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17 Jun 2022

Using distributed renewable energy to create a just energy transition

Africa; energy; renewable energy, finance, investment
Abhishek Jain and Ashish Kumar
Distributed Energy Systems

A group of 900 women in Udaipur district of Rajasthan in India are extracting pulp from the custard apples using a solar-powered food processor, storing the pulp in solar-powered refrigerators, before transporting it to the nearby town in solar-powered refrigerators mounted on mini-trucks.

Adoption of solar refrigerators have resulted in a three-fold increase in their production and almost 70% saving in their energy cost by eliminating the need for diesel gensets.

Thousands of miles away, in Chitradurga district of Andhra Pradesh, a young rural entrepreneur is running a solar-powered hydroponics station (Hydroponics is a process of growing crops/plants without soil using mineral nutrients in a liquid solvent, requiring much less water usage overall) to harvest green, and nutritious fodder and sell it to cattle-rearers, helping them increase their milk yields by 15-20%. 

These are not isolated examples; from waste-biomass-powered cold storage and solar dryers for perishables to solar-powered looms, to grain milling and food processing using efficient solar-powered solutions – a Silent Revolution is underway across India.

Recognising these undercurrents, in February this year, the Indian government released a new policy framework to mainstream distributed renewable energy (DRE) solutions for income-generating applications in a gender-inclusive way.

DRE across Sub-Saharan Africa

Across the Indian Ocean, in Sub-Saharan Africa (SSA), the need for such DRE solutions is even greater (SDG 7), both for household lighting etc (consumptive use), as well as for the income-generating activities (productive use) – to tackle poverty (SDG 1), gender inclusion (SDG 5), and climate action (SDG 13). With almost 700mn people still deprived of electricity access and roughly 1bn people receiving unreliable electricity, according to the Lighting Global: Offi-grid Solar Market Trends Report of 2020,  (Lighting Global: Off-Grid Solar Market Trends Report, 2020), the lack of energy access limits economic opportunities for millions.

Though the continent has seen a huge uptake of the consumptive solar lanterns and home systems – with over 360 million people having gained access to lowest tiers of electricity over the past 10 years (according to GOGLA’s Lighting Global: Off-grid Solar Market Trends report of 2018) – the shift to more productive applications of renewables has been rather limited, even while a sizeable market opportunity exists.

According to Lighting Global’s The Market Opportunity for Productive Use Leveraging Solar Energy in Sub-Saharan Africa there’s an addressable market of more than US$11bn for just the top few DRE-powered productive-use solutions across the SSA. While some initial solutions are emerging in the continent – from solar-powered irrigation pumps to grain milling, the vibrant enabling ecosystem is lacking to kick-start the revolution like the above.

DRE and the inclusive energy transition

Any talk of a just and inclusive global energy transition is incomplete if it does not factor in the energy poverty experienced by low-income populations across India and the entire Global South. A typical household in SSA owns 2-5 appliances, compared to the 30+ appliances found in a typical European or North American household, says a report from Efficiency for Access.

Availability, affordability and performance of DRE-powered appliances are critical for income-generation, time-saving and low-carbon socio-economic development across the developing regions. Equally crucially, the DRE-powered solutions also reduce vulnerability to multiple climate-related shocks by cushioning smallholder farmers from the impacts of climate change, fuel price variations and fluctuations in market prices for agricultural produce.

And this comes with growth in real economy: majority of the DRE solutions highlighted above serve the agriculture sector, which sustains livelihoods of more than 50% of the SSA population and employs up to 48% women in rural workforce across the low-income countries, says the Food and Agriculture Organisation of the United Nations.


Furthermore, Lighting Global’s 2019 Pulse report says 65% of the land in SSA is tilled, ploughed and weeded by human hands and 25% by animal power. The penetration of DRE solutions has the potential to boost farm productivity substantially, by increasing efficiency by five-fold or more, says a review of patterns and progress of mechanisation for rural development by the UN’s Food and Agriculture Organisation. And UNEP estimates that, for every 10% increase in farm yield, there has been an estimated 7% reduction in poverty in Africa and more than 5% in Asia, according to IRENA policy brief Solar pumping for irrigation: Improving livelihoods and sustainability.

With the potential to drive such socio-economic growth, DRE-powered solutions also present the opportunity to displace the far-pervasive diesel gensets and dirty fuel usage for MSME enterprises. According to one Shell Foundation study, the low-carbon pathway to achieve SDG 7 (Universal Energy Access) by 2030 by deploying DRE solutions at scale has the potential to avoid up to 626mn tCO2 – the approximate equivalent to the annual emissions of 160 coal-fired power plants.


