energy access practitioner...

ENERGY ACCESSPRACTITIONER

NETWORK

2016SURVEY RESULTS

DISTRIBUTED ENERGY MARKET TRENDS AND ANALYSIS

32

Energy Access Practioner Network: 2016 Survey Results

Jem PorcaroSenior Director, Energy Access, UN Foundation

FOREWORDDistributed energy is revolutionizing access to energy for the 1.1 billion people who still lack electricity and the 2.9 billion people who lack access to clean and safe energy for household cooking (2012 data). Several trends are making this revolution possible, such as the declining cost of renewable energy, the increasing efficiency of off-grid products and appliances, and the emergence of innovative business and financing models. Thanks to these advancements, distributed energy solutions, while not new, are increasingly being adopted as a low-cost and practical complement – and at times alternative – to traditional approaches. With the right support they could open up opportunities to go further and faster towards closing the energy access gap.

Once the domain of a small handful of “forward thinking” development practitioners, distributed energy solutions are now being driven by a diverse eco-system of businesses, social enterprises, non-profits and governments. Despite significant progress, critical gaps in market intelligence still exist. These gaps are further widened by the fast pace at which the sector is evolving.

This brochure – commissioned by the UN Foundation and based on the Energy Access Practitioner Network’s 2016 annual survey – seeks to expand our understanding of the current state of the energy access sector, explore key market trends and areas of future opportunity. This work is a contribution to broader efforts of Sustainable Energy for All (SEforALL).

54


SUMMARYThis brochure features findings from a survey conducted by the UN Foundation-led Energy Access Practitioner Network in the summer of 2016. The survey is the latest in a series of surveys the Network has conducted since 2012 to shed light on the changing opportunities and challenges faced by practitioners working to expand energy access.

The UN Foundation received 285 complete responses to the survey. This was the largest respondent pool to-date; a 36% increase from the 210 respondents to the 2015 survey. This increase was consistent with the continued growth of the Energy Access Practitioner Network and was also explained by the fact that for the first time, the UN Foundation extended the 2016 survey to partners of Sustainable Energy for All in addition to all Network members. As further detailed later in this brochure, respondents represented a wide variety of organizations (ranging from service producers to investors), and geographic areas of operation and areas of work. Within this diversity, however, there was significant representation from small and medium sized enterprises (SMEs) and non-governmental organizations (NGOs), particularly those working in East and West Africa and South Asia. This mix of respondents closely mirrors the overall membership of the Energy Access Practitioner Network; which makes sense given that 197 out of the 285 responses were from members of the Network.

Some of the survey’s key findings – along with conclusions and implications drawn from these results – include:

• The significant representation of SMEs in the survey, making up one-third of the respondent pool, underscores their importance for growing the distributed energy sector. Thanks to dramatic cost reductions in clean energy technology, coupled with the emergence of innovative business and financing models, the sector is attracting a growing number of entrepreneurs and small businesses seeking to deliver energy services directly to the market. With support tailored to the needs of SMEs, these enterprises are well placed to understand and respond to local markets and meet household needs and preferences more quickly.

• Standalone electrification solutions such as solar lanterns and small solar home systems are playing a critical role in lifting households to the first rung of the energy ladder and beyond. Solutions vary in size; however, most cater to basic services such as lighting and phone charging. The introduction of larger standalone solutions combined with the emergence of high efficiency appliances are paving the way for higher levels of access associated with the use of radios, TVs, fans, and even refrigerators.

• Business models that are designed to respond to the needs of rural households and their abilities to pay (e.g. pay-as-you-go or PAYG) are a key factor behind the growth of standalone solutions, making the systems more affordable to a larger customer base.

Another important factor is a decline in technology costs that is being passed on to customers in the form of less expensive products. In 2015, the reported average retail price of most solar lanterns was below $15/unit, with a significant portion costing $5 to $10/unit.

• Even with lower prices and innovations in end-user financing, households remain concerned with the up-front cost of standalone electrification solutions. This challenge is recognized throughout the sector and reflects the fact that the majority of off-grid households do not yet benefit from having access to innovative financing mechanisms (e.g. PAYG) and still use one-time cash payments to purchase their energy solutions.

• Small-scale mini-/micro-grids lead the way. In 2015, almost three-quarters of reported mini-/micro-grid developments were less than 100kW in size. These smaller mini-/micro-grids may warrant lighter regulation, more akin to household solar, allowing for innovations that bring down prices and help reach customers with essential energy services. Otherwise, mini-/micro-grids of this scale are unlikely to be as cost-effective for “entry-level” power compared to standalone home systems.

• Despite the potentially important role (larger) mini-/micro-grids can play in global electrification efforts, their commercial

development still hinges on fundamentals such as proving a viable business and finance model. Concerns with policy and regulations underlie these challenges, especially those related to permitting and licensing, existing frameworks and support mechanisms or lack thereof, taxes, and the ability to charge appropriate tariffs. Addressing these barriers will be critical to enabling the development of larger-scale mini-/micro-grids (>1MW) capable of supporting higher tiers of access.

• Financing continues to be a bottleneck for growth. For new enterprises trying to engage in this market, a lack of equity and grants at early stages is a significant barrier. As pointed out by investors, this may be because the industry still lacks the track record necessary to attract higher-risk investment vehicles. On the other hand, for the small but growing number of more established leaders in the market, a lack of available and appropriate debt financing from local banks, specifically local currency products, is proving to be a key hindrance for growth.

