This article was originally published by SciDev.Net and is republished with permission.
Can local energy systems merge climate and poverty goals? Anita Makri reports from Bellagio.
The “tremendous expansion” of businesses selling small solar systems in rural areas is one of the success stories of efforts to roll out renewable energy, according to environmental lawyer Alan Miller.
Miller has been involved in climate policy since the 1970s when concerns about the ozone layer would eventually lead to the Montreal Protocol and then the UNFCCC climate convention in 1992. He says countries in the global South need to develop their energy systems sustainably to avoid getting locked into high-emission fuel sources – and undermining global climate goals.
“More and more of what’s projected as growth economically ‒ but also in greenhouse gas emissions ‒ is in developing countries, and particularly in China and India,” he says.
In India, Harish Hande runs a social enterprise, SELCO, which offers a door to door service and financing for families eager to move from candles and kerosene to small solar systems. Hande recognised as a pioneer in the field, does business with marginalised people who often get overlooked by the private sector and centralised government services.
Rolling out nationwide power grids is expensive, and tends to rely on non-renewable, carbon-emitting energy sources such as coal and gas. But small, off-grid solutions still make a small proportion of most countries’ energy supply.
The challenge of rolling out clean energy to meet climate goals is on the agenda at the Bellagio Center in Italy, where academics, scientists and artists from around the world meet this month to discuss science for development.
Connected or independent – the question of grids
Introducing small solar systems and mini grids “avoids what would otherwise be dramatic increases in greenhouse gas emissions from traditional grid connections powered by fossil fuels,” says environmental lawyer Alan Miller.
Though slower to emerge than China and India, African economies are also in the picture. In all three regions, large populations matter: as millions rise out of poverty, so does energy demand. For many countries with underdeveloped grids, this demand is hard to meet centrally.
Hande says it is a mistake to focus solely on electrification by extending the grid. He believes this ignores other ingredients of a sustainable system: producing efficient electrical devices, reducing consumption, and – in a diverse country such as India – introducing tariff and innovation structures that distinguish between people at different levels of poverty and social class.
There’s another, practical reason to move away from a focus on the grid, says Asim Waqif, an artist in residence at Bellagio: often, government of India can’t be relied on to maintain a constant energy supply in remote communities.
But grids are still the norm in many national energy strategies. A report by the NGO Practical Action found that, although distributed systems such as mini-grids or stand-alone systems are the least costly way to meet the needs of energy-poor people, most countries continue to invest in the grid. In Kenya, for example, investment in distributed systems accounts for just 15 per cent of the total, even though they serve 73 per cent of the unconnected population, according to its analysis.
A matter of money
One of the barriers that keep countries addicted to grids is money. For businesses, pouring money into these systems is risky, says Carlos Sordo, an energy access expert at Practical Action. “Once solid business models are in place, and they have attractive returns for the financiers, this will start sparking interest.”
Big projects connected to the grid are also more familiar to investors and carry lower management costs, according to Sordo. He thinks off-grid projects could be more financially attractive for companies if they are bundled up into larger projects.
But according to Hande, what small systems really need to take off is access to long-term financing. Spread over five years, the cost of a solar system is lower than what a poor Indian family would spend on candles, kerosene and phone charging. But convincing banks to give poor families a loan is difficult. Banks need guarantees to reduce their risks, while many users are wary of committing to technology that may end up breaking down and not deliver what they need.
In such cases, microfinancing can also help, says Jeremy Stone, director of resilience at Mercy Corps in Myanmar. “There are a number of projects in Nepal, India, and Bangladesh that have established microfinance services for household energy,” he said.
A microfinance project for biogas use in Kenya is another example where this has worked, says Sordo. But both agree that this kind of finance may still be out of reach for the poorest people in remote areas.
The problem is convoluted. Sometimes, loans for off-grid systems can be too small for the larger banks to take on, says Tom Morton, a project manager at ClimateCare in Kenya. “We have worked with Savings and Credit Co-operatives, which can lend smaller amounts, secured against an element of savings to reduce risk,” he says.
ClimateCare has used carbon finance, a system that reduces emissions by selling permits, to support their energy projects, and Morton says this mechanism has been increasing in East Africa as countries gear up to implement the Paris Agreement. “Kenya is at the forefront of this, with its Climate Change Act, National Climate Change Action Plan and other pieces of legislation.”
Another role for government, according to Ezzaldeen Edwan, Assistant Professor and Head of Engineering Programs at the Palestine Technical College, is to prepare the grid so it can receive electricity generated by local systems. This is where Argentina took an important step, this week eliminating a law that banned its citizens from producing electricity if they had access to the grid.
Power companies discouraged the country’s move, according to Veronica Galea, executive director of Fundación INVAP and a practitioner resident at Bellagio. But – under pressure to meet global climate goals – the government found a way to “make [companies] accept this distributed generation option”.
But it doesn’t all come down to money. “We are not actually concentrating on what the energy can [and] should be doing in the first place,” says Hande, who has made it his mission to show that poor people can afford and maintain sustainable energy systems. He says that greater efficiency of technologies powered by small systems can help lift people out of poverty ‒ this is because small solar can easily power a well-designed sewing machine, for example, or a dental chair with basic features that doesn’t need the huge power supply of a hospital.
Tariffs are another part of that ecosystem. Low tariffs encourage energy waste among the middle class, who can easily afford them. “If you’re a middle class [person] and using a number of air conditioners, you need to pay that cost,” Hande says. “You need to feel the pinch.”
India’s leadership is crucial for less developed regions like Africa, says Hande. And across the global South, unless the diffuse network of small-scale systems can expand enough to compete with systems powered by fossil fuels, both climate and development goals are set to suffer.
“In many countries, entrepreneurs and engineers are already quite active in developing improved indigenous technologies and energy systems,” says Stone. “What is missing is a clear strategy and enabling environment to replicate and take good ideas to scale.”
By Anita Makri