Across the world, roughly one billion people lack access to energy. Now the social enterprises battling to connect them face a grave threat – the coronavirus pandemic. The work of these organisations, particularly that of smaller or locally-run enterprises, is vital. Their collapse would be disastrous.
These companies bring affordable solar panels to remote rural villages, pollution-reducing cookstoves to urban slums, and so much more. They are driven by a deep understanding of their communities – on-the-ground knowledge far beyond that of any funder in New York, London or Geneva. These enterprises are responsive to local needs and succeed by empowering local people – not only through essential products, but also employment and opportunities for the most marginalised.
Now they face an enormous challenge. Supply chains have been disrupted by lockdowns around the globe, movement restrictions make the sales process difficult, and customers are simply less able to pay. This summer, 85% of companies surveyed by energy access partnership Endev said they would struggle to survive for more than five months. 19% said the volume of their sales had fallen by at least three quarters. Endev’s report confirms that small businesses are most heavily affected by the crisis.
Coronavirus has dealt a terrible blow to the progress towards Sustainable Development Goal 7 – global access to sustainable, affordable and reliable energy. Relief funding is urgently needed, particularly by smaller outfits. Much of the finance currently available is only offered in larger chunks than small organisations can make use of. But the disbursal of lower amounts would make an enormous difference – Endev’s research found half of organisations in need requires $50,000 or less to survive.
However, many of the issues enterprises face are long-standing and deep-rooted (albeit made dramatically worse by the pandemic). If we are to reach SDG7 by 2030, it is crucial we enact systemic change and build a better energy access ecosystem. Policymakers, funders and the wider development sector all have a vital role to play.
Clean energy enterprises are needed now more than ever. In fact, many have already dramatically pivoted their activities and operations to support communities through their disaster. India’s Frontier Markets is just one example. The company’s business model centres on employing rural women to sell lighting products and much more to their neighbours.
India’s villages are hard-hit by the pandemic. But Frontier Markets has formed a crucial link between isolated communities and those in power. Staff at head office spent the first days of the crisis calling customers and sales agents to find out how they had been impacted, and what they needed. These calls revealed that essential products — from food to lighting to cleaning supplies to agricultural tools — were unavailable or suddenly much more expensive.
The company shared these insights with state government officials, who pledged to help provide essentials to rural customers during the lockdown (and beyond). Frontier Markets quickly added new products to its range: food items, masks, gloves, and more. It shifted management systems online and redeployed all field staff as delivery personnel who could deliver bulk orders to sales agents.
The need to move systems online is just one expensive challenge faced by enterprises – and one reason they need short-term grant relief and, looking further ahead, new long-term equity or debt investment and concessional loans. But attracting finance has long been difficult, particularly for smaller organisations that lack glossy marketing material or personal connections with local banks or investors in North America and Europe. Since 2010, two-thirds of total investment into the energy access sector has flowed to the world’s ten biggest solar home system companies. This risks creating an industry dominated by global behemoths, rather than networks of tailored local solutions.
A way forward is outlined in a new report from Ashden and Wallace Global Fund: Transforming Energy Access. This draws on insights from more than 50 frontline organisations from around the world and suggests reform in three key areas.
Understanding: Funders and frontline organisations report a shortage of reliable, useful information about each other’s intentions and impact. Closing this ‘knowledge gap’ would undoubtedly aid the flow of finance into the sector. Industry bodies and global energy access initiatives have played a key role uncovering and sharing information during the pandemic – this work should be expanded and sustained after the crisis.
Inclusion: Funders and policymakers should boost energy access by nurturing a more inclusive and diverse ecosystem of climate enterprises, one that features a prominent role for organisations owned and operated by local people, including people from marginalised communities. Again, intermediary organisations such as local industry bodies can play a key role.
Ambition: Reaching SDG7 demands a fundamental shift in attitudes by funders and policymakers – a new focus on reaching the most marginalised, and acceptance of subsidies as essential to universal energy access. Comprehensive national and regional plans are vital – trailblazing work in Zambia and Togo, bringing together the public and private sectors, should be replicated worldwide.
Despite the challenges ahead, we see reasons for optimism. The enormous social impact of clean energy enterprises has been brought further into the light by the pandemic. And in recent months some donors have stepped up at speed, creating new mechanisms and funds for energy access.
At Ashden, we are putting these big ideas for change into action. For example, new criteria for the Ashden Awards – our annual search for the best sustainability solutions – place greater-than-ever emphasis on driving systemic shifts, and innovation that empowers communities and grassroots organisations. And through events such as our investor pitching events, we are helping enterprises speak directly to those interested in financing them.
Finally, the global response to coronavirus suggests societies and economies can be redesigned at lightning speed when those in power are motivated to do so. Universal energy access will undoubtedly require such a shift – one widely thought impossible just a few months ago. But the first step to SDG7 is ensuring clean energy enterprises survive and thrive around the world.