16 May marks the International Day of Light.
To mark this year's International Day of Light, Palladium's Lydia Hatch shares three ways to increase access to electricity for rural and remote areas in developing countries.
Over one billion people—about 14% of the world’s population—do not have access to electricity. Eighty-four percent of those without electricity live in rural areas, mostly in Sub-Saharan Africa and Asia. And these figures don't account for the many more whose electricity access is often unreliable and prohibitively expensive.
There are various reasons why rural areas are not connected to the electricity grid (the network that delivers electricity from producers to consumers). In some regions, the landscape is too rugged, vast, or remote that building infrastructure is simply too difficult and costly. And even if a grid exists, it may not have enough capacity to transmit electricity across it. In other cases, low population densities mean electricity companies have little incentive to integrate these communities into the grid.
Without grid access, many communities rely on energy sources such as kerosene, candles, dry cell batteries, and diesel generators — which are not only polluting, but expensive.
Electricity is instrumental to stable livelihoods, economies, and poverty reduction. Here are three approaches that can create better access to electricity in rural and remote areas in developing countries.
1. Renewable Energy
For off-grid communities, renewable energy such as solar panels, wind turbines, hydropower, and biomass can be sustainable and affordable solutions. Communities do not need to rely on grid access and renewable energies tend to be cheaper for consumers in the long-term. These solutions can be tailored locally since renewable energy sources can be stand-alone points of power generation or used to complement already existing forms of electricity.
It's also been shown that for women in remote communities, renewable energy can improve air quality inside their homes as well as reduce fire risk from candles and oil lamps. Solar lighting also enables more hours for study and work, and greater freedom to socialise at home.
Take an example from Papua New Guinea, where only 20% of households have electricity and only 12% are connected to the grid. A partnership between Digicel, a mobile phone network, and Australia's Business Partnerships Platform was able to bring safe, reliable, and affordable energy to over 200,000 people by selling solar units that provided light and a place to charge mobile phones.
To do this, Digicel first improved its supply chain by streamlining operations and channelling stock through wholesale distributors. The improved logistics resulted in being able to purchase higher quality solar panels without increasing the price point for consumers - ultimately 40,000 solar panels were dispersed. The partnership also worked with local communities to understand its needs and tailored approaches for them.
Jack, one of the recipients of a Digicel solar panel attests, "The lights are very bright. It doesn't give me any problem and it's strong. My daughter now uses the light to do her homework."
2. Innovative Financing
In these often complex operating ecosystems, innovative financing is key to generating additional finance or using existing capital more effectively. Subsidising costs for consumers and businesses is just one way innovative financing can be used to create equitable electricity access.
Grid electricity is prohibitively expensive for many of the low-income consumers across the world. Renewable energy is more affordable for consumers in the long-term but has a high initial investment cost. Innovative financing helps subsidise this initial investment.
For example, PEG Africa is a company in West Africa that sells solar home systems. It provides solar panels on credit, allowing customers to pay in smaller increments, and each payment goes towards ownership. This model is creating a substantial impact in remote areas and for people who previously could not afford electricity. In 2017, Palladium made an impact investment in PEG Africa and those funds alone are projected to bring renewable, affordable electricity to 500,000 people.
On the supply side, electricity companies tend to have little incentive to connect more people to the grid. Subsidising incentives can mitigate this challenge; incentives may include paying companies per household connection or providing output-based grants.
One example is viability gap financing: a subsidy tool that governments and donors use to incentivise private investment in infrastructure that otherwise would not be financially viable in the short-term. Normally this is used for large-scale infrastructure projects, but in Cambodia, the Investing in Infrastructure project is using it for small-scale infrastructure projects like electricity. It's projected to bring electricity to more than 33,000 households and 150,000 Cambodians.
3. Whole of Ecosystem Approach
Ecosystems need to be considered locally and holistically in order to achieve sustainable solutions. This is because there is no 'one size fits all' solution.
Locally-tailored solutions will bring about better long-term local benefits. What are the communities' main challenges? Who makes the decisions in the household? How can businesses get the word out? Which payment mechanisms will work?
It's also critical to understand how the ecosystem operates holistically. This may include landscape analyses of operating companies, stakeholder mapping, understanding how regulatory bodies work, and how long it will take to get approvals. And like with any successful ecosystem, a balance of the right, trusted partners will successfully implement the solutions.
These various methods are certainly not an exhaustive list of ways to bring electricity to remote and rural regions across the world. But, no matter the method, it is critical that we work towards equitable electricity access. As technology becomes more integral to the modern world, we risk widening the inequality gap even further between the developed and developing worlds.
Palladium manages the implementation of the Investing in Infrastructure and Business Partnership Platform projects.