The Challenge – Why Market Readiness?

REEEP’s approach to market transformation is informed by our 15 years of experience working at the intersection of climate change mitigation, adaptation, and poverty reduction.

Mr Seng Sokhom inspects his longan orchard in Battambang Province, Cambodia, which is irrigated by a solar pumping system purchased with an affordable loan from the Clean Energy Revolving Fund (CERF).

REEEP’s mission and activities are framed by the 2015 Paris Agreement on Climate Change and the United Nations 2030 Agenda for Sustainable Development. Under the Paris Agreement and the Sustainable Development Goals, the world needs to reduce greenhouse gas (GHG) emissions quickly and steeply to avoid the worst impacts of climate change. At the same time, we need to “end poverty in all its forms everywhere”, “achieve food security” and “ensure access to affordable, reliable, sustainable and modern energy for all” by 2030, or in just twelve years. These and the other SDGs are only compatible with climate change mitigation if that mitigation is designed to benefit the most vulnerable populations. At REEEP, we know that when it is done right, climate change mitigation can offer new economic opportunities and enhance the resilience of those vulnerable populations.

Energy access is widely recognised as one of the main conditions for prosperity growth. One billion people worldwide still lack access to electricity, and for household uses such as lighting and cooking have to resort to using kerosene lamps and firewood. Kerosene fumes and wood smoke can cause severe health problems, especially indoors, and collecting firewood can take hours every day. These traditional fuels also pose a fire risk and cause significant GHG emissions, as well as damage to the environment through local pollution and deforestation.

Clean energy solutions have great potential to provide electricity to those without. Basic solar home systems can provide clean, safe lighting and phone charging, and upgraded versions can power radio’s, televisions, refrigerators and even larger equipment for productive use. Mini-grids, powered by solar photovoltaics, hydro or biogas installations, can provide a level of service similar to the central grid, including for businesses.

The benefits of expanding energy access with decentralised clean energy solutions rather than by expanding the central grid are manifold. Firstly, clean energy mini-grids are much faster to deploy and much less expensive per connection than grid expansion projects – especially since in most countries the areas that remain off-grid are remote and sparsely populated. Furthermore, in many low- and middle-income countries, clean energy installations are many times more reliable than the central grid, and, as small, independent systems with limited transmission infrastructure, mini-grids also have proven to be more resilient to storms and other extreme weather events. Finally, solar and hydro installations provide free energy without requiring any inputs after the initial capital investment, and of course clean energy mini-grids do not generate any GHG emissions.

Despite the benefits of clean energy mini-grids, most governments still view central grid expansion as the default option for providing energy access to off-grid communities. Clean energy solutions are mostly provided by private sector companies. In so-called ‘frontier markets’, where viable business models for clean energy services do not yet exist, market intelligence is scarce and investors have yet to be convinced of the economic potential of clean energy, clean energy solutions may not be available at all.

It is in these frontier markets that REEEP has chosen to focus its operations, to demonstrate the social, environmental and economic benefits of clean energy and energy efficiency solutions to customers, businesses, financiers and the government, and work with all of those stakeholders to build strong, dynamic and sustainable clean energy markets.

We also work in frontier markets for energy efficiency solutions. Though it is often neglected in favour of more ‘glamorous’ clean energy interventions, energy efficiency is increasingly recognised as the equivalent of a cheap resource, which is available in untapped abundance in many industrial installations.

This is the case, for example, in small and medium-sized enterprises operating in textiles, food, mining, and many other sectors, and in largescale infrastructure, for instance in wastewater treatment facilities. However, even in cases where tested energy efficiency solutions exist and could generate large energy and cost savings, many businesses and other operators have difficulty determining the appropriate solution for their situation, and viable models for raising the required upfront investment are missing. By providing capacity building and facilitating engagement with private sector businesses in the energy efficiency space, financiers and regulatory authorities, REEEP helps these businesses and other operators tap into this underutilised resource.