The State of Off-Grid Energy

 
  1.2 billion people live without access to power, even more live in areas where access is patchy and unreliable (Daniel Fogg/BuffaloGrid)

1.2 billion people live without access to power, even more live in areas where access is patchy and unreliable (Daniel Fogg/BuffaloGrid)

 
  The impact of access to energy from Acumen's latest report ( link ) 

The impact of access to energy from Acumen's latest report (link

 
  Solar energy is helping off-grid communities across India and Sub Saharan-Africa tap into a reliable and affordable source of power (Daniel Fogg/BuffaloGrid) 

Solar energy is helping off-grid communities across India and Sub Saharan-Africa tap into a reliable and affordable source of power (Daniel Fogg/BuffaloGrid) 

 An agent for Indian banking inclusion network selling affordable mobile charging with a BuffaloGrid Hub  (Daniel Fogg/BuffaloGrid)

An agent for Indian banking inclusion network selling affordable mobile charging with a BuffaloGrid Hub (Daniel Fogg/BuffaloGrid)

In August 2016, I met BuffaloGrid’s Daniel Fogg for a coffee in Mumbai. After catching the access to energy bug while working for FSG in India, I was eager to learn more about his company’s product and business model.

Today – almost two years and several coffees later – it’s been fascinating to observe BuffaloGrid’s growth and journey so far.

During a recent catchup, Daniel asked me if I’d be interested in sharing my thoughts on how I’ve seen the off-grid sector evolve, and where it might be headed next.

So, here’s the state of play in off-grid energy from where I’m standing.

 

The impact is real, but progress is slow

Despite some doubts over the benefits, as outlined in this article from The Economist, several studies, including Acumen’s Energy Impact report, have shown that most low-income customers desire and value off-grid solutions. 

People also save on the total cost of energy when switching from traditional, inefficient sources like kerosene, dung cakes or firewood, according to CGAP’s Escaping Darkness report.

Yet bringing off-grid technologies to populations in need has not been easy. The Sustainable Energy for All’s 2017 Global Tracking Framework shows progress has fallen short of what is needed to meet the global objectives by 2030, despite new policy commitments made under COP21 and the rapidly reducing costs of solar photovoltaics.

In Sub-Saharan Africa, electrification has actually lagged behind population growth, meaning the number of people without power actually increased from 585 to 632 million between 2009 and 2014.

With organisations around the world looking to accelerate access to reliable energy to the 1.2 billion people who currently go without, what’s really preventing the scaling of off-grid products and services?

 

Affordable financing: The elephant in the room

An increasing amount of research shows that the barriers are complex and various, including:

However, the single biggest challenge facing the sector is the lack of affordable financing.

According to Shell Foundation’s financing report, achieving SDG7 will require over $30 billion in commercial capital over the next 13 years.

Juxtapose that figure with the most recent off-grid solar market trends report, which states that less than a billion has been raised since 2012, and the size of this issue quickly becomes apparent.

According to SEforAll’s Energizing Finance report:

“Finance commitments for decentralized energy solutions are miniscule, accounting for roughly $200 million per year, or only one percent of total trackable finance for electricity committed in 2013-14 across high-impact countries.”

Beyond falling short on the needed volumes of capital, there is also a financing type gap between the much-needed early stage capital (grants and convertibles) and the more readily available, late stage, commercial capital.

This is alarming, and sector-acceleration outfits such as the Shell Foundation, SEforAll, Acumen Fund, and Rockefeller’s Smart Power India, are all working hard to resolve the mismatch. Undoubtedly, increased public sector involvement will also be critical moving forward.

 

Hope on the horizon, but work to be done

While my analysis above may paint a worrying picture, it’s worth noting a number of encouraging, albeit early trends:

Despite this flurry of activity, however, off-grid technologies are still far from getting the financing support they deserve.

 

Enter BuffaloGrid: An asset-light model ready for scale

With that in mind, asset-light models such as BuffaloGrid’s networks can play a critical role in bridging the energy gap for underserved communities.  

Rather than seeking to provide each and every household with ownership of a Solar Home System, or installing capital intensive micro-grids, BuffaloGrid works with organisations like telecoms providers, banking inclusion networks, NGOs and assisted eCommerce companies to provide their network of agents, usually small shop owners, with BuffaloGrid Hubs.

Agents can then instantly access another source of income by offering the Hub’s solar-powered phone charging capacity to local customers at an affordable cost, alongside other services they already offer.

This power-as-a-service model is not only debt free for end-users, it also allows one of BuffaloGrid’s Hubs to serve hundreds of customers. While I haven’t seen data that compares capital required per-customer-reached across off-grid technologies, I’d be surprised if a BuffaloGrid Hub didn’t top the charts on this metric.

It goes without saying that, ultimately, underserved communities will need to be able to power non-mobile appliances such as refrigerators, televisions, and fans. However, until the capital for the respective technologies becomes available, rapidly scaling less costly models such as BuffaloGrid’s Hubs could quickly transform the lives of millions.

Thanks to Simon Meier of Elevate Strategies for this incredibly in-depth guest post, if you think you have something interesting to say and would like to share it with the BuffaloGrid community, feel free to get in touch