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Increasing Energy Access through Off-Grid Solutions

One billion people around the world currently live without access to electricity, and many more do not have a reliable energy source. Until recently, energy consumers relied almost exclusively on centralized grid infrastructure for their energy needs, aided by government subsidies and public utilities. Today, however, with significant advancements and reduced costs associated with renewable energy technology, a growing opportunity has emerged for decentralized, off-grid energy solutions to bridge the gap in energy access in the United States and abroad.

Off-Grid Systems

Off-grid energy systems are standalone systems that provide power independently of other electrical grids. Off-grid systems frequently rely on solar electric panels or other renewable energy generation sources and battery banks for the collection and storage of energy and can be designed for portable lanterns, multi-light systems, residential and commercial systems, and other products. In rural settings, these systems are often more cost-effective than extending a pre-existing conventional electrical grid to the area and can be installed more rapidly than a large government-subsidized expansion project.

In addition to the economic benefits of these systems, off-grid systems have significant environmental implications. According to the Global Off-Grid Solar Market Report, currently existing off-grid solar products are expected to avert the use of 51 million metric tons of carbon dioxide and black carbon due to the reduction in kerosene use over the lifetime of the products.

Opportunity

The viability of off-grid energy solutions is facilitated in great part by advancements in energy storage and movement toward grid parity. Much of the world, including the United States, experiences spikes in demand that can overburden conventional electricity grids and lead to demand response charges that can be inhibiting for those in impoverished communities. Overburdened electricity grids can also require managed demand response in the form of load shedding, or planned power outages. Battery storage presents a unique opportunity to store energy within a chargeable battery to be utilized during unanticipated spikes in demand for electricity. An increase in energy storage capabilities allows for better flexibility to provide consistent and efficient energy, on or off the conventional grid, in response to sudden and unpredictable fluctuations in load. This capability is crucial for the maintenance of high quality and reliable energy in an era where people require greater and greater amounts of electricity to live.

Additionally, the movement toward grid parity in the United States and countries around the world is promising for the future of off-grid energy solutions. Grid parity occurs when a clean energy source generates power at costs equal to, or less than, energy from conventional electric grids. Solar grid parity has already been achieved in roughly half of the United States, and is expected to be reached in 42 out of the 50 states by 2020. Clean energy market forecasts predict that a number of developing countries, including China, will also achieve grid parity within the next decade.

Alternative Financing Opportunities

The efficiency and cost-effectiveness of off-grid systems has opened the door for private companies to fund off-grid system development in rural areas globally, supplementing publicly subsidized extension projects. To finance these projects, payment plans such as pay-as-you-go (PAYG) and on-bill financing have become increasingly popular options.

The PAYG plan allows consumers to pay for solar energy costs in installments as they utilize energy, rather than paying upfront costs. By spreading out these payments, consumers can manage their energy use, and therefore their corresponding costs, as necessary. The growing popularity of the PAYG financing plan is evidenced by the product sales of GOGLA and Lighting Global, global organizations dedicated to increasing electrical access through clean energy. The value of GOGLA and Lighting Global PAYG products sold globally in the first half of 2018 ($110.89 million) surpassed the value of GOGLA and Lighting Global cash products sold during that same period ($107.5 million).

In the United States, on-bill financing is a prevalent financing method that allows customers to access clean energy upgrades directly through their utility provider. Through this payment plan, the utility provider grants the customer a loan to pay for energy improvements, which is paid off by the customer’s monthly utility bills. Frequently, on-bill programs require that the savings from the energy upgrades equal or exceed the on-bill loan payments. This encourages investment in efficient and clean energy products, while allowing the customer to pay in affordable installments.

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About this Author

Verna Krishnamurthy, Corporate Attorney, Mintz Law Firm
Associate

Verna’s practice focuses on general corporate and securities laws matters, representing both private and public companies. Verna has experience advising clients in the life sciences, energy and sustainability, and technology industries on a broad range of corporate matters, including corporate formation, venture capital financings, stock and asset acquisitions, capital markets transactions and ongoing securities compliance. Verna also dedicates a portion of her practice to social entrepreneurship and impact investing.

Prior to joining Mintz,...

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