The Future of Energy: It’s the Developing World’s Turn to Shine

GreenMoney
By Nancy E. Pfund
July 1, 2016

A Chang­ing Climate

headshot-article3By 2050, the world will con­sume 61 per­cent more energy than it does today. This should be good news, for, as access to reli­able, afford­able energy increases, so does the qual­ity of life for hun­dreds of mil­lions of peo­ple. Energy keeps schools and busi­nesses run­ning, com­put­ers work­ing, cities shin­ing, and cars mov­ing. With­out the avail­abil­ity of energy, the global poverty rate could not have dropped by more than half since 1990, allow­ing the oppor­tu­nity to improve lives across a wide sphere. And yet, in a skewed par­al­lel, 1.3 bil­lion peo­ple lack access to the most basic energy ser­vices and the eco­nomic, envi­ron­men­tal and health ben­e­fits they pro­vide. Fur­ther­more, many are at a dis­pro­por­tion­ate risk to the world’s most press­ing cli­mate change threats.1 For exam­ple, The Carteret Islanders of Papua New Guinea have become the world’s first entire com­mu­nity to be dis­placed by cli­mate change, recently pack­ing up their lives to move out of the way of ever-​​rising waters that threaten to over­take their homes, their crops, and their history.

Extend­ing Progress to the Devel­op­ing World

The devel­oped world has seen great progress in renew­able energy. Today, in the United States, vir­tu­ally all new addi­tions to power capac­ity come from sus­tain­able sources. How­ever, much of the future energy demand in the world will come from devel­op­ing coun­tries as they con­tinue to grow and add more cit­i­zens to the mid­dle class. This is per­haps one of the most dif­fi­cult chal­lenges that we face today. How can we ensure that the most threat­en­ing cli­mate change con­se­quences are avoided, but also ensure equi­table access to energy? The answer, of course, is renew­able energy, and the atten­dant elec­tri­fi­ca­tion of prod­ucts and ser­vices once ser­viced by fos­sil fuels.2

Afford­able and clean renew­able energy would help mil­lions of peo­ple escape poverty and become more self-​​sufficient. It would ease inter­na­tional ten­sions and increase global secu­rity by mak­ing more coun­tries less depen­dent on oil. It would unlock new eco­nomic oppor­tu­ni­ties in a grow­ing trillion-​​dollar indus­try. It would attract more for­eign invest­ment to the regions that need it most. It would lessen the prob­lems caused by the expen­sive and some­times dan­ger­ous work of extract­ing fos­sil fuels. It would reduce air pol­lu­tion, which kills mil­lions of peo­ple every year. And it would sta­bi­lize energy prices by elim­i­nat­ing the volatil­ity of nat­ural gas and oil, which will have an even big­ger impact on the global econ­omy as more peo­ple come to rely on energy in their daily lives.

The ques­tion that remains, how­ever, is how do we eco­nom­i­cally pro­vide clean energy to the bil­lions of those who need it? In 11 coun­tries, all in Africa, more than 90 per­cent of peo­ple go with­out elec­tric­ity. In six of these coun­tries, only three to five per­cent of peo­ple can read­ily obtain elec­tric power.3

For­tu­nately, there is good news. The price of solar pan­els has decreased dra­mat­i­cally in the last decade by 70 per­cent. Solar instal­la­tions have also grown expo­nen­tially, account­ing for more than one per­cent of global elec­tric­ity demand in 2015 and 22.5 per­cent of all new gen­er­a­tion sources in the same year. Advances in stor­age and soft­ware have allowed us to push the bound­aries on cre­at­ing a smarter and cleaner grid. From street­lights to kitchen-​​top appli­ances, more devices and ser­vices are being con­nected in pre­vi­ously unimag­in­able ways; allow­ing a more sophis­ti­cated and effi­cient approach to man­ag­ing demand and grid oper­a­tions. With the growth of renew­ables, — some 13 per­cent of elec­tric­ity con­sump­tion in the US in 20154, — and the increase in elec­tri­fied fleets of cars enter­ing the trans­porta­tion sec­tor, the tra­di­tional use and dis­tri­b­u­tion are chang­ing before our eyes. We are mov­ing from a cen­tral­ized energy sys­tem to one that inte­grates dis­trib­uted energy resources, cre­ative micro­grid solu­tions, and, soon, vehi­cle to grid energy flows. It is truly stag­ger­ing to see how much progress has been made in the energy indus­try in the last decade. Elec­tric vehi­cle growth presents one of the most robust sta­tis­tics in this regard, glob­ally, from below 30,000 in 2010, to 720,000 in 2015, to one mil­lion today.

