With more energy communities (ECs) in the EU keen to engage in energy solidarity, it’s critical that they grasp the need to build supportive ‘ecosystems’.
To help ECs better understand the concept of ecosystems to support innovation across all aspects developing and deploying local clean energy installations, CEES turned to SELCO India and SELCO Foundation. Together, these entities have been empowering very poor communities across India through decentralised solar energy since 1995.
SELCO India has been pioneering technologies to bring clean, affordable energy solutions to last-mile households in both remote rural areas and urban slums. They first focused on installing small solar PV panels on homes so people could charge their mobiles or have lighting at night. More recently, they began developing super-efficient technologies that could be powered by such PV systems, with the aim of boosting productivity across diverse low-income livelihoods.
Targeting small-hold farmers, for example, they developed solar-powered equipment for seed sorting, irrigation, threshing, milling, etc. This enabled farmers to increase their harvest and start processing what they grow, thereby bringing higher value products to the supply chain. In turn, this increased farmer incomes and boosted food security for local communities.
While they succeeded to a degree, SELCO India soon realised a major barrier: the people who could benefit most from the technologies simply could not afford them.
Clearly, technology was not enough. This prompted SELCO Foundation to investigate the disconnects across key areas, such as economic and social policy, or barriers in access to financing. Seeing the need to get more stakeholders involved, they set out to build ‘clean energy innovation ecosystems’.
In this webinar, Ms. Surabhi Rajagopal, a policy expert from SELCO Foundation, explains how the efforts invested in establishing local support structures ultimately plays a vital role in accelerating innovation, scale-up and amplification of proven solutions. Notably, SELCO India and SELCO Foundation are doing similar work in the textiles and animal husbandry industries, and in the health care sector.
Stimulating a clean energy innovation ecosystem
To establish a clean energy innovation system, SELCO India finds that it first requires strong local partnerships with technicians, clean energy enterprises and NGOs to understand energy needs and develop innovative solutions. When actual solutions are in place but costs prove prohibitive to enabling local ownership, engaging government agencies and financing institutions becomes vital.
Often, as represented below, a technology innovator holds the central position in Stage 1. Over time, stronger relationships among stakeholders make it possible to tackle non-technical challenges more effectively (e.g. regulatory and administrative hurdles), and the ecosystem becomes more resilient (Stage 2). As the effectiveness of innovation ecosystems becomes clear, stakeholders begin to branch out across their own areas of interest and networks (Stage 3).
Figure 1 ● Stages of building ecosystem to form independent working local networks
When considering ‘who’ to recruit into such an ecosystem, SELCO India suggests strategising on ‘how’ collaborators can help to integrate five enabling factors. As noted above, innovation and technology should cover both energy supply and end-use appliances and equipment. Conducive policies need to both specific to some challenges and cross-cutting to address systemic problems. They may also need to be customised to local contexts and implemented at grassroots levels. Entrepreneurship and skills reflect the need to develop business models to deploy innovative technologies and to build up the skills of end-users and of technicians who will keep them functioning well. It should also include knowledge exchange to capture local, traditional knowledge and skills. Market linkages are needed to support distribution. Formulating financing mechanisms and customised financial products for target markets that have low incomes and little access to financial systems is particularly challenging (see below).
Figure 2 ● Elements of a clean energy ecosystem
A holistic approach to the clean energy transition
Over time and through ecosystem engagement, SELCO India became increasingly aware of other factors related to sustainability and ecosystem optimisation. They now consider three elements as vital to achieving an effective energy innovation ecosystem:
- Clean energy systems, including solar panels, batteries and inverters to provide reliable and sustainable sources of electricity.
- Energy-efficient technologies, designed specifically for small-scale operations, to reduce reliance on centralised grids while also saving money on electricity bills.
- Green built environments, which integrate solutions such as natural lighting and thermally insulating materials, to reduce energy demand while creating a more comfortable and productive work environment.
Figure 3 ● Expanding clean energy innovative ecosystems for more holistic approaches
Relevant to ECs in Europe, a similar emphasis on integration is evident in recent revisions to key energy directives, which go beyond promoting clean energy generation to set new ambitions for energy efficiency of buildings and appliances.
