People living in villages in Africa used to wait years, if not decades, for governments and multinational oil companies to install electricity-providing infrastructure. But now, the they only need to wait four months, thanks to startups and entrepreneurs. They are gunning for development goals that once belonged only to governments and multinationals, taking advantage of clean energy technology and an influx of private equity funding to access under-penetrated markets and democratize electricity. A power plant usually has a price tag of a few hundred million dollars and complex infrastructure requirements, while small scale solar deployment targets people most in need of basic electricity and knocks a few zeros off the bill. The aggregate positive impact is exponential, making the democratization of clean electricity across the world a social movement that anyone can take part in.
Just ask Leonardo DiCaprio, Champion of Planet Earth, who used his maiden Oscar winning speech in 2016 to champion the fight against climate change. The Leonardo DiCaprio Foundation has supported clean energy projects globally, including SunFunder’s recent product that aims to make electricity a constant reality for people who live in off-grid and grid-deficit areas in Africa and South Asia. Leo is joined by a long list of celebrities – including Tom Hanks, Edward Norton, Brad Pitt, and Scarlett Johansson – who have jumped on the bandwagon. Individuals can now provide solutions to development goals, but there’s still more fundamental work to be done.
The World Bank recognizes that users of mini-grids may need access to finance and vocational training to fully capitalize on opportunities that electricity brings to rural communities. In this respect, startups and entrepreneurs that operate mini-grids are stimulators of rural development.
Andy Moon is co-founder of SunFarmer, a non-profit that installs solar energy in hospitals, health clinics, and schools in developing countries. Launching in Nepal in 2012, SunFarmer focused solely on installing solar panels, and later realized that it was not a holistic solution for a country where farmers constitute 70 percent of the workforce. SunFarmer now focuses on agricultural training for farmers, targeting the whole value chain to help farmers develop export driven businesses. “Solar wasn’t enough to sustain these communities,” Moon said. “We needed to target the entire value chain – installation of solar panels, irrigation training, what to grow, how to grow it, and where to get seeds and fertilizer.”
Solar startups received a record high of over $2.1 billion in private equity funding in 2014. In more recent years, investors are placing more careful bets, but solar remains on the table. However, while smaller players have been driving this movement from the bottom-up, large institutions are still yet to move on from a traditional financing mindset that supports huge energy infrastructure projects. This is demonstrated by tariff bidding price wars on solar around the world.
Institutions should employ more holistic strategies to address development goals and work in tandem with the startups and entrepreneurs trying to democratize clean energy. “Governments don’t run factories, they’re meant to provide the incentives to drive solar innovation and show startups how it’s done,” Moon said. “Governments aren’t taking coordinated action – investment is just going towards software. Unfortunately, we can’t ignore the government, they have the budget, they set the rules, they determine what the private sector does.”