Off-Grid, Clean Energy Access Market Valued at $12 Billion

The following Sierra Club perspective by Justin Guay and Vrinda Manglik is cross-posted from the Huffington Post.

(Read full report here)

Off-Grid, Clean Energy Access Market Valued at $12 Billion

One in five people around the world, approximately 1.3 billion people, lack access to electricity.

Today, the Sierra Club is releasing a new report -- Clean Energy Services For All (CES4All) -- showing that off-grid clean energy is the right tool for the energy access job. That’s because it’s the fastest, cheapest, and most effective means of ending energy poverty - and it’s going to create a $12 billion annual industry by 2030.

Working with Evan Mills of Lawrence Berkeley National Lab and Stewart Craine of Village Infrastructure Angels, we have provided one of the first estimates of future growth for the rapidly expanding clean energy access market. Today, excluding grid extension, this market is estimated to be a $200-250 million industry annually. However, we project a 26 percent compound annual growth rate that will enable growth that reaches a $12 billion annual market by 2030 – when universal electrification is achieved. To put that in perspective, the U.S. residential market for solar in 2013 was only $3.76 billion.

 It turns out our central thesis has been right all along – small is big.

Figure 1 - Estimated value of future markets of household energy access products

Central to our ‘CES4ALL’ model is the notion that energy efficiency unlocks the energy access ladder. Energy efficiency measures that are currently available allow energy access to be delivered for 50-85 percent less energy input, which enables dramatically reduced capital expenditure.

From off-grid LED lighting to "Skinny Grids," we can now provide energy access with a fraction of the amount of power we used to need. More importantly, we can unlock affordable initial interventions -- like lighting, mobile phone charging, fans, and TVs plus a small amount of agro processing -- to help people get onto the energy ladder today rather than forcing them to wait decades for a grid extension that may never come.

As incomes expand and markets evolve, these populations will upgrade and expand their energy services, in turn creating a bottoms up, distributed, democratized grid.

It’s important to understand that we aren’t just imagining this clean energy market growth – it’s already happening. The fact is that the off-grid energy market is growing rapidly, with estimates of 95 percent compound annual growth rates in sub Saharan Africa alone. In Bangladesh, 80,000 solar home systems are being installed every single month while neighboring India has promised solar for all by 2019.

Similar to how solar leasing unlocked the market for residential solar use in the United States, this off-grid market has been unlocked by business and financial model innovations, like mobile money-enabled “pay-as-you-go” systems. These innovations have primed the off-grid sector for further rapid growth, similar to what the mobile phone industry experienced a decade ago.

Figure 2 - Estimated future usage of energy access products by households

 But if there is one message we need to leave you with it’s this: show us the money!

In order for the market to reach its full potential by 2030, entrepreneurs need financing now. We estimate that financial need to be roughly $100 million in new investments in off-grid clean energy manufacturers over the next three years. The investment needs of consumer finance companies in this market will require even larger investments -- $400 million over roughly the same time period.

Combined, approximately $500 million is needed in the next two to three years, consistent with a letter from industry to the World Bank.     

Figure 3 - Estimated future total demand for capital for the off-grid energy access markets

In short, this off-grid energy market has a tremendous opportunity to catalyze a solar revolution for the masses -- one that will help democratize energy, create local jobs, and decarbonize new power systems in one fell swoop. The only thing standing in its way is access to the financing to make it happen. Private investors are already stepping up to the plate with $45 million invested in just the past four months, but international financial institutions like the World Bank are nowhere in sight.

It’s time we held these development institutions accountable. It’s time they finally built the equitable, sustainable, and democratic systems that distributed clean energy make possible. It’s time for clean energy access for all.

About the study authors

Stewart Craine is the CEO and Engineering/technical manager of Village Infrastructure Angels. Stewart spent the last six years as Founder and CEO of Barefoot Power, which has reached more than two million people with solar lighting. Barefoot Power was the first Australian company listed in the CleanTech100, and Stewart has been featured in TIME, the New York Times, and Richard Branson’s latest book “Screw Business as Usual.”

Evan Mills, Ph.D. is a Staff Scientist at Lawrence Berkeley National Laboratory (he worked on this report as an independent consultant) and a regular contributor to the Intergovernmental Panel on Climate Change (IPCC) assessments. He has worked in the off-grid lighting arena since the mid-1990s, and is founder of the Lumina Project which performs lab- and market-based research on off-grid lighting and operates LuminaNET.org, a social network for manufacturers, policy makers, and practitioners. His contribution to this study was made as an independent consultant.

Justin Guay is the Associate Director of the Sierra Club’s International Climate Program based in San Francisco. He leads the team’s efforts to secure international energy lending reform that will catalyze greater clean energy access investment. He previously lived in Mumbai, India and spent time working with social entrepreneurs on distributed clean energy research projects in rural areas.

(Read full report here)

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Comment

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Comment by Maxwell Shimba on December 7, 2014 at 9:22am

Excellent work 

Comment by Eliza Hogan on July 10, 2014 at 4:39pm

Great job Stewart, Evan and Justin! 

Comment by Salvatore Chester on June 28, 2014 at 5:40am

Thanks Evan, this is quite serious. Real money is there to be made, sooner or later. Like cell phones' dissemination. Simply. Best wishes to anyone involved.

https://www.facebook.com/groups/TEA.ethiopia/

Comment by Kennedy Lamwenya on June 19, 2014 at 6:56am

Quite stunning.

Comment by Yotam Ariel on June 18, 2014 at 4:53pm

Wow!

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