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© sun-connect-news.org | Harald Schützeichel

Why we need a subsidized energy access for remote and poor households

The off-grid industry has started with the clear goal of providing power supply, especially for remote and poor people. However, the industry has to admit today that it cannot reach this target group with the existing models of distribution and financing.

The sale of solar systems via end-customer loans (pay-as-you-go / PAYG) proves to be an effective financing and sales instrument. But today’s business strategies only reach a portion of the 1.2 billion people without electricity. On the margins remain those who either live in regions with very low population densities or those who are simply too poor to pay a price for solar systems, which enables companies and their investors to make a good profit.

Especially those target groups, for whom many companies say they work for in their mission statements, remain underserved. This is not new knowledge and has been repeatedly complained about. Finally, the off-grid industry association GOGLA in its “Off-Grid Solar Market Trends Report” at the beginning of 2018 found that the expectations regarding impacts are often not reached, and in particular the lowest-income population little benefited from the current fascination of investors about the PAYG approach. Regarding the current orientation of the off-grid industry, GOGLA clearly states: “Majority of efforts today are focused on the higher-income segments within villages and peri-urban segments.”

Of course, there is no objection to the fact that companies turn their attention primarily to the customers, who enable them a sufficient business, the hope for profitability and thus new investor funds. However, it is surprising and also frightening that there is still no business approach in the off-grid sector to really provide all people with at least a basic energy supply.

Presumably, a purely profit-oriented approach is not in a position to reach the goal of “sustainable energy for all”. Presumably, a mix of for-profit and non-profit elements is needed – as it has been the case with traditional forms of energy supply for decades.

The business model of other energy sources

Diesel and kerosene: With these forms of energy, the devices (generators, lamps) must be bought by the off-grid households at the market price. The required fuel (diesel, kerosene) is then highly subsidized – and yet is often hardly affordable for people in remote and off-grid areas. Households even find themselves in financial dependence on increasingly expensive fossil fuels. Ultimately, subsidies benefit the suppliers and dealers of diesel and kerosene, who can sell their fuels profitably because of the high subsidy.

Grid power: Unlike fossil fuels, it is the connection to the power grid that is here usually highly subsidized, but not the price of the purchased electricity. But even this approach does not provide a viable solution, because a) the expansion of the power grid in remote areas is unpayable, and b) even in urban and peri-urban regions, the price of electricity is often so high that people cannot afford it. Just recently, the Kenyan energy provider, for example, has had to admit that millions of households are connected to their electricity grid but consume little or no electricity because it is simply too expensive.

Subsidized Sun-Connection instead of subsidized grid-connection

Fossil energies and grid electricity prove very nicely that even the old technologies can only survive economically with a mix of non-profit and for-profit. So why should the off-grid industry be forced to pursue a pure for-profit approach?

A possible new approach could be rather to apply the current approach to grid electricity to decentralized solar technology and to subsidize access to energy. Only that it is now just an access to the sun instead of access to the power grid: the purchase of a basic solar system (3 LED, mobile phone charging) is made possible for all households at a subsidized price.

Since the subsequently consumed electricity – in contrast to grid electricity – is generated free of charge, the heavy burden on households caused by increasing expenditure on fossil fuel or grid electricity is eliminated. The sun sends no bill! The electricity reaches the remote and poor people without additional costs.

It is therefore time to redirect subsidies for old energy technologies to decentralized energy solutions. Then a reliable supply of electricity to the remote and poor areas would be possible. But of course, this is a wish that the economic profiteers of the previous subsidy will oppose with all their might. On the other hand: that alone is no reason to give up the idea.


SUN-CONNECT / Off-Grid-News 2018 | Harald Schützeichel

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