• The financing needs of the sector are diverse and changing, with greater emphasis being placed on debt. Nearly half of industry respondents reported being in an active financing round and/or having raised capital in 2015. For-profit organizations raised capital mostly to satisfy working capital needs and develop distribution channels. Most for-profits

76


CONTENTSFOREWORD .....................................................................................................................................................p.3

SUMMARY ........................................................................................................................................................p.4

ABOUT THE SURVEY .......................................................................................................................................p.8

MARKET CONTEXT .......................................................................................................................................p.10

GENERAL .....................................................................................................................................p.10

SPOTLIGHT: SMALL-SCALE DISTRIBUTED ENERGY SOLUTIONS .............................................p.19

SPOTLIGHT: MINI-/MICRO-GRIDS ..............................................................................................p.24

FINANCING / INVESTMENT TRENDS ...........................................................................................................p.26

INDUSTRY PERSPECTIVE ............................................................................................................p.26

INVESTOR PERSPECTIVE ............................................................................................................p.31

CROSS-CUTTING ISSUES ............................................................................................................p.33

RESPONDENT PROFILES ...............................................................................................................................p.34

ABOUT THE PARTNERS .................................................................................................................................p.38

ACKNOWLEDGMENTS .................................................................................................................................p.39

PHOTO CREDITS ...........................................................................................................................................p.39

reported raising capital in the order of $100,000 to $1,000,000 in 2015, with equity, debt and grants representing almost equal shares of capital raised. However, more debt financing will be needed in the future as the energy access market grows and more companies seek to scale up their operations.

• A desire for long-term impact and scale are driving investments. In 2015, social and environmental impacts each ranked among the most important considerations for investors when

evaluating investment opportunities in the energy access sector; return on investment ranked second to last. Investors also reported that the average investment horizon for equity investments in the energy access space was 7.5 years; the average investment horizon for debt was 10.5 years. This suggests that some investors engaged in the energy access space are taking a medium-to-long-term perspective on their investments, and this may be a factor in why there have been so few “exits” in energy access investments to date.

98


ABOUT THE SURVEYSince its inception in 2011, the UN Foundation-led Energy Access Practitioner Network has grown to close to 2,500 members (representing approximately 1,400 organizations), making it the largest network of individuals and companies involved in distributed energy solutions. Its membership is drawn from more than 170 countries, and from a wide variety of entrepreneurs, large businesses, social enterprises, civil society and non-government organizations (NGOs), as well as investors, bi- and multi-lateral organizations, government agencies and academia. While the Network primarily supports market-led, distributed energy solutions, focusing particularly on rural electrification and last-mile distribution, it also represents stakeholders engaged in contexts where market solutions are not always appropriate or feasible, such as humanitarian emergencies.

The Network’s mission is to contribute to Sustainable Development Goal 7 which aims to secure affordable, reliable, sustainable and modern energy for all by 2030. The Network serves as a global platform for leaders and practitioners from around the world who seek insight on best practices and solutions for distributed energy, and who look to create powerful partnerships to advance progress towards this goal.

As a contribution to this goal, the UN Foundation conducts annual surveys of its Network members to generate market intelligence about the distributed energy sector and thereby assist all stakeholders – industry, investors, governments and civil society – in making informed decisions. Considering the size of the Network, these surveys serve as a way of “gauging

the pulse” of the energy access sector as a whole. The surveys are not intended to be scientific or serve as the last word on energy access, but rather designed to draw on the collective experience of people working on the frontlines of delivering energy services around the world to highlight broad trends related to a range of market, policy, and financing topics.

During the summer of 2016, the UN Foundation conducted its fifth annual survey through the online platform SurveyMonkey, and for the first time extended the survey to partners of Sustainable Energy for All as well as all Network members. While touching on a broad set of issues, the survey focused mainly on financing, and for the first time asked finance-related questions of both practitioners and investors to investigate both the demand and the supply of financing for the sector. For the second time (the first being the 2015 survey), the 2016 survey included a special section for stakeholders engaged in mini-/micro-grid projects. The survey, also for the first time, explored themes of energy access for humanitarian settings as well as clean-cooking solutions.

The survey included both qualitative and quantitative questions, mainly consisting of multiple choice options to promote uniformity in answers. The survey was “branched” to optimize responses from different stakeholders, who only saw questions relevant to their organization and areas of work, which also helped avoid potential double counting. Most quantitative questions requested data/information from 2015. Most qualitative questions allowed respondents to select multiple responses that applied to them.

The remainder of this brochure presents the survey’s results – in the form of a collection of key findings and figures – with all summary statistics reflecting aggregated survey responses1. Where feasible, data from this survey have been compared with data from past surveys to show trends over time. Findings from this survey, as with previous years, are meant to inform the development of more appropriate policies, financing instruments and other types of support for organizations involved in scaling-up distributed energy solutions.

BOX #1: TERMINOLOGYSeveral terms are used throughout this brochure to describe certain groups of stakeholders and segments within the distributed energy market. The most frequently used terms and their associated definitions are provided below:

“Industry” is defined, for the purposes of the survey and this brochure, as including small and medium enterprises (SMEs), large corporate firms, non-governmental organizations (NGOs), community-based organizations and social enterprises operating in the distributed energy sector.

“Investor” is defined, for the purposes of the survey and this brochure, as any organization providing any type of funding/financing that may be relevant to the distributed energy sector, including but not limited to donors, banks, impact investors and micro-finance institutions.

“Mini-/micro-grids” are defined, for the purposes of the survey and this brochure, as village, town or district scale electrical distribution networks either unconnected to, or able to operate autonomously from, the main electrical grid. This is an inclusive definition which differentiates mini-/micro-grids from stand-alone household systems and grid-extension approaches; where a mini-/micro-grid must serve multiple customers with some ground-based infrastructure and operate autonomously.

1 The UN Foundation conducted basic quality control on the responses it received (primarily removal of duplicate or incomplete responses and removal of outliers where the data provided was clearly out of bounds with the amount and/or unit expected), but is not responsible for the accuracy of the data/information provided.

100%

80%

60%

40%

20%

0%

Start-up Scaling-up Established

2015: Non-Profit2015: For-Profit20142012

Perc

ent o

f Sel

ectio

ns b

y St

age

RESPONDENTS’ STAGES OF GROWTH (2012, 2014, 2015)2

78%

3%

19%

57%

22%

21%

51%

17%

32%

54%

21%

25%

Less than 20% of respondents affiliated with for-profit organizations cited their organization as being “established” in 2015, defined as having an established customer base. This is broadly in line with findings from previous years’ surveys, and a testament to the young, but growing, state of the sector.

