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​er​gy​.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