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[Episode #21] – The Role of Development Banks in Energy Transition

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Multilateral Development Banks (MDBs) like the World Bank, the African Development Bank and the Asian Development Bank are publicly committed to ending energy poverty and enabling energy access to the developing world. But their conventional processes and approaches to risk management make it difficult for them to invest in the decentralized renewable energy solutions that have the best chance of lifting people out of energy poverty. So what can be done about it? To find out, we talk with a pioneer in the energy investment and energy access space and ask her some pointed questions about how development bank funding works, and how it needs to be changed.

Geek rating: 5

Guest: Christine Eibs-Singer is the Director of Global Advocacy at Power for All, an organization that advances renewable, decentralized electrification solutions as the fastest, most cost-effective and sustainable approach to universal energy access. She also serves as Senior Advisor to the Sustainable Energy for All initiative, with a focus on energy access finance. Christine has been in the energy access space for 20+ years, starting as the co-founder of E+Co in the mid-90s, the pioneer energy enterprise investment company.

On Twitter: @Power4All2025

On the Web: www.powerforall.org

Recording date: June 15, 2016

Air date: July 13, 2016

Chris Nelder: Welcome, Christine to the Energy Transition Show.

Christine Eibs-Singer: Thank you very much Chris. Pleased to be here.

Chris Nelder: Christine you recently offered a paper with Power For All entitled "De-centralized renewables: The fast track to universal energy access," which we'll link through in the show notes in that paper you talk about how multilateral development banks or MDBs are uniquely positioned to accelerate energy transition for the developing world. So let's start with that. For those who aren't familiar with multilateral development banks how would you describe them and what are some examples?

Christine Eibs-Singer: The multilateral development banks or MDBs are actually that. They're banks. They're created by groups of countries both donor countries as well as borrowing developing country members and when we talk about MDBs they're really the World Bank Group which includes the International Finance Corporation, the Asian Development Bank, the African Development Bank, the Inter-American Development Bank and then two new banks are upon the scene that haven't really commenced operations yet: the Asian Infrastructure Investment Bank and then the New Development Bank, which is actually created by the BRICS or Brazil Russia India and China. And they'll be focusing very much on infrastructure. And what these banks do, and again they're banks so they're very much targeted to sustaining their credit ratings but they provide financial and professional assistance in the form of loans and grants. But they're again focused on their credit ratings so they're very conscious on the volume of funding that they commit and disburse and then the rates of return they make on that funding.

Chris Nelder: And what is their charge or their purview like what are they supposed to invest in?

Christine Eibs-Singer: Their purpose is to catalyze poverty alleviation, specifically end extreme poverty. So they're focused on types of development investments that lead to economic growth in countries and lead to the elimination of poverty.

Chris Nelder: So the paper talks about the role of decentralized renewable energy also referred to as DR energy or DRE. And that sounds a lot like what people in my circle refer to as distributed energy resources or DERs. Are these actually the same thing by different names or what?

Christine Eibs-Singer: They are. We use the words de-centralized renewables because in the developing country context we have both distributed household services and then de-centralized or off grid. So we've used the de-centralized renewable as kind of the catch phrase in the developing country market but generally speaking it's the same thing. It's off grid. It's distributed in the sense that it's a household level and then de-centralized to really communicate more the mini grid concept.

Chris Nelder: Gotcha. OK so in that paper you note that MDBs such as the World Bank they tend to overlook decentralized renewable energy to radically speed up the access to energy for those who lack it. And many grids residential solar systems and the like could actually bring energy to these areas much more quickly and economically than centralized grids which are slow and prohibitively expensive to deploy. And this is a point we've discussed actually in several previous episodes of this show including episode 11 on India and episode 12 on energy access for the developing world. So what do you think the main factors are that make DERs or DRE more efficacious for those who lack access to energy?

Christine Eibs-Singer: The experience to date and again I've been in the market now for 20 years or so and really working at the energy enterprise distributed energy level. And when you look at the speed by which households and communities and small businesses can access electricity through de-centralized solutions versus the grid, speed is by far the number one reason. And then you have the cost. If you look at the cost of what it takes to extend the grid to the 1.1 billion people who don't have electricity, 80 percent of whom are in the rural areas, you're looking at costs of extension that are just prohibitive and again on a time basis not going to happen in a way that's going to get that electricity there quickly. So looking at household solar looking at mini grids, de-centralized... You've got solutions that can get there quickly, between days to a period of months versus years which it takes for a normal world bank electricity project. And then the cost factor. These are systems that people can afford on a daily basis. One of the comments that came a number of years ago in thinking about what's the availability or the affordability question for households? And one household, and this has stuck through many examples that have been given of de-centralized solutions, is that a household can afford a rupee a day but a household can't afford 30 rupees a month. And so really breaking it down and the de-centralized solutions offer the ability for households to pay on a much more affordable basis.

Chris Nelder: Why do you think am dbus have favored the funding of big central conventional grid assets in the past instead of supporting these distributed solutions?