1110


MARKET CONTEXT

RESPONDENTS' GROSS REVENUE IN 2015

> $15M

$10M-$15M

$5M-$10M

$1M-$5M

$500K-$1M

$100K-$500K

$100K

0

Number of Selections0 5 10 15 20 25 30

For-profits Non-profits

1

62

31

22

910

713

719

1624

37

The distributed energy access sector is dominated by small and medium-sized enterprises (SMEs), at least by a measure of gross revenue, with more than half of respondents affiliating themselves with organizations that generated less than $500,000 in gross revenue in 2015.

GENERAL This section features findings about the financial status of industry respondents.

Despite the early stage nature of the distributed energy access sector, a significant number of respondents affiliated with for-profit organizations reported that their organization was capitalized with some amount of debt in 2015.

Only grants (non-commercial)

Equity + grants

Debt (<50%) + equity + grants

Debt (>50%) + equity + grants

Other

RESPONDENTS' CAPITAL STRUCTURE IN 2015 (For-Profit Organizations)3

27%

35%

15%

16%7%

1312


Access to finance

Access to finance for customers

Policy / regulatory environment

Distribution challenges

Lack of consumer awareness

Recruiting and retaining trained individuals

Poor product quality, market spoilage

Lack of after-sales services

Lower Priority Higher Priority

0 3.50.5 1 1.5 2 2.5 3

Investors Industry

INDUSTRY AND INVESTOR VIEWS ON BARRIERS TOGROWTH FOR DISTRIBUTED RENEWABLE ENERGY

4

When it comes to barriers to growth in the distributed renewable energy sector, respondents representing industry2 are mostly concerned with access to finance and macro-level issues (e.g. policy) while investors are predominantly concerned with factors that limit scalability (e.g. distribution challenges). Both sets of stakeholders share a common concern over the importance of access to finance for consumers.

Both industry and investors agree that a lack of available and appropriate financing from local banks, specifically local currency products, and investors having insufficient knowledge of the market are key barriers to financing the distributed renewable energy sector, suggesting more investment in training and awareness-raising is needed. Views diverge when it comes to the importance of a firm’s track record, with investors citing the limited track record of businesses as a major barrier to financing.

2 “Industry” covers small private business (includes SMEs), large private business (>250 employees), social enterprises, CSOs and NGOs. For further details, see terminology box in the “About the Survey” section above.

This section presents industry and investor views on the key barriers and challenges faced by the distributed renewable energy sector.

Lack of support from local banks in local currency

Insufficient knowledge of investors

No innovative deal or fund structures

Limited track record of industry players

Foreign currency risk

Lack of successful investments by investors

Subcritical deal sizes

Better investment opportunities in other industries

No common platform to talk about impact investing

Lower Priority Higher Priority0 30.5 1 1.5 2 2.5

Investors Industry

INDUSTRY AND INVESTOR VIEWS ON BARRIERS TO FINANCING DISTRIBUTED RENEWABLE ENERGY

5

1514


For the cookstoves market, industry and investors generally agree on the key challenges for growth, the most weighted being consumer acceptance and access to consumer finance, followed by distribution challenges. Industry and investor views diverge on the importance of policy / regulations as well as recruiting and retention of trained staff, on both of which industry places a higher importance.

This section presents industry and investor views on the key barriers and challenges faced by the clean cookstoves sector.

Consumer acceptance / behavior change

Access to finance for consumers

Distribution challenges

Lack of consumer awareness

Poor product quality, market spoilage

Insufficient fuel supply

Lack of after sales services

Recruiting and retaining trained individuals

Policy / regulatory environment

Lower Priority Higher Priority0 0.80.1 0.30.2 0.4 0.5 0.7

Industry Investors

INDUSTRY AND INVESTOR VIEWS ON BARRIERS TO GROWTH FOR THE COOKSTOVES MARKET

7

0.6

When it comes to regulatory and policy challenges to scaling up distributed renewable energy, respondents from the individual or household system segments of the industry are mostly concerned with (i) taxes on distributed renewable energy systems and components, (ii) design and implementation of support mechanisms and (iii) permitting and licensing. Industry members involved in mini-/micro-grids, on the other hand, show a clear and pronounced concern for permitting and licensing.

Taxes on distributed renewable energy productsDesign/implementation of renewable energy support mechanisms

Permitting and licensing, including clear regulatory frameworks for mini-/micro-gridsStandards and import control

Clear mandates and institutional arrangementsPower system planning

Subsidized fossil fuel-based energy servicesFinancial awareness and capacity (among lenders)

Training and skills development infrastructureFinancial infrastructure (central bank guidelines)

Mobile money tariffs and regulationFinancial regulations (foreign investment and exit)

0 255 10 15 20

INDUSTRY VIEWS ON REGULATORY AND POLICY CHALLENGES TO SCALING DISTRIBUTED RENEWABLE ENERGY (Non-Mini-Grid Practitioners)

6a

Permitting and licensing, including clear regulatory frameworks for mini-/micro-gridsFinancial awareness and capacity (among lenders)

Design / implementation of renewable energy support mechanismsTaxes on distributed renewable energy products

Power system planningMobile money tariffs and regulation

Clear mandates and institutional arrangementsSubsidized fossil fuel-based energy services

Training and skills development infrastructureStandards and import control

Financial infrastructure (central bank guidelines)Financial regulations (foreign investment and exit)

INDUSTRY VIEWS ON REGULATORY AND POLICY CHALLENGES TO SCALING DISTRIBUTED RENEWABLE ENERGY (Mini-Grid Practitioners)

6b

0 5 10 15 20Number of SelectionsPrimary challenge Secondary challenge Tertiary challenge

25

19

14

13

13

12

9

7

6

5

22

21

20

10

9

7

7

4

4

4

3

2

13

11

1716


When it comes to financing clean cookstoves, the industry generally agrees that a lack of support from local banks, specifically local currency products, constitutes the most significant barrier to raising capital. Investors are predominantly concerned with the small ticket size of investment opportunities available to them; this suggests a need for aggregators and/or intermediaries. Like the distributed renewable energy sector, both industry and investors agree that investors have an insufficient knowledge of the clean cookstoves sector, suggesting more investment in training and awareness raising is needed.