The Energy Performance of Buildings Directive (EPBD) and the Ecodesign Directive, for example, have become increasingly interconnected. The Renewable Energy Directive (RED II) acknowledges the role of ECs in providing affordable energy solutions, at the local level, to vulnerable households. In turn, policy-makers have acknowledged the need to make space for ECs in the Electricity Market Directive.
An ongoing challenge for ECs in Europe is that Member States’ progress in transposing these directives into legal and regulatory frameworks is advancing at different paces and applying diverse approaches. Also, as past policy-making related to energy and related areas was designed primarily for large actors focused on turning a profit, the entry of ECs as local actors with different ambitions and business models requires policy innovation.
At present, policy approaches often create bureaucratic hurdles that are difficult for small, financially constrained entities (such as ECs) to manage. Additionally, the diversity of policy approaches makes it difficult for ECs to apply proven models in different contexts.
Finally, inconsistent – or indeed complete lack of – dedicated financial support programmes at national and local levels hinder the ability of ECs to secure funding and operate effectively.
Tapping into the ecosystem to solve fundamental challenges
Financing instruments, Ms Surabhi emphasised, are perhaps the most critical of the five building blocks of an energy innovation ecosystem. In communities in which SELCO India is active, potential energy users have severe financial constraints. Initially, financial institutions considered that managing numerous very small loans to very poor households was too much work and carried too much risk.
Working with other ecosystem actors to better understand end-user needs and capacities was a critical first step in efforts to bridge the funding gaps. Over time, joint solutions emerged. With targeted capacity building, local NGOs could take on the role of aggregating small loans while governments engaged by developing effective policy to offer risk guarantees. This brought the risks and workload down to levels that were acceptable to convince local banks to get on board.
Figure 4 ● Integrating financing mechanisms to support share objectives
With the overarching disconnects resolved, it became easier to make the case for other actors (e.g. philanthropies and corporate social responsibility programmes) to step in with instruments such as margin money support and gap funding.
By applying an ecosystem approach, the actors were able to work through, step-by-step, what seemed an insurmountable challenge and devise financing solutions that are context-specific and customised to diverse end-user capacities. Finally, funds could flow through the NGOs to low-income households.
From innovation to amplification
“Once, we have an ecosystem in place,” says Ms. Rajagopal, “it becomes easier to navigate through these three phases of innovation. Ultimately, small businesses can operate more efficiently, creating jobs and boosting the local economy.”
A recap of their story may offer insights for ECs in Europe:
- Innovate: Identify problems, such as the lack of efficient small-scale processing options for millet farmers. Through research and collaboration with manufacturers, develop and/or test small-scale, clean energy-powered solutions, get feedback from end users, and optimise the technologies for particular geographic, social and economic area.
- Scale: Once a viable solution is identified, find partners to scale it up. This could involve women’s self-help groups managing the business, local governments and NGOs facilitating market linkages, and clean energy enterprises providing power.
- Amplify: The ultimate goal is to integrate these successful partnerships into larger programmes. This could involve government agriculture schemes providing the equipment and local financial institutions offering loans.
Similar to the early days of SELCO India, ECs are bringing new models for energy delivery to EU households and to EU markets. With more supportive energy and related directives now in place, the time may be ripe to apply clean energy innovation ecosystem approaches. By working with a wider range of stakeholders, ECs may be better equipped to accelerate advances and integrate solutions across the three main phases of development and deployment.
At present, as noted in recent EU Guidelines on Energy Poverty, households in energy poverty or vulnerability remain largely underrepresented in ECs. Also, many ECs struggle to become more inclusive towards a broader segment of society — especially those with most to gain from collective structural and empowering measures.
Evidence of more supportive policy is emerging. In Italy, the 2020 National Energy and Climate Plan (NECP) mentions: “In addition, given the aims as set out in the Renewable Energy Directive, ways in which those communities can also provide support to families in conditions of energy poverty, especially where direct interventions (for example, self-consumption plants) are not technically feasible, will be explored.”
This blog was prepared by Deepal Khatri, EnAct
The segment featuring Ms Rajagopal begins at 01:03:03.