To unlock affordable, reliable power and turn on a green and equitable recovery from the Covid-19 pandemic, we must make distributed energy a core part of integrated electricity systems.
Electrifying economies is a scroll-based narrative to illustrate the role of distributed energy in providing affordable, reliable power for all.
The reading time is approx. 20 minutes. Scroll down to start reading, or use the menu to jump to a specific topic, such as GDP and jobs unlocked by distributed energy.
This limits potential and stifles economic prosperity.
Covid-19 has magnified inequality, making it harder to progress on the UN’s Sustainable Development Goal 7 (SDG7)—ensuring access to affordable, reliable, sustainable, and modern energy for all.
If we make investments now to enable an equitable recovery, we can power a future brighter than we ever imagined—more sustainable, safer from pandemic threats, and better for the world’s poorest two billion, who can enter a growing global economy.
Accelerating progress on SDG7 requires power. Today, the world needs a massive, public-private investment in green infrastructure that unlocks inclusive growth for everyone. Without electricity, you’re powerless in today’s global economy.
With new breakthroughs in distributed renewables, it’s now possible to end energy poverty in 10 years, without accelerating climate change. Distributed energy can be integrated with grid infrastructure to enable a sustainable, equitable recovery that drives economic growth and job creation.
For two billion people living with no or unreliable access to electricity, distributed energy provides a pathway to economic inclusion and prosperity.
No rich country is energy poor. Electricity access and consumption are essential for human development and economic growth—especially in rural areas where access to power remains limited.
Most electricity is used outside the home. Without sufficient access to power for agriculture and businesses, people risk being locked out of the modern economy.
As a first step on the energy ladder, let’s consider a minimum level of annual electricity demand per person to drive social and economic development in rural communities.
Electricity consumption per person will be much higher when averaged across a whole country, including cities and industry. While 200 kWh per person can provide power for the first stages of development in rural communities, a modern energy minimum of 1,000 kWh per person has been proposed as a country-level threshold for middle-income status. See the proposal here.
per person, per year
Household services include: Lights, phone chargers, a fan, TV
What’s needed to unlock this demand: Support for homeowners to wire their houses; financing for home appliances and places to buy them
Community services include: Health clinics, schools, water pumping
What’s needed to unlock this demand: Support for Better coordination between responsible ministries, NGOs, and power providers
Productive uses of energy include: Agricultural processing, small businesses
What’s needed to unlock this demand: Structured support to access appliances and finance
200 kWh is our minimum productive use benchmark: energy-efficient appliances cut demand by half, making the same set of energy services viable at half the cost.
These agricultural processing activities are enabled at 200 kWh per person per year.
When a community reaches an average electricity consumption of 200 kWh per person, a new world of opportunity opens. Small businesses can be electrified, agricultural productivity is unlocked by this energy, and incomes will rise.
Higher-income households can afford to use more appliances, like refrigerators. They can use electricity for cooking, leading to major health benefits. As communities move to the next stage of the energy ladder, electricity consumption can rise to 300 kWh per person (or 600 kWh if inefficient appliances are used).
Learn more about predicting demand:
Providing 200 kWh per person is only the first step. To unlock the full benefits of electrification, a community needs:
The future of energy is decentralized. Rapidly falling costs and improving technology mean that distributed energy is ready to play a major role in modern energy systems.
These three types of energy resource are sustainable, and work close to the end-user. When used together, they can provide the energy services that people need, complementing traditional grids and large-scale energy generation.
Between 2010 and 2019, prices of PV panels fell by 82%
and prices of Lithium Ion batteries by 85%
In mature markets, building new renewables and battery storage is cheaper than operating many existing power stations.
New Energy Outlook, 2019
Renewable Energy Generation Costs in 2019 (2020)
How to Retire Early – Making Accelerated Coal Phaseout Feasible and Just (2020)
It saves time, reduces emissions and delivers robust, more equitable access. Compared to traditional approaches, distributed energy is:
Evolving technology can optimize systems, improve service and reduce costs:
We can calculate the cost of electrification and demonstrate the models and technologies to serve different communities and loads.