Industry players cite “supply-side” factors such as the lack of early stage investment vehicles, the time taken to raise funds and high interest rates as being the main challenges for raising capital, while de-emphasizing the importance of “demand-side” factors such as a company’s track record or staff capacity.

This section presents industry views on the importance of various financial and non-financial resources to the energy access sector as a whole.

Subcritical deal sizes

Insufficient knowledge of investors

Better investment opportunities in other industries

Limited track record of industry players

Lack of support from local banks in local currency

Lack of successful investments by investors

No common platform to talk about impact investing

No innovative deal or fund structures

Foreign currency risk

INDUSTRY AND INVESTOR VIEWS ON BARRIERS TO FINANCING CLEAN COOKSTOVES

8

Lower Priority Higher Priority0 0.60.1 0.30.2 0.4 0.5

Industry Investors

Availability of early stage investment vehiclesTime required to raise funds

High interest ratesLack of access to international creditors or investors

Lack of local lenders / investorsForeign exchange risk

Collateralization requirementsLack of policy clarity in market, leading to high perception of risk by investors

Limited cash flowDeveloping bankable business plan

Balance sheetLimited track record of company

Limited track record of sectorManagement and staff capacity, talent

Strength of local / regional capital marketsLow credit

High legal and regulatory costsLegal costs

Limited liquidity of assets

INDUSTRY VIEWS ON CHALLENGES TO RAISING FINANCES10

Lower Priority Higher Priority

0 1.81.40.2 0.60.4 1.210.8 1.6

Industry players cited a lack of national strategies to advance clean cookstoves as the key policy challenge to scaling clean cookstoves in the regions they operate, followed by design and implementation of renewable energy support mechanisms and financial awareness and capacity among lenders.

National strategies to advance clean cookstovesDesign/implementation of renewable energy support mechanisms

Financial awareness and capacity (among lenders)Trade barriers / tariffs on imported productsSubsidized fossil fuel-based energy services

Standards and quality controlTraining and skills development infrastructure

Testing and monitoring mechanisms to ensure qualityClear mandates and institutional arrangements

Lack of local or regional testing capacityFinancial infrastructure (central bank guidelines)

Financial regulations (foreign investment and exit)

INDUSTRY VIEWS ON REGULATORY AND POLICY CHALLENGES TO SCALING-UP CLEAN COOKSTOVES

9

Lower Priority Higher Priority0 30.5 1.51 2 2.5

1918


In 2015, distributed energy solutions were used primarily to satisfy basic services such as phone charging and task lighting, with higher tiers of access (e.g. entertainment, IT, refrigeration) accessible to fewer consumers. In 2014, the survey results were broadly consistent proving that the nature of energy demand over the past two years has remained fairly constant.

SPOTLIGHT: SMALL-SCALE DISTRIBUTED ENERGY SOLUTIONS This section features findings related to the market for small-scale distributed energy solutions (e.g. pico-solar home systems and appliances). The results are derived from respondents that identified themselves as being in the business of selling or distributing small-scale distributed energy solutions to end-users.

According to respondents, households represented the lion’s share of the market for small-scale distributed energy solutions in 2015 and a large potential business opportunity for an increasingly commercially-driven distributed energy sector.

Phone chargingEducation: In home

Education: In schoolsEntertainment

Community servicesGeneral residential or business lighting

HealthcareComputer / ITRefrigeration

Small business machinery / operationsCooking

Irrigation / agricultureFood processing

OtherAir circulation

Heating

Number of Selections

0 80

67

60

49

43

40

33

46

30

28

26

22

17

9

7

6

27

10 3020 40 50 70

END-USES OF OFF-GRID PRODUCTS SOLD IN 201512

60

For the second year in a row, matchmaking ranks as the top non-financial resource sought by industry to grow their business, followed by access to new customers (within the same country of operation), information3 and talented employees4.

3 “Access to information” refers to information on funding sources, regulatory framework, etc. 4 The “Access to talented employees” category was only included on the 2016 survey while the “New leadership” category was only included on the 2015 survey.

Matchmaking with potential partners

Access to new customers within the same country

Access to information

Access to talented employees

Access to new customers in another country

Access to consulting services

Mentorship

Access to a manufacturer

Access to component suppliers

New leadership

Percent of Selections0% 25%5% 10% 20%

2014 2015

NON-FINANCIAL RESOURCES SOUGHT AFTER BY INDUSTRY (2014, 2015)11

15%

21%17%

15%17%

15%13%

13%

13%11%

10%7%

9%7%

8%7%

3%

7%7%

2120


Distributed energy is revolutionizing access to energy for the 1.1 billion people who still lack electricity and the 2.9 billion people who lack access to clean and safe energy for household cooking (2012 data). Several trends are making this revolution possible, such as the declining cost of renewable energy, the increasing efficiency of off-grid products and appliances, and the emergence of innovative business and financing models. Thanks to these advancements, distributed energy solutions, while not new, are increasingly being adopted as a low-cost and practical complement – and at times alternative – to traditional approaches. With the right support they could open up opportunities to go further and faster towards closing the energy access gap.

Once the domain of a small handful of “forward thinking” development practitioners, distributed energy solutions are now being driven by a diverse

eco-system of businesses, social enterprises, non-profits and governments. Despite significant progress, critical gaps in market intelligence still exist. These gaps are further widened by the fast pace at which the sector is evolving.This brochure – commissioned by the UN Foundation and based on the Energy Access Practitioner Network’s 2016 annual survey - seeks to expand our understanding of the current state of the energy access sector, explore key market trends and areas of future opportunity. This work is a contribution to broader efforts of Sustainable Energy for All (SEforALL).

In the market for solar home and business systems, there is an emphasis on smaller-scale products that provide the important first step up the energy access ladder (Multi-Tier Framework —Tiers 1 and 2). Solutions providing higher levels of access (Tiers 3, 4 and 5) are less common but show signs of promise.

LED lights, phone chargers and TVs led the market for off-grid energy appliances in 2015, with fans, radios and refrigerators representing a smaller but promising market. More energy service providers are diversifying their product offerings by including appliances compatible with their larger solar home systems. This is partly due to more efficient appliances being made available in off-grid settings. The relative popularity of appliances tracks very closely with findings from an appliance survey conducted the previous year5.

