It was on track to be a feel-good story for the power sector in 2020.
The energy access market had for a long time been too complex, with too many companies trying to do too much. As companies figured out what they were good at, and as the weight of strategic investors like EDF helped to push regulatory changes in key markets, things had been looking up. Demand and, to an extent, finance have been plentiful for those ready to put the work in.
According to the U.N.’s Sustainable Energy for All program, the number of people without electricity fell from 1.15 billion in 2010 to around 789 million by the end of 2019. Its goal is to bring that number to zero by 2030, and it is currently off-track. Today, the forecast for 2030 is 620 million to 690 million without electricity.
Companies like minigrid provider Husk Power were set for huge growth in 2020.
We all know what happened next: a global coronavirus pandemic and a major economic downturn.
The fundamentals of energy access are so strong, however — clean and reliable power is a social and economic no-brainer — that the sector has had a unique pandemic experience.
Husk Power, for example, provides pay-as-you-go power using renewable-powered minigrids for businesses and communities. Two Indian states where it is most active were on lockdown for four-and-a-half months through three separate lockdowns.
Husk gave its customers, mostly small and medium-sized businesses, a rolling three-month 50 percent discount to acknowledge their inability to make money. Husk saw between 50 and 80 percent of its revenue dry up as restrictions limited its ability to build new sites. It had planned growth of 100 percent this year but now expects somewhere between 60 and 65 percent.
Despite all this, it will close the year having added around 45 minigrids to its initial tally of 60.
“We think of our relationship with our customers as being a bit like a marriage,” Manoj Sinha, CEO of Husk Power, said in an interview. “We’ve built huge trust with them now going into 2021.”
Resilience as an off-grid selling point
Sinha showed considerable foresight as the pandemic spread in China — “I was wearing a mask in January,” he said. But he also cast a safety net for the company.
As China shut down, Sinha sourced alternatives for all of the company's components coming out of that country. In India, Husk applied for key worker status in its busiest provinces, allowing its workers to move around during curfew.
When it wasn’t possible to work normally, the company set out on an experiment to stress-test its deployment capabilities and figure out just how many deployments it could handle — 12 per month, it turned out — and set out developing its IOT remote management platform.
Contingency plans, originally put in place to help the company in times of severe flooding, also paid dividends. These included pivoting to solar irrigation pump sales and installing rooftop solar on government-owned properties.
That use of time has left the firm in a strong position for 2021, said Sinha, with plans to double deployments next year and raise around $100 million in Series D funds. The goal then will be to scale from 200 to in excess of 1,200 by 2025.
Fundamentals put power at the heart of the lockdown recovery
Mark Gainsborough, who sits on Husk Power’s board, was previously executive vice president for new energies at Shell. During his time there, he led a $20 million investment into Husk Power, along with venture investments in a series of other energy businesses including sonnen, d.light, PowerGen and Innowatts.
“The world of energy assets is not only about cleaner energy; it is [also] about the fact that people need the energy in the first place,” Gainsborough said in an interview. It’s a reminder that the global energy transition is about more than enabling more Teslas on the roads and letting a select few with residential batteries make money selling grid services.
Energy access is also about more than making the connection and moving on, Gainsborough said.
“Because they didn't have access, they haven't been able to take full advantage of the benefits that electricity brings to people,” he said. “It's...about actually working with communities to build demand for power.” People who live without electricity can't take "full advantage of the potential that it brings to them for their economic growth and prosperity.”
Solar home systems in Nigeria’s COVID-19 recovery plan
With that observation in mind, any emphasis on economic growth only boosts the attractiveness of cleaner and more reliable power.
Lumos Global sells solar home systems, primarily in Nigeria, a country with 22 million diesel generators. It allows consumers to swap expensive diesel power for solar panels and batteries.
Restrictions on movement in Africa started just as its supply lines to China reopened in Q2. Lumos' sales staff focused on areas beyond the big cities where the virus and its accompanying restrictions were less common.
As the lockdown began, the company sent its call center workers home with a laptop, access to the mobile phone network and a Lumos kit for their power needs. It soon realized other companies were in the same boat, which opened up a new line of business backing up other sales staff as residential customers fell off.
“We had one bank that took some boxes and gave them to their key managers who were authorizing transactions so that they always had power and connectivity. Some interesting use cases came out of the woodwork,” Lumos Global CEO Alistair Gordon said in an interview. All the companies that initially bought a few systems later returned to procure more, he added.
Solar has become a key part of the Nigerian government’s Economic Sustainability Plan. This week it approved a $369 million plan to provide 5 million residential solar systems over the course of the next year.
“They know that power is an important piece for rebuilding the economy and giving people a kick-start,” Gordon said. “They're actually putting their money where their mouth is, which is fantastic.”