The-Carteret-Islanders-of-Papua

The Leapfrog Effect

Unlike the United States, many devel­op­ing coun­tries do not have a cen­tral­ized energy infra­struc­ture. In sub-​​Saharan Africa alone, almost 600 mil­lion peo­ple lack access to elec­tric­ity and rely on burn­ing bio­mass and fos­sil fuels such as kerosene. Although this notion seems out­moded, it actu­ally presents a unique oppor­tu­nity. Due to the spe­cial eco­nomic and geo­graphic nature of many of these coun­tries, they have the abil­ity to com­pletely skip pri­mary depen­dency on the cen­tral­ized grid and instead develop stand-​​alone solar stor­age sys­tems and microgrids.

Exam­in­ing the African continent’s pro­gres­sion through phones today, we can see that Inter­net brows­ing via phones now stands at 40 per­cent across these mar­kets. We are at a piv­otal moment where a sim­i­lar explo­sion can occur in elec­tric­ity use. Increas­ingly, eco­nomic, tech­no­log­i­cal and finan­cial advance­ments pio­neered in the devel­oped world can be applied in the coun­tries that need them most in an effi­cient, local, and cost-​​effective man­ner.5

Although sig­nif­i­cant progress has been made in tech­nolo­gies such as wind, solar and elec­tric vehi­cles, the scale of the most press­ing cli­mate change chal­lenges requires the explo­ration of dif­fer­ent and inno­v­a­tive approaches. Tech moguls have risen to the chal­lenge. One of the most famous of these techno-​​philanthropists, Microsoft founder Bill Gates, with other tech­nol­ogy lead­ers, has founded the Break­through Energy Coali­tion6 which has com­mit­ted to dra­mat­i­cally scal­ing up the pub­lic research pipeline to develop the tech­nolo­gies that will make up the world’s new energy mix. Addi­tion­ally, Mis­sion Inno­va­tion7, which is an ini­tia­tive dri­ven by 18 coun­tries, aims to rein­vig­o­rate and accel­er­ate global clean energy inno­va­tion with the objec­tive to make clean energy widely afford­able on a global basis.

These tech­nol­ogy gurus are one path to a low-​​carbon future, but they are by no means the only one. Given the scale of this chal­lenge and the fact that we are run­ning out of time, lead­ers should be explor­ing all poten­tial avenues. Doing so is a job for both the pub­lic and pri­vate sec­tors. Part­ner­ships will be key here: gov­ern­ments play an indis­pens­able role in sup­port­ing energy research and early mar­ket devel­op­ment, help­ing pri­vate firms amass the fund­ing and related resources to scale a multi trillion-​​dollar market.

Entre­pre­neur­ship has also played and will con­tinue to play a crit­i­cal role, espe­cially in scal­ing inno­va­tions to cre­ate large mar­kets. Entre­pre­neur­ship helps to cat­alyze action today, while we still have time to turn back the clock on the adverse effects of cli­mate change.

Walk­ing the Walk… to Africa

As a Founder at DBL Part­ners, I have been involved with many com­pa­nies work­ing on promis­ing energy solu­tions. I only wish there were many more to choose from. Given the scope of this huge prob­lem, there should be hun­dreds if not thou­sands of com­pa­nies around the world explor­ing dif­fer­ent approaches. Here at DBL, we’re walk­ing the walk when it comes to step­ping up and doing more. After 10 years of impact invest­ing in the U.S., last year we took the plunge and made our first inter­na­tional invest­ment in a Tan­zan­ian com­pany called Off Grid Elec­tric (OGE)8. Hav­ing been at the fore­front of invest­ing in the Amer­i­can solar indus­try, DBL mit­i­gated the risks on this African Invest­ment by using lessons gained from over 15 years of expe­ri­ence in the space.

