Energy Transition

The new technologies bringing power to the developing world

Sarah Murray
Journalist, Financial Times/Economist Group
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Decarbonizing Energy

As of 2014, 1.3bn people lacked access to electricity. For those without power, lack of indoor lighting is among the most pressing of problems, forcing families to rely on expensive kerosene lamps, which cause pollution and are unhealthy—inhaling fumes from a kerosene lamp is equivalent to smoking two packets of cigarettes a day.

When it comes to lighting, the technology is relatively simple—a LED lamp, a solar panel and a battery. The drop in prices and improvements in efficiency for all three are making off-grid solar systems increasingly viable for low-income communities.

“First has been the improvement of efficiency of LEDs of 10,000% in the past 13 years,” says Russell Sturm, ‪head of Climate Change Advisory at the International Finance Corporation (IFC), part of the World Bank Group. “Batteries have improved 90% with the whole revolution around lithium and it’s been a similar trajectory for photovoltaic cells.”

These dramatic cost reductions have led to a quadrupling of installations of solar home systems  worldwide between 2002 and 2014—from 1.3m to 5.1m. Bangladesh is a global leader in the field, with more than 2.4m systems installed.

For homes, power sources range from simple solar lamps and solar home kits to microgrids, with several houses in a village connected to a group of solar panels.

“What’s exciting is it’s going to be incremental,” says Shuaib Siddiqui, director of the energy portfolio at Acumen, a nonprofit venture fund with investments in solar and off-grid power companies. “It completely changes the way we think about utilities and power distribution for this income segment.”

Technology is also playing a role. Mobile phones and sensors, for example, have enabled the use of “pay-as-you-go” models to serve remote communities. Customers pay the fee using their mobile phone; if they miss their payments, the system can be shut off remotely. Remote sensors can also monitor changes in demand, allowing companies to send out engineers to repair the system when an unusual drop in demand is identified—or to add solar panels to the microgrid when the system has reached its full capacity.

The above developments are opening new opportunities for governments to push for universal energy access. India, for example, is now betting on solar technology to bring energy to every household by 2019. Meanwhile, as part of its Power Africa initiative, the US is engaged in a $2.8m Off-Grid Energy Challenge to promote innovations that can scale up off-grid energy technologies.

The overall result is a growing market opportunity. Early-stage investments in solar off-grid companies reached $64m last year—two-thirds of which went to solar companies using mobile for payments. Large actors from developed markets are also getting increasingly active in the space, with two important solar players, SolarCity and FirstSolar, announcing global microgrid offerings in the last two months—in partnership with Tesla and Caterpillar, respectively.

The potential business opportunities go beyond the sale of power devices, argues Mr Sturm. “They have millisecond information about usage patterns and demographic information matched with payment history,” he says. “This is a way to get data about a consumer group that could open the door to entire industries.”

This post first appeared on GE LookAhead. Publication does not imply endorsement of views by the World Economic Forum.

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Author: Sarah Murray is a specialist writer on business, society and the environment. A longtime Financial Times contributor and former FT staff journalist, she is also a regular contributing author for the Economist Group.

 Image: Solar Panels are seen in a field. REUTERS.

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