Access to Energy for the Base of the - Ashoka

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The four groups of business models discussed above
describe the spectrum of opportunities that have shown
promise in terms of access to energy for the BOP.
However, these businesses will remain modest in their
impact if they lack an enabling ecosystem. Primary
among the gaps in this ecosystem is financing. Although
other factors such as government relationships or skilled
staff make a difference, access to financing is a strong
determining factor in the growth of energy enterprises.
Almost all energy enterprises profiled required grants or
subsidized capital, at least in the early stages. The launch
of access to energy enterprises targeting the BOP will
depend on low-cost capital for the foreseeable future.
Sources of financing and financial intermediaries for
this market are becoming increasingly more available;
the diversity of these financial actors indicates a wellfought
maturity in the access to energy market and a
readiness to support new entrants. Unfortunately, high
hopes for carbon markets that serve low-income people
have failed to materialize. Significant barriers remain for
small clean energy enterprises that wish to access
carbon finance, and most do so in the end through
voluntary markets rather than the UN-regulated system.
Financing for access to energy can be split into three
categories:
1. Grant-based support to build the market
2. Patient capital with energy expertise
3. Carbon markets designed to serve low-income
communities
Figure 18 E + Co’s portfolio around the world
Grant-based support to build
the market
Building a new market involves an immense amount
of uncertainty, and an expensive outlay for research,
development of regulation, and educating consumers,
among other things. For example, solar home system
entrepreneurs first had to help households gain
confidence that it is possible to get electricity from
the sun. Cookstove enterprises had to test their
stoves and teach people about the dangers of indoor
air pollution. Provivienda worked out a new
arrangement that would allow households without
formal land title to receive a gas connection. These
are time-consuming endeavors that will be beneficial
for all subsequent enterprises. In a sense, they are
market-building public goods. Purely commercial
enterprises are poorly suited to take on this role. The
access to energy market benefits from dedicated
foundations such as Winrock International and
dedicated multilateral programs at the World Bank
and IFC.
In September 2007 the World Bank and the IFC
announced the Lighting Africa program, dedicated to
bringing clean lighting to 250m people in Africa. 17
Initial programs include a design competition, market
research, and a business-to-business web portal.
Although the IFC had struggled to dispense the funds
allocated to its solar PV market-building funds,
financiers are learning from the past. 18 For example,
the African Rural Energy Enterprise Development
(AREED) program has invested $4.3m in clean energy
enterprises in Africa, generating a 2% - 6% risk
adjusted return. The program has been replicated in
Brazil and China.
17 Other sponsors include Global Environment Facility, the Energy Sector Management Assistance Programme, Public Private Infrastructure Advisory Facility, the
European Commission, Governments of Norway, Luxembourg and Sweden, Good Energies Inc., and the Renewable Energy and Energy Efficiency Partnership
18 Selling Solar Part I; IFC