PRIVATE SECTOR LED
OFF-GRID ENERGY
ACCESS
The A-B-C Business Model and How Third Parties Can
Support the Development of Energy Access Solutions
Feb 20, 2013
Incubating Innovation for Rural Electrification:
The Telecom Energy Initiative
Speaker: Mohua Mukherjee
Structure of the Presentation
• Why does the off-grid space represent a promising area
for small power providers to invest in?
• What is the A-B-C Model?
• How can external parties (like donors, financing
institutions, foundations and challenge grant providers)
provide support to create a better eco-system in which
private energy supply companies (ESCOs) can grow?
Why is the off-grid space attractive to
private investors now?
• Off-grid customers rely on fuel (kerosene, diesel) to meet their
energy needs
• Their fuel costs have been rising while solar panel costs have
been falling
• So the cost to supply an energy solution on a commercial basis
is falling
• The power consumption of household appliances, for example
bulbs, television sets and
refrigerators – has decreased drastically in just
the last couple of years
• So a small amount of low-cost power supplied
commercially can go a long way to improving the
access picture
Why is the off-grid space attractive to
private investors now?
• Electrification technologies can range from a few watts for
solar lighting and phone charging stand-alone PV, to full
grid connections or isolated mini-grid electrification that
gives 24/7 access to a sufficient amount of power.
• Most small investors’ initial focus will be at the lower
wattage end of this scale, of getting 1-50W of electricity
(micro-energy) to households, for 4-12 hours of power per
day, rather than 50-500W of 24/7 access at first
• Familiarity with the customer base and increase in
customer income and loads will allow for scaling up at a
particular location
What is the A-B-C Model?
• This model seeks to reduce risks for small private
power producers in the off-grid space
• It identifies three sets of customers:
• Anchors
• Businesses and
• Community members
• Anchors represent daytime load, predictable in nature,
requiring continuous delivery
• Businesses are local commercial establishments, for
whom power is a critical input
• Community members: affordability is a major issue; may
have many other pressing needs in addition to power
How Does the A-B-C Model reduce risks?
Type of
Customer
High Margin
for a Small
ESCO Power
Supplier?
Does it make
the ESCO
Bankable? Do
commercial
Banks like this
risk?
Conclusion
Risk Mitigation
Impact
Anchor e.g.
telecom tower
NO – telecom
tower can
squeeze ESCO
on prices
YES
Telecom tower is
not profitable but
is Bankable
PPA with a
Telecom Tower
gives ESCO
access to Banks
Business e.g. local
rice mill or local
shopping center
YES – it is very
expensive for
local business to
supply itself with
power, manage
fuel logistics etc
NO
Local business is
profitable but not
bankable
PPA with local
businesses gives
ESCO high
margins, most
proftibale
Community
Member/Household
YES/NO-if
household
demand is small
and variable
NO
Household is
neither bankable
nor profitable but
needed for local
buy-in
Supply to local
household gives
ESCO roots in the
community and
protection of
assets
Barriers to Growth Of Mini-grids
• Market Information and Data Collection, Mapping of
•
•
•
•
Load Locations and Daily Fluctuation in demand
Information on latest available technologies to reduce
transactions costs e.g. ICT enabled pre-paid smart meters
Information on potential financing partners (equity, debt,
R&D, grant) for investment and working capital
Information on Policy and Regulatory environment—new
incentives, how to access government grants, required
paperwork, reporting formats
Information on identifying local entrepreneurs in new
areas for replication of a business model
How Can Third-Party Supporters of Minigrids help?
• Reduce transaction costs for mini-grid operators
• Identify and train high quality professional services required by
them
• Identify technological inputs and make the information
accessible
• Mini-grid operators can then spend less of their scarce time
and hard-earned money chasing up these services which
effectively reduce their focus on O&M
• With proper support, we can increase the mini-grid operators’
“bandwidth” and allow them to do more in their area of core
competence
How Can Third-Party Supporters of Minigrids help?
• There are many resources to support energy access—
•
•
•
•
how to resolve the mismatch?
Public sector Rural Electrification Agencies have delivered
very limited results
Difficult for donors to channel funds to individual private
companies
How can support be delivered where it is needed, “just in
time”?
One idea is for these funds to be invested in creating a
common “eco-system” for all mini-grid operators in a
given region or country, to lower transaction costs
How Can Third-Party Supporters of Mini-grids
help?
• “Mini-Grid Development Company” to reduce
transactions costs for a large number of its
“member mini-grid operators”
• It would pro-actively identify and disseminate
market information on un-electrified areas, and
available technology providers
• It would identify and train a roster of professional
service providers for mini-grid operators and
• It would cost-share the payments required for
professional services to mini-grid operators
THANK YOU FOR
YOUR ATTENTION