The predominant historical approach to providing new energy connections has been to extend the existing grid network. In many countries throughout Africa, however, both the public and private sectors have realised that building more centralised energy capacity and extending the grid system using non-renewable energy sources is both economically unfeasible and environmentally detrimental. That has led to the emergence of a broad spectrum of decentralised renewable energy models to fill the void. This is both timely and relevant, because energy access has proven to be one of the most effective mechanisms to combat poverty. Providing energy into low-income households creates opportunities to study, engage in commercial activities and enhance safety in ways that were previously impossible.
South Africa is an energy anomaly from the rest of the continent in almost every way possible. Its energy generation, electrical infrastructure and renewable energy provision are extraordinary by comparison. It produces almost 50 percent of all the energy generated in sub-Saharan Africa’s 49 countries, yet it’s home to only 5 percent of the continent’s population. This energy powerhouse provides 85 percent of its citizens with access to grid-powered electricity in comparison to the average of 43 percent in other sub-Saharan countries. Yet, within this backdrop, 60 percent of South African rural households have no access to electricity, large sections of low-income urban settlements have no access, and over 40 percent of the households that are connected are considered energy poor, spending upward of 20 percent of their monthly income on power.
Since my company, Impact Amplifier, and I are based in South Africa and interact with a wide variety of social enterprises designing and operating alternative energy provision models, it was clear that not enough was understood and available regarding alternative means of providing energy to the poor. This motivated us to undertake a nine-month research process to review the decentralised renewable energy business models being used in poor communities globally; if and how they have been tried in South Africa; and the potential these models have for expansion. As a firm believer in the power of the private sector to create lasting, innovative solutions to the challenges confronting the poor, we wrote a report, “Energy Provision at the Base of the Pyramid – Are there viable business models to serve South Africa’s low-income communities?” to support entrepreneurs, researchers, public benefit organisations, government and other institutions interested in creating economically sustainable energy solutions at the base of the pyramid.
We settled on five distinct energy access business models for low-income communities to review in detail:
What we discovered is that many of these models have gained traction in other parts of the world; however, South Africa’s off-grid energy ecosystem – which includes 15 percent of the population – is very immature by comparison to many other African countries. Almost all the above models, except biogas, have been tried in South Africa, but none have been able to scale. Some were poorly structured government programmes, which tried solutions when the technology or expertise was immature, or simply were mismanaged. Multiple NGOs have provided energy solutions to various communities, but none were designed as commercial models nor moved beyond a single community in the main. Meanwhile, a new breed of entrepreneurs has entered the market within the past three years that have developed a range of different solutions. However, none to date have been able to scale their ventures.
What isn’t discussed in this report is why South Africa, with its substantial generation capacity and relatively consistent supply, is defined by vast extremes between the energy rich and poor. Why hasn’t all of its historic energy success sufficiently addressed energy access or affordability for the poor? There are a few things I believe are happening simultaneously that have caused this schizophrenic personality:
South Africa has the greatest potential in sub-Saharan Africa to make energy universally accessible. Realising this potential will only be possible, however, if the public sector creates the enabling environment, entrepreneurs enter the market with innovative models and have the financial backing to stay in business through a steep learning curve, and communities are prepared to let go of the promise of free electricity and adapt alternative solutions.
Republished with permission from Next Billion