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Published on June 29th, 2014 | by Guest Contributor

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Off-Grid, Clean Energy Access Market Valued At $12 Billion

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June 29th, 2014 by
 
By Justin Guay

One in five people around the world, approximately 1.3 billion people, lack access to electricity.

The Sierra Club just released a new report — Clean Energy Services For All (CES4All) - - showing that off-grid clean energy is the right tool for the energy access job. That’s because it’s the fastest, cheapest, and most effective means of ending energy poverty – and it’s going to create a $12 billion annual industry by 2030.

Working with Evan Mills of Lawrence Berkeley National Lab and Stewart Craine of Village Infrastructure Angels, we have provided one of the first estimates of future growth for the rapidly expanding clean energy access market. Today, excluding grid extension, this market is estimated to be a $200-250 million industry annually. However, we project a 26 percent compound annual growth rate that will enable growth that reaches a $12 billion annual market by 2030 – when universal electrification is achieved. To put that in perspective, the U.S. residential market for solar in 2013 was only $3.76 billion.

It turns out our central thesis has been right all along – small is big.

CES4ALL 1

Off-Grid, Clean Energy Access Market Valued At $12 Billion

Central to our ‘CES4ALL’ model is the notion that energy efficiency unlocks the energy access ladder. Energy efficiency measures that are currently available allow energy access to be delivered for 50-85 percent less energy input, which enables dramatically reduced capital expenditure.

From off-grid LED lighting to “Skinny Grids,” we can now provide energy access with a fraction of the amount of power we used to need. More importantly, we can unlock affordable initial interventions — like lighting, mobile phone charging, fans, and TVs plus a small amount of agro processing — to help people get onto the energy ladder today rather than forcing them to wait decades for a grid extension that may never come.

As incomes expand and markets evolve, these populations will upgrade and expand their energy services, in turn creating a bottoms up, distributed, democratized grid.

It’s important to understand that we aren’t just imagining this clean energy market growth – it’s already happening. The fact is that the off-grid energy market is growing rapidly, with estimates of 95 percent compound annual growth rates in sub Saharan Africa alone. In Bangladesh, 80,000 solar home systems are being installed every single month while neighboring India has promised solar for all by 2019.

Similar to how solar leasing unlocked the market for residential solar use in the United States, this off-grid market has been unlocked by business and financial model innovations, like mobile money-enabled “pay-as-you-go” systems. These innovations have primed the off-grid sector for further rapid growth, similar to what the mobile phone industry experienced a decade ago.

Clean Energy Access Chart

Clean Energy Access

But if there is one message we need to leave you with it’s this: show us the money!

In order for the market to reach its full potential by 2030, entrepreneurs need financing now. We estimate that financial need to be roughly $100 million in new investments in off-grid clean energy manufacturers over the next three years. The investment needs of consumer finance companies in this market will require even larger investments — $400 million over roughly the same time period.
Combined, approximately $500 million is needed in the next two to three years, consistent with a letter from industry to the World Bank.

Clean Energy Access Microgrids and Solar

Clean Energy Access technology

In short, this off-grid energy market has a tremendous opportunity to catalyze a solar revolution for the masses — one that will help democratize energy, create local jobs, and decarbonize new power systems in one fell swoop. The only thing standing in its way is access to the financing to make it happen. Private investors are already stepping up to the plate with $45 million invested in just the past four months, but international financial institutions like the World Bank are nowhere in sight.

It’s time we held these development institutions accountable. It’s time they finally built the equitable, sustainable, and democratic systems that distributed clean energy make possible. It’s time for clean energy access for all.

About the Author: Justin Guay is a Washington Representative for the Sierra Club. Based in Washington D.C., he focuses on energy lending reform at International Financial Institutions and global efforts to transition energy systems beyond coal. In his previous position at the Sierra Club, Justin lived and worked in Mumbai, where he collaborated with Indian NGOs and for-profit companies to develop a model of clean energy distribution in rural areas.

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  • JamesWimberley

    Marty: there’s no reason why biomass shouldn’t compete in this market. Development banks are likely to be agnostic on technology. We can agree that wind and geothermal have a minimum scale that will restrict them to grid supply, which is also needed. My sense is that the Sierra Club is knocking on an open door and the development banks are now readier to lend into offgrid projects. They have learnt from the mobile phone boom, which they didn’t anticipate or finance.

    At the scale the Sierra Club has in mind, competition from solar for land is minimal. Even scaled up, I doubt it’s a real problem. Most of the Third World poor live in hot and pretty dry environments. A well-designed PV farm provides partial shade and allows vegetable growing or livestock grazing underneath. The water used for cleaning the panels goes straight to the plants (link). This double use is now routine in rural PV farms in the UK. It’s tragic to see pictures of solar farms in American deserts where the ground underneath has been bulldozed into sterility.

  • Marty

    I am very much aware of the proposed village-size scale of proposed projects and that’s why biomass micro-grids 20-200 kWe are a good solution at $1000-1200/kWe. Drop a container from a truck and you’re ready to go, no night time to worry about.
    Too-small solutions are likely to become leap-frogged.

    • Offgridmanpolktn

      So a small village of subsistence farmers or with even a few craftsmen is going to have resources to pay for a twenty thousand to quarter million dollar investment (by your numbers) and the technical know how to install and keep it running? As I tried to explain India tried doing that big of a jump in multiple places with a large majority of the projects failing and going bankrupt.
      I still think that her plan to start out with minimal projects that in the 25 years since those experiments can be done for less than a thousand dollars with Solar being so much cheaper and include some batteries (which have also done a big drop in price) will have a better chance of success.
      Just my opinion though, of course.
      Once they learn how to operate these smaller systems and hopefully increase their economic resources due to having them, then of course the desire for more infrastructure and the resultant benefits would seem appropriate for what you have in mind.

