Dialling in from Sierra Leone, Dr. Kandeh Yumkella, the founding CEO and former Special Representative to the Secretary-General for Sustainable Energy for All, talks to us about catalyzing enterprise, breakthrough solutions and the huge potential of distributed technologies.
Listen to the Q&A or read the transcript below.
Power for All: What actions have governments taken that have facilitated the growth of decentralized renewables?
Dr. Kandeh Yumkella: Some governments have been able to make distributed energy legal. When I say legal, I mean that they have put in place policies approved by their parliaments that make it legal for people to build mini-grids or install solar systems on their homes. However, it is just a handful. There are a number of other countries where only the National Power Authority is allowed to establish a grid system in the country. So there are many entrepreneurs who want to build mini-grid or micro-grid in their communities so that people can have access to decentralized energy who cannot do it. There is much more that has to be done through policy and regulatory initiatives to make distributed energy legal and also to provide incentives for entrepreneurs who want to do it.
In terms of the entrepreneurs and the business models that you have been seeing, what are some of the breakthroughs?
There are a few that come to mind. We all celebrate the success of Bangladesh having reached three million solar household systems. And that was made possible because in the case of Bangladesh they built on some existing infrastructure. In Bangladesh there was already a culture of micro-finance so people were used to borrowing small amounts of money and paying it back. Therefore, it was not too complicated for people to borrow money to install a household solar system and pay back the cost.
Secondly the donor community rallied round and there was strong donor collaboration: USAID, Germany, UK and others who wanted to develop and institution. So they created an agency that actually worked with communities and households to make these systems available to them. But you do need—particularly to make home systems available—institutional innovation, instead of agencies that are just there to create more awareness of the possibility of having solar household systems available.
Second, the mobile telephone companies. We see quite a bit of innovation in East Africa where banks and mobile companies have made it possible for people to pay for solar systems through mobile payments. This is creating a huge solar revolution now in Kenya, Rwanda and Tanzania, and now spreading to Ethiopia. We don’t see much of that in West Africa yet. Part of what I hope I will do is to see how we can create the ecosystem within West Africa and the rest of Africa in order to see those systems grow.
So those are two key innovations I want to talk about. But the most promising I think for the future of micro-grids or solar household systems will be the role of the mobile phone companies to enhance mobile phone payment systems.
In terms of mobile finance, have you seen a shift in the way that customers have been engaging with that which has impacted demand?
The customers are taking that [mobile finance] up fast and so far the experiments in East Africa are working very well. I remember a year ago when I visited Rwanda and Mobisol was just setting up there. When I saw them again recently at the Global Off-Grid Lighting Conference in Dubai, the Mobisol CEO and others told me that they are already being called to go over to Uganda.
The consumers are really demanding [these products] as people know the benefits of having light. Not to talk about another level of energy to enhance their productivity. So immediately there is an infrastructure that allows mobile payment systems, people will acquire solar household systems. It has also made it possible for relatives living in the bigger cities to easily pay for their own families that may be poorer in the rural areas.
You can see that for me that is one of the biggest opportunities we are going to see in the next few years; the convergence of digital mobile telephone and renewable energy systems. I have also seen some experiments now where you can also use solar water pumping, where the system allows you to pump water to a tank in a village and then, with filtration systems, people have access to clean water. But to get a liter of water you have to pay for it, maybe two cents or five cents. Now with mobile payment systems we have seen experiments run where the payments can be done by a relative living somewhere else.
There an integration of digital mobile, solar energy and clean water and sanitation and this is another area where we see what we call the nexus. The nexus between different sustainable development goals now being facilitated by technology. In this case, renewable solar technology and digital payment systems.
In relation to all of those incredible leapfrog technologies and the social benefits they will bring, what are the investment opportunities you are seeing?
To be very honest, I don’t see the investment flowing fast enough. I just know that in the case of d.light and Mobisol and others such as Azuri, they really need more innovation. They have told me there is capital to be raised and the availability of money is not a problem. The challenge, though, is in public policy and risk mitigation. People are not sure what the regulatory environment will be like in three or five years, or for that matter ten years, and because of that financial institutions are not willing to lend the big money we need.
Yes we get five million dollars here, ten million there, but what we are looking for to really get the renewable revolution— but particularly the energy access revolution—to scale up is mitigating political risk, foreign exchange risk and the uncertainty in the market, because the regulations are not very clear. So I would say yes, I see money coming into some of the companies, but not at the scale at which we expect. We are hoping we can mobilize 250–350 billion a year just going into renewables.
Let me take this opportunity to mention since we have talked a lot about lighting we should also be talking about cooking solutions. Energy access for cooking solutions in Africa is a big problem and so we want to see similar innovations going into making available liquified petroleum gas for clean cooking solutions. So you can have small canisters of LPG available in homes that have solar home systems but also have clean cooking solutions. Those dealing with clean cooking solutions can learn from what has happened now with this convergence of mobile phone technology and solar household systems. That is an area we have not touched yet but I feel it could be a big investment area, to see how we can bring lessons learnt from the solar digital community into the clean cooking alliance.
What do you think the development agencies could do more to unlock the kind of private finance needed?
