Solar energy has been identified as a potential low-cost and highly-efficient means of providing electricity to those in off-grid remote areas, but a new study has concluded that with little access to financial resources, new business models will be required to make this happen.
For many years, the traditional thinking has been that, to provide reliable electricity to those living without access to basic electricity services — often in remote and very poor areas of the world — large-scale infrastructure and fossil fuel energy generation technology was required. In 2014, a report published by Peabody Energy claimed that coal was “essential to meet the scale of Africa’s desperate need for electricity” — a blatant lie and horrifying misrepresentation of the new global energy reality.
However, over the last decade, with the rise and proliferation of solar energy throughout the first world, these assumptions have changed, with many now considering the benefits of large-scale deployment of renewable energy technologies like solar energy across developing nations and remote areas. One of the primary reasons for this shift away from fossil fuels is the fact that fossil fuels like coal require massive infrastructure to deliver electricity — infrastructure that is missing in developing countries (and could be used a guide for whether a country is ‘developing’ or not) and is well beyond their ability to finance and develop. Comparatively, solar can be developed without the massive infrastructure, delivering clean electricity onsite.
More than 1.2 billion people currently live on planet Earth without access to basic electricity. These people are primarily living in developing nations, and live in rural and isolated areas in high poverty conditions.
Over the past few years, investment in renewable energy development throughout developing nations has increased dramatically.
A Pew Charitable Trusts study published in early-2015 showed that investment and deployment of electricity infrastructure was shifting into the “global south” — the collective name for the developing economies located below the prosperous north. In addition, this shift incorporated a turn away from fossil fuels toward clean energy technologies. Just under a year later, this shift had resulted in a return on investments in renewable energy projects across emerging markets providing returns that are on average 28% higher than returns on renewable energy projects in Europe or North America.
However, a new study released this month has shown that low-cost off-grid solar energy will likely require new business models to be able to reach these rural and poor communities.
According to Inara Scott, an assistant professor in the College of Business at Oregon State University, developing a successful business model that is able to deliver off-grid solar energy to these poverty-stricken communities must address challenges unique to each community. These communities inherently don’t have the finances necessary to jump at solar, and don’t have access to the commercial institutions or markets necessary to deliver solar electricity. Add in the inherent difficulty in developing renewable energy in remote locations (though it is still less of a problem than developing fossil fuel) and you end up with a problem.
“Surviving and growing in this market is very different than in a typical commercial enterprise,” said Inara Scott. “There are a lot of people working on off-grid solar products on the small scale, but the problem becomes how can they scale the programs up and make them profitable?”
But these problems are worth solving. Providing electricity to these remote communities have literal life-changing results. Children are better equipped to attend school because they can suddenly use light at home to study by. Health is impacted as well, as the need for dirty kerosene lamps disappears, removing indoor air pollution. Additionally, electricity can extend working hours for adults, which means a better change to earn money or build a business.
“Providing electricity starts an incredible cycle of improvement for communities without reliance on charities or government aid,” explained Scott. “There are also environmental benefits to encouraging sustainable development using renewable resources.”
Scott’s research concluded that a successful renewable energy enterprise dedicated to serving these remote communities would have four components:
- Community interaction: Work with local communities to understand local norms, culture, social issues and economic systems that might influence the effort.
- Partnerships: Join forces with other companies, government organizations, non-profit groups or non-governmental organizations to share ideas and resources and gain support.
- Local capacity building: People in the community may lack product knowledge and have little experience with technology, while the community may not have typical distribution channels. Consider the potential customers as both producers and consumers, training local entrepreneurs as distributors, marketers and equipment installation/repair technicians.
- Barriers unique to the off-grid market: Address issues such as financing of upfront costs, which may be prohibitive to consumers; educate people on the products and their benefits; build trust in quality and reliability; and develop multiple strong distribution networks.
“You’re not going to be successful just trying to sell a product,” she said. “This is really a social enterprise, with the goal of trying to bring people out of poverty while also emphasizing sustainable development.”