Virtual Policy Dialogue on Decentralised Energy Solutions in post-COVID Recovery Plans

The GRC held its first virtual policy dialogue of 2021 in late February. The dialogue focused on the role of decentralised renewable energy in COVID recovery plans. Legislators and experts from around the world gathered to discuss the challenges imposed by the pandemic and ways to build back better.

Challenges for a green recovery

Catherine Adelmann, founder and CEO of Fosera and member of the GRC Advisory Board, shared evidence of recent studies showing that the off-grid solar market in most of the world has seen a at least a 25% drop in sales in the first quarter of 2020 – with South Asian (-57%) and East Asian (-49%) markets being hit hardest.[1] The pandemic took a particularly heavy toll on small, local enterprises, due to their limited access to financial resources and lack of proper reserves. The economic volatility induced by COVID19 lead to more risk-averse investment behaviour and a significant drop in equity financing. Yet, interest rates for microloans remained high – making it far more difficult for low-income customers to afford solar-powered lanterns or solar home systems.[2] This situation is further concentrating power in a few well-established businesses. Around 75% of all invested capital from January to August 31st 2020 concentrated on only three major companies.[3] Besides being considered an “essential service” in some countries, thus being able to operate during the lock-down, the off-grid solar sector has been given little or no attention in recovery planning on local and government level so far. Although the demand for solar home products is strongly increasing, enabling frameworks and support from governments as well as sufficient financial resources are still often lacking.

Decentralised energy in COVID19 Recovery Plans

Various policy briefs, published by the Global Renewables Congress, however, show examples of how countries in Europe and Asia are trying to promote decentralised energy solutions. These may hint at a larger shift towards renewables which, in the face of the crisis, have proven less vulnerable to supply chain disruptions and price volatility. One of the reasons being that the recovery plans analysed were designed at a time in which the cost of solar and wind power has dropped significantly making them the most cost-effective energy source.

The Indian government, for instance, launched a program that is providing financial assistance and skill development training for business start-ups developing and deploying RE-centered services in rural areas. Bangladesh is distributing free solar home lighting systems to 40.000 remote households. To ensure proper use discussions are ongoing on potentially also providing extensive maintenance training for end users. South Korea’s New Deal promotes pilot projects for community energy that include profit-sharing models for residential renewable installations.

Perspectives from the Global South

Although these examples from Asia shed a light on how decentralised energy can be promoted by recovery plans, government programs need to be tailored to the specific context. Liberian MP Joseph Nyan Somwarbi pointed at the very low level of awareness concerning the multitude of co-benefits resulting from renewable energy in his region while calling for sharing information of best practices in practical use cases (e.g. solar-powered pumps). Charity Chepkwony, a MP from Kenyan, criticised that 70% of rural women in African countries are still using firewood for cooking, resulting, inter alia, in increased deforestation, in turn changing rainfall patterns thus affecting food production. The most urgent task therefore is developing a better RE infrastructure and making sustainable energy available and affordable to everyone.

These interventions showed the importance of clean cooking. Eco Matser, Global Manager of Just Climate Action at HIVOS, made the case for clean cooking during his presentation, highlighting that cooking with fossil fuels and wood is one of the main causes of respiratory diseases and deaths for women and children in the Global South. Unfortunately, there is still little recognition of its devastating impact on human health, the environment and local economies – costing the affected populations an estimated USD 110 billion every year. Recent reports by Hivos and the World Future Council have proven that electric cooking powered by mini-grid or solar home systems are more cost-effective than the traditional use of charcoal or wood. By promoting decentralised energy and therefore clean cooking solutions, people could reduce the costs associated with energy. Energy expenditure is especially high for the poorer strata of society, putting an additional financial burden on their situation. Consequently, the ability to pay for clean cooking solutions powered by off-grid RE systems is low.

For many countries of the Global North, Klaus Mindrup, German MP, stresses the importance of a mixture of decentralised and centralised energy solutions as the key to a safe, reliable and renewable energy supply. Further, a strong regulatory framework in favour of community energy – as a decentralised renewable energy solution in the hand of citizens – needs to be ínstitutionalised to ensure the lasting potential in terms of commitment, ownership and acceptance of renewable energy

Considerations on how legislators can help to build back better

Pursuing a people-centred and needs-based approach:

  • To best fit the people’s needs, energy solutions must consider the specific services renewable energy applications are needed for (cooling vaccines, pumping water, electrical cooking etc.).
  • Illustrate co-benefits of renewable energy solutions and strengthen acceptance and ownership of local communities.
  • Create stable long-term, enabling policy and regulatory frameworks for (decentralised) renewables.

Promote funding for (small) businesses to reach “the last mile”:

  • Link donor-funding to long-term objectives (e.g. SDGs) and include criteria for actor diversity to support smaller entrepreneurs and companies.
  • Support local financial institutions to set-up investment schemes to promote (local) energy enterprises.
  • Donors can provide guarantees to decrease risks associated with RE projects in the Global South and thus, effectively reduce interest rates.
  • Strengthen the role of renewable energy in sectoral programs related to health, gender equality, education or agriculture etc.
  • Encourage female energy entrepreneurs that are promoting clean cooking and renewable energy.

The fruitful discussion has proven that legislators are key drivers in shaping policy frameworks that enable investments in renewable energy for all. The stimulus packages issued by the governments to combat the negative socio-economic effects of COVID19 should include measures that help to overcome the financial barriers to energy access. The technology is available and cost-efficient. Yet, it seems but a question of channelling the funds in the right direction.