Microgrids and mini-grids along with other off-grid solutions have the potential to bring electricity to almost two-thirds of those without access across the world – and especially in India and Africa, where the needs are greatest.
Unsurprisingly this technology with the associated business opportunities has given rise to a whole range of new entrants and innovative business models.
The Sustainable Energy for All (SEforAll) Energy Access Practitioner Network’s Investment Directory lists no less than 83 companies and organisations for this area.
A recent agreement between the India Energy Storage Alliance and the European Space Agency is bringing space technology to bear on some of the technological challenges of developing and operating microgrids in remote areas.
But still a key challenge is the funding of these microgrids beyond the traditional sources such as the World Bank or the regional development banks.
Microgrid Investment Accelerator
To contribute to addressing this challenge, Facebook and Microsoft, along with project development company Allotrope Partners, have formed the Microgrid Investment Accelerator (MIA).
The financing facility seeks to mobilise around $50m between 2018-2020 to expand energy access to communities that currently lack reliable access in India, Indonesia and East Africa.
“The MIA will test the commercial opportunity for microgrids and demonstrate how concessionary finance can unlock progressively larger proportions of private capital as risks are discovered, priced, and mitigated,” explains Alexia Kelly, Chief Executive Officer of the facility.
“With innovative financing and partnership models, the MIA facility will unlock the resources needed to scale microgrid solutions to achieve our shared energy access and economic development goals.”
The MIA is intended as a blended capital platform, leveraging grant and concessionary finance from foundations and development finance institutions to mobilise private sector capital into renewable energy microgrid projects.
The facility intends to take an ‘ecosystem’ approach to finance, emphasising partnerships for productive end uses of energy (such as agricultural equipment and household appliances) and with accelerators and incubators, other financial intermediaries and larger institutional sources of capital.
The MIA will help prove the commercial business case for microgrid investment through rigorous data collection, management and analysis.
As much data as possible will be made publicly available in order to inform the broader investment community on the opportunities and risks associated with investment in energy access microgrids.
Implementing partners include cKers Finance in India and Crossboundary Energy in Africa to work with MIA to deploy microgrid project debt and equity in key markets, Morrison & Foerster LLP, California Clean Energy Fund, Electric Capital Management, and GivePower.
The first solicitation to developers for pilot projects will be issued early in the second half of the year, with the facility disbursing funds at scale in 2018.
Enel lends support to microgrids
In addition to the launch of the MIA at the SEforAll Forum in April, Enel committed its expertise to support electrification.
Under an agreement with the SEforAll initiative, Enel will create an Electrification Accelerator, in which the company will lead a working group to encourage electrification through the development of microgrids, sustainable mobility and digitised grids.
Progress towards electrification
So how is the drive for electrification progressing? According to the newly released Global Tracking Framework 2017, we are not on track and efforts need to be accelerated to get close to the target of universal access by 2030.
Access to electricity, 2014 (Global Tracking Framework 2017)
In 2014, global electrification reached 85.3% (96% in urban areas, 73% in rural areas), marking a modest improvement since 2012 and a slowdown from preceding years. Access to clean fuels and technologies for cooking reached 57.4% globally in 2014 (78% in urban areas, 22% in rural areas), with barely any increase since 2012.
This means that in 2014, there were 1.06bn people without access to electricity and 3.04bn without access to clean cooking.
This apparently limited progress is not for lack of effort, however. A good part of the challenge is that the growth in the global population is almost matching the current rate of electrification. Indeed, in some countries in Africa, such as Angola and the Democratic Republic of Congo, population growth is exceeding new electrification and greatly so for new access to clean cooking.
The latest projections from the International Energy Agency, taking account of the latest policy pledges under COP 21 and technology trends such as the fast declining costs of solar PV, indicate 2030 access rates of 91% for electricity and 72% for clean cooking.
According to the report, investments in energy access aren’t well understood but to reach universal access by 2030 is believed to require a fivefold increase in current levels.