With negotiators gathering in Paris Climate Summit this week, talks will likely be ruled by the need for mega projects of scale to help stem the rise in global temperatures linked to our deep addiction to fossil fuels. Though there is no doubt that developed economies such as Europe will need large offshore wind farms in the North Sea and equally massive solar farms in North Africa to reach existing targets, a much more interesting question is this: How can the developing world contribute, given the fiscal challenges facing the bottom of the pyramid populations?
A quick answer: Through a major scaling up of both remote microgrids and nanogrids.
In a forthcoming report, Navigant Research forecasts the size for both of these off-grid networking platforms designed to increase renewable energy content for off-grid power. Ironically enough, it is here, in the deep jungles near the Equator or the frozen tundra of Siberia, where renewable energy resources such as solar and wind actually reduce energy costs.
It is estimated that over one-fifth of humankind lacks modern energy services. According to the United Nations, more than 95% of these potential customers live in Sub-Saharan Africa and Southeast Asia, with 78% residing in rural areas. While the cost of providing universal access to the electricity grid and decentralized electrification systems would be in the tens of billions of dollars annually, these costs also represent potential revenue to vendors of microgrid/nanogrid components such as distributed generation, energy storage, smart inverters, and smart meters.
The International Energy Agency (IEA) estimates that by 2020, developing countries will need to double their electrical power output. Demand for energy, especially electricity, is growing much more rapidly in these nascent economies than the rate of expansion of conventional electricity grids in the major industrialized world. All told, the developing nations are expected to represent 80% of total growth in energy production/consumption by the year 2035, according to IEA’s World Energy Outlook. Given the current economic conditions, one could safely assume that the majority of these new power supplies will be produced and distributed via remote microgrids, nanogrids, and other related forms of distributed energy resources rather than traditional hub-and-spoke centralized transmission grid infrastructure. This distributed approach is less risky and incremental, and syncs up with available trends in finance and business models related to power distribution in emerging economies.
Just how much investment is needed to bring clean energy to the world’s poorest of the poor?
The African Development Bank, for example, aims to mobilize $55 billion in private funding under a New Deal on Energy for Africa program also designed to eliminate Africa’s energy deficit by 2025. Yet this number could underestimate the opportunity just for one continent, since it is based on providing minimal power for things like cell phones, LED lights, and laptops. Experience shows that once electricity is brought to a village, desire rapidly increases for more power.
In Africa alone, Navigant Research forecasts spending will reach more than $8 billion on remote nanogrids for village electrification by 2024. Ironically, it is these smaller systems that are expected to lead the market in Africa, rather than microgrids, due to their simplicity. They translate into not only big business, but a key tool to slow climate change in parts of the world that historically have not been considered major hotbeds for innovation. If we are to succeed in harnessing the power of new technology to slow climate change, I would argue it is in the developing world where that battle will be won—or lost.