Energy as a Service — Energy Poverty
The presence of electricity is usually taken for granted in the modern world. Most of the work that we do requires electricity to some extent, and the lack of it would see these grind to a halt. Yet, more than 10% of the world’s population lacks access to energy, and more only have partial access to it and thus experience some form of energy poverty.
While there is no set standard for energy poverty, the International Energy Agency defines energy access as “a household having reliable and affordable access to both clean cooking facilities and to electricity, which is enough to supply a basic bundle of energy services initially, and then an increasing level of electricity over time to reach the regional average”. Globally, more than a billion people lack access to electricity, with the majority of them in Africa. Though progress has been made, energy poverty is still widespread and innovative approaches are needed to tackle it. And Energy as a Service (EaaS) provides one way to solve it.
In the modern world, want for electricity results in a lack of access to other opportunities. Longer working hours, increased productivity, easier household work, greater access to education, better healthcare delivery, provision of communication facilities, and access to recreational activities are just some of the things that people lose out on when they lack access to electricity. Throughout the 20th and 21st centuries, access to electricity has been one of the revolutionary developments that have transformed life for humanity. And to ensure that the benefits of this reach everyone, energy poverty must be addressed.
There are two related but distinct reasons that contribute to the lack of energy access, and there need to be solutions built accordingly to tackle the issue. The first is the lack of grid access and hence the lack of provision of electricity. This means that, while people might be able and willing to pay for the facility, it is still unavailable to them on account of circumstances beyond their control.
The second is that of people being unable to afford electricity or the appliances that depend on it. While there are affordable ones for lighting, those for heating, cooling, and many other uses are still expensive and require significant investments.
(Source: International Energy Agency, World Energy Outlook 2021)
Though grid infrastructure has been improving across the world, there still exist millions of people who live outside it because of several reasons. The terrain might be such that it is difficult to extend the grid to the area. It could be that there are too few people living in the area, so extending the grid for a small group of people makes it an expensive proposition. Or it could simply be the case that the energy utility does not have the resources to make significant investments, such as extending the power grid.
In a world with a centralized energy network, there was little that could have been done to provide electricity to people outside the grid other than to supply fossil fuels such as diesel for power generation. And these involved transportation costs that added to operational expenses. And if they did not have access to even this, they had to obtain energy through the burning of firewood or biomass which is an inefficient process and also adversely impacted people’s health.
One way to provide power to people living outside the grid is through microgrids. These are a smaller version of the power grid, generating energy and supplying them within a small area. If the energy generated for this is through renewable sources such as solar or wind, it makes the grid emissions-free while also providing electricity to people. With a sufficient number of solar panels, these can power homes and take care of lighting, cooking, cooling, and heating while also powering transport and community buildings.
These can also be used for commercial and agricultural purposes such as pumping water. Solar pumps as a standalone system have seen great reception in countries such as India and Bangladesh, where they serve the purposes of reducing the burden of free electricity (where the grid exists) for the state, and lowering diesel costs of the farmer (where there is no grid access and pumps are powered by diesel motors). According to a report in PV Magazine, a farmer in Bangladesh pays Tk 3,000–4,000 for irrigating a bigha of land using diesel pumps, whereas the cost for a solar pump is Tk 2,000–2,800. The presence of solar pumps thus improves the lives of farmers while resulting in fuel savings for the government and avoiding carbon emissions.
While microgrids are not a novel concept, the fall in prices of solar panels in the last decade has made them more accessible to people. However, it is not easy to invest in the entire setup upfront as these are still significant investments. Through the EaaS model, the payment for the system can be made over a period upon which ownership is transferred or the existing arrangement continues to be as it is.
While millions of people live outside the electric grid and are thus unable to use electricity, many are within the grid and still face energy poverty. Various factors have led to energy poverty rising in urban areas — the rapid growth of cities has meant that the grid has not kept pace with the rise in population, requirement of documentation that may not be available with people from poorer economic backgrounds, and a process that takes time to install and wind up which makes it cumbersome when people tend to shift frequently. All these mean that urban centers have a growing number of people who need access to power without the traditional processes and risks involved.
Similar to microgrid networks, EaaS models can help people in urban areas access basic provisions. Such a setup allows for them to only pay for the kind of services they need, such as solar power on rooftops that power a limited number of devices, and renting the required appliances when they need them. While there are financial risks associated with this, addressing energy poverty for the urban poor is a growing challenge, and EaaS offers a solution to this.
(Source: Wood Mackenzie Power & Renewables Global Off-Grid Renewables Investment Data Hub)
The lack of energy access impacts a sizeable portion of the global population, and challenges to access are only set to grow in the coming decades. Amidst other available solutions, EaaS offers a model that makes it a compelling option to address current inequalities as well as future challenges.