Down to the Last Mile: Key Research Needs for Energy Access
- According to the International Energy Agency (IEA) and the World Bank, approximately 1.06 billion people around the world still lack access to electricity. Furthermore, both institutions predict that despite efforts to expand universal access, the world will fail to meet the 2030 “sustainable energy for all” (SE4All) target.
- India remains one of the largest contiguous economic markets of unelectrified people, along with the sub-Saharan Africa region. In India, the challenge of electrification is complicated by politics of electricity, which have left state-owned utilities struggling to expand distribution networks and provide reliable power at below-market rates for residential and agricultural needs.
- Recognizing the limitations of centralized grid extension, the government of India has plans to achieve universal electrification with the help of off-grid systems, suggesting a sizeable potential market for decentralized energy technologies and business models lasting well into the future.
- Questions remain that if answered could help development practitioners and scholars understand what factors are affecting access to electricity and what kinds of issues need to be resolved to achieve quality universal access.
- This brief acknowledges that many institutions at the global and country level are hard at work helping address and analyze the energy access challenge. To further their efforts, this brief compiles the key research needs in energy access, based on extensive interviews conducted in-person and via email 1, with scholars and development practitioners in the energy access sector mainly in India, with a special emphasis on solar photovoltaic (PV) technologies used for electrification.
Mapping Customer Demand
Mapping consumer electricity demand and consumption behavior continues to be a need in the energy access sector. While new methods for mapping energy demand are being developed by institutions such as the International Institute for Applied Systems Analysis , most models assume that consumer demand for energy will grow based on the graduated step-ladder approach. This approach implies that consumer demand for electricity can be gradually increased based on the kinds of services people need. It is classified as energy for: (1) basic human needs (lighting, education, health, communication, and community services); (2) productive uses (electricity and fuels to be used for agriculture, commerce, and transportation); and (3) modern society needs (energy to power more home appliances, increased requirements for heating and cooling, and private transportation). The range of electricity needs in this ladder model ranges from 50 kWh to 2000 kWh per person per year.
Questions remain that if answered could help development practitioners and scholars understand what factors are affecting access to electricity and what kinds of issues need to be resolved to achieve quality universal access.
Electricity access firms, assisted by research scholars, periodically survey their customers to understand the household electricity consumption behavior of their customers. Yet we fail to have a coherent and comprehensive analysis of how much energy people are consuming and how this varies according to geography. This leads to a mismatch in projections of consumer demand and ground realities. For example, how many hours of electricity does a household really need? And what happens if a household does not buy many electronic household appliances? How can energy access firms prepare for entry into communities where households may already own appliances but not have access to electricity?
Research conducted by scholars from the Haas School of Business focused on Kenya indicates that generous subsidies are not sufficient to boost electricity connection uptake. Furthermore, being exposed to grid connected households does not lead consumers without electricity in the same neighborhood to choose to get connections. Various factors, including corruption, unreliable access, and genuine demand for electricity, may affect these results. A survey conducted in 2015 by scholars from Columbia University, UK-based Practical Action, and the India-based Council on Energy, Environment and Water of 8,566 households across six Indian states was the largest of its kind in the energy access field in India. More such surveys are needed to shed light on the levels of existing access and factors inhibiting their growth, such as reliability and affordability, as the survey found. In addition, we need research that can shed light on the impacts of poor reliability on latent energy demand in grid connected households and the amount of latent energy demand in unelectrified households who are “grid ready.”
We fail to have a coherent and comprehensive analysis of how much energy people are consuming and how this varies according to geography.
Finally, studying impacts on the improvement of livelihoods as a result of electricity access may help determine the role of different types of technologies be they pico (1 – 10 watts), micro (10 – 1000 watts), or grid-tied. More impact studies may also help us identify the missed job growth opportunities in communities based on the level or lack of electricity access. For firms, customer satisfaction surveys can play an important role in designing services based on feature preferences for the rural customer. For example, as incomes rise and the costs of certain appliances fall, there is a market opportunity to sell more technologies that require electricity to use. The best example of this is the rise of super-efficient appliances such as televisions and fans that use direct current and can be powered by small solar home systems. Appliance-led diffusion is likely to further the reach of small solar around the world and push the boundaries of efficiency of new technologies such as refrigeration. It would be worthwhile to survey the growth of firms selling super-efficient appliances or technologies without basic mobile phone charging capabilities to gauge the growth of consumer electricity demand and behavior.
