Harnessing finance for a new era of decentralised electricity access: A review of private investment patterns and emerging business models

Falchetta, G. ORCID: https://orcid.org/0000-0003-2607-2195, Michoud, B., Hafner, M., & Rother, M. (2022). Harnessing finance for a new era of decentralised electricity access: A review of private investment patterns and emerging business models. Energy Research & Social Science 90 e102587. 10.1016/j.erss.2022.102587.

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Abstract

Achieving the Sustainable Development Goals (SDGs) requires ensuring universal energy access. Yet, governments of low-income countries face significant budget constraints for the capital-intensive infrastructure required to reach the hundreds of millions of households and businesses without grid electricity. In this context, private investors are the key actors capable of channelling such large capital requirements. Compared to the previous decades, the 2010s witnessed a growing mobilization of private funding in the off-grid electricity access sector, including some success stories. Nonetheless, with less than ten years left until the SDGs horizon, off-grid companies systematically struggle to ensure the financial sustainability of projects, as the industry still seeks to demonstrate its maturity and profitability. In this paper, we critically review the main business approaches adopted by private decentralised electricity access service providers. The aim of the analysis is to identify the main drivers of risk and failure which have been hindering sectoral investment. We then propose and discuss four potential game-changing factors that could foster the next generation of private investment in decentralised electricity solutions: (i) anchor-businesses-community (ABC) models; (ii) the design of integrated business models centred around income generation; (iii) the growing role for “local” financiers; (iv) the securitization of assets. Our paper targets private infrastructure developers and financiers aiming at fostering investment in financially sustainable decentralised electricity access projects.

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