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Pandemic’s Economic Hit Threatens Off-Grid Power in Developing Countries

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  • Apr 30, 2020

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Off-grid electricity companies that have been supplying power to poor communities in developing nations are struggling to keep the lights on as the economic fallout of COVID-19 leaves more and more customers unable to pay their bills. 

“The nascent industry fears being starved of new capital as investors shun risk amid an expected recession—a crunch that could force weak firms out of business and scupper progress on a global goal to provide modern energy to everyone by 2030,” writes Reuters. In a recent survey of 80 Africa- and Asia-based mini-grid and home solar businesses, Sustainable Energy for All (SEforALL) found that the businesses expected to lose between 27 and 40% of their revenues due to the pandemic.

“We could be in the situation in six months’ time where we have no off-grid companies to be talking about,” said SEforALL CEO Damilola Ogunbiyi. “We cannot start from ground zero again…we cannot let that happen.”

In many cases, these mini-utilities rely on small daily or weekly payments from customers whose employment—often as street vendors, or workers in the farming and building sectors—is insecure at the best of times. After weeks of pandemic-imposed shutdowns and with unknown weeks to come, many operators fear for their future.

“Job losses could put regular payments for electricity or cooking gas out of reach,” said Mansoor Hamayun, CEO of BBOXX, which provides off-grid solar power to more than a million people across Africa. Even so, she stressed, her company doesn’t want “to switch off customers that suddenly have a week or one month of lack of income.” Many off-grid utility companies are adopting new measures and price structures to “provide clients with electricity to meet their basic needs, such as offering five hours per day free and charging only for use on top of that,” reports Reuters.

Cash flow is also tight across the small-scale grid sector, with the SEforALL survey finding that about 70% of providers have “two months or less” of operating expenses remaining. This economic situation is dire news given that such companies are “seen as vital in getting electricity to the 840 million people still living without it, the vast majority in rural parts of sub-Saharan Africa and South Asia.”

Responses to the crisis have included a pledge from India to supply “millions of cylinders of cooking gas to those in need,” and a COVID-19 relief package in Ghana that will, according to the Clean Cooking Alliance, “subsidize electricity for three months, fully covering costs for the poorest consumers.” SEforALL has also been urging governments to classify off-grid power companies as essential services so that their technicians can keep working, and to freeze the price of cooking gas.

Many global NGOs and other entities are launching their own efforts to help off-grid electricity firms, from “foundations postponing loan repayments for several months to development banks giving promised grants up front, as well as donor governments providing aid as digital cash with which consumers can buy electricity,” reports Reuters.

The lockdowns have “really shown us what happens when we don’t have electricity,” said Ogunbiyi, who is also a special representative of the United Nations secretary general. Citing her own country, Nigeria, as an example, she noted that a lack of electricity also means a lack of refrigeration, which necessitates frequent shopping for food. People cannot realistically be expected to self-isolate, she added, if staying at home means “they will starve and they will die.”

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