E4C_Webinar_Series_-_Mitra_Ardron_notes.pdf

8/14/2019 E4C_Webinar_Series_-_Mitra_Ardron_notes.pdf

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E4C Webinar SeriesEXPLORING CHALLENGES AND MISCONCEPTIONS IN SCALING ENERGY ACCESS IN[

DEVELOPING COUNTRIES] Mitra Ardrons Notes

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Meet Hina,

Like 1.4 billion other people, she studies by the light of a kerosene lamp. Itstings her eyes and contributes to the continuous cough that her mother has.2 million deaths occur from such respiratory problems each year. Hina keepsback from the lamp as her brother was severely burned last year when oneknocked over. He was lucky. 2.5 million other Indians were severely burnedlast year, and 300,000 died worldwide.

Lack of electricity in the home impacts every aspect of Hinas life: the abilityfor her parents to use their mobile phone, her studying, treating water and soon.

While renewable energy alternatives exist such as solar lamps; solar homesystem; small wind turbines etc.; her family doesnthave the savings to buythese kind of systems, and they dont qualify for a loan. Her school has power,but they wont sell the power to the village for some reason.

In todays webinar, well look at some of the myths and misconceptions that

drive the availability or non-availability of power to people like Hina, andexplore some of the solutions, and finish with a bit more detailed look atLumeters approach to the problem.

Myth 1: We just need to invest in centralised infrastructure and extend thegrid to everyone.

Existing electric grids are often poor, and have evolved to serve industry,who can afford to buy politicians, and not to serve the poor.

We all saw the headlines when 680 million people lost power in India, butwhat we dont hear is that 400 million arent connected to the grid at all , andthat many, if not most of the rest, cant rely on the grid. For example , in theIndian state of Utta Pradesh, the power is out roughly 20% of the time, and

20% outage time seems to be better than the conditions experienced bymany of the people I know in India.

And everyone steals from the grid anyway in some places as much as 50%of power is stolen, and this rampant theft has become a barrier to gridextension. After all, what is the incentive to extend power into an area wheremuch of it will be stolen.

The International Energy Agency, or IEA, estimates we need $48 billion peryear invested to bring modern energy to the remaining 1.4 billion people by2030. That sounds a lot but that is only 3% of global energy investment overthe same period.

Most significantly, the IEA sees 20% of this number being served by off-gridsources, and 38% by mini-grids. This is stunning when you consider that theIEA is the most conservative international energy body, and has beendominated by fossil fuel and nuclear lobbies.

Tamil Nadu has one of the highest rates of electrification in India, but theirexisting grid is so poor that most rural places are essentially off-grid for muchof every day.

I cant find the quote, but the Tamil Nadu government has supposedlysaidthat those not reached by the grid never will be as its already cheaper toinstall renewables than to extend the grid.

The Peruvian government has also estimated that there are 300,000 ruralhouseholds that cannot be reached by extending the grid.

Whats the alternative to extending the grid?

Distributed renewables are the obvious choice; they dont rely on concerted,unworkable multi-decade plans. They can, and are, being implemented by


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many independent actors: companies, NGOs, governments, or villagersthemselves.

In Bangaldesh, for example, 30,000 Solar Home Systems are being installedevery month.

Myth 2: The problem is rampant corruption among developing worldgovernments who misallocate funds for electrical infrastructure andestablish draconian bureaucracies that make entering the marketprohibitively challenging and expensive.

So some, or maybe all this is true:

But although much centralised funding is misappropriated, that number ishighly variable even within countries for example, in India, its estimatedthat in Bihar up to 80% of aid is misappropriated but this number is far lowerin some other states, especially in Kerala.

Bureaucracy is also a major impediment to doing business, and bureaucracyand corruption are tightly linked without a cumbersome bureaucracy thatonly knows how to say NO, there would be no incentive to pay bribes tospeed things up.

Some specific sorts of bureaucracy are critical barriers, for example, if thereis an import tariff, it will slow things down or make them uneconomical butwe should note that this isnt limited to developing countries. In October, theUS supposedly the bastion of free trade imposed a tariff of 24-36% onsolar panels to protect its own uncompetitive manufacturers.

The other barrier is regulation if a government imposes western standards,then it can prevent cost-effective implementation, and if it imposes a pricingstructure that is below cost for example enforcing grid-parity, when thegrid itself is subsidized, but the supposed subsidies for renewables arentaccessible without the right connections. Then this, being classified and

treated as a utility, can be a deal breaker against the more effective mini-gridsolutions. With the result that people are left paying as much as $5/kWh foralternative energy sources such as kerosene, candles and battery or phonecharging services.