OGE is focused on pro­vid­ing clean solar-​​powered light, appli­ances and elec­tric­ity to the bot­tom of the pyra­mid and beyond. OGE has devel­oped a solar and stor­age sys­tem that takes advan­tage of the large pen­e­tra­tion of the mobile pay­ment mar­ket in Africa. Instead of pay­ing for an expen­sive sys­tem upfront with cash, cus­tomers are able to make pay­ments for light­ing and a series of follow-​​on appli­ances with their cell­phones to access the energy pro­duced by their pan­els over a time period that suits their cir­cum­stances. By gen­er­at­ing renew­able power from the sun, OGE’s sys­tems are help­ing intro­duce cleaner forms of energy into many house­holds. As pre­vi­ously men­tioned, many homes in Tan­za­nia are still reliant on burn­ing kerosene for light­ing. Accord­ing to the World Bank, this is equiv­a­lent to smok­ing almost two packs of cig­a­rettes a day. Replac­ing all kerosene lamps world­wide with solar lights would dra­mat­i­cally improve the health of many through­out the world and would be the equiv­a­lent to a five per­cent reduc­tion in the U.S’s annual car­bon emis­sions. OGE has already reached over 100,000 cus­tomers and hopes to pro­vide power to mil­lions through­out Africa over the next five to ten years. A fringe ben­e­fit of these sys­tems is that bet­ter light­ing will help build the ranks of Africa’s mid­dle class as dark­ness will no longer hold peo­ple back from pur­su­ing edu­ca­tion, entre­pre­neur­ship and at home-​​based employment.

The busi­ness model of OGE is designed in such a way that cus­tomers can main­tain cur­rent spend­ing on energy, but with cleaner and often times more pow­er­ful elec­tron­ics. Start­ing with sim­ple LED light­ing and phone charg­ers, OGE also offers upgrades to radios and TVs that can enable cus­tomers to have mod­ern devices at acces­si­ble prices. In many cases, in addi­tion to mod­ern­iz­ing home life, OGE is also help­ing cre­ate the advent of “solarpre­neurs” by enabling peo­ple to start phone charg­ing busi­nesses or other com­pa­nies with their new sys­tems. Once this hap­pens, regional invest­ment will increase, jobs will be cre­ated, and an entire con­ti­nent will light up not only with clean energy but also with a bur­geon­ing mid­dle class ready to put Africa on the 21st cen­tury map in a new, pow­er­ful way.

Going for­ward, we see a fan­tas­tic oppor­tu­nity to build on the work that OGE and oth­ers in the off-​​grid sec­tor are doing. Of course, unmis­tak­able chal­lenges exist and there is always the loom­ing threat of going back­ward to a cen­tral­ized fos­sil fuel dom­i­nated econ­omy rather than for­ward to a clean energy one. Yet, in 2016, we can­not and should not sit back and watch mas­sive income and energy inequal­ity per­sist as though we were still liv­ing in the 19th or 20th cen­tury. Dis­trib­uted renew­ables, invest­ments in stor­age and scal­able EVs offer a proven path toward a world with greater equal­ity. The whole world is watch­ing, and we don’t have time to wait. The time is now.

Arti­cle by Nancy E. Pfund, Founder and Man­ag­ing Part­ner of DBL Part­ners (www​.dblpart​ners​.vc), located in San Fran­cisco and Palo Alto. DBL Part­ners is a ven­ture cap­i­tal firm whose goal is to com­bine top-​​tier finan­cial returns with mean­ing­ful social, eco­nomic and envi­ron­men­tal returns in the regions and sec­tors in which it invests. As a lead­ing player in the grow­ing field of “impact invest­ing”, DBL has helped to reveal the power of ven­ture cap­i­tal to pro­mote social change and envi­ron­men­tal improve­ment, and Ms. Pfund writes and speaks fre­quently on the field of impact invest­ing. She spon­sors or sits on the board of direc­tors of sev­eral com­pa­nies, includ­ing; SolarCity (NASDAQ: SCTY) on both the audit and com­pen­sa­tion com­mit­tees, and is chair of the cor­po­rate gov­er­nance com­mit­tee; Farmer’s Busi­ness Net­work, Advanced Micro­grid Solu­tions, Off-​​Grid Elec­tric, Primus Power, The Muse, and, prior to their pub­lic offer­ings, Tesla Motors and Pandora.