Christine Eibs-Singer: The main reason is that if you think about a large bank that has access to billions of dollars of capital, they work in large projects. So there's a mismatch between what multilateral development banks are used to doing and what de-centralized renewable energy actually needs. So banks are used to small number of large projects that have extensive due diligence. The types of transactions that you're looking at in the distributed DRE space is many small transactions with limited information and a perception of high risk. So there's just a mismatch in the business processes and the financial products that the MDBs offer traditionally. And so it's very difficult for them to get down to the level of investing in smaller projects and programs.

Chris Nelder: Well that brings me to my next question. I was wondering you know what's really different about these investment funds or how they need to be designed, how capital gets allocated, how it gets paid back... What are the mechanisms that MDBs can use to actually speed up investment in these distributed solutions? Can you comment on that a little bit?

Christine Eibs-Singer: Sure. There's a couple of areas. The first is that one of the things that the multilateral development banks are quite good at is the policy regime. And one of the areas that is certainly something that's holding back distributed renewables is the policy framework. In fact a colleague recently wrote coming out of the Energy Access X program that was held in San Francisco a few weeks back in concert with the clean energy ministerial meetings that the major barrier that was talked about in Energy Access X was policy. It wasn't access to finance. And so the policy regime has to be tackled in all of these markets and the multilateral development banks, particularly the World Bank, that's something they do quite well. They have access to the ministries. They have access to the different examples and evidence of what's been working in markets. So at a first step while it's not a finance product per se, we see the opportunity for the banks to take the leadership with their clients at the country level in structuring policy frameworks that foster centralised and decentral integration. The second area that we see an opportunity is for the bank to really look at this area differently in the sense that they're really small and medium enterprises or SMEs. They're not all large energy infrastructure projects so the context within which you design a financial product, you design a government program at the national level, is different than if you're designing an infrastructure program. And so while the new energy is infrastructure it's smaller scale and it requires different types of financing products. Linked to that, Chris, would be the fact that you know you're really looking at working with enterprises and companies who are doing these small transactions and so you want to try to expedite the due diligence processes. So create standardized approaches and standardized finance products and that way you can expedite the flow of capital into the space. So for example if you think about an SME waiting the six years that it would take for an actual project to work its way through the planning design implementation finance of one of these MDBs, no entrepreneur can have that sort of patience. So we need to put the financing structures just in a completely different framework than large scale energy infrastructure.

Chris Nelder: Right. OK so the SMEs are playing sort of aggregating and bundling role here to try to come up with a deal size that's that's more well-matched to what MDBs are looking for.

Christine Eibs-Singer: Well that's actually part of the solution set is the concept of intermediaries who are bundling the SMEs. So you're actually looking at an intermediaries whether it's a fund structure - and we addressed this idea a bit in our paper about the concept of a super fund - or whether you're talking about an intermediary-like SunFunder which recently won the gold award from the Asheton Awards, which is a lending intermediary that's basically working with a number of small enterprises primarily in East Africa at this juncture many of whom are local enterprises. And so they're bundling these enterprises together and creating a portfolio that then is of interest to larger scale donors and investors.

Chris Nelder: This super fund sounds like a lot more fun than the kind of super fund we have here in the States.

Christine Eibs-Singer: Well absolutely in fact we were concerned with the idea coming from New Jersey where we have a lot of superfund sites. The reason for the concept was that we needed one coming together and it certainly would be a lot more fun and a lot more positive impact.

Chris Nelder: Yeah indeed. In fact I was just recently watching a documentary about one of those superfund sites in New Jersey. There was a river that was just terribly polluted from many many years of industry. Can't remember the name right now but.

Christine Eibs-Singer: It could have been the Hackensack. It could have been the Passaic. There's a number of them. Fortunately they are being cleaned up.

Chris Nelder: So tell me about more about this concept of the Superfund. How does it work?

Christine Eibs-Singer: Well the first thing is we're not proposing that we create another entity like the Green Climate Fund or another massive fund. It really is more the concept of aggregating capital, putting in place approaches and products that are appropriate to the DRE space, putting in place more standardized and lending mechanisms and recognizing that they need to be separate windows from the business as usual. So while we use the concept "superfund". We're not talking about the creating of a whole new institutional framework but rather segregated capital that can be accessed in a more time efficient manner given the size of the enterprises and the amount of capital that's being requested and pushed through in ways that enable rapid dissemination of capital. So that's really the concept and these could be parallel windows within each of the MDBs or there could actually be a new intermediary established or an existing intermediary further enabled to take in capital that would then be structured to meet these specific financing needs. And I'll give you a couple of examples of the types of financing we would be talking about. One of the major challenges right now that many of the companies, particularly in Africa and to a lesser extent in India, are they're really looking for working capital and access to debt. That's a significant constraint right now to the growth of these markets and these companies. And so one of the areas would be creating a specific window for debt that would be well aware of the types of situations, able to deal with some of the local currency, understanding the data availability of these companies, and putting in place lending mechanisms that these companies could access quickly. There's actually been some discussions underway with the African Development Bank around this kind of a concept and while they're moving slowly they are actually considering the establishment of a debt fund specifically for DRE which is really really good news for the space. Another way would be to further empower entities like SunFunder to be able to take on more clients and be able to do more syndicated lending and potentially actually move into more securitization, a topic you touched on in a previous podcast. So there are opportunities to look at what's working in the market, what's needed in the market, and then take the capital of the MDBs and dedicate it and define it to those spaces so that it moves quickly. Right now in most of the MDBs you don't have dedicated teams who are focusing on this space. You don't have sufficient staff who are well-versed in the energy enterprise development space and you're not seeing a lot of the bank's own capital flowing into this space which is a fact that the recent Sierra Club and Oil Change International report commented on where they you know in the case of the African Development Bank less than 1 percent of the capital that the bank spends on energy is allocated to the DRE space.