In reality, nimble energy entrepreneurs can bypass most of this corruption,by introducing market-based solutions not dependent on governmentlargess, or on its honesty or competence.

Its hard to find an energy image that matches this concept, but weve seen itin finance.

Its much harder to misappropriate funds spent by a village on their ownenergy, than funds spent by a donor through a government on a grid.

Customers are already willing to buy services, and suppliers have to work outhow to meet that demand and deliver affordable services despite thecorruption and regulation.

Myth 3: We don't have the technology to affordability deliver electricity topoor people in the developing world.

So we have to stick with noisy, expensive, polluting diesel generators, or waitfor the next generation of solar or the extension of the grid.

Certainly there is new technology coming, but clean tech is like computers,except on a slower version of Moores Law. There will always be somethingbetter, cheaper, cleaner coming, but that doesnt give a reason not to start

now, using what is available.


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Because in reality cost-effective technology solutions exist, even for low-income people and they are being deployed globally today.

Centralised, large scale coal is a lot cheaper than small scale renewables, butits price ignores the cost and viability of extending the grid, the externalitiesfrom mining, from water usage, and from greenhouse gas emissions.Unfortunately, in many countries, both developing and developed, the coalindustry is big enough to own politicians.

Comparable electricity costs are measured with a value called Levelised Costof Electricity, or LCOE for short, which takes account of capital, operationaland maintenance costs, and the different value of both power and expensesnow, versus those in the future.

Diesels LCOE is typically around 50c (depending mostly on cost/availability

of fuel). With a really small scale 500W wind project we have been looking atsimilar LCOEs. This comparisonis done at todays prices, and as oil becomesscarcer, it is estimated that diesel will increase in cost by 30% over the next20 years, while solar, wind, and, most importantly, the cost of replacingbatteries are falling rapidly.

Most importantly, both PV and wind are already implementable on a scalethat matches the financial ability of people to pay, i.e. a household spend of$2/week, which is enough at 50c/kWh to purchase about 4 kWH, whichdoesnt sound like much, except that these homes are being installed with

typically 2.45W lights, and maybe a 40W TV or room fan.

Myth 4:Lets just raise some money and go to some place weve never heard

of, and put solar panels on a school, or build a water system

Great idea trouble is that it doesnt scale. Dont misunderstand me; theseprograms are a great form of cultural exchange, and a great way for people tolearn a bit about the culture. But these programs have far more impact on thevoluntourists than on the host countries. They do almost nothing for solving

energy, or water, or other infrastructure problems in the destination becausethey are very limited in scale. Most programs have at most installed a dozenor so installations when tens of thousands are needed, and very few, if any,have built the capacity for local organisations to continue that work, or to

expand it beyond the villages where they work.

In fact, in many cases, they may cause more harm than good and disrupt thepotential for a local business because they create an expectation of a freeinstallation, and encourage people to wait for th e next pack of voluntouriststo provide free power for their school.

This is a related mything that all you need is DIY training and education.

Youve probably seen this image before, from the book The Boy WhoHarnessed the Wind, the story of William Kamkwamba, who taught himselfscience and built a windmill.

So why cant everyone do this? Can you see what the scarcest component inthis image is?

Right the Boy, i.e. someone with the intelligence of William, who is stillliving in their village and hasnt migrated to the city to seek education and

fortune. William, of course, is now at Dartmouth, and I understand his windgenerator hasnt even been replicated in his, or the neighboring, villages,which absolutely should not be taken as a critique of Williams abilities, butdoes point out the challenge of scaling.

Most of the do-it-yourself videos like the Instructables simply dont work inpractice because the materials needed arent available locally and training

people to the level of inventiveness needed to improvise from whatever isavailable is itself expensive.

And what appears to be free usually isnt. One project my non-profit NaturalInnovation was supporting was sourcing old wheel bearings. The first time


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they visited the dump, the wheel bearings were free; the second time, theyhad a price; and the third time, there werent any usable ones left. Somebodyhad figured out that if the bearings were desired, they must have a value.

Training itself costs money, and skilled p eople, and in most cases, trai ningpeople Village by Village is neither affordable nor scalable.

There are nuances of course to this. Look, for example, at Barefoot Collegesscheme, which trains illiterate grandmothers to be solar engineers.

At one level, it certainly makes sense to bring some capacity locally but onanother, the methods used might not bring affordable solutions.