Business Innovation for Energy Access Technologies
Business model innovation can leverage the dropping cost of many energy access technologies and further the reach of electricity. Major areas of research focus should be on community-owned versus entrepreneur-owned models, new technologies for improving business models, and new forms of financing.
With microgrids, for example, which model is most appropriate given a community’s location and finances: community-owned and operated or single entrepreneur-owned and operated? A survey that helps analyze the strengths and weaknesses of both models, given variables such as geography, finance, culture, and technology, might help answer this question. Are entrepreneur-owned and operated models likely to create new power monopolies and dynamics in regions where society already struggles with entrenched power disparities? And will turning farmers into prosumers of electricity help relieve the pressure on tariffs for beleaguered state-owned utilities which previously had to sell electricity below market price? Gender is also important from an energy access perspective as access to energy may have impacts on women’s health and productivity. Research exists on the disproportionate impact on women’s health and productivity as a result of lack of adequate energy access. To further research on this topic, we should ask: how many electricity entrepreneurs are women? What is the rate of success in managing off-grid energy distribution systems or sales by women versus men? Tapping into groups like Energia who are helping facilitate the growth of women-led energy access enterprises may be a good starting point.
In terms of technologies, the pay as you go (PAYG) business model has allowed energy access firms to leverage the prevalence of mobile phones to ease the purchase of electricity as and when customers need it. However, we need to understand the challenges and pitfalls of this business model. A report released by strategy consulting firm Hystra states that “reaching scale in energy access requires investment in strong relationships with satisfied customers” due to their centrality in further propagating sales for an energy access firm. Given the role of agent networks in building out customer trust and their importance in the success of the PAYG model, we must first have a comprehensive understanding of agent network-based models. This must be followed up by questions about community response; for example, what is the likelihood of customers transitioning from the PAYG model to pay full cost for purchasing off-grid technologies? What can we understand about energy demand growth from customers utilizing the PAYG model? What are the constraints and areas where technology and business innovation can further improve the model? Finally, what policies and regulations might be hindering the use of mobile money? The latter is important given that financial regulations have impeded the ability to harness the full potential of mobile money technology in advancing access to energy.
We should ask: how many electricity entrepreneurs are women? What is the rate of success in managing off-grid energy distribution systems or sales by women versus men?
The emergence of blockchain technology may further the trend of PAYG by facilitating secure energy trading between consumers and “prosumers,” while advancing a network of intelligent and connected microgrids and rooftop solar home lighting systems. However, few examples exist of blockchain technology being used to facilitate electricity access, particularly for rural areas. Now is the time to conduct field visits and witness how this technology can be beneficial for expanding electricity access.
Finally, finance continues to be a limitation for expanding energy access. According to the IEA, “providing electricity for all by 2030 would require annual investment of $52 billion per year (the majority being directed to sub-Saharan Africa), more than twice the level mobilized under current and planned policies.” Specifically, microgrids require a total investment of $187 billion, while electrification efforts using off-grid systems and grid expansion require $90 billion and $114 billion, respectively. In India, 90 percent of the main electrification program is funded by the central government while the remaining 10 percent is funded by state governments. For the off-grid sector, firms surveyed in 2017 stated that they “expected their need for finance to increase three-fold over the next three years to $59 million.” In addition, these firms highlight that “long-term debt remains the biggest barriers to growth, followed by onerous collateral requirements.” To channel more private-sector financing to private enterprises interested in the energy access space, a new tool was launched in January 2018 to help financiers evaluate project proposals and for enterprises to self-evaluate their projects based on project design and geography-specific factors such as customer needs. Similarly, the newly launched U.S.–India Clean Energy Finance fund is meant to support early stage distributed solar power projects by providing project preparatory funds to firms that can catalyze long-term debt financing. The role of the private sector in addressing the energy access challenge in India is critical given that some estimates peg the market value of the sector at $48 billion by 2030.
