The nascent industry fears being starved of new capital as investors shun risk amid an expected recession – a crunch that could force weak firms out of business and scupper progress on a global goal to provide modern energy to everyone by 2030
BARCELONA (Thomson Foundation): Companies that provide clean off-grid electricity to the poor in developing nations are searching for ways to stay afloat – and keep life-saving power on – through the coronavirus pandemic, as the economic fallout from the crisis empties customers’ pockets.
The nascent industry fears being starved of new capital as investors shun risk amid an expected recession – a crunch that could force weak firms out of business and scupper progress on a global goal to provide modern energy to everyone by 2030.
In a survey by international organisation Sustainable Energy for All (SEforALL), 80 businesses running mini-grids and selling solar home systems in Africa and Asia said they expected to lose on average 27 per cent-40 per cent of their revenues in the coming months due to COVID-19 impacts.
“We could be in the situation in six months’ time where we have no off-grid companies to be talking about,” said SEforALL CEO Damilola Ogunbiyi.
“We cannot start from ground zero again… we cannot let that happen,” she told the Thomson Reuters Foundation.
Many such companies, operating in Africa and Asia, rely on small daily or weekly payments from poor consumers who use mobile money on their phones to buy solar power from mini-grids or cover instalments on loans for home solar systems.
But economists are warning that shutdowns to limit the spread of the novel coronavirus pose a major threat to the livelihoods of street vendors, farm labourers, construction workers and others with insecure employment.
Job losses could put regular payments for electricity or cooking gas out of reach, said Mansoor Hamayun, CEO of BBOXX, which provides solar power to more than 1 million people.
“We don’t want to switch off customers that suddenly have a week or one month of lack of income,” said Hamayun, whose business operates off-grid solar systems in 12 countries, including Kenya, Rwanda, the Democratic Republic of Congo and Togo.
Company officials are now thinking through ways to help provide clients with electricity to meet their basic needs, such as offering five hours per day free and charging only for use on top of that.
For now, of the places it operates, only Rwanda has imposed a strict lockdown. BBOXX is running some of its call centres remotely but it will be unable to ramp up a new gas-based clean cooking service in Kigali this year as planned, Hamayun said.
The firm has not yet had to lay off staff based in Africa, he added, but cuts at its UK headquarters were unavoidable as new product development and innovation were put on hold.
As a relatively large player in an emerging sector, BBOXX is well-capitalised, Hamayun said, but it would need to spend quite a bit of that money on running its operations instead of growing, as raising cash from new sources was impossible in today’s market.
The SEforALL survey found cash positions were tight across the industry, with about 70 per cent of off-grid companies having only enough available to cover operating expenses for two months or less.
“If the money environment doesn’t loosen up… unfortunately I think the progress the sector has made in the last year or two or three could be wiped out really quickly,” said Hamayun.
Companies that sell solar home systems and operate small-scale grids are seen as vital in getting electricity to the 840 million people still living without it, the vast majority in rural parts of sub-Saharan Africa and South Asia.
COVID-19 OR HUNGER?
Ogunbiyi, also a special representative of the U.N. secretary-general, said lockdowns to curb the spread of the new coronavirus have “really shown us what happens when we don’t have electricity”.
In Nigeria, her own country, there are about 100 million people who would struggle to comply with restrictions on movement because they have no electric power, meaning they cannot store food in fridges and must shop frequently.
“If they stay at home, they will starve and they will die,” she said, warning the COVID-19 pandemic could lead to another crisis in some poor countries: hunger.
Since the outbreak began hitting Africa, Ogunbiyi has been giving governments practical advice such as not hiking the price of cooking gas and ensuring off-grid power firms are classed as essential services so they can send out their technicians.
“There are so many things we can be doing to help make sure people’s lights don’t get turned off,” she said in a video interview from London.
In some developing countries, governments appear to have grasped the importance of making sure people have the energy required for their basic needs.
India’s government said it will give away millions of cylinders of cooking gas to those in need, while in Ghana, a state COVID-19 relief package subsidises electricity for three months, fully covering costs for the poorest consumers, according to the Clean Cooking Alliance.
Meanwhile, backers of the global push to provide universal access to clean power and cooking are putting their heads together to devise ways to keep companies in business as sources of funding dry up.
“Crisis financing” ideas range from foundations postponing loan repayments for several months, to development banks giving promised grants upfront, as well as donor governments providing aid as digital cash with which consumers can buy electricity.
Efforts are also underway to push renewable energy as part of both the response to, and recovery from, the coronavirus pandemic.
The International Renewable Energy Agency and African Union Commission agreed last week to cooperate on projects such as helping rural health centres and communities deal with COVID-19 by using renewable power to run critical services.
Those include operating medical equipment and pumping water for better hygiene.
Achim Steiner, head of the United Nations Development Programme, said there would be an opportunity in the next five years for huge investment in building clean energy infrastructure in Africa, where nearly 600 million people still lack electricity.
Such investment, while helping meet goals to tackle climate change, would also have “massive positive impacts for rural areas, poorer segments in society and actually will provide Africa with something that it urgently needs to accelerate its economic recovery (after COVID-19) – which is power”, he said.