Looking for social innovations enabling access to efficient energy
A collaboration between Advise for Change and the Rexel Foundation
leader in the professional distribution of electrical products and services for
the energy world, operates in 38 countries for a turnover above €13 billions.
Rexel launched in June 2013 the Rexel foundation for a better energy future.
Created under the aegis of the Foundation of France, the Rexel foundation´s
mission is to improve access to energy efficiency for all and is based on three
key pillars: improve understanding and raise awareness of energy efficiency,
encourage innovation through research programs and educational projects, and
support charitable community-based projects.
Advise for Change conducted a study on behalf of the Rexel Foundation to develop knowledge on innovative solutions providing an access to efficient energy in developing countries. From January to June 2015, Romain Joly and Amandine de Montvalon interviewed more than 40 actors across 7 South East Asian countries to collect insights and feedbacks from social entrepreneurs, NGOs, large corporations, public agencies etc...
The study aims to:
- Get a better understanding of local ecosystems on access to energy;
- Identify actors that are developing innovative solutions in this field;
- Determine the main barriers to growth faced by these projects.
The outcome of this study are:
- On the one hand, raise these projects’ visibility and share insights on their needs to scale up thanks to large dissemination
- On the other hand, the Rexel Foundation may support some of the identified projects through skills-based volunteer work and funding.
Throughout the year, Advise
for Change’s team interviewed the following actors supporting or developing
social innovations enabling access to efficient energy:
- International, regional and local public agencies;
- Entrepreneurs networks;
- Foundations supporting social innovation;
- NGOs supporting;
- Social entrepreneurs;
- And any other actors relevant to better understand the issue.
HOW CAN THE PRIVATE SECTOR PLAY AN EFFICIENT ROLE IN ACCESS TO ENERGY IN SOUTHEAST ASIA?
During the last 7 months, Advise for Change’s team has explored 7 Southeast Asian countries and conducted 40 interviews with development agencies, NGOs, startups, multinational companies, social enterprises and impact investors to collect pieces of answer to this question.
What is the situation of access to energy in Southeast Asia?
There is no consensus on a general definition of access to energy. However, all definitions include two key dimensions: 1. Access to reliable electricity and 2. Access to clean and safe means of cooking. These two needs sum up what energy access is – at least for households. On the one hand, the situation on access to electricity in Southeast Asia is very heterogeneous.
We can divide the 7 countries visited into 3 categories:
• the electrified countries – Thailand, Vietnam and Singapore - in which most of houses are connected to the grid and where the emerging challenge is energy efficiency;
• the archipelagos - Indonesia and the Philippines - where a large majority of the population has access to electricity but connecting the last part of the population is very challenging because of the difficulty to reach rural areas on distant islands;
• the countries lagging behind – Myanmar and Cambodia – where a most of the population is still not connected to the grid and using kerosene or car batteries to meet their needs in electricity.
On the second hand, the situation on access to safe means of cooking is quite homogeneous across Southeast Asia. A large majority of people still cook with biomass stoves using wood and charcoal whatever their level of revenues. Changing this habit, which has dramatic impacts on the health and on deforestation, is as much a social challenge as an economic one.
Who are the key actors in access to energy in Southeast Asia?
Access to electricity is highly correlated to the quality of public infrastructures and State’s efficiency. Today’s
high electrification rates in Vietnam and Thailand are the result of the will and efforts of their respective public
authorities to develop the national infrastructures (production and distribution). In Indonesia where the State
is very present with high energy subsidies, there is an extended grid but it does not provide enough power to
meet the demand and it does not reach the most remote areas. Political instability and weak public finances
prevent Myanmar and Cambodia to invest in a reliable electric network. These countries receive support from
multilateral public agencies such as the World Bank to build their infrastructures but the needed investments
are so important and the implementation of these projects so complex that it will still take more than 20 years
to bring electricity to everyone across these countries.
This is why private actors such as large corporations, social entrepreneurs or NGOs are playing a critical role.
