James Gadsby Peet, Director of Digital at William Joseph wrote a fantastic summary of our annual International Conference. Here are some of the key takeaways from each panel discussion.
Panel 1: Collaboration for impact – Bottom-up, integrated approaches to financing energy access and community services
Without data, it’s difficult to get the buy-in from decision makers and convince investors to finance energy access. MASS Design Group have found collecting data in some places where they operate challenging, as many of the tools that are used don’t work in some of the more underdeveloped areas. Chhattisgarh State Renewable Energy Development Agency (CREDA) convinced its local government to buy into off-grid solar for health centres by showing them small scale examples that proved its impact. Driving collaboration between ministries is crucial to progress in renewable uptake. CREDA created joint projects between the ministry of health and the ministry of energy in Chhattisgarh. This sub-national strategy has been seen to be more effective than trying to drive integration at the country level.
Panel 2: Digital Innovation – Using data to understand customer behaviour and mitigate financial risk
Bloomberg New Energy Finance thinks that there is a $17B/year digitisation opportunity for energy systems. Shuttl finds that by being a data-centric company, they can develop their routes to fit different user behaviours. Similarly, Angaza’s features are completely informed by the needs of their distribution partners. Through the increasing adoption of digital transactions in emerging markets, as well as mobile behaviour and tracking, banks can understand their customers even better. This gives banks more confidence in offering credit and financing to these individuals, which helps drive adoption of more sustainable technologies. Lack of customer data isn’t necessarily a roadblock for investment moving into the sustainable energy market in emerging markets. The challenge is how to develop individual products that fit in with the local conditions.
Panel 3: Unlocking blended finance – Catalysing investment for universal access to energy
According to Bloomberg New Energy Finance, for every $1,000 that goes into clean energy, only $1 goes into small scale off-grid products. However, with the increase in debt financing, the signs are good that the industry is maturing. SunFunder sees a huge number of enquiries from small companies looking to access debt, at a cost that can enable them to be a sustainable business. CDC is focussing on enabling local currency financing due to the huge risks involved in converting dollars in other models. The challenge it sees is that the local banks aren’t comfortable in investing with such early stage innovators. Early stage, clean energy businesses find it difficult to bring in commercial lenders as they are seen as a riskier investment that may not offer a large enough return. Blended finance vehicles combining people like social investors, NGOs, public money, and early stage lenders can allow these organisations to still access debt in a way that works for individual companies.
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Panel 4: Leaving no one behind – Financing approaches for reaching the last mile
The International Energy Agency (IEA) worries that there will be remote areas of Africa that will be without electricity even in 2050. Lumos believes that this is a huge opportunity – but one that can only be solved by development money and NGOs underwriting commercial expansion. SELCO Foundation finds that a key area is to help banks feel more confident in the measures that are in place to mitigate the risks of lending to the off-grid solar industry. Ecozen Solutions has found it challenging to raise finance and has started to change its business model to allow farmers to have cold rooms for free initially and have them pay for it on an ongoing basis from the extra returns they see. Meanwhile, Lumos has a full distribution network within MTN’s shops. This partnership has allowed it to expand rapidly and for a relatively low cost, whilst making the most of its word-of-mouth success. At the moment, off-grid solar companies have to cover a vast array of capabilities from credit scoring to software development. Lumos believes that in the future, this will become disaggregated and organisations will specialise in one or two.