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A new report published today by Ashden and Christian Aid reveals how donors, investors, technical experts and policy makers can improve support to enterprises providing access to clean energy in the developing world.
Some 1.3 billion people live without electricity, while nearly 3 billion people cook on open fires or inefficient cookstoves, damaging health and keeping people trapped in poverty.
It is based on in-depth interviews with leading providers of solar lights and improved cookstoves that use less fuel - and crucially minimise health-damaging pollution in the home - as well as makers of energy-saving ceramic water filters providing rural families with safe drinking water.
Those taking part included d.light, EcoZoom, and SELCO and support providers such as ERM Foundation's Low Carbon Enterprise Fund and GVEP.
Energy access enterprises face a finance gap
The report, Lessons on Supporting Energy Access Enterprises, highlights the problems that such enterprises can face both in raising finance, and ensuring a regular cash flow until a market is established.
With most clean energy enterprises needing finance, especially those at the small and medium end of the scale, key findings of the report include a need for working capital, with interviewees emphasising that long delays over financing place a huge strain on enterprises.
It says finance that can be accessed quickly, with minimal conditions, such as lines of credit, should be more readily available, along with impartial advice on the financing options that exist and guidance on how to attract investors.
Support for sales and marketing was also seen as crucial, as well as management support.
Ashden Founder Director Sarah Butler-Sloss said:"Increasing access to energy is the biggest challenge, and also the greatest opportunity for reducing poverty in the developing world."
"This research demonstrates the catalytic role the right kind of support can play in helping energy access enterprises thrive and grow - so they can transform people's lives and stimulate development."
"We urge donors, investors, technical experts and policy makers to take note of the recommendations of the report, so that appropriate financial and technical support gets to the enterprises that badly need it."
Christian Aid international director Paul Valentin said: "Energy provision in many developing countries is poor.New York State consumes as much energy as the 800 million in sub-Saharan Africa."
"People in rural areas are often most affected, even losing out when major electricity generation schemes are built as the power lines go straight to the nearest big city".
Sustainable clean energy delivers immediate benefits. It minimises the air pollution caused by cooking with solid fuels such as wood, animal dung and crop waste which costs an estimated four million lives a year. Education improves as young people can study at night by electric light. And people's economic prospects improve as local industries prosper.
But finance is required. At present, commercial investors may be wary of doing business with clean energy enterprises, regarding them as high risk, while markets are undeveloped, with potential customers unaware that the products exist. Rural customers may also be expensive to reach, and have little purchasing power. But these problems are not insurmountable.
The report calls on donors to leverage working capital for energy access enterprises. Grants should be focused on growth, new programmes and innovation, and funding for obtaining technical assistance from experienced providers.
Investors should ensure management capacity is in place, provide debt for working capital with repayment terms that allow an enterprise to thrive, make financing decisions in good time, and publically champion successful ventures to draw more investment into the sector.
Technical assistance providers should strengthen their sales and marketing support services and ensure business mentors are provided for enough time, while policy makers must develop mechanisms to help clean energy enterprises thrive, such as enabling access to local finance.
Additional information: Full report
News date: 25/06/2014