June 19, 2020 / 2:42 PM / 17 days ago

Pandemic sparks push to keep green energy-access firms switched on

BARCELONA (Thomson Reuters Foundation) - The coronavirus pandemic roiling the global economy has sparked fears for the emerging off-grid clean energy businesses serving poorer customers from Africa to Asia - but in northern Kenya’s Kalobeyei refugee settlement, the lights are staying on.

U.S-based firm Renewvia Energy is running two solar mini-grids in the area, providing power to 600 households of refugees mainly from South Sudan and the local host community, as well as businesses, churches, school and health facilities.

Backed by donor funding from Britain and Germany, the mini-grids are part of a wider push by the Kenyan government to provide all its citizens with modern, affordable and reliable energy by 2022 - eight years ahead of a global deadline.

Renewvia, which already operates 11 mini-grids in sub-Saharan Africa, secured the investment it needed for 10 more such projects in Kenya and Nigeria in February, right before the coronavirus crisis hit, and plans to push ahead with them.

Its founder and CEO Trey Jarrard believes the pandemic will be “a blip for this sector”, because electric power is needed to advance other areas of economic development, from health to education and gender equality.

“I think the demand is there,” he told the Thomson Reuters Foundation. “We haven’t seen much of a difference in terms of how much energy we’re selling in the communities we’re serving right now.”

Nearly 550 million Africans without electric power already spend money on dirty energy sources such as kerosene and diesel, or cut down forests for fuel.

Buying power from a solar mini-grid operator would save them both cash and time, Jarrard added.

Energy access specialists said the COVID-19 pandemic had demonstrated a hunger for electricity in rural communities to keep health centers functioning, children learning or televisions on for information, especially as workers who lost jobs in cities headed home.

“People are seeing it is an essential service and are willing to pay for it in a crisis,” said Leslie Labruto, head of global energy for Acumen, a nonprofit that invests in innovations to tackle poverty.

She pointed to the rapid growth of the off-grid clean energy sector in developing countries, where it has expanded into a market worth about $1.75 billion over the past decade, providing power to 470 million people as well as about 370,000 jobs, many with small, local companies.

But that growth rate and investment remain too low to reach Sustainable Development Goal 7 (SDG7) to provide clean power to all, including the poorest, by 2030.

Now measures to curb the pandemic, including lockdowns, curfews and their economic fallout, have created further challenges for the hundreds of firms providing off-grid power.

“We can’t afford to see no sector in a couple of months when companies have gone bankrupt,” said Labruto. “We need these companies to achieve SDG7.”

RELIEF FUND

Back in March, Acumen began convening companies, investors and industry associations to try to set up a fund to limit the damage if the pandemic meant customers could not pay for energy services, supply chains stalled and investment flows dried up.

The relief fund now is set to launch in July, offering energy access companies in Africa and Asia cheap loans for up to three years to maintain existing services and retain the staff they need to expand in future.

“The point of this is to preserve jobs,” said Labruto, adding that nearly 500 companies from 40 countries had registered early interest in applying to the fund.

Investors have also responded well, she said. The debt fund hopes to attract close to half its $100-million target by July, helped by grants from Sweden’s development agency and several philanthropic foundations, which will be used to reduce risk.

The fund aims to provide capital to at least 70 companies, Labruto said, adding it would not be suitable for bailing out smaller firms as they would struggle to pay back loans.

In an open letter, major off-grid energy organizations appealed last month to donors, foundations and others for an extra $25 million in grants “to avoid the most severe impacts - including the bankruptcy of energy access companies, halting progress of the SDGs and leaving communities in the dark”.

The Green Climate Fund, one of the biggest sources of international climate finance for developing countries, confirmed to the Thomson Reuters Foundation it was considering putting money into the Acumen-led energy access relief fund.

It is exploring options to support small and medium-sized companies (SMEs) working on renewable energy “to remain financially solvent, going concerns at a time when businesses are facing significant liquidity constraints due to COVID-19”.

“This will ensure that SMEs with robust business models can continue to generate climate benefits in developing countries,” a Green Climate Fund spokeswoman said by email.

FIT FOR THE FUTURE

International development banks, meanwhile, have been rejigging their portfolios to help keep the lights on in poorer nations and to support governments to provide power to health clinics, about a quarter of which in some developing countries in Africa and Asia have no access to electricity.

The World Bank Group, for example, repurposed some of its loans to Nigeria and Sierra Leone to procure solar-hybrid power systems to electrify COVID-19 quarantine centers, said Riccardo Puliti, its head of energy and extractive resources.

And a share of the up to $160 billion it plans to make available over the next 15 months to help developing nations cope with the virus will also trickle down to electricity companies, he told the Thomson Reuters Foundation.

“Regrettably, the pandemic hit us in a moment of great expansion... of private-sector participation in the power sector in developing countries,” he said.

Governments should do everything possible to keep afloat companies generating both on- and off-grid power during the coronavirus crisis, he said.

Policy makers in Africa and beyond are inclined towards clean energy but need help with the technical and economic justifications for adopting it, added Puliti, also the World Bank Group’s director for infrastructure in Africa.

The cost of solar-power equipment has fallen fast, he noted, and it is easy to transport and install. A solar system to serve a village - with a battery that lasts three to four hours - can fit into a container that can be brought in by truck.

The battle now, as public budgets are squeezed by the pandemic, is to avoid turning back to energy systems that are “technologically obsolete, more expensive and dirtier”, he said.

“We have to be strong and keep on proposing solutions that think about the future for everybody,” he said.

Reporting by Megan Rowling @meganrowling; editing by Laurie Goering. Please credit the Thomson Reuters Foundation, the charitable arm of Thomson Reuters, that covers the lives of people around the world who struggle to live freely or fairly. Visit news.trust.org/climate

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