DRE-inclusive policy support to drive the silent revolution and market-building

The new policy by India lays a foundation for the government support to enable a vibrant market ecosystem of innovation, piloting, commercialisation and financing to scale up such DRE-powered solutions. Despite the electric grid expansion to every corner of the country, the government sees DRE solutions playing an important role in complementing the grid and making livelihoods more viable in the rural regions and in tackling gender-inclusion barriers.

In the short term, the released policy framework by the Indian MNRE ministry gives boost to other government units (such as State Rural Livelihoods Missions) to start considering DRE-powered solutions in their own running programs and schemes. This will allow DRE ventures to have concrete engagements to avail prevailing programmes and schemes for MNRE-backed DRE solutions (such as credit guarantees etc).

In the mid- to long-term, the government has indicted that a potential scheme with budgetary allocation could follow the policy to drive the market growth and affordability of the DRE solutions for the end-user.


What Sub-Saharan Africa and beyond learn from the emerging Indian experience

Energy-efficient appliances are critical to enabling the economic viability of the DRE-powered solutions. Most often the energy access programmes focus only on the supply provision – be it grid extension, mini-grids or micro-grids. However, effective productive-use appliances rarely exist. Off-the-shelf appliances – from oil expellers to milling machines – are meant to be low-cost, but are also bulky and inefficient.

Using these appliances mean oversized renewable systems, leading to poor economic viability. A shift from CFLs (Compact Fluorescent Lamps, which also contain toxic mercury) to LEDs for household lighting had made solar home systems affordable and relatively easier to dispose; we need a similar focus on efficient, DRE-compliant productive-use appliances.

Providing demand signals to innovators and entrepreneurs, in the form of innovation prizes, procurement guarantees, etc could fast-track the development of efficient products.


Supporting livelihoods go beyond the technology provision

While efficient appliances are necessary, they are not sufficient to enable sustainable livelihoods. The energy and technology interventions need to be complemented with end-user financing, skilling and at times market linkage support to enable income generation.

Grassroots-focused organisations such as the Selco Foundation have been driving such an ecosystem approach for the DRE adoption for livelihoods impact. And enterprises such as S4S Technologies, a solar dehydrator manufacturer in India, are prime examples of demonstrating this approach at substantial scale already, having served more than 6,000 farmers to date. They do not directly sell the dryers to their customers.

Instead, they enable financing for equipment adoption, provide training for equipment use and business management, and procure the dehydrated products back from the user for further value-addition and sales – providing an assured revenue stream for the microenterprises.

Expecting every energy supplier or appliance manufacturer to address these other needs may not be adequate. But ensuring partnerships between technology providers and livelihood enablers – such as financiers, skilling organisations, and respective civil society organisations – helps bridge the gap. The latest Indian policy also focuses on the convergence between government departments focusing on enabling livelihoods and the technical ministry.


De-risking and patient capital are essential to catalysing the market to support the energy transition

The potential market for DRE-livelihood solutions could be hundreds of billion US dollars. India alone has a market potential of upwards of US$50bn. However, the market needs priming in the form of early-stage equity and catalytic capital. But the risk appetite of private financiers and investors remain low, so public money must bridge the gap for early-stage innovators and entrepreneurs.

Philanthropic investments in India, through programmes such as Powering Livelihoods, have unlocked public support in the form of recent government policy and private investments to the tune of XX million.

At COP26, Rockefeller Foundation, IKEA Foundation and Bezos Earth Fund launched the Global Energy Alliance for People and Planet, committing US$1.5bn that will in turn unlock tens of billions for the growth of the DRE sector. Used strategically, the alliance could go a long way in catalysing the DRE-productive use market and enabling ecosystem growth.


Favourable policy support can go a long way in stimulating market growth

Across the SSA, there have been a few instances of the broader DRE sector benefitting from some of the government’s policy incentives. Some examples include: Tax and import duties exemptions on renewables in certain East African markets; the mini-grid focused regulation in Nigeria; Togo’s advanced national electrification plan incorporating smart subsides towards private DRE players, etc.

These have already resulted in building out some of the DRE markets (such as household lighting/solar home systems) – however, they need to be further evolved and spread across the DRE-powered productive-use sectors in Agriculture and beyond – as now concretely demonstrated by the Indian government’s new forward-looking policy framework covered above.

 As the world aims to achieve universal energy access under SDG 7 by 2030, we must ramp up the ambition and make energy access work for the economically poor in spurring their incomes. The energy access narrative needs to be situated within the realms of the broader energy transition momentum that is gaining traction. And the South-south knowledge sharing, technology transfers, favourable policy building, and even financial cooperation between India and Sub-Saharan Africa could go a long way in furthering the Silent Revolution.

Authored by Abhishek Jain and Ashish Kumar. Jain is a Fellow at Council on Energy, Environment and Water (CEEW) and is also a Director of Powering Livelihoods initiative; Kumar is Climate & Innovation Lead at the Shell Foundation London. Blog is originally published on ESI Africa.

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