In recent months, GTM has played host to a debate about what delivering "real" energy means in developing countries.
I have long argued for the rapid scale-up of off-grid, pay-as-you-go solar as a faster way to deliver energy and financial services to those without access to the grid or traditional banking.
In January, Katherine Wolfram, a business professor at the University of California, Berkeley, argued that this model does not deliver "real" kilowatt-hours comparable in quality or price to the kilowatt-hours provided by centralized grids in the developing world.
But it's not that simple.
“It’s like comparing apples and oranges,” said Xavier Helgesen, co-founder and CEO of Off-Grid Electric. “Kilowatt-hours are irrelevant for off-grid solar. What is relevant are the quantity and quality of energy services delivered.”
So what is “real" energy anyway?
Real energy is the amount of energy required to do what we want -- not some muscle-car measure of inefficient excess. It’s not surprising that customers in rural developing markets like Kenya entering the modern energy world feel the same; they want enough energy to do what they want without it costing them an arm and a leg. When people talk about "real" energy, they're talking about an over-engineered model for the market.
“Imagine if other industries operated in this way,” said Chad Larson, co-founder and CFO of M-Kopa.
“What if the only software that was available to run any type of business was a full-blown million-dollar Oracle enterprise suite? Oracle software is right for big companies, but a small business might run their numbers just fine in Excel. This idea is the same as assuming that most homes in Kenya need the same connection as a home in Kansas -- it’s just not correct," said Larson.
Here lies the irony. A centralized system seems like it would offer the greatest return on investment. But that assumption is based on outdated economic thinking that’s expensive, wasteful and ignores new technology.
“Some may fail to see where the puck is going, as Wayne Gretzky famously said,” said Helgesen.
Here's where the puck is going: “An industry operating at scale that captures the decreasing costs of solar, battery and LEDs coupled with innovative financing and ultra-efficient appliances. We don't have to make a great mental leap to see that solar-plus-storage solves many more energy problems for many more households than it does today," he said.
The idea that household distributed energy services are not “real" energy misses the point. Companies like Off-Grid Electric and M-Kopa have already launched high-efficiency TV sets, satellite decoders and base energy stations that power these and other appliances in a way that meets customers' needs.
Companies are also developing high-efficiency refrigeration and other white goods that run on single-digit load percentages. These and other similar breakthroughs are examples of reverse innovation that will challenge notions about power requirements.
"This is real delivery of energy as far as the customer is concerned -- they get exactly what they need, and not more, so they do not pay for more. From a rich-world perspective, it might not seem like the 'real energy' solution, but that is nonsense. You would not say that a small business running their numbers on Excel rather than Oracle is not using 'real software,'” said Larson.
When examining how we achieve universal household energy access, it is critical to assess the use cases of households and end-use efficiencies and not just the load capability and levelized cost of energy services.
As 1.2 billion people exit energy poverty and enter into the modern energy world, high-efficiency appliances and energy access services that are engineered to meet customer demands at the right price points are necessary to accommodate power demand at scale.
It’s time we break with the calcified mentality that bigger is always better. Bigger and excessive is usually inefficient and expensive. We should instead think about how to stretch a small amount of power a long, long way and yet get more of what we want. This is accomplished through designing energy solutions and approaching energy challenges with a mentality that doesn’t limit us to old thinking.
“The world is very different today than when Edison created the light bulb," said Helgesen. “Technological developments in efficient appliances and distributed energy are surpassing traditional energy distribution systems. Now is not the time to fix the grid -- it is time to reimagine it.”
This is the kind of thinking that will bring universal energy access to the world.