Published on June 18th, 2014 | by Sandy Dechert0
Cross-Sector Talks Reveal Asia’s High Off-Grid/Minigrid Renewables Potential
June 18th, 2014 by Sandy Dechert
This year’s international off-grid renewable energy conference in Manila—IOREC— has been exploring use of off-grid renewable energy and minigrids from the inclusive perspective of all its stakeholders. Conferences come and go, but this one seems to have achieved balance and a politics-free sense of hope for the industry, investors, new business, and the government agencies that inform the people and support the public good.
Here’s a rundown on what the seven sessions of the IOREC conference have shared in a series of finely focused addresses, panels, small groups, and one-on-one discussions.
Policy and regulatory aspects of developing markets for stand-alone renewable systems
- Hardiv Harris Situmeang, Executive Director, ASEAN Centre for Energy
- Farzana Rahman, Unit Head (Investment), Renewable Energy, IDCOL, Bangladesh
- Marcus Wiemann, Secretary General, Alliance for Rural Electrification
- Jiwan Acharya, Senior Climate Change Specialist, Asian Development Bank
- Andy Schroeter, Director, Sunlabob Renewable Energies, Laos
This session has focused on measures that governments can introduce to develop very promising markets and scale up renewable energy-based stand-alone solutions. The panel went a long way toward identifying key measures countries need to adopt to support growth of the sector and collectively support stand-alone solutions that will enable currently powerless or ill-served communities to meet basic electricity needs. Solutions such as residential solar PV installations are fast emerging as a cost-effective option against conventional lighting in most rural contexts. Modularity allows customization to suit consumer needs, be affordable, and deploy rapidly.
Financing and business models to develop stand-alone renewable energy systems
- Peter Ballinger, Director, U.S.—African Clean Energy Development and Finance Center, OPIC
- Dipal C. Barua, Managing Director, Bright Green Energy Foundation, Bangladesh
- Paul Needham, President and Co-founder, Simpa Networks, India
- Roderick De Castro, Executive Director, TeaM Energy Foundation Inc., Philippines
- Shrey Bairiganjan, Project Manager, Arc Finance
The session focuses on “lessons learned” from design and implementation of models to scale up deployment of stand-alone solutions. Given the challenges in accessing finance and the diversity of business models, the session has aimed to highlight best practices. Important here are replicability across countries and programs and the role of governments.
“A sustainable approach to the deployment of stand-alone solutions hinges on two interconnected pillars,” says IOREC: “the business model and the financing mechanism.”
A major hurdle for large-scale diffusion is in establishing accessible, affordable ways to deliver energy services in rural communities and islands. Some of the factors influencing viability: consumer willingness to pay, type and amount of demand, availability of local support, community acceptance, and access to markets. Participants explored several private initiatives using mobile payment schemes and pay-as-you-go meters. These integrate technology into business models that reduce resource-intensive fee collection.
Access to finance is one of the most commonly cited challenges within the off-grid community. Energy enterprises seeking to cater to most unelectrified households in remote rural areas will need to ensure that (1) households have access to financing (either through financial institutions or the energy enterprises); and (2) lending terms (type and tenor of financing) are affordable.
Meeting basic and productive socioeconomic needs with renewable energy deployment
- Aaron Leopold, Global Energy Advocate, Practical Action
- Laurie Navarro, President, CleanEnergy Solutions International, Philippines
- Soma Dutta, ENERGIA International Network on Gender and Sustainable Energy
- Iskandar B. Kuntoadji, Co-Founder, IBEKA, Indonesia
- Dagmar Zwebe, Sector Leader Renewable Energy—Vietnam, SNV Netherlands Development Organisation
- Divyam Nagpal, Junior Professional Associate, Knowledge, Policy and Finance Centre, IRENA
In Ichord’s session, the panel has closely examined the socioeconomic dimension of off-grid renewable energy deployment. The group shared specific country experiences designing policies to maximize the broader benefits to local communities and the synergies between providing electricity access and serving other basic needs.