We have modeled the cost of providing power to 2,000 households, spread across a town and three nearby villages.
While the communities are modelled, the data for the calculation of energy system costs comes from real cost and design benchmarks.
A small town, with 1,000 households (about 4,500 people). There is grid supply, but it is often unreliable, and not all households are connected. A textile factory is the town’s major industry.
Three nearby rural villages of different sizes have no grid access, and are located several kilometers from the medium-voltage lines. Diesel is used for essential tasks like milling grain.
Minigrids can be rapidly deployed to electrify productive uses and businesses in the largest off-grid communities. By targeting areas with higher productive use potential and daytime loads, minigrids can provide cost-effective power supply immediately.
Stand-alone solar systems can provide power to more affluent households or businesses far from the grid; costs are dropping and service improving
New connections can be added to reach people close to existing grid infrastructure.
These systems can provide grid-connected enterprises with reliable power, reducing losses and improving service for users and the utility, especially when combined with energy efficiency.
These minigrids can provide win-win solutions for communities and distribution utilities, offering reliable energy supply and reducing losses.
These minigrids can expand to meet higher levels of demand, as communities become wealthier and increase their access to appliances.
The four communities shown here have now reached full electrification at high levels of energy consumption and reliability, enabled by a blend of energy supply technologies and energy efficiency.
Tools and approaches exist for making these energy solutions work together, to provide solutions that are sustainable over the long term:
With today’s best-case equipment prices, this represents an annual cost of
This power provides new connections to 1,200 households and improves grid supply to 800 that were already connected. Consumption in rural areas increases to an average of nearly 200 kWh per capita. Energy efficiency is a vital part of the equation, providing more energy services at a lower cost.
The cost of power for this scenario is calculated and shown here. This includes both capital and operational costs, to produce an estimate of the total cost to generate, distribute, and consume each kilowatt-hour of electricity. We can compare the cost of an integrated, distributed energy approach with the cost of providing the same service through a pure grid extension approach.
The exact system design and cost for an integrated approach will look different in every region; in a more rural context, there will be greater need for distributed solutions, while an urban area with reliable supply will still use pure grid extension. And of course, the actual price consumers pay will depend on the type of tariff structure and cross-subsidy adopted. But the core principles hold true: by integrating grid extension with new, distributed energy resources, systems can cost less and provide better service. And by designing the whole system with least-cost optimization, we can improve financial sustainability for power providers and users.
Grid expansion will continue. Over time, grids will draw on both distributed and centralized energy resources to create interconnected systems that are low carbon and low cost, providing reliable power to all.
In advanced markets, these solutions are already cheaper than building new gas-fired power plants and make it possible to drive a drastic switch to a 90% renewable grid by 2035 with no extra cost for consumers.
Integrated electrification, with modernization of electricity grids and widespread use of distributed energy, is the fastest and most cost-effective way to provide affordable, reliable electricity to everyone.
Unlocking the full potential of distributed energy requires a dramatic ramp-up of investment for the sector. This represents a huge opportunity for private and public investors, and a path to low-carbon, inclusive economic development for all.
Distributed energy can expand access to an additional 450 million people by 2030. Regions with poor grid reliability can rely heavily on distributed energy to improve service, but for distributed energy to deliver on its promise, investment needs to scale up quickly.
For distributed energy to deliver on its promise, investment needs to ramp up dramatically.
