POWER December 2015 - 128

COMMENTARY
Aaron Leopold
T
2 Billion Underserved
Customers Are Waiting for
Energy Services
he world has a problem. According to the World Bank, 1.1 billion
people lack access to any form of modern energy service,
and more than double that number lack access to adequate,
reliable, affordable, and safe energy services. Most of the energy
poor live in rural India and Sub-Saharan Africa. And most own a
mobile phone (that needs charging), have lighting (dirty-burning
kerosene lamps), and cook food (mostly on open fires).
Illnesses resulting from the indoor air pollution of these fires
kills more people per year than HIV/AIDs, malaria, and tuberculosis
combined. It is actually the number one killer worldwide of
children under five. So the energy poor, who have traditionally
not been seen as a viable customer base for the energy industry,
are doubly penalized: They often pay up to 20 times more per
kilowatt-hour equivalent compared to grid prices for the energy
they do use, and they pay in terms of health and wellbeing.
In addition to the billions of un- and underserved individuals
living in energy poverty, the World Bank's Enterprise Surveys
have found Sub-Saharan African businesses experience an average
of 8.3 power outages per month lasting an average of 4.6
hours each. This adversely affects all aspects of doing business
and developing attractive markets.
This situation is known as the " poverty trap. " But rather than
focus on the trap, we must focus on the way out, and the essential
role the power sector can play.
This Big Problem Is an Even Bigger Opportunity
Bringing modern energy services to emerging markets has become
a global priority. Beyond its role in ending the poverty
trap, it is also a mammoth business opportunity for power generation,
transmission, and distribution. But it will require new,
decentralized ways of thinking.
To address energy poverty in the region, in 2012, ECOWAS (the
Economic Community of West African States) found that while
75% of the region's 600 million inhabitants would be best served
by conventional grids, 104 million more remote inhabitants would
be most economically served by an estimated 156,000 mini-grids,
and an additional 47 million would be best served by stand-alone
systems. Globally, the International Energy Agency says the economics
dictate an even higher percentage of new electricity infrastructure
should be decentralized and renewable: 36% mini-grids,
20% standalone, and only 45% conventional grids.
A $500 Billion Market
Demand for decentralized energy solutions that have become
more affordable and technologically refined over the past decade
is growing rapidly and becoming mainstream in emerging markets.
It is starting to attract hundreds of millions of venture capital
dollars as well as both commercial and institutional lenders.
The African Development Bank recently committed to mobilizing
$55 billion to deliver universal energy access on the continent
within a decade. The potential market globally for distributed
renewable energy products and related appliances is estimated
at up to $500 billion. The energy poor who have no access to
128
electricity spend an estimated $30 billion annually on kerosene.
That's money on the table for the power sector.
And customer demand is there: Just a handful of businesses
combined-including Off Grid Electric, Nadji.Bi, Greenlight
Planet, d.light, and Solar Aid-serve more customers than many
of the world's largest electricity utilities. Bloomberg estimates
that the off-grid lighting and household electrification sector
will light up close to 100 million homes by 2020.
Significant new revenue potential exists in these markets for
multinational power companies, which brings bankability and
access to balance-sheet financing, sophisticated sales and marketing
operations, policy influence, and quality control. Already
some, like Schneider Electric, ENEL, and Total, are seeing the
opportunity, taking action, and investing.
Some of the biggest opportunities for power producers in emerging
markets is found not in selling kilowatt-hours, but in services-
charging, lighting, cooling-with innovative prepayment methods.
Businesses such as Mobisol and Off Grid Electric are doing this with
small individual home systems, of which they have been selling tens
of thousands per month over the past year. And companies like
Inensus have found success using prepayment for more-powerful
mini-grids that can really spur economic progress.
" Energy as a service " works because it removes the burden of
high up-front costs; the end user owns an individual home system
after a few years of monthly payments. Although poor, customers
in emerging markets are willing to pay more per kilowatt-hour
for decentralized rather than grid power because, in most cases:
the grid won't arrive in the foreseeable future; even if it does,
connection fees average over 100% of average monthly wages in
many countries; the kerosene and mobile phone charging kiosks
they would otherwise use are more expensive than both grid and
off-grid electricity; and off-grid solutions may be less powerful
but are much more reliable than today's poor-quality grids.
With customer acquisition for off-grid renewables accelerating
quickly, and the data collected forming usage and credit histories
that financiers can use to build trust in the " bottom billion "
as a viable business model, what the market needs now is for the
wider energy sector to start embracing these changes as a new
and important growth opportunity.
With more than 2 billion people still waiting for decent energy services
they can afford, power companies unburdened by legacy thinking
have a chance to sell a lot of energy to a lot of new customers.
Increasing energy access is a " no brainer, " said executive Jerome
Schmitt of Total, the largest energy provider in Africa and
a top solar provider, at the recent International Off-Grid Lighting
Conference. " We want to be a better energy provider for all
people . . . [but] we cannot do it alone, we need partners. "
What are we waiting for? ■
-Aaron Leopold is deputy director of advocacy of Power for All,
a collective of public and private organizations dedicated to delivering
universal energy access before 2030. He is also the global
energy representative at Practical Action, a nonprofit working on
energy access.
www.powermag.com
POWER | December 2015
http://www.Nadji.Bi http://www.powermag.com

POWER December 2015

Table of Contents for the Digital Edition of POWER December 2015

Contents
POWER December 2015 - Cover1
POWER December 2015 - Cover2
POWER December 2015 - Contents
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