Can the private sector really serve the bottom of the pyramid?
In 2014, 1.05 billion people still did not have access to electricity – predominantly in low income countries. Progress needs to be 3 times faster to meet the 2030 objectives. Additionally, 3.04 billion people still did not have access to clean cooking, with the share of global population with access to clean fuels and technologies for cooking barely rising, from 56.5 to 57.4 percent over 2012-14. Estimates suggest that a five-fold increase to $45 billion annually would be needed to reach universal energy access by 2030.
In order to unlock the opportunities at the bottom of the pyramid in these low income countries, the private sector, governments, civil society organizations, development agencies, and the poor themselves must work together to progress access to energy services. Entrepreneurship on a massive scale is the key to unlocking this potential – recognizing the bottom of the pyramid consumers as resilient and creative entrepreneurs and value-conscious consumers allows for greater development gains through economic empowerment. Recent innovations in off-grid technology, products and services, business models and finance solutions are allowing for greater deployment of decentralized energy solutions to the bottom of the pyramid consumers – generally at a much faster rate than waiting for the national grid. These off-grid renewable solutions are also an attractive option because they generally don’t require regular fuel deliveries and are cost-competitive with diesel generator. Moreover, they can provide access at different scales, from solar lights and small home solar systems to mini-grids powered by solar PV, wind turbines or small hydropower plants. These technology advancements, combined with new business models such as pay as you go or leasing models, allows consumers to access products that are within their budget. This accelerated deployment by the private sector, civil society and government, creates paths to market growth and the generation of energy access dividends – making the case to go further, faster. Moreover, market development at the bottom of the pyramid will create millions of new entrepreneurs at the grass roots level—from women working as distributors and entrepreneurs to village-level micro enterprises – as can be seen through the Solar Sister and Smart Villages models. These micro enterprises become an integral part of the market-based ecosystem.
IRENA has estimated the number of people supplied by off-grid renewables from the population of towns and villages connected to renewable-powered mini-grids and the number of solar devices (lamps, lighting kits and home systems) sold in recent years. Based on these figures, it estimates that off-grid renewable energy currently provides electricity access to about 60 million people in Africa, or 10 percent of the off-grid population. Of these, 36.5 million use small solar lights, 13.5 million use lighting kits or solar home systems and 10 million are connected to mini-grids or standalone systems with a higher power rating. Given the access gap that exists, this should provide an attractive business case for private sector engagement.