The IEA’s World Energy Outlook (2020) estimates an annual investment need of $17.5 billion per year in off-grid distributed energy as part of the route to providing electricity to the 800 million people without access today. Of this sum, $12.0 billion per year is needed just in sub-Saharan Africa.In addition to providing new connections, distributed energy can strengthen or complement grid access for the underserved: 1.5 billion people whose electricity supply is so unreliable or unstable that livelihoods are seriously constrained. Initial modelling by Rockefeller Foundation and Catalyst Off-Grid Advisors has outlined a scenario where distributed renewables play a significant role in ending energy poverty, getting countries on track to provide reliable power and achieve a “modern energy minimum” of 1,000kWh per person in 2040. Delivering reliable power via distributed renewables to this wider group would require an additional investment of over $100 billion per year in distributed energy, of which over half would flow to India.
on distributed energy resources can unlock
For example, reaching per capita consumption of 200kWh per year in rural Ethiopia would make national GDP 14% larger in 2030, compared to business as usual.
These calculations are based on increasing annual power consumption per capita in rural populations, as countries move to meet their goals of 100% electrification in 2030. Baseline scenarios (or “business as usual”) use 50 kWh per capita per year as the rural electrification threshold, following the current IEA definition. Target scenarios achieve 200 kWh per capita per year in rural areas, to meet residential, social, commercial, and productive use needs in rural areas. Non-rural electricity consumption is identical in both scenarios.
The Global Electrification Platform is used to estimate the total investment needed for building the electrification infrastructure to meet this level of demand in each scenario. Detailed calculations based on GIS data for Nigeria and Ethiopia are used in the analysis.
Many studies identify correlations between GDP and power consumption. For the purposes of this calculation, a correlation coefficient of 0.63 between power consumption growth rate and GDP growth rate is adopted, as calculated by S. Fried and D. Lakagos, in “The Role of Energy Capital in Accounting for Africa’s Recent Growth Resurgence”, IGC 2017.
The return on investment is estimated by comparing the annual investment need and potential GDP growth in the baseline and target scenarios, through 2030. Minigrids play a major role in the least-cost energy infrastructure development scenario, alongside stand-alone systems and grid extension.
According to this calculation, a single dollar spent on energy access infrastructure drives US$19.82 in increased wealth (gross GDP) in Ethiopia, and US$21.22 in Nigeria. In Ethiopia, moving from the baseline (50 kWh) to the target (200 kWh) scenario represents a 14% increase in national GDP over a 10-year period.
Powering Jobs Census 2019: The Energy Access Workforce (2019)
Power for All
The report shows preliminary findings for productive use jobs; more detailed studies are ongoing.
Installing solar panels for a rural village enterprise zone in Diara Rasulpur, Saran District, Bihar, India. A rural energy program in Bihar encourages productive use of energy to foster business development.
A metalworker in Kenya. Minigrid development requires additional labor beyond direct energy jobs, such as metal fabrication of parts and equipment. Photo courtesy Isaiah Lyons-Galante.
Producing cotton yarn and socks in Addis Ababa, Ethiopia. The availability of reliable energy resources creates abundant productive use jobs, such as textile factories. This factory employs at least 450 people.
Climate change impacts are accelerating. A hotter world is a poorer world. It means deeper, longer droughts decimating farmers’ crops, and more deaths in vulnerable populations from excessive heat. Investment decisions made now will be central to meeting climate goals. Adaptation and resilience must increasingly be at the heart of infrastructure design.
Sustainable Development Scenario of the World Energy Outlook 2019 (2019)
An integrated electrification approach can provide a least-cost, reliable and diversified solution for Malawi, saving the country US$500 million by 2030 and avoiding 19 million tons of CO2 emissions
The 80kW Sitolo minigrid in Mchinji district, Malawi, shown while still under construction
Today, 20-30 million backup generators run on fossil fuels at a cost of $50 billion per year. Reliable, integrated electrification can make these obsolete, saving over 60 million tons of CO2 per year.
The Covid-19 crisis risks reversing development gains and pushing up to 400 million people back into extreme poverty, earning less than US$1.90 per day. Energy infrastructure should be at the core of a robust international response.
Recover Better with Sustainable Energy series
Green Stimulus and Recovery series
A decentralized and affordable energy system based on renewables is more than a great investment: it is a promise for increased prosperity for all.
