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Thursday, July 12, 2012

Guest Post: Sounding Off On Scale - At Rio+20, Big Energy Companies Talk Barriers to Access for All

By Filippo Veglio

Editor's Note: Filippo Veglio, deputy director of the WBCSD Development Focus Area, attended the Rio+20 Business Day last month and shared some key take aways. 

Business Action for Sustainable Development (BASD 2012), a temporary coalition of 13 international business organizations, hosted more than 800 leaders of government, business, United Nations, NGOs, and other organizations at the BASD 2012 Business Day on June 19 in Rio de Janeiro. The event was held under the theme “Achieving Scale”, and formed the culmination of a year-long process to ensure the business input to the Rio conference was heard.

The two dozen sessions featured interactive workshops and plenary sessions and focused on identifying scalable business solutions on a variety of key topics, including energy, water, natural resources, technology, and policy development. 

During the Business Day, the World Business Council for Sustainable Development (WBCSD) organized a session focused on “Business solutions to enable energy access for all: Achieving scale”. Below are shighlights from the session, including key conclusions and recommendations.

Context

Addressing the lack of access to clean, reliable and affordable energy services for billions of people is one of the world’s most urgent development imperatives. Worldwide, approximately 2.7 billion people rely on traditional biomass for cooking and heating, and about 1.3 billion have no access to electricity. Up to a billion more have access only to unreliable electricity networks. A recent report by the International Energy Agency found that little progress will be made in reducing these numbers by 2030 without significant additional action.

Business is a critical actor in addressing global energy challenges. Business is a primary solution provider, bringing to the table innovative products and services, efficient service delivery, essential technologies, management and technical capabilities, and financial resources. This role includes not just extending the reach of energy services, but also supporting the quality and reliability of the services that are delivered, which significantly increases the benefits that energy access has for low-income consumers and producers. The recent WBCSD report Business solutions to enable energy access for all documents 19 case studies of business action and innovation to deliver energy access solutions.

Universal energy access by 2030 is one of the three objectives of the UN Secretary-General’s Sustainable Energy for All (SE4All) Initiative, and the year 2012 has been declared the International Year of Sustainable Energy for All to bring a greater level of attention to the issue. The SE4All Initiative, along with a number of other key international initiatives and partnerships (e.g. The Global Alliance for Clean Cookstoves, the Energy+ Initiative, the Asian Development Bank’s Energy for All Partnership) has made scaling business up action and investment a central focus of their implementation strategies. Many national governments are also seeking to integrate the role of business within their national plans and strategies to expand energy access and address energy poverty.

However, it must be highlighted that this is not an easy area for business investment. Despite the potential size of the market, involvement in expanding access to energy for the poor is often highly challenging, or commercially unattractive, for business.

The vision for the Business Day session was to provide a platform for detailed discussion on how real progress can be made in overcoming these challenges, to promote the necessary major increases in business investment. Given the importance of the business role and the magnitude of the challenge, additional action must be taken to scale up the business contribution. Companies cannot do everything; there are a number of areas where investment and service provision need to come from governments and other stakeholders. However, maximizing the opportunity for commercially-viable and sustainable investments to support energy access will: 

  • Help mobilize private capital and reduce the financial burden on governments and development assistance.
  • Allow energy access objectives to be achieved efficiently and effectively.
  • Catalyze the role of business as a primary solution provider within the energy system.

Summary of the session

The session began with three keynote speeches.

  • Gérard Mestrallet, chairman and CEO of GDF Suez, the world’s largest utility, described how the company develops its businesses around a model based on responsible growth to address the global energy and environmental challenges, particularly the lack of access to energy. Mestrallet highlighted how GDF Suez is demonstrating its leadership through the launch of a major global initiative focused on access to energy – Rassembleurs d’Energies – and through co-chairing the WBCSD Access to Energy Initiative.
  • Jean Pascal Tricoire, CEO of Schneider Electric, presented how, as one of the world’s leading energy solutions providers, the company’s role is to help energy to be used more efficiently, so that it can be distributed more equitably. Tricoire described how the company had taken its early lessons from providing energy access to poor communities, to develop the BIPBOP program (Business, Innovation and People at the Base of the Pyramid). This highly successful program targets three key challenges for expanding access to energy – support for local businesses, product innovation, and skills development  – and has already helped expand access to over one million people.
  • The Hon. Heikki Holmås, minister of International Development of Norway (pictured below, image courtsey of WBCSD), provided an overview of Norway’s leadership role within the international community in catalyzing action to expand access to energy and to address climate change. Norway has initiated the Energy+ Initiative, a major new international partnership to expand access to energy through renewable energy and energy efficiency. The Initiative is focused on catalyzing business investment, and the Minister identified a number of concrete ways that development partners and business can work together to scale up energy access solutions.

The second half of the session consisted of a high level panel discussion, moderated by Mark Spelman (global head of Strategy, Accenture). The panelists included: Brian Dames (CEO, Eskom); Giuseppe Recchi (chairman, Eni); Sven Mollekleiv (senior vice President, DNV); Sagun Saxena (managing director, CleanStar Ventures); Prof. Abeeku Brew-Hammond (Board Chairman, Energy Commission of Ghana); Seethapathy Chander (director deneral, Asian Development Bank) and Christoph Beier (CEO, GIZ).

The panel addressed three key opportunity areas for scaling the business contribution to access to energy: business model innovation, enabling policy frameworks, and financial mechanisms. The discussions further highlighted how business leadership, innovation and technical and managerial capacities will play a critical role in expanding access to energy.

While there was consensus on the panel that there are ‘no magic bullets’ for addressing the energy access challenge, there was agreement that scaling up action to expand energy access could be greatly accelerated by learning from a number of existing successful business models, and from the planning and policy experiences of countries like South Africa, Ghana, and others. A range of financing instruments and sources will be needed to support the diverse range of business models needed to deliver local solutions. However, it is critical that public and development finance mechanisms are specifically designed to leverage additional private investment. Finally, there was a clear message that partnerships and multi-stakeholder approaches will be essential for success.

Key conclusions & recommendations

  • Business model innovation – The technology solutions exist to deliver access to energy – the key challenge is to build business models that deploy these technologies so that they deliver clean, reliable and affordable energy solutions to customers, while ensuring commercial sustainability for business. There is significant scope for the large number of proven energy access business models to be scaled and replicated with additional policy, financing and capacity building support. However, it must be recognized that no size fits all, so local innovation for local challenges is particularly important.
  • Enabling policy frameworks – Well-designed and stable policy and regulation are critical for facilitating business participation in the energy sector, and the expansion of access to energy. The success of countries like South Africa and Ghana in expanding access to energy in recent decades was built on the right planning and policy support. Policymakers need to focus on prioritizing energy access in national development planning using a multi-stakeholder approach; market creation; improving the investment climate; and implementing enabling measures to promote the primary energy access solutions.
  • Financing mechanisms – Meeting universal energy access targets will require mobilization of significant additional financial resources – perhaps as much as US$ 50 billion per year until 2030. A range of financing instruments and sources will be needed to support the diverse range of business models needed to deliver local solutions. However, it is critical that public and development finance mechanisms are specifically designed to leverage additional private investment, if this financing gap is to be closed. The broader financing architecture must give appropriate consideration to the quality of the regulatory and investment climate, which impact risks and returns associated with private investment.

 

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