Energy poverty is direr in some African countries than others. Likewise, in Asia, overcoming this challenge requires collaborative efforts between the public and the private sector.
During a fireside chat that premiered at the Digital Energy Festival, Kristina Skierka, CEO of Power for All, sheds light on the organisation’s initiative that is geared towards improving energy access. According to Skierka, utilities are not the only ones responsible for the task.
Without a reliable and affordable energy source for all, it will be difficult to end energy poverty, this calls for an integrated energy approach. What is integrated energy?
The first thing I would say is that unpacking the concept of integrated energy is a relatively new term. About two years ago, with the support of the Rockefeller Foundation, together with some of the leaders we came together to figure out what the definition and what integrated energy would mean.
The collaboration of ideas resulted in the concept of utilities 2.0, which is focused on bringing together decentralised and centralised energy to catalyse the research, engineering, regulation and political will to create faster, more reliable access for all. There are several components to integrated energy that stretch across policy to products and technologies and even processes and how they interrelate together.
Policy involves planning in order to estimate energy demand, this could be perceived as a threat by utilities to their service obligation. Why should utilities in poor energy countries care about working with the decentralised renewable energy sector to end energy poverty?
We all know that SDG7 is essentially way behind where it needs to be with 10 years to go for universal access for all. And for the most part, the central grid has been the connection of choice for development dollars. And what we have seen is that global investment has actually gone up 2.5 times over 15 years. But yet, at the same time, we are seeing the numbers of the energy poor, not really decline in significant amounts, so something is not working.
When you look ahead to achieving some of the national targets that have been set in countries like Nigeria, Uganda and Ethiopia, then you’re going to have to be looking at literally hundreds of millions of connections a year in order to achieve these targets. But there are limits to what we call this utility 1.0 mindset. Utilities everywhere are struggling to meet their provision of service obligations. That shows up in all sorts of different ways such as unprofitable customer connections, over electrification, dealing with peak demand issues and capital constraints among them.
At this point, the current approach is not a win for the customer. In many cases, customers are being forced to conform and deal with a situation where they are being asked to pay for $2,000 worth of connections, which for many of the unconnected, that is already their annual income.
The decentralised renewable energy sector has observed that new energy customers don’t always know exactly how to use energy in the best way possible. They need education to come up on what we call the energy ladder in the sector. At the end of the day, the energy poverty problem lies largely in peri- urban rural areas; places that the grid is not always the best solution.
Through the utilities 2.0 initiative, as opposed to seeing decentralised renewables as a threat, we hope centralised utilities will see decentralised renewables or DRE as a partner to solve and address their biggest challenges and universal electrification.
What can you tell us about utilities 2.0 pilot? Has any work been done yet?
The project was developed based on Power for All having found that neither centralised nor decentralised energy is purpose-built to solve energy poverty alone. Statistics indicate that in many energy-poor countries utilities are suffering from incredible transmission and distribution losses, oftentimes five to 10 times what developed world counterparts might be experiencing. There are over 500 hours per year of service interruptions in some countries, and an average utility deficit of about 10 cents per kilowatt hour, which can add up to ultimately almost 2% of some nation’s GDPs.
The new framework that we are testing in Uganda seeks to communicate in a collaborative way that traditional utilities don’t need to solve the access problems by themselves. But this requires collaboration to advance this new future. The concept starts with a fundamental belief that the collaboration of sectors will result in speed and that some technology and business models in innovations will reduce costs.
Let’s look at some of the competitive advantages between centralised and decentralised energy:
- Centralised strengths are strong infrastructure and incredible brand;
- The grid power is still considered premium in many places;
- There’s incredible amount of grids around the world and a lot of connections compared to where decentralised energy has been able to get so far;
- In addition, there is low cost long term debt available to many utilities, and a significant customer base.
On the other hand, the benefits and unique approaches of the decentralised community include:
- The modularity approach;
- The ability to be incentivised and have competition to connect the most in the best way possible;
- Agility of companies that can adapt both from a business model perspective and the countries they are operate in;
- Focus on customer-centric approaches;
- The ability to add on ancillary products and services;
In brief, through the 2.0 pilot, we are testing the benefits that I just laid out of technology integration, as well as demonstrate the benefits of integrated public-private approaches. The project is a first of its particular kind. There is a great belief in part of what we are testing is that grid integrated decentralised technology can both improve the reliability of the connection and reduce grid losses.
Watch the full conversation as Skierka shares about her experiences in working with centralised and decentralised energy companies.