Holistic business models and new approaches to rural electrification are already being piloted around the world by ARE and its members, as exemplified by the surge in pay-as-you-go and fee-for-service offerings.

Despite significant advances in electrification rates on a global level and the huge efforts made by practitioners in the last past, universal access to clean electricity is still far from achieved. The reasons for this differs to a large extent from country to country. However, typical obstacles are: immature and not incentising market conditions, lack of finance and access to it, differing population growth and electrification rates as well as a lack of implemented self-sustainable business models. This means that there is a huge market opportunity and massive potential to scale the off-grid market.

Strong market drivers include:

  • 1,1 billion people still living without access to electricity. (SEforAll, Global Tracking Framework, 2015)
  • A full 60% of all new connections are expected to be through off-grid solutions. (IEA, 2011)
  • A large market to replace diesel generators with renewable energy (currently there are approximately 400 GW in operation, either in the form of industrial facilities and mines operating remotely, as back-up units where electricity supply is unreliable or as community mini-grids. (IRENA, 2015)
  • Economic growth in emerging and developing markets. (World Bank, 2016)
  • Population growth, especially in Sub-Saharan Africa will increase the energy demand. In 2013, IEA estimated that the number of people without access to electricity in 2040 in Sub-Saharan Africa would reach 530 million (IEA, 2013).
  • Strongly falling technology costs.
  • Money flows into the market: USD 9 billion invested in electrification to enable universal access to modern energy services public, but also private and philanthropy initiatives such as the SEforAll High Impact Opportunity on Clean Energy Mini-Grids (HIO CEMG), the African-EU Energy Partnership mapping of energy initiatives in Africa and the African–EU Renewable Energy Cooperation Programme’s (RECP) efforts to facilitate finance access.
  • New business models, e.g. Pay to go (PAYG) and Fee-for-service (FFS) partnerships with telecom operators and social services to roll out electricity supply in parallel, distribution approaches involving kiosks selling electricity, but also FMCG, internet etc.
  • Increasing demands of rural households to make use of electricity-fed appliances during the day (e.g. fridges, cook stoves, TV, mobile phones etc.) and at night (e.g. lighting) as well as of local companies who make us of electricity for industrial/ processing purposes and services provided.

Market conditions can be further developed to allow for at least equal competition and between renewables and fossil fuels, measures favouring renewable energy technologies, while closing the information gap between practitioners, investors and policymakers. Similarly, considering current public and non-profit resources devoted to clean energy access, it is paramount to leverage these resources and attract private sector capital. This is especially true for wind and hydro projects, which often require significant upfront investment, even as they benefit from low operating costs.

Many challenges remain. From a global standpoint the sector is currently too fragmented to live up to the expectations, largely due to market barriers in developing countries. These barriers, combined with typical emerging-market framework conditions, push up the costs to acquire commercial finance and mitigate the risks, ultimately holding back the large-scale roll-out of off-grid solutions. Also coordination amongst donors could be improved to streamline incentives and priorities.

Hence, coordination and cooperation within developing countries and the donor community, as well as between them, is essential. For its part ARE – as the voice of the global RE off-grid private sector – stands ready to assist and help its partners to reach our common overarching objective of clean energy access.

In this context, we especially applaud the considerable efforts of the UN’s SEforAll initiative, under which ARE is recognised as the only business association partner and is one of the leaders of the SEforAll HIO Clean Energy Mini-grids. Moreover, in the context of EU-Africa cooperation, we express our strong support for the Africa-EU Energy Partnership (AEEP), for which ARE is leading the Energy Access Workstream, as well as the Africa-EU Renewable Energy Programme (RECP), of which ARE is a strong partner.

In addition, we highly commend the tireless efforts of our numerous valued partners to improve market conditions and enhance cooperation, including the European Commission, IRENA, Power for All, GIZ, EUEI PDF, IEC, UNEP, UNIDO, USAID and many others.

The time to act is now. The world is struggling to keep the global temperature increase under two degrees, while energy poverty is still a major constraint to human development for over a billion people, especially in rural areas of Sub-Saharan Africa, South/East Asia and Latin America.

Fortunately, the COP21 Paris agreement, where global leaders agreed not to let the temperature increase raise above 1.5 C degrees, offers a platform of hope and momentum, which has opened the eyes of an increasing number of governments, organisations, businesses and individuals to see the potential in renewable electrification solutions, which tackles the issues of climate change and socio-economic development at the same time.

Certainly, the window of opportunity has opened more widely to push for the transition to a sustainable economy built on renewable energy, energy efficiency and clean solutions: Do you want to be a part of the global movement to increase economic growth, eradicate energy poverty, improve the human condition and empower hundreds of millions of people, or do you want to passively accept the existing and unsustainable energy usage & market?

Contact

David Lecoque

Policy & Business Development Manager

+32 2 709 55 25