By Ron Dizy, Managing Director of the MaRS Advanced Energy Centre
The resource economist Erich Zimmerman said, “Resources are not, they become.” It is not by their existence that resources gain value, but by their use. And so it is with electricity. It’s existence is not important — it is in its use that it provides utility and improves the quality of life.
Globally, there are around 1.2 billion people without access to electrical power, most of whom live in developing nations within Asia and Africa. In some sub-Saharan countries, these numbers are actually rising, not falling. Governments in these countries are acutely aware of the situation and are taking steps to provide energy to these areas, with 68 countries having targets for increasing electricity access. However, the cost of providing centralised generation, transmission, and distribution systems is often too expensive and not cost effective for many developing nations.
In developed countries such as Canada, we built centralised generation stations which transmit energy over long distances, and then distributes it to neighbourhoods and homes. They have redundancy built in, so that the grid can easily handle peak demand, as well as provide high levels of reliability. In Ontario for example, peak demand is approximately 24,000 MW (24 GW). However, the grid’s generation capacity is more than 35,000 MW (35 GW). In general, cities are served by more than one transmission feeder and most neighbourhoods have redundant distribution. Our grid has been engineered to be capable of both adding new loads (like electric vehicles) and performing reliably (generally, less than an hour a year of outages).
However, this comes at a cost — higher electricity prices, especially considering the huge cost of replacing aging assets. This model might not work for remote areas or poorer communities in developing nations, where the populace doesn’t have the purchasing power to support a system with such high levels of redundancy, supply, and engineering.
But what if someone only wanted to buy enough electricity to support a bit of nighttime lighting? Or to run a television for a few hours in the evening? In these cases, there would be no need for a centralized, highly engineered grid.
In these developing areas of the world, new companies are bringing alternative business models to the fore, combining innovation in finance, logistics, and operations to deliver “personal power” to energy-poor communities. These models often rely on solar PV as the core technology (sometimes supplemented with small amounts of storage), coupled with innovative financing models — usually utilising cellular infrastructure, which is often fairly well developed and accepted. The design combines the appliance provision (TV, lights, refrigeration, etc.) with a solar panel to power it. Imagine buying lights (for nighttime reading and studying) with the solar panel and storage to operate them for a set time. And yes, the system may not be as resilient as a Western-style grid (if it is very cloudy that day, there will not be light in the evening), but it also costs much less — some of these business models are enabling lighting for under $0.50/day.
Good examples of these models in action are from SELCO, an Indian company which provides solar lighting systems to communities not connected to the grid, and both M-KOPA and Off Grid Electric, operating in rural Africa. While M-KOPA’s success lies in being able to provide financing options to poor communities unable to afford solar — consumers buy the system for an initial cost of $35 and then make payments of $0.43/day over a mobile payment system called M-PESA until the costs of the system are covered. The customer then owns the system outright.
This “personal power” approach is challenging how we think of energy and electricity, namely the core assumptions of what getting electricity means. They raise the question, what do people want: access to electricity or appliances that make their life easier? The above companies focus more on supplying personally relevant solutions (like lighting, television, refrigeration), and in doing so are creating deep customer relationships that in some ways transcend the ones that Western utilities have as “just” electricity suppliers to their customers.
- Their success raises some interesting questions, not only for these remote communities but about how we all see and use energy.
- Could there be a different model around electricity supply and use?
- Could such a model work in the developed parts of the world, where we are reliant on the abundance of energy?
- Is this the future of energy as we move towards more energy efficient practice? Or would it only be applicable for remote areas?
- What if you just had enough power for the things you wanted to use?
- What if we could produce and trade electricity with our neighbors to meet our electricity needs?
We usually think about what we can offer to the developing world — but just maybe they can teach us something about how to deliver solutions to our customers! We have amazingly reliable and resilient electricity systems in the developed world. But as technology, systems, and customer relationships change, maybe there are different ways to deliver solutions to customers that will turn some of our long-standing ideas on edge.
Ron Dizy is Managing Director of the MaRS Advanced Energy Centre. Ron works with a diverse group of public and private sector partners to assist utilities, energy users and energy innovators to adopt new technologies faster. He is passionate about making our energy system more cost effective, more resilient and more reliable.He was previously the President and CEO of ENBALA Power Networks, a smart grid technology company that offers grid optimization services to utilities and system operators to increase the overall efficiency and reliability of the power system.He was recruited to the executive committee of the board for the Ontario Energy Association and the Association for Demand Response and Smart Grid, and is also elected chair of the Corporate Partners Committee of the Ontario Smart Grid Forum.His entire career has been focused on bringing new technologies to evolving markets, including spending nearly ten years as a venture capitalist (both as a direct investor and as a pension fund manager), co-founding a company specializing in artificial intelligence and gathering experience in major consulting firms.
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