CROWDFUNDING: NEW KID ON THE POWER BLOCK?
Looking at the multitude of challenges faced by emerging and disrupted markets before they can access the world of online technology, renewable energy solutions sounds like the proverbial manna from heaven. Access to electricity and internet connection is surely compulsory to participate in the world economy today. The scorching Middle East and African region, where most economies are in dire need of improved electricity and internet access, whilst having an excess of wind and sun, can especially benefit from this.
Harnessing simple renewable solutions could be the answer to problems such as lack of infrastructure, roads, technical support skills and power project funding which can take decades to realise in some areas.
The seemingly simple concept behind solar, wind and hydro power can surely bring quick and inexpensive access to electricity and therefore connect rural schools and businesses to the rest of the world? While the short answer is yes, like most seemingly simple solutions in emerging economies, we know the reality is far more complex;
Firstly, governments need to have the political will to enable these solutions. Power has long been an important economic leverage for governments. If you control energy, you have power (pun intended). After not being able to keep up with the huge energy demand in oil-rich Nigeria, (the biggest economy in Africa), government made the decision to completely outsource power generation in the country. Further south, the embattled Eskom, government-owned power utility in the second biggest economy in Africa, South Africa seems to have, as some may argue, regressed into a power hungry entity blind to its own short comings. For the last few years, renewable power projects have been placed on hold in the country while the South African people and economy swung like a pendulum between blackouts and excess power, falling victim to extreme price hikes and corruption. Some stability and even progress appears to be on the horizon with new President Cyril Ramaphosa recently signing off on long pending renewable agreements and initiating a re-structure of the embattled organisation.
Secondly, without funding, these projects are dead on the ground. In emerging economies, money for energy projects is often not available to individuals and small businesses, especially not in rural areas. If the project is too small; there simply is not enough money in it for big businesses to get involved. At the same time, electricity is a long term investment and even if a small business or community is able to ‘sell power back into the grid’, it can take forever (10-20 years) to realise a worthy return on investment.
Enters the new kid on the block; Crowdfunding. And it appears to quickly make friends in interesting places like NGO’s (such as UK AID). And likes hanging out in communities. Could this be the answer to bringing power to the people in a simple, quick and seemingly cost effective manner? And all of this with being environmentally friendly to boot? While little case studies have been done thus far on crowdfunding for energy, we do have examples in community shared renewable projects, for example projects by Som Energia in Spain. It is said that the Energy Co-op has raised over 2 Mil Euro for energy projects in recent years with no government assistance. Through Crowd Power, UK AID has already raised 3.4 mil GBP and supported 106 energy campaigns.
For such a crowdfunding project to work we need three participants: 1. A group of individual crowdfunders, 2. the owner of a solar farm OR community who initiates the crowdfunding and 3. an electricity company or utility who purchases green energy from the farm through a wholesale contract.
Firstly, the electricity company makes a wholesale price. The solar farm will then, according to this price, choose the investment level and mechanism to raise funds from the group. Each ‘crowdfunder’ will then make his or her own decision on how much to invest. It is clear that the investment decisions of the three participants are inter-dependent. According to its website, UK AID is currently implementing a pilot programme that tests whether grants by public agencies can accelerate the impact of crowdfunding platforms on energy access.
I read that the European federation of renewable energy cooperatives (REScoop.eu) figures predict that over 264 million European citizens could produce their own energy in 2050, meeting 45% of Europe’s electricity demand. May this also be true for emerging markets in the Middle East and Africa one day….Power to the people, indeed!