Fueling Development: what Solar Energy can do to fight energy poverty
Learn how solar companies and governments are helping developing countries to fight fuel poverty.
According to Nick Butler, an FT columnist, for one person in six, worldwide energy is not a tradeable commodity but a matter of survival. More importantly, it takes the form not of electricity from the grid or petrol from the pump but wood or dung collected by hand.
Today 17% of global population lack access to electricity, and 38% lack clean cooking facilities. Modern energy services are crucial to human well-being and to a country’s economic development; and yet globally 1.2 billion people are without access to electricity and more than 2.7 billion people are without clean cooking facilities. More than 95% of these people are either in sub-Saharan African or developing Asia, and around 80% are in rural areas.
Energy access is about providing modern energy services to everyone around the world. The IEA defines these services as household access to electricity and clean cooking facilities (e.g. fuels and stoves that do not cause air pollution in houses). Although already in 2014 global electrification reached 85.3% in 2014, over 1 billion people still do not have electricity. Some countries made rapid progress, including Kenya, Malawi, Sudan, Uganda, Zambia, and Rwanda. Others, such as Afghanistan and Cambodia, are progressing rapidly by making greater use of off-grid solar energy, underscoring how new technologies can drive progress.
Some of these countries also experience rapid population growth, especially in Sub-Saharian Africa, which makes the modest progress in terms of the living conditions negligible. The IEA predicts that even in 2030 almost a billion people will still be lacking electricity, and this figure could be even higher if the population growth in India and Africa continues at the same pace.
In general, energy and fuel poverty follow poverty as such, so energy access is related to socio-economic modernization of the countries. In general, modernization, or development, means a transition to better living and governance standards, from an agrarian to an industrial economy, in parallel with urbanization and a demographic shift — from high birth rates and high mortality to modest population growth and low mortality. Moreover, historically the countries who modernized successfully have been equipped with country-wide electric grids. Remember Vladimir Lenin’s famous words that socialism is the power of Soviets and electrification of the whole country. Whatever the historical record of the Leninist-style socialism, it has undoubtedly been an effective development project that pushed many countries of the global periphery from poverty to industrial economies with modern living standards.
For those countries who modernized after the Second World War, electrification is no longer an issue. However, for the poor countries of the bottom billion that currently lack any infrastructure, industrial electrification might not be an option. This is not only because it is unsustainable, but also because it requires massive investments and consolidated political effort, both of which are often lacking in Sub Saharian Africa and other similar countries of the Global South.
This is not to say that governments cannot use the proven industrial modernization scenario. Thus, China has succeeded in lifting hundreds of millions out poverty and subsistence in the recent decades. However, China is currently a leading player on the global solar market, because the resources of the 20th-century-style industrial modernization — including energy modernization — are limited.
But what to do in the countries with weak governments, poor population and lacking infrastructure? Where millions of people are living in energy poverty, relying on an excessive use of kerosene which is dangerous to both their lives and their environment, and also quite expensive? In such conditions, energy modernization might take another route, skipping the industrial stage — large scale fossil fuels power generation — in an attempt to start with a greener, renewable technology provided by private companies.
How to do this? Butler writes that
“Of course money matters, but this is not particularly about aid. The challenge is much more about organisation to give people the opportunity to use the technology that is already available. A crucial element is finding a viable financial mechanism that can help families and villages to get the equipment and to pay back the cost out of the revenue it can generate. This is a matter of spreading risk, creating revenue flows and of developing a system to collect payments in communities completely unaccustomed to financial transactions”.
Fueling Development: Solar Companies Off Grid
In East Asia, 27 million people live without electricity. Every year they are compelled to literally burn $3 billion in kerosene equivalent, living in complete absence of electrical grid. To heat their homes and cook food, they have no other choice but to buy large quantities of kerosene, unsafe batteries, and other unsustainable and dangerous devices. That is the problem Solar Home, a solar energy startup, intends to solve.
SolarHome installs integrated solar energy and appliance units in customers’ homes, and offers radically affordable “rent-to-own” plans of energy service subscription. This dramatically lowers the barriers to adoption of solar technology by the bottom-of-pyramid clients. For people living in developing countries and suffering not only from “conventional” poverty, but also from fuel poverty, contemporary renewable energy generation systems are not an option, because of their unbearable costs. Even the cheapest ones require at least $100, which way too much for a one-time payment for many people living in poverty.