For example, in their solar lamp program I have heard, though I dont havefigures, that the lower level components (LEDs, batteries, etc.) that areimported and made into by the Grandmothers into lamps locally actually

cost more than the full cost of importing high quality solar lights, and that thequality of the hand-made lamps is significantly less than quality brands like

the similarly named but unrelated Barefoot Power or Greenlight Planet justbecause of the economies of scale, and automation that those companieshave.

What is really needed is capacity building.

Capacity building takes many forms. For example, there are programs such asGreen Empowerment in the US or Engineers Without Borders in placeengineers with local engineering companies, to train and help solveproblems. Help at this level can really create a lasting difference, especiallysince the relationships forged often lead to ongoing support.

The images shown here are from Minvayu, an organisation in southern Indiathat my non-profit, Natural Innovation, supported. Minvayu trained villagemechanics to build wind turbines. Its founder, Jorges key insight was that if

maintenance requires a days trip each way for a higher paid city engineer,

then its unaffordable, and that the costs to train local maintenance peoplewould also never be recouped, so instead Minvayu was training villagemechanics to build and erect their own turbines. When I was last visiting, acouple of Nepali mechanics whose village is a 4-hour walk from the nearestroad, were there to be trained. The Nepalis built one turbine in the class andanother on their own, and returned home confident in their ability to buildmore turbines for all the villages near their homes.

But even this program needs careful scrutiny. When I crunched thenumbers, we realised that while training to build the metal framework, thetower and to site and install the turbine made financial sense, but the extracost of training the mechanics to build the generator and carve woodenblades, wasnt justified, and that to be financially viable Minvayu should

really make those components in regional facilities, and probably make theblades from fiberglass.

Myth 5:Why dont we just buy a huge number of solar lights and give themaway, a so-called Buy One, Give One program?

After all, if it worked for shoes, why not for energy?

Well actually, it didnt work for shoes for several reasons.

1: Giving away shoes distorts local markets. It creates a dependency on adonor and put local shoemakers out of business.

2: And also it doesnt scale it didnt for shoes, and it wont for lamps. Sooneror later (usually sooner), you run out of donors or western customers orwestern governments willing to subsidise it.

Distribution into developing countries isnt easy, but supply chains do exist,for soap, for household goods, and for energy.


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Lumeters renewable energy partners are installing off-grid installationsevery day, as are many others.

Distribution does, however, need realistic margins. For example, at aconference recently in 2011, someone showed a prototype LED light they hadmade, and boasted how it only cost $5 for the LEDS and batteries, andmounting them in a plastic pipe, and commented on how much cheaper itwas than solar lanterns.

What they failed to consider was that something costing $5 at the factory gateis going to clear customs in-country at about $10 and sell retail from a kiosksuch as that above for about $20. Since Solar Lanterns cost $20-$30 WITH thesolar panel, this is hardly an improvement.

So you need to focus on getting the cost down, on making sure there arereasonable margins. And that you are selling a product that people reallywant, and you have the time and budget to convince people that what youhave to sell has value and should command some of their tight budget.

Myth 6:This is really two competing myths. Either that there is no money tobe made serving the poor, OR that there is a fortune to be made.

Both myths are harmful, because the former discourages investment andentrepreneurship, while the latter sets unrealistic expectations of a quickfortune.

So what is the reality?

Image source:http://isiria.wordpress.com/2008/07/18/world-poverty-on-

the-increase/

If we assume 5 people per household, there are roughly 300 millionhouseholds off-grid and without electricity today.

Its a market that wants energy services, and is willing to pay for them; infact, they are already spending money.

Typically, BoP households spend about $2/week on energy, buying batteries,candles, kerosene and recharging phones or batteries.

This represents a $60 billion market.

But its a cautious market if you are earning $1 a day, you are going to becautious about what you spend it on.

And that money has to be collected roughly weekly as most BoP householdswould find it hard to save up a monthspayments.

And they dont have easy access to credit, or if they do , its at interest rates

often around 20% per annum.

So solutions need to be embedded in a business model that can work withthese realities.

Lets dig a little deeper into the barriers that our Peruvian partner faced inscaling their offering and bringing it to the BoP.