BOX #2: THE MULTI-TIER FRAMEWORK (MTF) The Multi-Tier Framework (MTF) is a framework for measuring energy access. It redefines energy access from the traditional binary count to a multi-dimensional definition as the “ability to avail energy that is adequate, available when needed, reliable, of good quality, convenient, affordable, legal, healthy and safe for all required energy services.” Energy access is measured in the tiered-spectrum, from Tier 0 (no access) to Tier 5 (the highest level of access). MTF Tiers are defined as follows:

Tier 1: >1W for at least 4 hours/day (task lighting and phone charging)Tier 2: >50W for at least 4 hours/day (general lighting, TV, fan)Tier 3: >200W for at least 8 hours/day (general lighting, TV, low-power appliances)Tier 4: >2,000W for at least 16 hours/day (general lighting, TV, medium-power appliances)Tier 5: >2,000W for at least 22 hours/day (general lighting, TV, high-power appliances)

The MTF was developed by the World Bank acting in the role of the SEforALL Knowledge Hub, with the support of the Energy Sector Management Assistance Program (ESMAP), in partnership and through consultations with multiple SEforALL stakeholders.

LEVELS OF ENERGY ACCESS SUPPORTED BY RESPONDENTS' PRODUCT SALES IN 2015

13

201816141210

86420

Num

ber

of S

elec

tions

Tier 5: >2,000W for at least

22 hours/day (general lighting, TV, high-power appliances)

Tier 4: >2,000W for at least 16

hours/day (general lighting, TV,

medium-power appliances)

Tier 3: >200W for at least 8 hours/day (general

lighting, TV, low-power appliances)

Tier 2: >50W for at least 4 hours/day (general

lighting, TV, fan)

Tier 1: >1W for at least 4

hours/day (task lighting and phone charging)

18

11

8

5 5

Sustainable Energy for All Tiers

LED room lighting appliancesMobile phone chargers

TVFan

RadioRefrigerator

OtherLaptop

Not applicableHair Clippers

TabletMedical appliances

Clothes ironTea kettles


0 40

34

30

26

18

14

8

19

8

7

6

3

2

0

6

5 1510 20 25 35

TYPES OF APPLIANCES SOLD IN 201514

30

Ap

plia

nces

Sui

tab

le fo

r O

ff-G

rid R

eso

urce

-C

ont

rain

ed S

ettin

gs

5 Global LEAP (2015) “Off-Grid Appliance Market Survey”, http://energyaccess.org/wp-content/uploads/2015/07/GlobalLEAPOff-GridApplianceSurvey-April2015-for-publications.pdf

2322

Upfront costQuality of product or service

Lack of understanding / knowledge of product / servicePayment schedule

Lack of ongoing support / maintenance / warrantyDoes not adequately fulfill their needs


0 80

43

38

74

26

18

13

29

33

37

19

10 3020 40 50 70

CUSTOMER CONCERNS ABOUT PURCHASING DECENTRALIZED ENERGY FOR HOUSEHOLD USE

17

60C

usto

mer

Co

ncer

ns

100%

80%

60%

40%

20%

0%

$0-$5 $6-$10 $11-$15 $16-$20 $21-$30 $31-$40 $41-$50 >$50

Multiple lights and phone charging - Average retail price (US dollars)

Single light and phone charging - Average retail price (US dollars)

Single light - Average retail price (US dollars)

Perc

ent o

f Sel

ectio

ns

PICO SOLAR SYSTEM PRICING15

Despite falling technology prices and recent innovations in financing, the upfront cost of distributed energy solutions remains a major concern among households, according to survey respondents. Further reductions in the upfront cost of distributed energy and increased options for consumer financing are critical to achieving universal energy access.

6 For a further discussion on pico-solar cost trends, please see Bloomberg New Energy Finance, Lighting Global and the Global Off-Grid Lighting Association’s “Off-Grid Solar Market Trends Report 2016”.

In 2015, traditional one-time cash payments were the leading payment plan offered by providers of distributed energy products. This leaves plenty of room for growth for consumer finance and Pay-As-You-Go (PAYG) solutions which, despite their rapid growth, still service a relatively small portion of the off-grid market. In 2013, the results were somewhat similar, with one-time cash payments still receiving 36% of selections, followed by installment, credit/microcredit and PAYG all of which received 19% of selections7.

One time cash payment

Installment plan (rent-to-own)

Credit / microcredit

Ongoing service plan (pay-as-you-go)

Other

Not applicable

Percent of Selections0% 5% 40%10% 15% 20% 25% 35%

2013 2015

TYPES OF PAYMENT PLANS OFFERED TO CUSTOMERS (2013, 2015)16

30%

Paym

ent T

ypes

36%36%

19%24%

19%

19%16%

12%

8%8%

3%

2015 saw a continued reduction in the pricing of solar systems, with more affordable options that also adhere to global standards being rolled out by several key companies in the sector6 – including some who participated in the survey. The majority of solar lanterns fell under $15/unit, with a significant portion being $5 to $10/unit. For more sophisticated lantern solutions that also offer phone charging, the average retail price was more varied, with single light versions generally falling under $40/unit, and the majority of multi-light systems being above $50/unit. The higher prices contribute to concerns around upfront costs and the need for enhanced consumer financing for more households to move past Tier 1 access.

7 The 2015 data also incorporated a “not applicable” category that received 3% of selections.


2524


In 2015, and for the third year in a row, mini-/micro-grid practitioners cited solar PV as the leading power generation technology used for their projects.

SPOTLIGHT: MINI-/MICRO-GRIDSThis section features findings specific to mini-/micro-grids. The results are derived from respondents that identified themselves as being involved with mini-/micro-grid projects.

In 2015, mini-/micro-grids below 100 kW in size were the most popular mini-/micro-grids among respondents active in this space.

Despite the strong rationale for mini-/micro-grids, their (commercial) development still hinges on “fundamentals” such as proving a viable business model and finance.