The legacy market has been focused on standalone minigrids and has not yet achieved scale or realized the full potential of distributed energy.
But as costs are falling and technology is improving, only a small push is needed to get the sector on a pathway to rapid expansion.
These four actions will unlock positive feedback loops of falling costs and rising investment, enabling rapid growth and bringing the benefits of distributed energy to hundreds of millions of people.
Unifying the sector around these four actions can create scale and unleash energy solutions for economic development.
Technology improvements and cost reductions in energy technologies are currently slow to reach small developers and local utilities.
WHAT NEEDS TO HAPPEN
Minigrids in the Money, RMI 2018 Mini Grids for Half a Billion People, ESMAP 2019 Benchmarking Africa’s Minigrids, AMDA 2020 State of the Global Mini-grids Market Report, BloombergNEF and SEforALL, 2020
Renewable energy and battery costs:
New Energy Outlook, BNEF 2019 Breakthrough Batteries, RMI 2019 Renewable Power Generation Costs in 2019, IRENA 2020
Pooled procurement for energy efficiency:
UJALA Program, EESL 2020
Bulk procurement for minigrid components:
Bulk Procurement Pilot (design stage only), CrossBoundary 2020
TECHNOLOGY FACILITY: PROCUREMENT & INNOVATION
Harness cost disruptions in storage, smart meter, solar PV, and other relevant distributed energy technologies via ambitious pooled market commitments, and drive continued innovation through a dedicated fund.
Finance flows remain far short of the estimated US$40 billion required annually to reach universal electricity access. The economic crisis caused by Covid-19 threatens to slow progress even further.
Energizing Finance, SEforALL
UNIVERSAL ENERGY FACILITY
The Universal Energy Facility is a multi-donor results-based financing facility that provides incentive payments to eligible organizations that are deploying energy solutions, providing verified end-user electricity connections (minigrids and solar home systems), or providing clean cooking alternatives based on predetermined standards. The facility will begin accepting project applications in 2020.
Mobilize finance to address the unique capital needs of distributed energy project developers in emerging markets, through a blended capital fund that leverages concessional capital and encourages commercial financing flows.
Lack of demand-side management and stimulation results in high costs to consumers, lost revenue for suppliers, and limited expansion of power to other productive use activities.
Efficiency for Access Coalition
Powering Ag, Power for All eGuide Capturing the Productive Use Dividend, RMI 2020 65 Livelihoods Application, SELCO 2019 Mini-grid Innovation Lab, CrossBoundary 2020
Reduce energy needs through efficiency, including passive and active solutions, by enforcing product standards, supporting the supply chain manufacturers or importers and last-mile distributors, and investing in getting the right solutions to consumers at low cost.
PRODUCTIVE USE AND SOCIAL SERVICES
Link electrification with national programs on agriculture, health, education, and small business support, to leverage synergies and capture benefits across areas.
Without certainty provided by clear plans and regulatory frameworks at national levels, investment in distributed energy will stall. Current business models and approaches are far from sufficient for unlocking the full potential of the sector. High financial risk further threatens the scale-up of the distributed energy sector, which is characterized by small to medium enterprises.
Integrated Electrification Pathways, SEforALL
Global Electrification Platform, ESMAP
Reference Electrification Model, MITEI
Energy Access, Data and Digital Solutions, TFE 2020
Minigrid Tendering Platform, Odyssey
Utilities 2.0: Integrated Energy for Optimal Impact, Power for All 2020
INTEGRATED DISTRIBUTION FRAMEWORKS
Apply effective governance models to restructure the distribution sector and accelerate electrification; for example, through the application of concession agreements at the utility level.
INTEGRATED ELECTRIFICATION PLANNING
Carry out geospatial electrification planning to identify least-cost strategies for providing electricity and the associated energy services necessary to meet human needs and contribute to sustainable development.
INVESTMENT-GRADE POLICY AND REGULATIONS
Draw on best-in-class electrification policies and regulations to develop a robust regulatory framework enabling private sector actors to contribute to national electrification objectives and unlock investments in the sector.