The first part of course is helping get the right regulations in place so we can help with development. You see, I still think I am wearing my development conversation hat. So let me explain that. First of all development agencies should step up and provide more funding for technical assistance to support countries to design the right policies. Second of all, to help with the regulatory environment. Beyond policy, most developing countries are now trying to reform their energy sectors. I see the efforts in bonding those sectors moving ahead. However, you need a regulatory agency. This is new for us. So training of regulators, helping regulators understand that their role is to be a catalytic agent to create markets, rather the interpreting it is being a barrier. In some countries the regulators think they’re just policemen. No, they should be trying to give signals so that the market can grow.
The third area is to back entrepreneurship. Entrepreneurship is not new in these regions but there is a high risk for small and medium sized businesses that try to emerge in poor economies where the institutions don’t work. If you want more entrepreneurship in energy systems—as what we have been talking about so far requires energy entrepreneurs—the donors should be providing more money to train people on how they could become installers of solar household systems, LPG distributors, service providers and builders of the internet; so that these solar systems and other systems will be proliferating in the millions in various economies. Building that ecosystem of entrepreneurs and service providers, you need a lot of technical assistance and donor money to do that legwork in many economies. Also in developing the supply chains.
Finally, we need seed capital. I have been advocating for two types of seed capital. One, we need a public development facility. There is no money in Africa right now to provide funding for the key feasibility studies for simple energy systems. Our entrepreneurs are not rich people so let’s say they want to be a distributor for 300,000 solar lighting or clean cooking solutions, they’re going to need $10,000 or $20,000 to write a good business plan. Somebody has to step in to provide that kind of financing or at least create a consultancy service that will help them develop their business plans.
On the other hand we also need seed money—assuming that some of the entrepreneurs want to take the risk. I know this [is not always the case] as I brought Azuri to Sierra Leone a year and a half ago and Simon [Bransfield-Garth, Azuri CEO], after doing some work in Kenya said “Ok, Kandeh I will join you there to see if I can help your country”. Well, he was looking for entrepreneurs that could pick up the first $70,000 to distribute the first units and become a franchisee. In my country, finding [financing for] $70,000 is a problem, and if you do get it, you have to borrow it at 52%.
So we need seed capital, we need money from organizations like the World Bank and the Green Climate Fund. That’s part of what I will be advocating in Paris next week. We need the Green Climate Fund to have a special window: seed money particularly for Africa a) to finance a public development facility and b) to provide money to local development banks and micro-finance banks, which then only provide [this finance] to entrepreneurs and for consumer financing to acquire these technologies. These are just a few areas I will highlight where development finance institutions can play a catalytic role in the clean energy revolution.
You mention the potential for enterprize given certain catalytic support, what are your hopes in terms of the decentralized renewable sector? Can this lead to a large number of jobs being created?
I believe so, I believe it is a quick win and that is the confidence we want to give governments. That this is a quick win and will create more jobs, it will quickly enhance productivity in rural areas. We are running an experiment now in Benin. The Prime Minister of Benin came to New York in September and announced that he wanted to guarantee every rural household in his country at least one solar light. He said he needed $60 million. That’s peanuts. And quickly, within two months he was invited to the White House and a facility has been created to get the first funding to him. We feel that is going to have an immediate impact. Why? Because that will mean recruiting the first set of energy entrepreneurs which will be the suppliers of this solar future. You can quickly integrate the service sector. So I think the experiment that will be running in Benin now is one that we will see as a good test case.
Azuri is also trying another experiment in Ghana. They are trying to work with the Ghanaian national utilities to put bulk prices on solar home systems to make them more affordable for ordinary people to be able to acquire. So I see really major impacts for job creation in the whole supply chain and in distribution, and I am hoping a lot of them will be for women. We see in Bangladesh, India and other places that women can be the suppliers and the repair people for these systems. So the job creation potential is huge.
I don’t want to compare developing countries with Germany but you see the numbers in Germany where there were 350,000 jobs created within the renewable energy sector within a decade. And it is growing now. IRENA has more data on this and the job creation potential in various markets.
How can a global advocacy campaign like Power for All make a difference in the decentralized renewable space?
We need a campaign badly. You and I know all these benefits and opportunities that I have discussed but I have a feeling that governments in a number of developing countries, particularly in sub-Saharan Africa, don’t appreciate the benefits. We are still hooked on grid based solutions. And of course we need it, let me say that we need the grid solutions because we need power to power the economy. But I have a feeling that they do not fully realize that [at the same time] as you pursue the big energy projects you can immediately provide half a million people within your society with lighting within a year, or year and a half. That is why I believe that the Bangladeshi case is something we should spread to Africa. The African leaders need to see the immediate benefits.
Second, I am also working with another group designing a global campaign on clean cooking solutions. In Africa we are losing over 600,000 people a year to premature deaths because of indoor household pollution. We want to launch that campaign and say “Look at the amount of people you can save quickly if they are able to have clean cooking solutions, now. Today.” Some of those numbers are worse than HIV and malaria, so this is a silent killer and those that are dying are women and children. So any campaign that can show the benefits of distributed energy solutions, whether lighting or clean cooking, I believe will be most beneficial. We also need to raise awareness of the kind of public policies that are working elsewhere and the kind of incentives provided to grow the market and develop the ecosystems.
I am forecasting that the Power for All campaign will help to catalyze all of those micro campaigns around the world. In fact, for about a month since I went to GOGLA in Dubai I have been wearing the Power for All pin. The joke I will give you is that many times I wear the same sports jacket as it is easiest to wear on the flight so the pin is attached to it!