    • Bob_Wallace

      Marty, it might help you understand if you were to take a look at some village solar projects….

      • Marty

        Are you comparing a lonesome 250 W panel working avg. 8 hours/day, costing min. 3000 euro/cont. kWe to a 20,000 W biomass microgrid at 1000 euro/kWe ? 20,000 W PV takes away 100m2 from food-growing vs. 2m2 for a biomass appliance ?
        Numbers don’t lie.

        • Bob_Wallace

          I’m pointing out to you that your approach is not appropriate for the places we are discussing.

          These people can pay for a bit of solar to run a few lights and charge a cell phone with their kero savings.

          There’s no capital to drop a container full of biomass generators and the equipment to grow the fuel sources to fire it. There’s no market for that much power. There’s no ability in many of these places to grow enough biomass.

          If you are considering a village in Germany then, perhaps, yes. Rural Pakistan is not Germany.

          • Marty

            Instead of treating “these people” like chattel (a few lights and a phone charge …), give them energy to actually do something, like power tools or construction machinery.
            I foresee local entrepreneurs leasing biomass microgrids and charging people for the use. That’s healthy and will slow down desperate migration to the cities.
            But, as James correctly points out, there will be a market-appropriate mix. So, not “let the best solution win” but more like “let there bloom a thousand flowers”.

          • Matt

            Sorry Marty you made a mistake. “give them” no one is giving them anything. They are buying them based on saving. Unless maybe you have a trillion dollars burning a hole in you bank account. But yes biomass will play a role in larger systems.

          • Bob_Wallace

            That’s a great idea, Marty.

            Now where do we get the money to give 1.4 billion people the energy to run power tools and construction equipment? Furthermore, where do we get the money to give them the power tools and construction equipment as well? Most of these folks are struggling to purchase kerosene and candles.

            These solar lamps and micro-solar programs are not welfare, Marty. They are clean energy that these people can afford with their present budgets. They can purchase a solar light or micro-solar system and pay it off in a few months (lamps) or a year or two (systems).

            Once they’ve paid it off that frees up some money for them to improve their lives in other ways. Plus it frees them from kero fuels immediately.

            In some cases it extends the number of hours they can work per day which brings in more income.

            And it improves their children’s ability to study, which should pay off for the next generation.

            This is a real workable approach, Marty. It isn’t dependent on huge amounts of outside money or outside technicians. It’s cheap and simple stuff that works gives the people on the very bottom some boot straps for them to tug on.

            Now, apparently you have some ‘special’ interest in biofuel generators. That’s great. Hope you have good luck finding the appropriate market.

          • Marty

            Yes, I have interest in what works. Frequently, the bottom-market solutions are just an illusion of assistance, to make one feel better.
            As for power tools, these are the means of work, and everyone understands that they will pay for themselves in no time, rather than sit in a museum.
            Realistically, though, both passive and active solutions have a place in the market.
            It’s just my hunch that active solutions will be more popular, when affordable. Biomass solutions can be MUCH cheaper in quantity, while PV costs are beyond our control.

          • Bob_Wallace

            Over one million households in Bangladesh now have electric lighting thanks to small scale solar. That makes me feel good.

            Small scale solar is happening around the world. People are saving money and breathing cleaner air. There is less CO2 and less soot being added to our climate problems. And this is being done with user financing, not charity. That also makes me feel good.

            Marty, how about telling us your involvement in biomass generation? Why are you pushing so hard for biomass?

  • IMPOed

    I fear, as long as “big energy” is the prime drivers of profits for world banks, I doubt any investments in something as benign as solar will peak their interest, but I for one, have started small (100W) I plan on expanding, I hope it is contagious,,!

  • Marty

    Why are you only promoting solar minigrids ?
    Do you have some anti-biomass agenda ?
    Biomass/waste minigrids are much more appropriate for hotter-climate countries with the largest populations and cheaper to boot, considering they work 24/7.
    In addition, as the population density is highest in hot climates, biomass grids are taking less than 10% of PV space, that could be otherwise used for growing food, while biomass grids can pump the renewable CO2 into hothouse-like enclosures to feed the plant growth..

    • Offgridmanpolktn

      Perhaps you are misunderstanding the scale of these projects? As stated in the article they want to establish skinny grids, taking a village of 10-30 households with absolutely no power or infrastructure and setting them up with just lighting and cell phone charging to start with and building up the to fans and maybe some tv’s.
      A mini grid such as you mention could support 20-40 western or developed nation homes and all of the requisite power drains. But these places just don’t have the technical know how or the infrastructure to support those types of projects.
      India made the mistake twenty to thirty years ago of trying to jump right up to the scale of project you mention with many failures due to lack of technicians able to maintain and infrastructure able to distribute.
      Which is why in this case they are talking about building from the bottom up, give a village a chance to learn how to deal with 1-500 watts or maybe a Kw of production and work up from there

      • Bob_Wallace

        I think this is exactly how we bring power to the 1.4 billion people who now have none.

        Start small and simple.

        Create local entrepreneurs/technicians who know how to wire up a very basic system and how to use the web to learn more.

        Create supply streams that reach into rural areas.

        Create financing systems that let people pay as they use.

        Marty, I think you are suggesting a too complex, too expensive solution when there is a cheaper, faster route.

        And I don’t understand your claim that ” biomass grids are taking less than 10% of PV space”. Most of these systems are going to go on rooftops or be pole mounted where they are too high for people to mess with.

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