Given the heavy role of government financing to expand electricity access in India, we must analyze government-funded projects in this sector as well. These could be historical central or state government financing mechanisms to expand transmission and distribution infrastructure. Studying them might help in designing new models for transmission network build-out despite the poor finances of utilities. Or are there public-private partnership models that invite third parties to create anchor loads such as telecom towers that need to be better studied? And what incentives exist for individuals to get in the business of selling decentralized solar energy technologies, such as the Indian government’s now shuttered Akshay Urja solar shops program? What exactly went wrong and does the government have a role in providing proper incentives? Another area ripe for analysis is the effectiveness of the new tools meant to unlock private-sector financing, as mentioned above.
According to the IEA, “providing electricity for all by 2030 would require annual investment of $52 billion per year (the majority being directed to sub-Saharan Africa), more than twice the level mobilized under current and planned policies.”
Finally, crowdsourcing finance has also played a large role in globally expanding access to technologies like solar. An analysis of the data from these crowdfunding platforms can help define the role and impact of this form of financing for energy access. For example, it can tell us how many days a campaign was run, how many contributors it involved, the size of their donations, and the ultimate number of people who received electricity access.
Skill Development for Expanding Energy Access
Deploying new energy access technologies and the expansion and maintenance of electricity distribution networks into the field requires trained technicians. The efforts of several donor institutions working with non-profits to build this capacity is meant to address the capacity gap. Recognizing that, do we have a sufficient number of institutions and the right kinds of training to support the gargantuan task of expanding and maintaining the electricity needs of hundreds of millions of new customers? Are there sufficient testing and certification centers equally distributed to ensure that quality technologies are being sold to the last mile customer? These are the foundational needs to ensure the people have quality, sustained access to electricity beyond the initial connection.
While many of the firms known to scholars and development practitioners are considered a part of the formal economy, one needs only travel through a rural town to see that many entrepreneurs are taking advantage of the falling costs of technologies like solar PV to also get in the business of selling solar. Limited research exists on how these entrepreneurs are running their businesses, where they may be getting trained, and how they are establishing supply chains to ensure consistent servicing to their customers. Importantly, these individuals are embedded in local ecosystems and are likely to be the source of many business innovations to help expand access to electricity.
Technologies for Energy Access
Practitioners surveyed during the course of this study identified that when it comes to off-grid technologies, they have proven to be functional. However, to further improve the technologies or bring down their costs, technological innovation must focus on the following factors:
- Cutting the cost and size of batteries, while also using new materials that will continue to increase their capacity
- Cutting the cost of solar photovoltaic panels by using new low-cost materials
- Increasing the efficiency of solar photovoltaic panels above 30 percent
- Creating new super-efficient appliances to help increase access to electricity services like home cooling, refrigeration, and transportation
In addition to improvements to existing technologies, more research needs to be conducted on the market of second-hand technologies and the generation of electronic waste. For example, how many people are purchasing used solar technologies and at what rates? What happens to off-grid technologies when they break and are beyond repair or out of the warranty period provided by the selling firm? Specifically, where is the junkyard of solar technologies that is sure to pile up in countries with large solar technology deployment targets?
An Evolving Field
Many institutions operating at the global and country-level, including the World Bank, the IEA, Sustainable Energy for All, the Global Off-Grid Lighting Association, and the United Nations Foundation, have been hard at work addressing and analyzing the energy access challenges. Through them we have learned that the challenge of providing universal electricity access will persist for at least the next decade. New technologies, new business models, and new policies may disrupt the status quo at any stage. We are in the process of ushering in an incredible energy transition where traditional utility business models are being upended and large amounts of new renewable energy are being integrated into the grid. Coupled with a changing climate and the continued rural-urban population migration, the methods of providing electricity to the last mile will continue to evolve. As such, there are ample opportunities for scholars and practitioners to study the challenge in all its dynamism and help design policies that are able to keep pace.
Dr. Kartikeya Singh is a fellow and deputy director of the Wadhwani Chair in U.S.-India Policy Studies at the Center for Strategic Studies in Washington, D.C.
CSIS Briefs are produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).
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1Semi-structured interviews were conducted in 2014 and added to in 2018. The initial fieldwork was supported by the Center for International Environment & Resource Policy at the Fletcher School of Law & Diplomacy, Tufts University.