The image on the left is a little hard to see, but it shows a wind turbine abovea village. The secret is that the village gets no power from the turbine; it feedsa school that is out of camera. The people of this village wanted to buy power,

but our partner was unable to sell to them because of the challenge ofcollecting $2 per week from each household and dealing with the inevitableproblems of unwillingness or inability to pay; of cutting peoples power off

etc.
http://isiria.wordpress.com/2008/07/18/world-poverty-on-the-increase/http://isiria.wordpress.com/2008/07/18/world-poverty-on-the-increase/http://isiria.wordpress.com/2008/07/18/world-poverty-on-the-increase/http://isiria.wordpress.com/2008/07/18/world-poverty-on-the-increase/http://isiria.wordpress.com/2008/07/18/world-poverty-on-the-increase/http://isiria.wordpress.com/2008/07/18/world-poverty-on-the-increase/


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In the center, we see an installation on a ridgeline in mountainous country,adjacent to a clinic. The people in the picture have climbed steep pathscarrying heavy Lead Acid batteries for recharging. It would be technicallyeasy to run cables down the mountain to the houses. However, once the cablewas run, there would be nothing to stop other houses from tapping into thecable and stealing power.

On the right, we see a turbine at a seafood processing facility. Soon after itwas installed, the neighbor asked if he could run a cable and light his shack. Aprice was agreed one fish a day and the cable run. But a week later asecond light appeared down at the beach where the fisherman beached hisboat, and soon after at night, the blue flickering light of a TV could be seen.But still, one fish a day was delivered as payment. Of course, the seafoodplant owner had no way to measure, monitor and control the amount ofpower delivered. In this case, it didnt matter, but scale that over a hundredhouses, and it matters.

This is where Lumeter comes in. With Lumeter's new meter, customers buycredits, or what we call Luminutes, in the same way as they buy mobileminute top-ups for their phones. Our back-end tracks the payment andprovides tokens that enable the meters, and also handles all the complexpayment processing.

We have had indications from large investors that de-risking the customerpayment could free up project financing allowing our partners to reach scale.

The second problem our Renewable Partners face is that electricity theft isrampant in developing countries, but our meters are designed to allow the

development of tamper-resistant micro-grids at a variety of scales, from 5 to500 houses and using whatever technology is appropriate: solar, wind,biomass, etc.

Lumeters meter also offers a number of power management functions,allowing control of the amount of electricity supplied, either on a home byhome, or by groups of homes.

Competitive products exist but they are typically vertically integrated,

applying to whole systems.

We believe, and our potential partners are confirming, that the degree offlexibility we provide and our functionality is unique, especially at a pricepoint affordable at the Base of the Pyramid.

Our meter is, to a certain extend, both power source, and business modelagostic.

In this image, we see one particular business model that could be applied.

This was intended to be an animation, but we werent able to deliver thatthrough the Webinar.

Here, a village entrepreneur sees a need to electrify their village.

They take a loan from a bank, and use it to purchase a system from one of ourRenewable Energy Partners.

They use the money to buy batteries and a turbine or a solar panel ormicro-hydro. They hire local labor and install a mini-grid.

One of Lumetersmeters is installed at each house, and another at the powersource.

In each village is a storekeeper (middle left). They maintain a balance on anAgent Network.

The storekeeper sends an SMS to the Lumeter via our in-country gateway.Lumeter checks the balance with the Agent Network and creates a token


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which is sent to the Agent and, if they have a mobile phone, the Customerenters the token on the meter, and their lights come on.

Lumeter distributes the money received according to the business model, tothe bank, the Village Entrepreneur and the Renewable Energy Partner.

This is just one version of the business model; many others are possible.

In Summary how does Lumeter and other projects approach the challengeof a Scalable, and Affordable solution?

Firstly, we need on-ground capacity to build, install, and, most importantly,maintain renewable energy systems. Weve got some great partners lined upwho already know how to deliver renewable energy in their own culture, butwe are always interested in more.

Then we need an affordable payment system, such as Lumeters meter andcloud accounting.

Then we need a growing financial investment pipeline, i.e. a source of loansthat can finance the installation of systems to be paid back using our systemover several years.

Finally, we need create the potential for communities or villageentrepreneurs to own and provide the power themselves as this will bring agreater degree of certainty, and create employment opportunities.

I want to finish by crediting and introducing our team:

Thats me with the solar collector on my head.

I pioneered community solar purchase in Australia, and spent the

last two years before co-founding Lumeter mentoring innovation fordeveloping countries.

Grants focus is micro-franchising for economic development & hebuilt a taxi micro-franchise in Peru.

Jona, our field engineer, is a systems and control engineer who haslived and worked in several countries.

Kat has an international development and business background andis working with us on market research.

Kurt & Dan from Meridian Design are the design smarts behind a

number of BoP products.

Documents

E4C_Webinar_Series_-_Mitra_Ardron_notes.pdf