Expanding access to electricity: the role of large companies Paul Loeffelman

Expanding access to electricity: the role of

large companies

Paul LoeffelmanAmerican Electric Power

Managing Director – Corporate External Affairs, Head of International Cooperation Affairs

Washington D.C.

21st February 2012

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Strategic & commercial drivers

• Key feature of many emerging & low income country energy markets.

• ‘Base-of-the-pyramid’ (BoP) market for energy services - USD +500 billion per year.

• Provision of infrastructure & management services.

• Competitive advantage for utility service providers.

• Deployment & commercialization of new technologies.

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Centralized electricity provision: company cases

• Eskom. Improving the electrification rate in South Africa by 36 to 83%, targeting universal coverage by 2020.

• GDF Suez. Improving access to electricity and other utility services for 500 000 people in Casablanca.

• Eni. Reducing gas flaring and providing electricity for 700 000 people in the Congo.

• Chevron. Clean and reliable hydropower from geothermal power in Indonesia for 4 million households.

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• Key business model innovations: Cost reductions through technical innovation. Connection costs paid in installments. Helping customers improve their efficiency of

energy usage. Pre-pay technology to reduce losses and

increase convenience. Working through community associations. Complementary businesses (e.g. sale of

appliances).

• Challenges: Cost of servicing many rural communities. Affordability for poorest consumers.

Extending the grid

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New models for decentralized energy services: company cases

• ABB. Access to Electricity Program.

• Schneider Electric. Distributed solutions for remote communities in Vietnam.

• Osram. Off-Grid Lighting – Energy Hubs.

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• Key business model innovations: Establishing/working through local enterprises

as the service providers. Locally-appropriate technologies. Servicing household and productive uses. Financial model - balancing affordability and

operational sustainability.

• Challenges: Mobilizing capital costs. Sufficient local capacity to manage, operate

and maintain systems. Cost v’s reliability trade-offs.

Distributed/renewable systems

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Scaling up business investment• Business investment can be scaled up by:

Removing investment barriers Enhancing return on investments Lowering the risks on investments

• Addressing risks is critical: Risk drives the cost of capital and hence the return on investment Risks: political, policy, technical, currency, carbon prices etc. Key tools: Power Purchase Agreements (PPAs), strong/enforceable contracts,

insurances, investment guarantee facilities etc. Fundamental importance of well-designed and stable policy and regulatory

environment

• Public-Private Partnerships will be a key delivery model Strengthening PPPs to Accelerate Global Electricity Technology Deployment (UN-

Energy & GSEP)