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Making The Connection: 1.3 Billion People Without Power

21 October 2014

“I spent two summers building improved cookstoves in the highlands of Peru. At one household, an elderly man laboriously stomped straw into mud with his bare feet; he was making adobe bricks for construction of a stove. He caught sight of the power drill I had brought down from the States. I locked in the cement mixing attachment and began churning through the wet earth with ease. His wide eyes conveyed a clear message: ‘Where has that been all my life!?’ This was one of the many encounters I’ve had in which it is apparent how much powered devices could transform lives in the developing world.”

– Jason Prapas 

A Necessary Development

Power allows people to refrigerate and cook food, light homes and hospitals, and run machines that drive economic activity. There are clear links between access to modern energy services and human development [1]; how more than a billion people currently without power will gain and sustain access is less clear. Developing countries face a host of challenges in delivering power to the masses, including technical, financial, and regulatory barriers. Dismantling each of these barriers will be critical if goals to transform least-developed regions into healthy, safe, self-sufficient communities are to be met.

The International Energy Agency estimates that 1.3B people currently lack access to electricity. While current projections show a net reduction in that number by 2030, there may still be a billion people unconnected, with energy poverty actually deepening in Sub-Saharan Africa over the next 15 years. Even for those who are connected, grid reliability is a massive issue, with hundreds of millions of people unsure of when the grid will go down on any given day. In addition to threatening everyday productivity, these outages can lead to crippling events including stranded trains, traffic gridlock, trapped miners, hospital shut-downs, and city-wide protests.

With a lack of energy infrastructure, this Haitian business owner resorted to purchasing his own highly polluting, operationally expensive diesel generator.

Opportunities for Improvement

The need to connect so many people to electricity in the 21st century is also an opportunity to improve the status quo. We have the chance to produce power that is more reliable, affordable, sustainable, and plentiful in the developing world than it has been in much of the developed world. There have been vast technological improvements since the world’s first power grids were established. For instance, recent studies indicate that micro-hydro and photovoltaics represent the most economical choice for power generation in much of sub Saharan Africa. Perhaps this marks the beginning of an era in which the cleanest solution is often the fastest and easiest solution [2]. In rural areas, there is an increased push for distributed power through micro or mini grids, which may minimize the need for significant investment in power distribution (such as high voltage power lines) [3]. Lithium ion batteries are approximately twenty times cheaper ($/energy stored) than they were when first introduced in 1991 [4]. Given a wide spectrum of energy technology improvements over the past few decades, there are a multitude of opportunities to circumvent outdated solutions.

There is precedent for this type of technology leapfrogging in the developing world. Unconstrained by the need for costly landline infrastructure, billions of people in underdeveloped regions gained mobile connectivity in one decade. This, in turn, has led to further leapfrogging. Cellular-enabled mobile money has outpaced traditional banking and plays a major role in many underdeveloped economies. In Kenya, for instance, nearly half of the country’s GDP flows through mobile money platforms each year [5].

While technology ranging from batteries to electric motors has never been cheaper or more durable, significant developments are still required to produce global impact on energy access. On the generation side, systems need to be more modular and adaptable. When a wind turbine is incorporated into a predominantly diesel grid, for instance, the overall system should make quick and efficient use of this new resource. Diesel gensets should not run as if the new capacity were not online, nor should there be a blackout when the wind dies down. Technical challenges like this call for a low-cost, readily deployable, smart grid solution.

On the demand side, end consumers need to be billed fairly, consistently, and in a manner that is regionally suitable. For example, energy consumers in Haiti cannot receive paper bills for electricity when there is no postal service. Many customers prefer to prepay for their electricity to manage cash; a low-cost, pay-as-you-go smart meter could greatly benefit these communities. Meters such as this could help utilities as well. Many electricity providers operate in deep debt, requiring heavy subsidies to offer any level of service. These companies must be better equipped to reduce their operating costs. Investing in smart meters could dramatically reduce nontechnical losses (theft, unbilled connections, etc.), greatly improving the economics of these enterprises. Cash positive utilities are more likely to extend the grid to new customers and invest in improved technology.

