Contextualizing Global Energy Poverty

On the Prospects of Powering the Last Mile 

Access to modern sources of energy is fundamental to eradicating poverty and spurring economic growth. Energy touches every aspect of a household’s quality of life. Without access to electric lighting, kids huddle around smoky kerosene lamps to study at night—endangering both their health and education. Lack of refrigeration and gas or electric cooking also impacts a family’s health as it hinders food preservation, makes it harder to purify water, and brings more smoky pollutants into the home. And without electricity for charging phones and starting businesses, many people are falling further and further behind both informationally and economically.

The scope of the problem is still enormous—more than one billion people lack access to electricity, and at least that many only have access to power that is intermittent and unreliable. Even rural households that have electricity still rely on wood or charcoal for cooking if the power is too expensive for using an electric hob or oven. Since the overwhelming majority of people living off-grid reside in rural areas in Africa, South Asia, and Southeast Asia, the target geographies are clear. Ending energy poverty features prominently in the Sustainable Development Goals (SDGs). The target within SDG 7—affordable and clean energy—is to achieve universal access by 2030.

While it’s helpful to better define the challenge, and the goal for overcoming it, the question remains as to whether this problem is solvable. Do we have the tools to achieve universal access by 2030? The answer is, “Yes. Absolutely.” One only has to look at the number of countries in the world that do have universal access. If around two billion people lack reliable power, that means more than five billion have good access to electricity.

The technology to achieve universal access to electricity exists. The barrier isn’t technology—it’s cost.

The technology to achieve universal access to electricity exists. The barrier isn’t technology—it’s cost. It is often joked, at least among energy nerds, that Thomas Edison would easily recognize today’s central grid because the technology has changed so little since his first commercial power plant at Pearl Street in New York. Significant improvements are possible through smarter metering and control systems, the addition of distributed generation, and other innovations, but there is no technology breakthrough needed to expand the grid.

While running power lines over long distances to reach a small rural community would not be cost-effective, there are appropriate solutions for remote customers. For truly isolated households, or those that have only a basic demand for power for lighting, cell phone charging, and maybe TV, a solar home system can reliably meet their needs. For households that have higher power needs and live closer to either a commercial or agricultural processing site, a microgrid may still be more sensible than the central grid.

Photo courtesy of Power Africa.

To solve energy poverty, solar home systems are the most efficient solution. Unlike the central grid, these systems have evolved considerably in the past 25 years. Early versions used component parts that were often incompatible, and the inefficiency meant that a relatively expensive 50–100 watt solar panel could power a couple lightbulbs, but not much else. Innovations in design and manufacturing of both panels and other components have resulted in lower cost and higher performance. A 50–100 watt solar panel can now power multiple LED lamps, a TV, and other small appliances, as well as recharge cell phone batteries.

Despite these advances, the more important innovation has been in financing. Even with the precipitous drop in technology costs, solar home systems would still be unaffordable in countries where GDP per capita is under USD$5,000. The “pay as you go” (PAYG) model, pioneered in India by Simpa and in Kenya by M-Kopa, allows customers to pay for the system in installments over time. So long as the account is current, the system continues to function. If the customer falls behind, the power shuts off until a payment is made. This plan works well for people who may not have regular incomes, or may have to stop paying for a period of time when other short-term, unexpected expenses arise.

With the technology and financial model solved, how are there still households without access to electricity? While the PAYG model is great for customers, it puts a serious financial burden on companies selling solar home systems, having to pre-finance all the equipment they sell. Companies require large volumes of debt at a low interest rate, and must be willing to cover the risk of low-income families. Therefore, the problem is the money available often doesn’t match the need, nor the scale. The Global Off-grid Lighting Association (GOGLA), the trade association for the off-grid sector, estimates that USD$2.4–2.6 billion will be needed in the next five years, primarily in the form of working capital, to fuel growth in PAYG system sales.

While there are still necessary improvements in design, customer service, product offerings, and the overall business model for deploying solar home systems, the solution to energy poverty already exists. Small off-grid solar will not power industry, but it will bring households out of darkness. All we need is the right kind of money.


 

This article is part of a series on “solvable problems” within the context of the UN Sustainable Development Goals. The Global Engagement Forum: Live takes place this October 10–11, 2018, bringing together leaders from across the private, public, and social sectors to co-create solutions and partnerships to address four urgent, yet solvable problems—closing the skills gap in STEM, reducing post-harvest food loss, ending energy poverty, and eliminating marine debris and ocean plastics. Learn more about the Forum here.

 

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