MINI-/MICRO-GRID GENERATION TECHNOLOGIES UTILIZED(2013, 2014, 2015)

18

60%

50%

40%

30%

20%

10%

0%

2013 2014 2015

Natural GasWindSmall hydro HybridDiesel Biomass or biogas

Solar PV

Perc

ent o

f Sel

ectio

ns 41% 41%

53%

13% 14%12% 11%

15%

10% 10% 11%9%

14%

7%9% 9% 9%

6%

2% 3%1%

<100kW

100kW-1MW

>1MW

AVERAGE SIZE OF MINI-/MICRO-GRIDS19

22%

74%

4%

Viability of business modelFinancing

Having an existing regulatory framework to work withinHaving the right to charge appropriate tariffs for commercial operation

Existence of technical and quality standardsAvailability of capital or operating subsidies

Necessity of social constructs / behavior changeOperational challenges (e.g. theft, tariff payments, etc.)

Threat of grid extensionBeing duty exempt

Being protected against expropriation0 4035255 1510 20 30

Primary Consideration Secondary Consideration Tertiary Consideration Number of Selections

INDUSTRY VIEWS ON CONSIDERATIONSFOR DEVELOPING MINI-/MICRO-GRIDS

20

34

14

14

14

10

7

7

4

3

22

17

Just over one-third of respondents reported having had some involvement in mini-/micro-grids in 2015; this is down slightly from 41% in 2014.

2726


FINANCING / INVESTMENT TRENDS

In 2015, satisfying inventory or working capital needs, scaling operations, and staff recruitment and training ranked as the top three reasons for raising capital among industry players. For-profit organizations raised capital mostly to satisfy working capital needs and to develop distribution channels. Non-profits raised capital principally to train and recruit staff and to scale operations. When compared with what industry and investors view as the most and least important barriers to growth for the distributed renewable energy space, these results suggest that investments are being targeted relatively well to where they are needed most.

INDUSTRY PERSPECTIVE This section showcases the types and amounts of financing raised and needed by industry respondents.

Inventory or working capital

Scaling operations

Staff recruitment and training

Piloting projects

Preparing / developing projects

Distribution channel development

Asset purchases

Engineering or technical assistance

Conceptualizing projects

Marketing & raising consumer awareness

End-user financing

Sales

After-sales service and maintenance

Product line expansion

1050 3515 20 25 30

For-Profit Non-Profit


RESPONDENTS' PURPOSE FOR RAISING CAPITAL IN 2015 21

31

23

18

23

23

18

23

17

17

16

28

26

11

10

Forty-two percent (42%) of industry respondents (both those involved in distributed power and clean cooking solutions) reported being affiliated with an organization that was in an active financing round and/or raising capital in 2015.

2928


As of January 2017, concessional project debt and company debt represented over half of the funding needs expressed by organizations that participate in the Practitioner Network’s online Investment Directory database8. This marks an increase from the financing needs last reported in August 2015, where concessional project debt and company debt combined accounted for slightly less than a third of organizations’ funding needs. The overall amount of funding sought has increased significantly over this same period, from a total of $1.3 billion to $1.8 billion9.

In 2015, most respondents affiliated with for-profit organizations raised a mixture of equity, debt and grants in the order of $100,000 to $1,000,000 per organization, while most non-profits raised less than $500,000. “Development Grants” played a key role in the capital raised for organizations seeking $1,000,000 or less.

3

4

10

4

12

2

6

3

4

6

1

2

2

$10M-$50M

$5M-$10M

$1M-$5M

$501K-$1M

$101K-$500K

$50K-$100K

<$50K

420 146 8 10 12

Equity Debt Development Grant Operational Subsidy

Crowdfunding Results-based Finance


CAPITAL RAISED IN 2015 (For-Profit Organizations)22a

$5M-$10M

$1M-$5M

$501K-$1M

$101K-$500K

$50K-$100K

<$50K

210 73 4 5 6


CAPITAL RAISED IN 2015 (Non-Profit Organizations)22b

Cap

ital R

aise

dC

apita

l Rai

sed

Other

100%

80%

60%

40%

20%

0%January 2017August 2015

Perc

ent o

f Fun

din

g N

eed

s b

y Ty

pe

PRACTITIONER NETWORK MEMBERS' FUNDING NEEDS(August 2015, January 2017)

23a

Concessional Debt (for project finance)

Company Debt

Project Equity

Company Equity

Project Development Grant

Commercial Debt (for project finance)

CapitaGrant

Working Capital

Operational Subsidy

8 The distributions reflect information provided by organizations in the database as of August 2015 and January 2017.9 This total does not include one significant outlier currently included in the directory; the total including the outlier amounts to $3.3 billion.

3130


In 2015, 57% of reported investments in the energy access space were for off-grid applications, followed by clean cooking/fuels and a small number of on-grid applications (i.e. grid extension).

INVESTOR PERSPECTIVE This section highlights investors’ actions and views on financing in the energy access space, specifically regarding the types and amount of investments made in 2015, investment horizons and the perceived risks and considerations when making investments.

In 2015, most investors reported committing capital to energy access companies and/or projects in the range of $500,000 to $5,000,000, using a mixture of equity, debt and to a lesser extent grants. The next most cited investments were less than $50,000. Debt constituted all incidences of funding above $5,000,000.

Off-Grid

Clean Cooking / Fuels

On-Grid (e.g. grid extension)

TYPES OF ENERGY ACCESS INVESTMENTS MADE IN 201524

56%

8%

36%

3

6

2

2

4

1

7

$10M-$50M$5M-$10M

$1M-$5M$501K-$1M

$101K-$500K$50K-$100K

<$50K210 873 4 5 6


CAPITAL COMMITTED TO ENERGY ACCESS EFFORTS IN 201525

Co

mm

ited

Cap

ital

Equity Debt Development Grant Carbon financing Results-based finance

In 2015, commercial project debt represented roughly half of the capital being sought over the next 2 years by respondents involved in mini-/micro-grids; 22% of funding sought is concessional project debt10. This shows a marked change from 2014, where the largest tranche of mini-/micro-grid investment needs was project equity, followed by commercial debt and capital grant or subsidy.