How to integrate renewable resources with conventional power resources is an increasingly common challenge throughout the world. Photo courtesy of Bryan Willson.

Beyond technical improvements, access to capital needs to improve across the energy sector in developing markets.  Start-up companies – critical testing grounds for technologies and business models – face a dearth of early-stage investors.  The Monitor Group reports that only 7% of venture funds in Africa offer early-stage capital and while multilateral institutions and philanthropies have begun to increase their focus on early-stage finance, it remains an underserved investment segment [6]. Early stage innovators desperately need access to seed capital and technical resources to de-risk their technology and reach scale. This is precisely why we established a new energy-access venture development firm, Factor(E) Ventures.  At the other end of the spectrum, many utilities in the developing world face drastic increases in demand, but do not have access to affordable capital that is required for large-scale infrastructure investments.  This has a variety of consequences, from rolling blackouts to incremental increases of diesel capacity as a stopgap measure.

Finally, government policy can be a critical enabler or obstacle to connectivity.  India is a prominent example of both: programs to subsidize capital costs for rural electrification projects has helped electrify hundreds of thousands of villages, but complicated and slow approvals processes limit the programs’ potential. Furthermore, over-emphasis on capital subsidies offers little incentive to maintain long term, sustainable grid performance, contributing to a landscape littered with defunct microgrids [7]. There is evidence that the diesel subsidy recently introduced in India spurred dramatic spikes in air pollution, causing New Delhi to surpass Beijing in that dire category. Government leaders need to recognize that all energy is not created equal and produce policies that promote clean, sustainable energy services moving forward to ensure that overall living conditions are actually being improved.

Up for the Challenge

Significant improvements must and will be made in the technology, investment, and regulatory arenas to empower the world’s poor and facilitate sustainable development.  Every day at Factor(E), we partner with people around the world who are working hard to replace these barriers with innovations.  There is no all-encompassing solution, but there are plenty of reasons to be optimistic looking forward.

References

1. Gaye, A. “Access to energy and human development.” Human Development Report – 2008 (2007).

2. Szabó, S., et al. “Sustainable energy planning: Leapfrogging the energy poverty gap in Africa.” Renewable and Sustainable Energy Reviews 28 (2013): 500-509.

3. Hatziargyriou, N., et al. “Microgrids–large scale integration of microgeneration to low voltage grids.” CIGRE C6-309 (2006).

4. Noorden, R. “The Rechargeable Revolution: A Better Battery.” Nature. 5 Mar. 2014.

5. Schulze, L. “The three billion new middle-class opportunity: The successes and technical challenges of mobile financial services in emerging markets.” Journal of Payments Strategy & Systems 8.3 (2014): 235-245.

6. Koh, H, et al. “From Blueprint to Scale: The Case for Philanthropy in Impact Investing.” Rep. Monitor Group, 2012.

7. Aggarwal, V., et al., “Rural Energy Alternatives in India Report” Princeton University. 2014.

Factor(E) is a venture development firm committed to improving lives in the developing world through increased access to sustainable energy, by supporting early-stage entrepreneurs through a unique blend of risk capital and world-class technical resources.  As Chief Technology Officer at Factor(E) Ventures, Dr. Jason Prapas (Ph.D. Mechanical Engineering, Colorado State University) leverages his work experiences with biofuel algae and biomass cookstoves to identify and build an understanding of technological solutions to energy access problems. In his role as the Business Director, Nick Peters (B.S. International Economics and Environmental Science, UCLA) applied his background in finance, consulting and philanthropy towards sourcing investment opportunities and helping entrepreneurs build successful businesses around innovative technologies. 

Cover image "Ouagadougou shop" by Martin Wegmann, licensed under CC BY-SA 3.0.

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