“We need partnerships with the private sector, the global engine of growth and the primary source of new investments.”
Ban Ki-moon, Secretary-General of the United Nations
Globally 1.3 billion people (20% of the world population) do not have access to modern energy such as electricity and lighting. Investment totalling US$ 48 billion/year will be required by 2030 to ensure universal energy access. Considering current yearly investments of US$ 14 billion, a gap of US$ 34 billion has to be closed.
At the same time, the market opportunity for business in enabling energy access is substantial. Large populations lack access to modern energy services worldwide and yet, despite low incomes, spend US$ 37 billion/year to meet their basic energy needs (cooking, lighting and productivity generation activities). Today’s market for electricity and lighting solutions represents 274 million households. 470 TWh of energy will have to be provided through off-grid and mini-grid solutions alone. Innovative solutions and services, as well as substantial investments are needed to unlock this market at the bottom of the pyramid.
Rationale for engagement
In response to a request from leaders from business, government and international organizations in 2012 in Davos, the World Economic Forum, in collaboration with Price Waterhouse Coopers has been developing a cross-industry framework that can help the Energy Access ecosystem flourish, through off-grid solutions.
In addition to traditional utilities, telecom or consumer electronics firms can commercially fulfil the rising energy demand by actively offering affordable energy services to households and communities, especially to those without grid access. To overcome challenges, such as designing affordable and accessible products and robust distributions channels, as well as to further unleash energy access market opportunities, it is clear that business across the value chain must commit to addressing the issues in new ways. Collaboration and co-investment are the way forward.
Partners and supporters
Following actors have been acting as advisory board to the early development of this project concept: Duke Energy, PwC, Philips, Suzlon, Trina Solar, Energy+ Initiative (Norwegian government), Climate & Development Knowledge Network, GSMA Development Fund, The Energy and Resources Institute (TERI)
In order to complement existing initiatives and private sector projects, our initiative aims to achieve the following goals:
- Facilitate the Energy Access discussion among business leaders in and beyond the energy sector
- Develop a cross-sector partnership framework and respective business model, to scope and guide large scale implementation through new partnerships
- Engage with multinationals, local companies and social entrepreneurs to foster collaboration and the formation of b2b partnerships
- Engage with investors and donors to attract financing for large scale testing and implementation
- Engage with governments and other stakeholders to support the development of enabling country eco-systems
Insight - Cross-sector partnerships: a way to unlock the potential
Based on consultation with key experts and knowledge available in the field, it is clear that, the potential and synergies of collaboration and matching of expertise across different sectors is vastly untapped. This cross sector collaboration promises to be key to successfully unlocking the market potential.
Looking at the off-grid market the following stakeholders have a key role to play due to their needs and their potential contributions:
- Telecom: Need for cheap and renewable energy supply for telecom towers and charging power for their customers; provide stable energy demand, as well as mobile payment and billing services
- Energy: Need reliable demand and revenue streams for energy; provide renewable off-grid energy, metering services and mini-grid distribution/ connection
- Electronics: Need energy at household level to power appliances and distribution channels to reach the customer; provide energy and lighting devices / services
- Local business / social entrepreneurs: Need affordable, reliable and locally accepted electricity and lighting solutions; provide local market insights, credibility, manufacturing, distribution and connection capacities
- Government: Need electrification and access to lighting for rural areas, not reached through grid to achieve local growth and development; provide regulatory and legal conditions
- Investors: Need low-risk, proven/tested and scalable investments; provide seed, patient and working capital
With effective cross-sector partnerships that bring these actors together, the following value can be created in the overall energy access ecosystem:
- Creation of new (non CSR) business models and commercially viable products, through combining best expertise and a clear business case
- De-risking project financing and investments through risk- and cost- sharing and leveraging synergies among partners
- Improving “last mile” customer reach through sharing market information, distribution channels and leveraging local contacts and brand recognition
- Increasing product affordability through price subsidies and customer finance, by sharing co-investments and developing customer financing models
- Increasing profit recovery and payment collection through consumption metering and mobile payment solutions
Process and interaction
Looking forward, we plan the following next steps:
- Davos 2013: Cross- industry energy access workspace that presents this framework to leaders of businesses, investors, governments
- 2013 – 2014: Support 2-4 countries in developing these business models through accelerated learning and potential simulations; followed by hand-over to relevant local organizations for implementation
- 2014 – 2015: Large scale implementation
Scope of the project:
- Market: the players of interest include - integrated mini-grid / devices, rural / peri urban off-grid
- Geography: Select countries from sub-Saharan Africa, developing Asia, Latin America where market based solutions would be possible, where there is sufficient partner and investor interest and there is sufficient commitment and interest from government
- Stakeholders: companies from energy, telecom and consumer goods sector; host governments looking to progress energy access market development; impact and commercial investors, Foundations, Aid Agencies and other funds to provide financing for business model development, testing and scaling up models
- Technologies: renewable energy based solutions; fossil fuel based solutions would also be considered
To achieve our goal of large scale implementation and impact we are looking for support and partnering in the following aspects:
- Private sector partners from the telecom, energy and electronics sector that see value in our approach and commit to engage and potentially, co-invest into the business model development, testing and large scale implementation
- Host governments who want to actively support the rural, off-grid electrification and support with enabling regulatory and legal conditions to test business models at scale
- Investors and funds that are interested to support the business model and project development by offering patient capital for testing; and those interested in developing projects that can be commercially bankable at a later stage
To get engaged, please contact Ramya Krishnaswamy (firstname.lastname@example.org), Associate Director, Head of Energy Utilities and Technology Industry, or Bosco Astarloa (email@example.com), Senior Community Manager, Head of Renewables Industry.