Socioeconomic development requires universal access to modern energy services. Synergies between off-grid renewable energy technologies and sectors critical to human development (water, education, healthcare, and telecommunication) offer tremendous opportunity to multiply all, both upstream (delivering energy services) and downstream (activities enabled by access to energy).
Evidence is accumulating that decentralized renewable energy can enhance rural and island living in terms of both employment and economic growth. IRENA* estimates that reaching universal access to modern energy services by 2030 could create 4.5 million jobs—and that’s just in the off-grid renewable electricity sector.
And last of all, some key numbers from IRENA’s 2013 report on Renewable Energy and Jobs:
17% of the global population has no access to electricity.
One billion people are served by health facilities that lack electricity.
More than 50% of all children in the developing world attend schools without electric power.
Policy and regulatory aspects of developing markets for renewable energy-based mini-grids
- Li Zhiwu, National Research Institute for Rural Electrification & Division Chief, Hangzhou Regional (Asia & Pacific) Center for Small Hydropower, China
- Nawaraj Dhakal, Assistant Director, Alternate Energy Promotion Centre, Nepal
- Brian Shaad, Co-founder, Mera Gao Power, India
- Rana Adib, Policy Advisor, REN21 Secretariat
- Nico Peterschmidt, Managing Director, INENSUS
Gauri Singh’s session has examined key policy and regulatory measures that (1) have scaled up minigrid deployment and (2) can be replicated. Her panel also explored major public support measures governments can put in place to facilitate deployment of renewables-based minigrids.
Minigrid deployment is essential to extend electricity access and stimulate socioeconomic development in rural areas. Minigrids cater to diverse loads, integrate multiple generation sources, and support productivity. Falling costs and maturing technology can make renewables the most suitable option. This can be shown for both new minigrids and for existing diesel-based minigrids, which can be replaced by either hybrid or entirely renewable energy-based power.
Policy and regulatory frameworks influence the viability and sustainability of minigrids. Clarity in rural electrification strategies, long-term political commitment, dedicated policies and enabling regulations, and diverse deployment approaches often contribute to minigrid development.
In some countries, the call for a long-term and clear rural electrification strategy has amplified over time. Both developers and rural communities gain clarity from demarcating areas reachable by extending the grid quickly and new areas suitable for mini-grid installation. Risks associated with slow community acceptance and inadequate or nonexistent regulatory frameworks have often hampered private sector participation. No one wants to strand investments.
Policy and regulatory frameworks must assimilate the broad range of minigrids being deployed. The systems differ in renewable resource used, services provided, and ownership/financing structures. Diverse approaches demand custom risk profiles. Policymakers need to work toward policies that cut across these differences and provide a support framework that addresses the challenges faced by developers. Among them: high transaction costs, incompatibility of tariff regulations with commercial viability, unavailability of technical skills for operating and maintaining installations, and so on.
Insights into financing and business models for renewable energy-based mini grids
- Anu Valli, Investment Manager, Bamboo Finance
- Sandeep Giri, CEO, Gham Power, Nepal
- Tripta Singh, Deputy Director, Energy Access Initiative, UN Foundation
- Santosh Kumar, Technical Expert, Indo-German Energy Programme, GIZ
Don Purka’s session has explored business models and financing frameworks in renewable energy-based minigrid development. The panelists identify, analyze, and explore ways developers can address financing challenges.
Minigrid deployment involving utilities, the private sector, and communities has had success in some cases, but scaling has not been an option. Barriers include constraints on flexibility and innovation constraints in designing business models (ownership, billing, and customer management) and financing models (securing capital along the different stages of project/enterprise development).
Minigrids also vary in technologies deployed and services provided. Again, risk profiles differ in ability to access finance. Traditional commercial financing is not easily accessible. Unlocking it often requires developers to prove business models over a given scale and period of time.
Conventional barriers to financing include insufficient market capital, perceived high risk and relatively low return on investment, high transaction costs, high interest rates, cost of equity finance, insufficient net worth, limited business experience, low liquidity and power sector exposure of local banks, and difficulty channelling multilateral development bank funds through local financial institutions.
