making at all levels, from the selection of mini-grid sites to influencing and informing policy solutions. Through our Applied Energy Lab, we conduct and share cutting-edge research on energy trends and consumer behaviour to better inform interventions and stimulate demand — among other things, this is crucial for solving the problems in the demand-side space for mini-grid developers and micro-enterprise energy consumers. Our work in data has the potential to positively influence the NEP2, inform integrated electrification planning at the state and regional level, and much more.
Facilitating access to finance, for both mini-grid developers and villages, is similarly essential. Through our Energy Impact Fund, we are supporting connection financing for villagers who are unable to pay a lump sum amount for a connection and provide financing to scalable productive use enterprises that play a key role in the success of both a mini-grid and a community. At the national level, we collaborate with key institutions to develop innovative financing solutions for developers aimed at reducing risk and spurring market confidence. We recently supported the creation of facilities large enough to finance all of Myanmar’s developers’ equipment needs this year; we are anticipating hundreds of millions of dollars in leveraged financing over the next several years. In addition to increasing access to financing, we are helping developers grow their businesses through targeted technical assistance and business development support.
Finally, thought leadership and convening is central to our mission because establishing a clear, unified narrative for a national electrification strategy will lead to a less bifurcated energy market, where on-grid and off-grid strategies are integrated. It will also allow us to help reduce barriers to common understanding among key stakeholders and bring diverse players together to solve challenges for creating an integrated energy market in Myanmar.
You mentioned new equipment financing facilities for mini-grid developers, such as the one that SPM developed in partnership with local commercial banks. Can you tell us what that process was like?
Unlocking finance is crucial to the success of Myanmar’s mini-grid market. Even with World Bank subsidies and contributions from local communities, developers under the DRD’s mini-grid initiative are still responsible for 20% of the equipment costs of the mini-grid. Many developers do not have this money immediately available, hindering the development of new mini-grid sites and energy access for communities in Myanmar.
After working closely with the DRD and mini-grid developers to understand exactly what the sector required, we worked with several commercial banks to improve understanding of the mini-grid market and held trainings in risk management. All were eager to learn more about this new asset class.
Several of these banks have since gone on to launch equipment financing facilities with manageable terms for developers, which three developers have already drawn down on. AYA Bank, A Bank and MCB have all stepped up, and we have several other interested banks in the pipeline.
Through our financing services, which help to establish and nurture new facilities and approaches, we’re aiming to catalyse at least $100m in financing by the end of 2022 to support integrated electrification, and local banks will need to play an essential role in this. To date, SPM has catalysed almost $20m in financing for off-grid energy solutions and will continue to find ways to remove the various barriers to bankability for mini-grids, which includes improving access to finance.
Shifting to the other types of support you provide, can you tell us about your new Mini-Grid Accelerator Program? How did the idea for the program originate?
Developers have multiple priorities: reducing costs, creating scalable long-term businesses and preparing for accessing international capital. Achieving these priorities is crucial to the success of off-grid energy solutions in Myanmar and the Mini-Grid Accelerator Program, launching in June, seeks to address all of them.
The Accelerator Program is the product of a new partnership between SPM and the Miller Center for Social Entrepreneurship. It was conceived last year through a chance meeting with one of Pact’s global board members who works at Santa Clara University in Silicon Valley, where the Miller Center is based. After seeing the potential of working in Myanmar, the Miller Center, which has provided extensive support to mini-grid developers in Africa, approached SPM with a joint proposal for funding from Chevron — a proposal that was fortunately successful.
In collaboration with the DRD, the first round of the program will bring approximately 20 participants from 13 mini-grid developers together and connect them with mentors based in Myanmar and Silicon Valley. In total, these developers have more than 50 mini-grid sites in various stages of the project development cycle. Some of our mentors have backgrounds in energy services, while others are CEOs and executives with extensive business experience.
With help from online videos and workshops, mentors will guide participants through 12-modules over the six-month program designed to help developers produce cutting-edge business plans. To accommodate new social distancing requirements and travel restrictions related to the COVID-19 pandemic, we have moved the program fully online.
By building the capacity of local developers and helping them to speak the language of international investors, the program will send a clear message: Myanmar’s mini-grid sector is ready for investment and growth.
SPM also recently announced a new partnership with Private Financing Advisory Network (PFAN). Can you tell us about how this program will support developers and what your role will be?
PFAN is a global network of climate and clean energy financing experts that aims to connect entrepreneurs working in clean energy with private sector investors. They typically support entrepreneurs in three main ways: building project pipelines; helping projects to develop investor-ready proposals and facilitating project-to-finance matchmaking.
SPM’s role is to utilise our unique position in Myanmar’s energy sector to make the partnership a success. This means identifying suitable projects for partnership, leveraging our network in Myanmar, facilitating access to project developers, and supporting PFAN and developers throughout the program.
We already have a number of projects in the pipeline and are expecting some significant developments in the second half of the year. Watch this space!