We've started 2022 with the COVID-19 pandemic still wreaking havoc on all aspects of our lives and new emerging variants delaying recovery. Combined with the last two years of extreme weather conditions, 2022 will usher in a new level of urgency to act on climate change. At the 2021 United Nations Climate Change Conference (COP26), developed countries yet again fell short of meeting the deadline of mobilizing $100 billion by 2020 to support developing countries to cope with climate change, and instead moved the goal post to 2023. However, pledges to stop the financing of international fossil projects and to quit coal were very welcomed developments that if implemented, will drive demand for faster scaling and adoption of renewable energy technologies.
This year, to better inform our annual top trends list, we again crowdsourced ideas through an open survey. We received input from nearly 60 of our partners who include investors and donors, international and national trade associations, companies, government, civil society, and researchers. So, in no particular order, here are some of the commonly cited top trends to look out for in 2022 in the decentralized renewable energy (DRE) sector.
Financing: DRE’s Millions of Small Businesses Will Start Getting Access to Easy(ier) Credit
Small and medium enterprises (SMEs)—usually defined as organizations with fewer than 100 employees (small) or less than 1,000 (medium)—make up the vast majority of DRE businesses. Altogether, SMEs like solar home system entrepreneurs and mini-grid companies represent 90 percent of businesses and provide more than 50 percent of jobs worldwide according to the World Bank. However, many SMEs including indigenous DRE companies have struggled to get the financing they deserve. As Power for All’s CEO Kristina Skierka and ANDE’s Executive Director Richenda van Leewen wrote in November: “International investors focus on getting dollars out of the door through larger deals, while local capital is kept on the sidelines by high collateral requirements and unmanageable interest rates for early-stage businesses.”
However, there are signs that 2022 may be different. In late 2021, we learned of some heartening developments in Africa to fund DREs by SMEs in the clean energy sector. Rwanda’s Development Bank has teamed up with the private sector to offer home solar systems to 10,000 indigent families. While this is through a corporate social responsibility challenge, it’s a step in the right direction of promoting DREs.
At the same time, Uganda is on the verge of rolling out guidelines for green financing to support SMEs using DRE. In South Africa, two banks have recently formalized financing for the DRE sector which will benefit entrepreneurs who are taking people off the grid. But it will take a strong global campaign to put a spotlight on the small businesses as it was pointed out in 2021 by the Worlds Bank, there is a $5.2 Trillion financing gap.
India is also rising to the occasion and creating space for SMEs and it’s expected the government’s 2022 budget will especially focus on small businesses in the renewable energy sector in what’s being described as a new direction.
We think this is just the beginning. Watch this space in 2022 to learn about pioneering banks offering new guidelines that can assist commercial banks with a template to use on how to give credit using a green finance policy hopefully with lower interest rates.
E-Mobility: Electric Two and Three-Wheelers to Drive Transformation of Clean Transportation in Emerging Economies
The game-changer towards zero-emission transportation on the African continent and other developing countries lies in electric two and three-wheeled vehicles. This is due to their affordability and accessibility. At COP26, India pointed out that two- and three-wheelers constitute more than 70 percent of global sales and more than 80 percent in India.
East Africa has embraced this DRE-powered mode of transport including in Rwanda, Kenya, and Uganda, and this is fueling the spirit of entrepreneurship among drivers of ‘boda-boda’, the popular motorbike taxis in the region.
“In 2022, we hope that there will be two or three other actors who will eventually start selling e-bikes because there's one university project selling e-bikes and another one transforming fuel bikes into electric bikes. So we hope to see the number of e-bikes increase. I think it's going to happen in 2022 because the oil prices are super high right now,” said Elissa Ferron.
She’s part of the team that runs the Zembo Electric Motorcycle Project which manufactures and sells motorcycles through a lease-to-own setup. Zembo (Zero Emission Motorcycle Boda) also has solar charging and battery swap stations. Zembo is just the beginning. The Global Environment Facility (GEF) project alone has committed to fund e-mobility across 17 countries -- to say nothing of recent investments by the Nordics and others.
Productive Use: Turning COVID-19 Crisis Into an Opportunity for DRE-Powered Technologies
An explosion of DRE-powered productive use was identified by approximately 20 percent of survey respondents as the biggest growth area of 2022. Productive use or PUE—the application of renewable energy appliances and machineries like solar water pumps and milling equipment to generate income—has been gaining momentum. Its full potential has not been well exploited due to a range of reasons from lack of access to finance, capacity building, and policies. Powering Renewable Energy Opportunities or PREO (funded by the Ikea Foundation and others), is particularly bullish on PUE applications for electronic mobility, cold chain for agricultural produce storage, and the health sector. If there is any silver lining to the global pandemic for the DRE sector, it is the never-before-seen level of interest in PUE and an explosion in innovations. (Pro Tip: Check out Power for All’s webinar on PUE game-changers to learn more.)
