The United States Agency for International Development is making a bet on the off-grid energy market with a new initiative that will commit $36 million over three years in an effort to reach 20 million households in sub-Saharan Africa.
The Scaling Off-Grid Energy grand challenge, which is designed to expand supply, drive demand, and strengthen the marketplace, was announced Thursday at the 2016 Global Entrepreneurship Summit. The U.K. Department for International Development and the Shell Foundation have partnered with USAID on the investment, which is part of the U.S. government’s $7 billion Power Africa initiative.
In addition to bringing new money into this industry, this challenge also signals a shift in the way the U.S. Global Development Lab, set up within USAID to promote innovation, is supporting off-grid energy.
“The grand challenges to date have been about sourcing innovations to solve problems where we don’t know what the answer is,” Chris Jurgens, who leads the Center for Transformational Partnerships at the lab, told Devex. “This grand challenge is the first of the eight grand challenges that is really saying, it is less about sourcing brand new innovations and more about sourcing innovation that is demonstrating traction in the marketplace and scaling it.”
As the solar energy market is maturing, and home solar companies attract more private capital, USAID is moving to support other parts of the market that need a push. A handful of market leaders including M-KOPA Solar and Off Grid Electric make up 80 percent of the market for off-grid energy in sub-Saharan Africa, Jurgens said. With this grand challenge, USAID wants to help those market leaders expand into more countries while also supporting new firms.
“Our solution to this wasn’t to air drop generators or give everybody a flashlight,” USAID administrator Gayle Smith said in a press conference announcing the grand challenge and explaining the USAID approach to scaling off-grid energy. “Our goal was in part to prime the pump so that private capital would continue to flow into this sector, because again, our theory is not that we can solve this problem with foreign aid.”
Scaling household energy solutions is the focus of the challenge, but USAID is also working to make energy systems that are more responsive to the needs of the families that have them. The goal is to incentivize innovation where the market isn’t pushing progress on its own, Jurgens said.
“The evidence is that people climb an energy ladder,” Jurgens said. “Most of the systems today don’t meet the full range of energy needs that a low income household has.”
As people gain access, their energy demands and needs also grow: they might move, for example, from a solar lantern, to a small household solar system, and then want increased capacity to power items like televisions, fans and refrigerators.
As part of the grand challenge, USAID has announced a refrigeration prize that will leverage $300,000 to catalyze technological advancements in off-grid powered refrigerators. USAID is partnering with the U.S. Department of Energy and the Global Lighting and Energy Access Partnership, or Global LEAP, which has called for actors to build on the success of LEDs to enable the off-grid lighting revolution by investing in ultra-low energy consumption versions of appliances.
In a Facebook Live interview with Devex following the announcement, USAID Assistant Administrator for Africa Linda Etim told Devex that the agency will need to play a key role in making innovations more cost effective and in addressing regulatory needs.
And this latest announcement seems to be an indication that USAID will continue to prioritize and work to support the off-grid industry as the agency works to spur innovation and expand market access.