- The vast majority of forcibly displaced people around the world have limited or zero access to electricity.
- Together, they represent a vast and untapped market for energy producers.
- Here's how the private sector can help to meet this demand.
Over the past decade, the global population of forcibly displaced people (FDP) grew substantially, from 43.3 million in 2009 to 79.5 million in 2019. Last year alone, an estimated 11 million people were newly displaced. Developing countries host 85% of FDP, and these nations are often already in need of development assistance. At the local level, host communities are also affected by the presence of the newly arrived. By any account it is a dire situation, and the trends do not bode well. A role for the private sector is emerging.
According to the UN Refugee Agency (UNHCR), 97% of FDP have limited or no access to electricity in camps. As a result of constrained resources and short-term funding cycles, energy access is rarely considered in the country strategies, projects and budgets of the UN. This energy gap hinders the ability of FDP to access education, water, sanitation and health, gender equality, connectivity, income-generating opportunities and more. This might make it more likely they will become an economical burden to their host communities.
In its latest Clean Energy Challenge, UNHCR encouraged other actors to intervene in order to meet the energy needs of both FDP and their host communities, emphasizing the need for partnerships and private sector participation. Innovative market-based approaches are being encouraged by the institution as long as FDP's empowerment is ensured and vulnerabilities are not aggravated by market forces.
Have you read?
Market-based models are most likely to succeed in protracted situations, which have increasingly become the norm rather than the exception. That is, the temporary facilities become part of the fabric of the city or community – often as a slum. In these situations, FDP tend to purchase products from their own income, as outside support decreases over time with other emergencies taking priority.
If protracted FDP settlements and their host communities are viewed as a single market, they represent a significant untapped demand for goods and services, as well as supply of labour. In some cases, these settings are comparable to typical rural markets, where the World Bank Group’s Lighting Global Program has successfully been implemented. Born in 2009, the market creation programme works with manufacturers, distributors, governments, and other development partners to build and grow the modern off-grid solar (OGS) energy market.
Lighting Global’s proven model could be one solution to harness and strengthen these markets to benefit FDP and their host communities. It is based on five main pillars:
1. Quality assurance standards. Ensuring product quality is critical to build confidence, ensure consumer protection and reduce market distortions. An influx of poor-quality products, usually at lower-than-market prices, will serve to negatively distort the market. This is particularly important in FDP camps where humanitarian agencies, in the attempt to serve as many people as possible, sometimes procure and distribute low-priced, often low-quality products. In the attempt to raise awareness among the humanitarian community, the Lighting Global team published a step by step guide on procuring solar kits in these contexts.
2. Collecting market information. This is crucial to help manufacturers, distributors and retailers make informed business decisions. Data points regarding the scale and nature of the energy markets in FDP camps and host communities are not readily available, and represent a big gap that initiatives such as The Global Plan of Action for Sustainable Energy Solutions in Situations of Displacement are trying to fill. The required information includes quantitative data such as demand (current expenditure and income, power supply and energy needs, solar use and awareness and ability to pay, and electrification rates in rfugees' country of provenance), supply (current products sold, interest in selling solar, financing options, and interest in financing to non-citizens - in the case of refugees) and potential market (potential demand and gross sales). Important qualitative data is also needed, such as financing options, and policies and regulations. Examples of such efforts include IFC’s Kakuma as a Marketplace and Market Analysis: Energy Access for Syrian Refugees in Lebanon, and Shell’s Access to more: creating energy choices for refugees.
3. Business development support. This is necessary to create a self-sustaining environment for the private sector. These activities must be preceded by the creation of an enabling environment for companies and micro-finance institutions (MFIs) to operate. This means, for example, informing companies on how to engage with camp management agencies and implementing partners, and on how to employ FDP considering the regulations on the right to work. Subsequently, it is critical to attract companies and stimulate entrepreneurs by raising awareness of the commercial potential of these settings, given the widespread perception that FDP are only recipients of humanitarian aid with no ability to pay. Finally, there are activities such as B2B linkages with last mile distributors, and advice about applicable business strategies and models.
4. Consumer education to stimulate demand and increase awareness. This is crucial mainly due to limited and unreliable information on the benefits of quality products, misleading perceptions about solar energy (cheap, poor quality or dangerous, for example), and market spoilage following purchases and distribution of low-quality products.
5. Product financing. Affordability is a core issue in FDP camps and host communities. There are at least two schemes that may be applied: MFI or pay-as-you-go (PAYG) financing. In the first case, financing is provided by a financial institution, whereas in the second case it is provided by the company itself. In the case of MFI financing, tailoring the types of loans to the needs of FDP and host communities is essential; for example, expanding the type of identification accepted. Kiva, the crowd-lending platform, has funded loans to thousands of FDP and helped prove the business case for serving them. Despite being complex and capital intensive, PAYG has revolutionized the OGS sector. This model is also likely suitable for FDP settings, as demonstrated by USAID’s latest De-Risking PAYG Solar Home Systems in Uganda Refugee Settlements Grants Program.
The public sector alone will not be able to meet the energy needs of the 1.8 billion people who live without modern energy access and a reliable grid. A similar situation arises in FDP settings. Leveraging the private sector—both in terms of capital and innovation—is a critical factor in closing the energy access financing gap in these contexts.