The decentralized renewable energy industry has gone through a tremendous amount of innovation, transformation and increasing documented impact over the years.
One example of this growth was shown during last month’s Global Off Grid Solar Forum in Hong Kong, From formal sessions to hallway conversations, there was a much greater focus on company and investor participation with more of a business and commercial tone. Notably, it was focused on the growth trajectory of the private sector industry.
As highlighted in Sustainable Energy for All’s (SEforALL) recent Energizing Finance report series, less than 1% of the total financing committed to electricity access in 2013-2014 was targeted to decentralized solutions. The Off Grid Solar Market Trends Report 2018, launched at the forum, is a strong statement on the overall position of the industry, recognizing the dual reality that few companies are declaring profits, yet massive sums of new investment are needed.
This financing demand is happening as the off grid solar industry is struggling to meet both impact and return expectations placed on it by the global development and investment communities, a tension that must be managed. If not, the worry is that grid advocates will cry out that the sector can never meet the energy access challenge and thus grid-scale solutions are, of course, the answer.
Yet as CEO and Special Representative to the UN Secretary-General for Sustainable Energy for All, Rachel Kyte, recently pointed out, the time has never been better to actually achieve energy access with decentralized solutions, especially in Africa where we are seeing examples of policy reforms that are working, investment climates that are attracting long-term financing and innovation that is poised to grow exponentially.
Conversations at international events are also changing now. While consumers and many of their civil society group advocates may not physically be in the room, conversations are focusing much more on affordability of off grid solar for the ‘last-mile’ household, consumer protection principles, safety net approaches and social and development impacts achieved.
This imperative to leave no one behind increased our focus on how to best utilize public resources to increase access to electricity, particularly in last-mile communities and latent, frontier markets. The translation of development impacts achieved through off grid solutions into data to influence financial and policy decisions, the subject of Why Wait? Seizing the Energy Access Dividend, should further inform discussions on best use of public resources.
Addressing how to most efficiently use public resources to increase private investment to close energy access gaps is a priority for the off-grid sector. There is strong agreement that public and philanthropic funding is needed to deploy energy access solutions and meet universal energy access goals – the private sector and market based approaches are not going to be able to deliver universal energy access alone. In order for public and private investment to productively align, however, companies at the Hong Kong forum vociferously called for a seat at the table when public programs and subsidies are being designed and stressed that there be a clear examination on the impact of public interventions in nascent commercial markets.
And what is my expectation, as we look ahead? As the industry becomes better developed and more visible, as financing mechanisms for its various components become more familiar and accepted, as lenders and investors become more confident, and as economies of scale inevitably develop, it is likely that the use of solar home systems and other decentralized solutions will become significantly more widespread in emerging markets, especially in harder-to-reach remote areas.
With ever-cheaper solar technologies, emerging business models, the mobile revolution, efficient appliances, innovative financing, the reality on grid limitations and true public-private engagement, the time for a revolution in off-grid markets is now.