Energy Equity: The Battle Cry of 2022
Energy inequity—in broad display around the world, where millions live in energy poverty every day—is the result of many factors, but institutional bias on power systems, (where, what and how to fund), and a (failing) one-size-fits-all approach to electrification, has a significant role to play. As efforts to mitigate climate change become a regular feature in the mainstream news, we are still seeing a tug-of-war between developed and poor nations on the financing of the energy transition. Therefore, we see clamor for energy equity will continue to be a common denominator for the poor nations in 2022, and a powerful way to confront international bodies that can mobilize the finance needed to end energy poverty, like the UN and the World Bank.
In her reflection on the work done in the sector in 2021, Sustainable Energy for All (SEforALL) CEO Damilola Ugunbiyi said the approach to ensure energy equity and a just transition in the future, should be a consultative process and not one that simply dictates to communities trying to change the tide against energy poverty. With a nine-year countdown to achieving Sustainable Development Goal 7 (affordable and clean energy for all), we expect to see a rise in both international non-governmental organizations and indigenous civil society organizations putting energy equity at the center of global campaigns. Just like the US has begun to address its structural racism, so must the global energy community confront its prejudices. In 2022, we expect the energy transition agenda to reshape the socio-economic relationships created by energy policy choices and undo the biases towards fossil fuels and centralized power.
A Heated COP27: Will DREs be Part of Mounting Demands for a Just Transition and Meeting Africa’s Needs?
Just as the UN Secretary-General António Guterres said in his COP26 closing remarks, “COP27 starts now!,” 2022 will see a steady drumbeat of demands from Africa for climate justice, at the next UNFCCC gathering which will be on the continent in Egypt. Many African countries are banking on the African COP to draw attention to the devastating impact of climate change in the continent and finally get a breakthrough in their push for recognition by the UN System of their “special needs and circumstances” to climate change. The continent is also gearing to push for discussions on “loss and damage fund” to compensate developing countries for the losses and damages caused by climate change. These were pushed to COP27 with only one country, Scotland, committing to the fund. Developed countries have been resisting this much-needed fund that will support developing countries in their adaptation and build their resilience to climate change and not just mitigation. The continent contributes only 4% to global emissions, yet it’s among the worst hit by climate change.
The continent’s climate justice activists are already mobilizing themselves for COP27, identifying priority areas and calling upon the Africa Union to take leadership. “We’re looking to see more action and less talk,” said Olumide Abimbola, a political economist and executive director of the Africa Policy Research Institute, at a media interview at COP26.
With adaptation at the forefront, COP27 could also be one of the biggest opportunities for DRE--especially mini-grids--to drive more interest in the sector.
Cold Storage: Food and Medical Industries Will Drive Demand for Clean, Green Cooling Tech
COVID-19 and the disruption in global and local supply chains brought attention to the challenges and untapped opportunities in the cold chain industry, particularly for food security and health systems in developing countries. Thanks to initiatives like Health Care Without Harm, there is a global commitment to address how we power critical infrastructure in developing countries, including cold storage. (After all, how healthy is a health sector where a lung cancer patient is forced to breathe air from the diesel generator powering the radiology lab they just left?)
As reported by the Economic Times, the Indian cold chain sector alone is expected to grow at a 14% compound annual growth rate (CAGR) in the next three years driven by the growth of online grocery, pharmaceutical sales, and the ongoing COVID-19 vaccination drive in the country.
Ravindra Dolare, President at India-based Ecozen and one of the participants in our survey noted that the DRE-powered cold storage industry has seen an explosion of opportunity due to the pandemic. “India is the second-largest producer of fruits and vegetables globally. However, almost 30-40% of vegetables and fruits and almost 10% of the total agricultural produce go to waste due to improper post-harvest handling. In recent times, there has been an increase in demand from the Government and food industries for infrastructure to reduce (food) losses, optimize the supply chain, and support the agriculture and food industries,” he said.