They provide alternative solutions to bring access to electricity on the ground to those who do not hope to be
These solutions can be classified in 4 main categories:
1. Off-grid projects: providing small devices like solar lamps to remote communities with no grid access.
2. Mini-grid projects: providing home-based devices like solar systems to one or several household.
3. Community grid projects: create a local grid operated and maintained by the community itself.
4. Clean and safe means of cooking: providing improved cook stoves.
None of the actors interviewed operates a 100% for-profit and poor people-oriented project. Most of them are
operating under hybrid business models with a mix of for-profit and philanthropy. They all highlighted that the
most difficult part of their job is to build the market. Different sources across the 7 countries pointed out
programs – both public and private - which are giving away devices for free and are very seriously disrupting
the market. These programs can result from a political campaign of the local Government just before elections
or result from a CSR program form a multinational company. They of course don’t include customer services
such as maintenance and the broken solar panels would soon be abandoned, undermining the trust of people
in these alternative solutions as well as the value of these solutions.
What are the key success factors for private actors willing to play a role in access to energy in Southeast Asia?
Private actors can therefore have a great role in access to energy in emerging countries if they are willing to play with local markets’ rules.
Here is the list of 5 key success factors most private actors underlined:
- Start by listening to the market to be able to define the right offer to the right target: importing a breakthrough but very expensive cook stove in Myanmar won’t work. Why? Because people don’t feel they need to invest in a very innovative product when their families have being using a traditional stove with much success for decades. Introducing on the market a product or service that “we think poor people need” is never a good start. Listening to the communities to understand what they “want” is much more efficient. Once the target’s needs and aspirations have been identified, the second challenge is to find the right answer. Households of a rural village without electricity don’t necessarily want solar lamps. They might be more interested in solar home systems that could enable them to access new devices such as TV. Last but not least entrepreneurs need to consider poor people as customers like any other and design inspirational marketing campaigns rather than educational ones.
- Develop an efficient distribution network by empowering existing actors: building a network in rural areas is very expensive and difficult. The most successful projects are thus those relying on existing distribution channels and upgrading them. This means identifying the more relevant existing local actors, agree on a deal with them so that they feel responsible for the success of the program and train them (accounting, sales...). Kopernik, a social enterprise based in Bali distributes innovative technologies (solar lights, cook stoves, water filter) at affordable price through the existing local network of small shops in rural Eastern Indonesian islands. They provide trainings and support to their “agents” so that they are better salespersons and they are able to manage the after-sale services (guidance and maintenance). Another great example is Geres, a NGO which supports the production and sales of efficient cook stoves in Cambodia. They first trained existing cook stoves producers on the production of improved stoves and then consolidated this community and connected them with distributors and retailers to support market access for their products.
- Ensure legitimacy and support across the community: introducing a new service or product in a local community can challenge some existing habits or actors. Beyond the needs assessment it is critical to understand the context and to make sure that the key decision makers of the community support the project. The Indonesian social enterprise IBEKA works in partnership with communities to develop offgrid hydro schemes that are operated by the communities themselves (public ones are often abandoned because of the lack of funds to maintain them). IBEKA pointed out that the longer phase of the project is the assessment and consensus building phase, to make sure that the majority of the community is in favour of such a project as well as the local chief before starting any investment.
- Anticipate what will happen next: the introduction of a service or a product is not a goal in itself. The impact of the use of this service or product is. It is thus critical to ensure that the customer has access to after sale services such as guidance or maintenance in order to take the best out of his/her investment in this product or service. Bad buzz can go much faster than good buzz, especially in remote communities!
- Keep testing the business model: most private companies and social entrepreneurs dealing with BOP markets do not manage to reach profitability in the short-run. The time to build the ecosystem and set-up a stepping stone for operating profitable activities is long and costly. Keeping the business model flexible with mixed streams revenues is important to find an economic balance (donations, premium for-profit services...). As stated by the founder of One Renewable Energy Entreprise, a social business specialized in solar in the Philippines: “we use the commercial branch of our activities to ;support the social one. We soon discovered that this cross-subsidy model is necessary in our field of activities if we want to operate independently.”
Access to energy in rural Cambodia: Banteay Chmar case study
Short video on what access to energy concretely means in a remote rural village of Cambodia, based on our 2 months experience and observations living with a family in Banteay Chmar, during one of our pro-bono mission.