Ms. Pfund was recently fea­tured in 2016 Fast Company’s 100 Most Cre­ative Peo­ple in Busi­ness list; fea­tured #17 in the 2014 FORTUNE Inau­gural World’s Top 25 Eco-​​Innovators; is Chair of the Advi­sory Coun­cil of the Bill Lane Cen­ter for the Amer­i­can West at Stan­ford Uni­ver­sity; a mem­ber of the Advi­sory Board of: the Lawrence Berke­ley National Lab­o­ra­tory (Berke­ley Lab); and the UC Davis Cen­ter for Energy Effi­ciency, and a Trustee of the National Geo­graphic Soci­ety. She has been a Lec­turer in Man­age­ment at the Stan­ford Grad­u­ate School of Busi­ness and the Yale School of Man­age­ment; and is a C3E Ambas­sador to the U.S. Clean Energy Edu­ca­tion and Empow­er­ment Pro­gram, led by the U.S. Depart­ment of Energy. She is also a found­ing offi­cer and direc­tor of ABC2, a foun­da­tion aimed at accel­er­at­ing a cure for brain can­cer. Ms. Pfund received her BA and MA in anthro­pol­ogy from Stan­ford Uni­ver­sity, and her MBA from the Yale School of Management.

* The author would like to thanks DBL’s Sum­mer Asso­ciate, Anjuli Koshal, for her assis­tance in writ­ing this article.

Arti­cle Notes:

1 – World Energy Sce­nar­ios, Com­pos­ing Energy Futures to 2050 –https://​www​.worlden​ergy​.org/​w​p​-​c​o​n​t​e​n​t​/​u​p​l​o​a​d​s​/​2​0​1​3​/​0​9​/​W​o​r​l​d​-​E​n​e​r​g​y​-​S​c​e​n​a​r​i​o​s​_​C​o​m​p​o​s​i​n​g​-​e​n​e​r​g​y​-​f​u​t​u​r​e​s​-​t​o​-​2​0​5​0​_​F​u​l​l​-​r​e​p​o​r​t​.​pdf

2 – Short Term Energy Out­look – https://​www​.eia​.gov/​f​o​r​e​c​a​s​t​s​/​s​t​e​o​/​r​e​p​o​r​t​/​r​e​n​e​w​_​c​o​2​.​cfm

3 – One-​​Quarter of World’s Pop­u­la­tion Lacks Elec­tric­ity –http://​www​.sci​en​tifi​camer​i​can​.com/​a​r​t​i​c​l​e​/​e​l​e​c​t​r​i​c​i​t​y​-​g​a​p​-​d​e​v​e​l​o​p​i​n​g​-​c​o​u​n​t​r​i​e​s​-​e​n​e​r​g​y​-​w​o​o​d​-​c​h​a​r​c​o​al/

4 – Elec­tric Power Monthly – http://​www​.eia​.gov/​e​l​e​c​t​r​i​c​i​t​y​/​m​o​n​t​h​l​y​/​p​d​f​/​e​p​m​.​pdf

5 – Study Reveals African Mobile Phone Usage Stats –http://​www​.itnewsafrica​.com/​2​0​1​5​/​0​4​/​s​t​u​d​y​-​r​e​v​e​a​l​s​-​a​f​r​i​c​a​n​-​m​o​b​i​l​e​-​p​h​o​n​e​-​u​s​a​g​e​-​s​t​a​ts/

6– Break­through Energy Coali­tion –http://​www​.break​through​en​er​gy​coali​tion​.com/​e​n​/​i​n​d​e​x​.​h​tml

7 – Mis­sion Inno­va­tion – http://​mis​sion​-inno​va​tion​.net

8 – Off Grid Elec­tric – http://​off​grid​-elec​tric​.com