10 Concessional project debt financing is typically agreed to with softer terms than commercial debt financing.

23b

100%

80%

60%

40%

20%

0%20152014

Perc

ent o

f Fun

din

g N

eed

s b

y Ty

pe

MINI-/MICRO-GRID FINANCING NEEDS FOR THE NEXT 2 YEARS (2014, 2015)

Operational Subsidy

Project Development

Working Capital

Capital Grant or Subsidy

Company Equity

Project Equity

Company Debt

Concessional Debt (for project finance)

Commercial Debt (for project finance)

3332


In 2015, more than 75% of reported investments by industry required between an average of 3 months to 2 years to move from initial discussion to signature of a financing agreement, with most deals taking a matter of months. Investors reported signing deals on a slightly more accelerated track. The amount of time from initial talks to disbursement of funds to investees seems to occur in a timely manner, with most disbursements occurring within months after a deal is signed.

CROSS-CUTTING ISSUESThis section presents industry and investor views on the time it takes to close financing rounds.

4% 4%

8%

37%

19%

39%

24%

30%

14%

4% 4%6% 7%

6%

12% 13%

19%

30%27%

26%

35%

15%

4% 4%2%

9%

45%40%35%30%25%20%15%10%

5%0%

Industry Investor

Not applicableMore than 2 years

6 months to 1 year

1 year to 2 years

Between 1 month and

3 months

3 months to 6 months

Less than 1 month

Not applicableMore than 2 years

6 months to 1 year

1 year to 2 years

Between 1 month and

3 months

3 months to 6 months

Less than 1 month

Perc

ent o

f Res

po

nden

ts

TIME FROM INITIAL DISCUSSION TO SIGNATURE28a

TIME FROM INITIAL DISCUSSION TO DISBURSEMENT28b

40%35%30%25%20%15%10%

5%0%

Perc

ent

of R

esp

ond

ents

Investors view operation and management risks as the leading risks for investing in the energy access space, highlighting the importance of building capacity and competency within firms to de-risking investments. This is consistent with an earlier finding (Figure 5), that investors view the limited track record of industry players as a key barrier to financing renewable decentralized energy.

In 2015, social and environmental impacts each ranked among the three most important considerations for investors when evaluating investment opportunities in the energy access sector. Return on investment ranked second to last. This suggests that investments in the energy access sector are driven primarily by a desire for impact and scale.

Operation and management riskFinancial risk

Technology riskPolicy and regulatory risk

Political riskCurrency risk

Market riskLiquidity and refinancing risk

Grid interconnection and transmission line riskCounterparty risk (power off-taker risk)

Environmental riskResource risk

Construction risk

Lower Priority Higher Priority0 30.5 1.51 2 2.5

INVESTOR VIEWS ON INVESTMENT RISKS26

Inve

stm

ent R

isks

Nee

din

g M

itig

atio

n

Social impactPotential to scale

Environmental impactManagement team

Regulatory frameworkNovel technology or business model

Political environmentStrong business plan

Return on investmentStrong balance sheet

Number of Selections0 305 1510 20 25

INVESTOR VIEWS ON DRIVERS FOR INVESTMENT27

Inve

sto

r Co

nsid

erat

ions

2623

2020

1818

1716

139

According to investors, the average investment horizon for equity investments in the energy access space is 7.5 years; the average investment horizon for debt is 10.5 years. This confirms that investors in energy access are taking a medium- to long-term perspective on their investments, and explains why there may be so few “exits”.

3534


Forty percent (40%) of respondents defined their role in the “energy access ecosystem” as involving one or more parts of the value chain for distributed energy products and exhibited a uniform distribution across most segments of the value chain, showing almost equal representation from manufacturers, distributors, retailers, importers/exporters, and providers of after-sales services. Of those who identified themselves as being involved in non-product related activities or services, training/capacity building, project development and consulting were the top areas of involvement.

Design and manufacture energy components or integrated systems

Assemble energy components into final products

Import or export energy products to and from other countries

Sell energy components or systems to merchants for re-sale

Distribute energy components or integrated systems within a country

Retail / sell energy products directly to end users (on pay-as-you-go, cash, lease, rent or other terms)

Provide after sales services

Not applicable

Other

Analytical services (risk analysis, life-cycle analysis, environmental assessments)

Commercial financing (including impact investment)

Consulting

Design and engineering

End-user financing for energy services

Grant making

Industry and consumer association services

Installation

Maintenance

Policy making / government regulation

Project development

Project / program management

Training / capacity building

Not applicable

DISTRIBUTION OF RESPONDENTS' INVOLVEMENT IN THE VALUE CHAIN FOR DISTRIBUTED ENERGY PRODUCTS

30a

DISTRIBUTION OF RESPONDENTS' INVOLVEMENT IN SUPPORT SERVICES30b

15%

16%

7%

4%13%

9%

11%

6% 8% 3%4%

8%

10%

7%2%

8%

11%15%

12%

15%

10%

3%3%

RESPONDENT PROFILES

The majority of the respondents (33%) affiliated themselves with small, private businesses (SMEs). Respondents from non-governmental organizations (NGOs) represented the next largest segment, accounting for 21% of responses, followed by social enterprises (12%).

This section provides further details on the general characteristics of the survey’s respondents.

Small private business (includes small-to medium-sized businesses)

Large private business (>250 employees)

Social enterprise

Local or national non-governmental organization (NGO)

International non-governmental organization (NGO)

Civil society organization (CSO)

Development organization (includes UN agencies and multilateral and bilateral development organizations)

Government institution

Financial institution or fund (includes international financial institutions)

Academic or research institution

Other

DISTRIBUTION OF RESPONDENTS' AFFILIATIONS29

3%33%

5%

7%

12%8%

13%

2%

4%

4%

9%

3736


Solar PV: solar home systems between 11-100WSolar PV: pico (lanterns and lighting kits of under 10W)

Energy efficiencyMini-/micro-grids

Solar PV: home or business systems between 100W and 1 kWSolar PV: home or business systems between 1-10kW

Clean / improved cookstovesBiogas or other biomass

Solar PV: home or business systems between 11-100kWEnergy storage

Solar PV: home or business systems greater than 100kWEnd-use equipment / appliances (e.g. TV, refrigerator, fan, etc.)