Everyone benefits from developing a broader environment that supports scaling up minigrid deployment. Also, encouraging innovation pays off in long-term sustainability (lower operating costs, robust supply chains, access to operations and maintenance resources).
Mobilizing finance for energy access initiatives and establishing delivery mechanisms
- Nafees Ahmad Khan, Advisor—International Cooperation, Alternative Energy Development Board, Pakistan
- Loeung Keosela, Executive Director, Rural Electrification Fund, Cambodia
- Sarah Alexander, SELCO India
- Roberto Ridolfi, Director- Sustainable Growth and Development, Directorate-General for Development and Cooperation—EuropeAid, European Commission
- Chingiz Orujov, Senior Energy Economist, Infrastructure Department, Islamic Development Bank
Diverse perspectives came together as Susan McDade’s panel discussed how to establish an efficient and effective “source to end-use” financing mechanism. They have also taken a stab at the roles that governments and other major stakeholders will play in this regard.
The latest annual estimate to achieve universal electricity access is $45B. Current spending is around $9B. Financing to meet this goal will come from a variety of sources. They include multilateral institutions, development agencies, governments, and practitioners. Identifying the mechanisms by end-users, entrepreneurs and developers can access suitable means in an effective and efficient manner is another matter.
Multilateral development banks, development agencies, and governments tend to commit capital on the “upstream” side these days. “Downstream” challenges associated with accessing much of that capital continue, however. Mismatches in scale (investment size on offer compared to financing needs of off-grid projects) and terms of financing are the main culprits. Capital has traditionally been delivered to those who need it, but a key consideration is whether existing mechanisms can absorb and deliver it efficiently, given a largely fragmented set of actors with diverse financing needs.
Design, innovation, and integration in off-grid renewable energy technology
- Matt Jordan, Senior Manager, CLASP
- Munawar Misbah Moin, Managing Director, Rahimafrooz Renewable Energy Ltd
- Dean Cooper, Energy Finance Programme Manager, UNEP
- Silvia Kreibiehl, Head, Frankfurt School- UNEP Centre
- Emanuele Taibi, Island Roadmap Analyst, IRENA
- Wilhelm van Butselaar, Sales Director Hybrid Energy Solutions, SMA Australia
Dolf Gielen’s panelists have explored the impact of technology improvements in accelerating deployment of renewable energy in off-grid areas. This discussion covered the state of the art in lighting, solar home systems, and hybrid mini-grid technologies.
Rapid technology improvement and large-scale deployment have been driving the cost of renewable energy down to a level at which they are competitive and often more affordable than fossil fuels for rural electrification. Technology solutions to serve off-grid communities have also been constantly evolving. This is true not just from the generation perspective (e.g., solar modules, small wind, small hydroturbines), but also for other components (inverters, batteries, charge controllers) and appliances like lights. Combined, these measures allow optimal performance of an installation throughout its lifetime.
Scalability of off-grid renewable energy solutions—ranging from small solar home systems to kW-scale and MW-scale minigrids—allows adaptation to local constraints, important because of diverse demand, varying resources, and limited infrastructure. Solar PVis the best example. For example, LED lights and lithium batteries make much smaller, lighter, and longer-lasting portable lighting systems than just a few years ago.
Once deployed, minigrids and off-grid solutions are gaining prominence. For islands, technologies like as smart grids and advanced power electronics are can integrate variable generation with little to no storage. Bridge solutions include hybridizing existing minigrid tallations formerly based on diesel, and feeding multiple renewable sources into the same to balance out inherent variability.
For many remote locations, the cost of delivering diesel fuel for power generation is high enough to make a hybrid system of solar, battery storage, and a limited amount of diesel the most affordable solution. Increasingly, minigrid deployment globally has begun to use innovative technological solutions to maximize renewable energy share, minimize operational costs, and improve long-term sustainability of projects.
*Full Disclosure: IRENA covered the cost of my flight to and accommodation in Manila.
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