Solar Home offers a more flexible payment model, similar to conventional loans, but integrated into the technical system itself. Basically, a user pays only when he or she needs energy, be it every day, every week or every month. In about 2 years since the beginning the payments will be covered, and the users acquire the ownership of the system. Since the majority of the population earn $85 a month (on average), they can afford payments ranging from $3 to $15. Solar Home expects 10’000 of such systems to be installed next year.
The company aims to address 27 million households across Southeast Asia living outside of the electric grid. Headquartered in Singapore, SolarHome presently operates in Myanmar.
In Africa, similar issues are getting solved by a similar startup company called Off-Grid Electric. The company plans to equip 1 million of rural African homes with cheap solar panels, costing $6 for the installation. The monthly payment will be not much higher than the initial installation price, so that 600 million of people living without electricity in Africa will be able to afford it. In 2016, the company won the prestigious Zayeed Future Energy Award in small and medium-sized business (SME) category.
Similarly to Solar Home, Off-Grid Electric utilizes the pay-as-you-go business model. The solar panels costing $6 are affordable and can provide enough electricity to power simple home appliances like lighting, TV, and radio. After the installation is completed, the users rely on the mobile platform called M-Power to pay the monthly rate of $6-$15, depending on the amount of electricity consumed. With the solar panels comes an individual meter, a pack of LED lighters, and a mobile phone charger.
Off-Grid Electric is already operating in Tanzania and plans to expand in Rwanda and elsewhere. Currently it operates 50’000 homes monthly.
From Firms to Policies: The Indian Case
Some of the energy issues faced by developing countries might be solved by more conventional means. For example, the Manchester-based company Inventid started the production of lamps based on solar batteries to be sold by $5 each. The idea is to sell them in African countries that face electricity problems. The project is co-sponsored by the Chinese company Yingli and the charity organization Solar Aid. The product has been tested by 9’000 of African families, successfully. The solar bulb is quite flexible and can be used in many everyday life contexts: it could be installed onto different surfaces, tied to a bicycle, used at home or as a torch. A fully charged battery is capable of working for 8 hours.
Narendra Modi, the Indian Prime Minister, started 16 billion rupees (1.8 billion of Euros) electrification programme called Saubhagya Yojna that is expected to have provided all households in the country with electricity by the end of 2018. The policy initiative will involve more than 40 millions families in both rural and urban India, which is roughly equivalent to one fourth of the country’s population. BBC and PV Tech have reported on this programme recently.
About 300 million of Indians are still living without electricity and access to the grid. The programme is intended to help them, and is financed through the federal budget. The primary beneficiaries are poor families and household spread all over the country, but mostly clustering in the rural areas where the electrification coefficient is the lowest.
The Indian government have been active on this policy arena in the recent years, having started a similar programme called DDUGJY that connected thousands of villages to the electric grid. Although similar in terms of intentions, Saubhagya Yojna targets separate households as opposed to villages, and has an explicit emphasis on green energy. Since many Indians still rely on kerosene to provide heat and power to their homes, the programme will make their power supply significantly safer, promote usage of more sustainable appliances based on solar batteries, and reduce carbon emissions.
This will both help India achieve its green targets and increase the quality of life in the distant villages that are difficult to connect to the power grid. More specifically, the programme will supply the unelectrified homes with solar batteries of 200–300 W capacity with an accumulator and other necessary tools. The beneficiary families will be guaranteed a right to maintenance services for the next 5 years, free of charge.
Power transforms lives in many ways. Households can have access to clean water, and communications systems can link the most remote villages to web-based health systems. Most important of all, accessible power can help create productive enterprises and the potential for exchange and trade, as Butler concludes in his article.
Since most of the future growth of energy business will be clustered in the emerging markets, including the poor countries, solar companies might be a viable option to fight energy poverty there. One of the challenges to make solar energy a means for development is creating viable financial mechanisms — and this is what Solar DAO is doing. We will write more about energy poverty and how solar energy can beat it; meanwhile, support us and stay tuned.
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