Jobs Jobs Jobs
Power for All’s next DRE jobs census will be released in early 2022, but in the meantime, this year’s biggest development stories will be around jobs--and specifically the good jobs available in the renewable energy sector. Millions lost their jobs during the pandemic. While ILO says jobs recovery is still uncertain, one of the few things to survive the many waves of the pandemic, has been the decentralized renewable energy sector. By the second half of 2021, the sector did not only show signs of resilience but it brought with it more possibilities to create jobs. IRENA’s report on clean energy employment said there were now 12 million jobs from 11.5 million jobs in 2019 - a trajectory that’s in line with our expectation to see more jobs created in the DRE sector in 2022. And these jobs tend to be more inclusive, and equitable.
Another effort to create jobs and end energy poverty worth mentioning is the Global Energy Alliance for People and Planet (GEAPP) initiative established by the Rockefeller Foundation and its partners with an investment of $10 billion to provide access to productive-use energy to one billion underserved people, create tens of millions of green jobs, and avoid and avert over four billion tons of emissions. “So if you provide power to people, what they could do with it includes agriculture, manufacturing, and education. So it's a host of direct jobs, but an even larger potential for indirect jobs. Without DRE, these jobs will not happen, because energy is a critical part of driving these new jobs,” noted Joseph Nganga, Managing Director of GEAP, during a COP26 side event hosted by Power for All.
India: Will continue to Lead the Way in DRE Despite ‘Phasing Down’ Phrase
India is home to 1.38 billion people with a GDP of $2.62 trillion; distributed renewable energy can play a major role in meeting its clean energy access and sustainable development goals with its vast solar and human resources. The country has been making great strides in investing in DRE, with solar replacing more than half of diesel-run systems in rural India under India’s National Solar Mission program. The country spearheaded the formation of the International Solar Alliance (ISA) and at COP26, was part of the Green Grid Initiative–One Sun, One World, One Grid initiative to interconnect national grids for mass transportation of solar electricity.
However, the country is yet to realize even a fraction of its renewable energy potential to provide reliable continuous electricity to its rural communities. Furthermore, India’s stance of ‘phasing down’ instead of the ‘phasing out’ narrative on fossil fuels at COP26 has the country’s renewable energy actors in jitters on the country’s political will towards net-zero goals. However, the sector is confident that India will keep leading the way in energy transitioning in the country and beyond, even if the global narrative differs.
"India has put in consistent efforts to ramp up the production of clean energy, in terms of policies, introducing favorable infrastructure and investments. India can take leadership on climate action by just focusing on the country's internal energy issues by promoting clean energy while promoting rural livelihoods and sustainable development thus becoming the success story of renewable energy implementation,” said Mr. Vinay Jaju, Co-founder and Managing Director, SwitchON Foundation in his trend analysis.
Media: Climate Change, Clean Energy and Science Will Be Headline News on The Dailies
2021 saw the highest coverage of stories around global warming and climate change in history, with an increase of 55 percent from 2020, according to the US-based Media Climate Change Observatory (MeCCo). Its taken 15 years since Al Gore launched An Inconvenient Truth, but perhaps the most important trend in media is we’re finally getting the facts right: Research has found 90% accuracy in the reporting of climate change in media houses in the United States, United Kingdom, New Zealand, Australia, and Canada (sorry, Brietbart).
In Africa, very few media houses dispatched journalists to Glasgow due to financial constraints. However, they overcame this hurdle by using virtual interactions that were made popular by the pandemic. In-depth interviews on more nuanced topics like decentralized renewable energy were able to take place without the news organizations spending a lot of money.
In 2022 we expect a flurry of activities that will keep climate change on the mainstream media’s radar including the release of several reports by the Intergovernmental Panel on Climate Change (IPCC) and all the preparatory meetings and activities leading up to and during COP27. We are also certain, clean renewable energy, which has now regained more attention as a sustainable solution to the reduction of carbon emission, will be part of the regular news diary.
Honorable Mentions
Other trends mentioned that we find worth highlighting include intensified efforts by the private sector to reduce their carbon emissions. The message from COP26 to companies was clear: go green or perish. We also expect to see more integrated energy development, a phrase that Power for All first coined in 2017, that packages mini-grids with PUE—creating more business opportunities and profitability for both operators and rural communities. At the same time as we’re bullish on integration, we’re also fearful that the capital stack is heading largely in the direction of higher-level energy use, and may leave behind the solar home system companies seeking to facilitate first connections. Industry players are however hopeful that we are at the beginning of the end of dirty coal following the COP26 pact to end coal by a coalition of 190 countries and organizations. By the time 2023 rolls around, we’ll be expecting to hear more about hydrogen which has been seen as the next generation of renewable energies. Electric cooking also made it to our list this year which is key in developing countries where a majority of the families still depend on firewood for cooking.