Case studies from around the world show how these four actions are already starting to scale the sector. Click the case studies to read more.
International financiers including DFID, AFD, AfDB, and IsDB have collectively made billions of dollars of commitments to the sector. The World Bank alone has minigrid programs in 33 countries.
The Global Commission to End Energy Poverty is bringing together investors, utilities, development finance institutions, and policymakers to build consensus on the way forward: www.endenergypoverty.org
The solutions shown here can be used to drive coordinated action for governments, investors, utilities, and project developers. By streamlining processes and sharing learning, these solutions can help drive progress in dozens of countries.
Access our data visualizations, reports, case studies, data sheets, and more.
We all play a part. Join us to turn ON the energy that will drive a greener, more equitable, and faster economic recovery.
The Electrifying Economies project demonstrates the role distributed energy will play in ending energy poverty and catalyzing a green and equitable recovery from the Covid-19 crisis. It draws on the latest data and research from around the world to show how distributed renewables can provide sustainable, affordable, and reliable power for all. The project provides information to support policy makers and investors in taking action today, to realize this potential.
Many of the solutions shown here will be launched as major initiatives in the coming months. We look forward to sharing these as they launch.
In the meantime, learn more about these initiatives, which are already underway:
Sustainable Energy for All (SEforALL) is an international organization working with leaders in government, the private sector and civil society to drive further, faster action toward achievement of Sustainable Development Goal 7 (SDG7), which calls for universal access to sustainable energy by 2030, and the Paris Agreement, which calls for reducing greenhouse gas emissions to limit climate warming to below 2° Celsius.
The Rockefeller Foundation advances new frontiers of science, data, policy, and innovation to solve global challenges related to health, food, power, and economic mobility. As a science-driven philanthropy focused on building collaborative relationships with partners and grantees, The Rockefeller Foundation seeks to inspire and foster large-scale human impact that promotes the well-being of humanity throughout the world by identifying and accelerating breakthrough solutions, ideas, and conversations.
Rocky Mountain Institute (RMI)—an independent nonprofit founded in 1982—transforms global energy use to create a clean, prosperous, and secure low-carbon future. It engages businesses, communities, institutions, and entrepreneurs to accelerate the adoption of market-based solutions that cost-effectively shift from fossil fuels to efficiency and renewables.
Many people contributed in many different ways to the creation of ‘Electrifying Economies’, and we are most grateful for their efforts.
Our institutional partners include:
The content and storyline for the Electrifying Economies project were developed by Edward Borgstein and Ruosida Lin from RMI. The project was coordinated by Eric Gay, Jenny Huang, Silvia Mansur de Oliveira, and Suman Sureshbabu from Rockefeller Foundation. Hadley Taylor, Min Hyejung, and Stephen Kent led content creation and review on behalf of SEforALL.
This website was designed and developed by Ahoy Studios under the creative direction of Connie Koch and Denise Sommer, along with designers Nadine Werjant, Denis Kuchta, Scott Brower and Katja Fluekiger. It was coded by Arne Spremberg, with data science consultation by Helene Schröcksnadel. User research was conducted by Dr. Joana Casaca Lemos and Goksü Kacaroglu in collaboration with Ahoy. Project management was provided by Emily Long from Inflection Point Agency.
We also wish to thank the following individuals for their consultation and participation: Ignacio Perez-Arriaga, James Banaabe, John Spangler, Joseph Peralta, Kelly Carlin, Kenny Anuwe, Rob Stoner, Sahele Fekede Tamiru, Sam Slaughter, Saidi Banda, Todd Moss, Uche Honnah, and Yann Tanvez. Photos and imagery were kindly shared by Rockefeller Foundation, RMI, and Powergen Renewable Energy. The organizations showcased in the case studies were all generous with their time, providing detailed information and reviewing draft versions. Any errors remaining are the responsibility of the website authors.