Small hydroWind

Waste-to-energyCombined heat and power (CHP)

Solar thermal: small-scale systems less than 2MWLPG

Natural gasSolar thermal: large-scale systems greater than 2MW

DISTRIBUTION OF RESPONDENTS' INVOLVEMENT IN DISTRIBUTED ENERGY TECHNOLOGIES

32

0 12020 6040 10080


114

102

101

95

90

87

69

65

60

57

46

46

43

39

38

24

21

18

15

11

While the distributed energy access space remains diverse in terms of the types of technologies being employed by its practitioners, a strong representation from solar generation technologies continues the trend observed in past surveys12,with solar home systems and pico-solar accounting for 18% of technologies respondents cited being involved with in 2015. Solar home systems had a larger share than solar lanterns for the third year in a row.

In 2015, East Africa, West Africa and South Asia were the three most represented regions by survey respondents - approximately 14%, 14% and 9% of the respondents reported having operations or offices in these three regions, respectively11.

12 Data from past years are not represented in the graph due to slight variations in response options offered.

16%

14%

12%

10%

8%

6%

4%

2%

0

2013 2014 2015

Perc

ent o

f Sel

ectio

ns

DISTRIBUTION OF RESPONDENTS’ GEOGRAPHIC PRESENCE (2013, 2014, 2015)

31

East

Afr

ica

Sout

h A

sia

(incl

udin

g In

dia

)

Wes

t Afr

ica

Sout

hern

Afr

ica

Sout

heas

t Asi

a

Cen

tral

Afr

ica

Euro

pe

Sout

h A

mer

ica

Eas

t Asi

a an

d t

he P

acifi

c

Car

ibb

ean

Cen

tral

Am

eric

a

No

rth

Afr

ica

and

the

Mid

dle

Eas

t

No

rth

Am

eric

a

Aus

tral

ia a

nd N

ew Z

eala

nd

Cen

tral

Asi

a

Oth

er (N

/A in

201

5)Region of Operation

Seventy-nine (79) organizations (representing 28% of respondents) reported having provided energy solutions as part of humanitarian relief efforts in 2015. Of the respondents who specified the countries in which they are delivering decentralized energy solutions for humanitarian relief efforts (16), Haiti ranked at the top (7 mentions), followed by Kenya, Uganda and Nepal. The Gambia, Senegal, Philippines, Nigeria, Indonesia, Honduras and Ethiopia were also mentioned once each.

For the second year in a row, less than 30% of respondents affiliated themselves with women-led/owned organizations, underscoring the fact that women continue to be under-represented in the energy access sector.

11 The categories “Central Africa” and “Australia and New Zealand” were only included in more recent surveys, whereas in 2013 they were written in under “Other”. In the most recent survey “Not Applicable” replaced the “Other” category.

3938


PHOTO CREDITSCoverAngaza DesignSELCORuben Salgado Escudero

Page 2REN21

Page 6Kopernik

Page 18Ruben Salgado Escudero

Page 21Ruben Salgado Escudero

Page 26SELCO

ACKNOWLEDGMENTSThe United Nations Foundation’s energy access team would like to acknowledge the Mott Foundation for their generous support of the Energy Access Practitioner Network, including this survey. We thank Jane Olga Ebinger, Christine Eibs Singer, Stacy Swann and Fiona Messent from Sustainable Energy for All; Peter George from the Global Alliance for Clean Cookstoves, and James Falzon at the Climate Policy Initiative (CPI) for collaborating with us on the survey and providing feedback on its results.

We give special thanks to Eleanor (Nora) Hennessy, our Stanford Schneider Fellow, for working with us over the summer on all aspects of this project, from survey development to collection to analysis. We also thank Meredith Watkins and John Goodrick, our energy access interns, for assisting with data analysis and publication drafts.

We also acknowledge Jem Porcaro and Yasemin Erboy Ruff from UN Foundation for overseeing the survey’s development and analysis, as well as drafting this report, and Molly Smith, UN Foundation for her editorial assistance.

Finally, we would like to thank all the organizations – Practitioner Network members and non-members alike – for taking the time to participate in the survey and allowing us to use their data.

ABOUT THE PARTNERSUNITED NATIONS FOUNDATION

The United Nations Foundation builds public-private partnerships to address the world’s most pressing problems, and broadens support for the United Nations through advocacy and public outreach. Through innovative campaigns and initiatives, the Foundation connects people, ideas, and resources to help the UN solve global problems. The Foundation was created in 1998 as a U.S. public charity by entrepreneur and philanthropist Ted Turner and now is supported by global corporations, foundations, governments, and individuals. For more information, please visit www.unfoundation.org.

ENERGY ACCESS PRACTITIONER NETWORK

The Energy Access Practitioner Network, which has close to 2,500 members globally, supports market-led, distributed energy solutions toward the goal of universal energy access by 2030. It catalyzes energy service delivery by serving as a global platform where leaders and practitioners from around the world come to gain insight, share best practices, and create powerful partnerships in support of distributed energy solutions. The Practitioner Network is open to all organizations and individuals actively involved in the implementation, development, financing, and management of delivering energy sustainably, affordably, and effectively. For more information and to join, please visit www.energyaccess.org.

SUSTAINABLE ENERGY FOR ALL

Sustainable Energy for All (SEforALL) is a global platform that is working towards three ambitious objectives for 2030:

• ensuring universal access to modern energy services• doubling the share of renewable energy in the global energy mix• doubling the global rate of improvement in energy efficiency

SEforALL supports these objectives by empowering leaders to broker partnerships and unlock finance to achieve universal access to sustainable energy as a contribution to a cleaner, just and prosperous world for all. SEforALL connects stakeholders, marshals evidence, benchmarks progress, amplifies the voices of its partners and tells stories of success. For more information, please visit www.seforall.org.

Energy Access Practitioner NetworkUnited Nations Foundation1750 Pennsylvania Avenue NW | Suite 300Washington, DC 20006T: 202-887-9040 | F: [email protected] | www.energyaccess.org

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