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Op-Ed: The Silver Lining For Distributed Renewable Energy Solutions Post Pandemic

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The Covid-19 pandemic has had significant impact across all sectors including access to electricity. The Distributed Renewable Energy (DRE) sector that provides decentralized energy access to users although equally hit by the pandemic can take advantage of new opportunities for the industry to thrive and grow. With the right support, funding and enabling environment, DRE solutions can become mainstream and play their part to improve access for the 789 million people still lacking electricity. 

Mama Esther has lived in my hometown in Eastern Nigeria for most of her life. She is a small-scale ‘Nsukka’ (yellow peppers) farmer who would typically harvest a few baskets of pepper, some tomatoes and other perishable products daily.

My village has not had grid electricity for more than 30 years and the closest to any form of such are the poles which once had cables connected to them. Towards the end of each market day, Mama Esther will have to sell her products at giveaway prices, barter some of it while the rest will go to waste because the lack of electricity supply means the products cannot be stored.

Mama Esther, just like other small-scale farmers, tends to lose a large percentage of her produce due to the lack of electricity for processing and storage. She remains a small-scale farmer, unable to escape the poverty trap as she cannot transition into producing higher value agricultural products to increase her disposable income, or at the very least maximize her income by reducing losses.

This inadequate access to electricity affects most aspects of life in developing countries – childbirth in poorly lit hospitals, inability to store blood and vaccines safely, children who are forced to study using candlelight, businesses who are unable to operate for longer hours to increase their profitability, and much more.  While the Covid-19 pandemic has made these situations more dire, it presents an opportunity for Distributed Renewable Energy (DRE) companies to make a positive impact.

DRE during a pandemic 

Distributed Renewable Energy companies have been providing customers with power, cooking, heating and cooling systems that generate and distribute energy independently of the centralized grid systems over the last few years and currently serve over 100 million people in both urban and rural areas of the developing world, and these numbers continue to increase annually.

Reports by The Economist and the IRENA Global Renewables Outlook 2020 highlighted that the outbreak of coronavirus has had significant impacts on the energy transition, particularly threatening global supply chains in the renewable energy sector.

Indeed DRE companies are facing their share of the Covid-19 induced challenges; surveys conducted by SEforAll shows that they are expecting to lose between 27% to 40% of their revenues in the coming months. In addition, their growth plans are likely compromised, and they have to take precautions to protect their staff and customers. They continue to advocate for ‘essential service’ status to enable them meet the needs of their customers and closely monitor their inventory given the impact of the virus in key component manufacturing countries.

DRE evolving under pressure        

While concerns remain that the pandemic has slowed down some of the progress that off-grid energy companies have made in the last few years, a closer look shows that the DRE sector is able to continue improving access to electricity by leveraging some of the resulting effects of the crisis.

DRE becoming mainstream as the solution of choice to complement bad grids or inadequate supplies: In regions where the electricity grid is unreliable or even non-existent, the Covid-19 pandemic added a strain to the requirements for reliable energy for health facilities, essential enterprises, citizens sheltering and working from home, and vulnerable communities. In these regions, DRE systems are increasingly serving as a complement to the centralized/ grid energy generation systems, or as a substitute. They provide an often cheaper alternative and sometimes provide the entire energy requirements for essential facilities.In fact, utilities are now receptive to the option of partnering with DRE developers like mini-grid companies through the increasingly popular “under the grid” models. The speed of deployment especially during the pandemic has been important, with installations within a few weeks, coupled with the plug and play nature of some solar home systems. Through simplicity, nimbleness, and mutually beneficial collaborations, DRE companies are becoming a popular choice to meet critical energy needs.

The growth of the Local Supply Chain: The Covid-19 pandemic led to delays in supply of imported solar components and stocking out due to restrictions affecting logistics. Players in the African solar industry are now seriously exploring local solutions to reduce import dependence. Some existing local companies who have been meeting local needs for almost a decade and local content requirements in countries like South Africa and Morocco have supported the growth of the local market. In fact, other local assemblers have experienced an up to 7X increase in demand for their locally assembled solar panels and are now exploring ways to increase their capacity. This is clearly an opportunity for enabling policies and incentives across African countries to help expand local manufacturing. This would enable value-chain competitiveness and support access to sustainable energy for all.

Promoting the Financial Credibility of DRE customers through increased Financial Inclusion leveraging mobile money: The restrictions in movement during the pandemic  has led to a significant increase in mobile payments across Africa; even beyond East African markets that have well advanced mobile money systems. With energy payments now ranking as a crucial expense just after food, school fees and medical payments, these mobile micro payments become the first channels for financial inclusion of the vulnerable DRE customers, who begin to build credit. Indeed energy companies such as M-KOPA receive over 30 million mobile money payments per day. With stronger financial credibility of their customers, DRE businesses may see a strengthened position during fundraising processes and as they scale their operations.

Ujunwa Ojemeni

The saying goes “never let a good crisis go to waste”, and as seen above, the DRE sector is able to find its way through the crisis as its solutions continue to take their place in the energy mix. Only by supporting these DRE solutions through enabling policies, affordable technology, suitable funding options and business support would we help women like Mama Esther to move out of the poverty trap, save lives in our health facilities, help students to study at night, enable businesses to thrive and much more. 

By Ujunwa Ojemeni, an impact investing, energy development and policy expert. She provides her expertise to drive access to energy in Africa through the Office of the Lagos State Commissioner for Energy & Mineral Resources, and is an Advisor with the Private Finance Advisory Network (PFAN). She holds degrees from the University of Nigeria and the University of Manchester, in addition to certifications from the International Finance Faculty and Florence School of Regulation. She is also an Alumni of the Open Africa Power program for young African Clean Energy Leaders by Enel Foundation. To promote the participation in the energy sector, she founded the African Women in Energy Development Initiative (AWEDI Network) focused on promoting the growth of the women in the sector through mentorship programs, career sponsorship (acceleration), networking opportunities, professional development and leadership training for women at all stages of their energy careers and for female students at the secondary and tertiary levels.

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