Sarah Chapman, 31st March 2017
On Monday 27th March I spoke at the International Energy Agency’s High-level Workshop on Energy and Development, providing Faro Energy’s views on “Mapping a pathway to sustainable modern energy for a prosperous, productive economy”. The following post is a summary of my presentation and my thoughts following the roundtable discussion.
Access to reliable, high quality energy at affordable prices is essential for economic growth and prosperity, at every level from households to businesses to nations. The link between rural electrification programmes and economic growth has been proven time and time again, as countries around the world have implemented such programmes – from China to Brazil to Ghana.
Fortunately for the countries that Faro works in, electrification rates are high, nearly 100% in most places. However, this often masks a deficit in energy quality and reliability, which requires many of our customers to rely on expensive and dirty diesel generation as backup. At the same time, our customers’ bottom lines are highly exposed to energy price rises. For some of our customers, energy costs can be as much as 40% of net profit. When prices rise (and price rises of 7% in Brazil were announced recently), profitability is hit. Rooftop solar allows customers to save money from day one, improve energy quality and hedge against rising prices. Greater and more predictable profits can be reinvested in the business, driving growth for the business and creating jobs.
At the same time, the distributed solar industry creates highly skilled jobs in engineering, construction, operations and maintenance, finance and other ancillary services. For example, around 27 people are currently employed constructing Faro’s 640kW project in Rio, and around 30% of capital invested goes directly into the local economy.
Once we get outside cities, and into remoter areas with poorer quality energy services, we believe that distributed solar has the power for transformational change for our clients and their communities. Our Colombia team recently visited a rural department which, while connected to the grid, imports all its energy from outside, and therefore suffers from high prices and frequent blackouts and brownouts. Despite rich agricultural resources, the lack of reliable power means produce is all exported for processing. High quality affordable power would enable farms and other agribusinesses to develop processing facilities and all sorts of other ancillary services locally – which would have a huge impact on the local economy. Solar can’t solve this problem on its own, but combined with energy storage it can – and the good news is that storage is rapidly becoming cheap enough that this makes sense.
Much of the discussion at the workshop focused on policy solutions to drive energy access at the most basic level – bringing electricity to off-grid communities for the first time. Micro scale household solar is transforming what is possible in this sector, mainly in Africa, where it is replacing kerosene lighting and firewood. Governments in countries with large off-grid populations are rightly focusing their investment and policy in this area – these new technologies have huge, cross cutting development benefits and is having immediate and far-reaching impact. However, we should not stop at this. Micro household solar are both far more expensive and far more limited in provision than bigger scale modern energy solutions, and there seems to be some concern in affected communities that this could be used as an excuse for not providing “proper grid connections”.
We should aim higher, and be aiming to provide a truly modern level of energy for people and businesses everywhere. For real prosperity, energy access, quality and price need to stop being barriers to investment in agriculture, industry and infrastructure wherever there is opportunity.