Chris Nelder: Wow that's amazing.

Christine Eibs-Singer: It's just basically showing that the banks are not willing to take a risk with their own capital to meet the needs in this space.

Chris Nelder: Right. So let's talk about the risk problem here. I mean I understand why you need to do this sort of bundling to come up with an appropriate package size with these big banks that they can grapple with it. But then there's two problems. One is that you you have the due dilly side of it right. I mean how do you make sure that all these assets have been properly vetted? Because the typical problem is that you're going to wind up with some undesirable assets getting bundled in with the good ones a la mortgage backed securities right? And so how do you make sure that you've really got a package that's worth funding? And then how do you do the follow up on that? And I've discussed this problem actually with Sean Kidney with the Climate Bonds Initiative. You probably know him.

Christine Eibs-Singer: Yes I do.

Chris Nelder: And you know they've developed this whole set of underwriting standards in partnership with all these banks and lenders where you know hopefully they can come up with an appropriate rating structure and a vetting procedure so that if a bundle of assets gets stamped as a certified green bond this is a worthy asset to invest in that it really is. So how do you deal with those issues here especially when the components are so small?

Christine Eibs-Singer: Sure well we're at the first step of that whole process. And you know just Sean and I have had conversations and talked about at what point in the future does the type of work that is being funded and de-centralized renewables going to be eligible for the green bonds efforts and we still think it's a bit of a ways away. But one of the areas - and here we have leadership by the International Finance Corporation and their lighting global work which has actually done quite a good job working with the global grid lighting Association looking at creating first key performance indicators that the companies would all agree to report on and be held to, which would also include some consumer protection indicators. So we're at the beginning of creating if you will those underwriting indicators that the companies would need to be able to report to. And that's a process underway and the companies recognize that in order for them to actually begin to bring into the market the levels of capital that are needed that we're going to need to see some transparency on these sorts of indicators and the definitions of terms so that investors can have confidence in the transparency and similarity of data. So that's the first piece. We're in a good position with many of these companies particularly in the pay as you go space or "pay go" because their back office systems, their mobile to mobile systems produce such strong data sets on their customers and on who's paying and when they're paying and why they're paying for what particular service. So the type of data that's being created by companies like M-KOPA, and Mobisol and BBOX really is going to create a very strong basis upon which to put package industrywide key performance indicators which would then lead to an ability to have an orientation to due diligence and a statement of principles for the underwriting criteria that can be tracked. But we're still at a very early stage as has been reported previously we've only had one securitization thus far which is with BBOX which was at a very small level. I believe it was at a $500,000 level, which in the world of packaging $300 loans is a lot of loans. So your point is spot on Chris about there's a multitude of transactions that will sit under such a securitization and that's going to be the basis upon which this data is going to be so critical.

Chris Nelder: Yeah you're right. I mean there's a pretty good sized gap there between even that first half million dollar securitization and your typical bank project which is going to be like $100 million or more right?

Christine Eibs-Singer: Absolutely. In fact one of the statements that was made by a colleague in the World Bank is in regard to a recent I guess about two years ago now in Ethiopia the World Bank did a $20 million line of credit to the Development Bank of Ethiopia for distributed renewables which has been quite successful by the way. But the comment that was made in conversation was that if there wasn't going to be a hundred million dollar project that the bank was pushing through they never would have been able to get the $20 million approved.

Chris Nelder: Wow.

Christine Eibs-Singer: So even there $20 million is a large amount of capital being designated for the off grid space. Yet at the same time it would have been too small to stand on its own. And that's where the banks need to step back and look at what are their procedures and processes that could be changed and adapted to enable them to work at a smaller scale level.

Chris Nelder: I think that's the right question because you know I keep seeing these efforts that people like you or people in the development space are doing to try to package things up and get things up to a level that it meets the criteria that are being established by the banks. And I keep asking myself well why are the banks just sitting there passively waiting for people to package up solutions that are agreeable to them? Like where's their creativity? Why are they not saying, "Tell you what here's a $10 million facility. Package it however you want and let's see how you do and if you manage it well, we'll give you another," or something? Where's their creativity here?

Christine Eibs-Singer: Well what's interesting Chris is their creativity is if you will with OPM, other people's money. There is good work being done in the multilateral development banks with donor capital, grant funds, trust funds that are being established in the MDBs. The Lighting Global Program which is evolved from the Lighting Africa work which began I would say about five or six years ago is one of the main reasons that the off grid lighting market has taken off in Africa. They've done a just terrific first rate work on consumer awareness and education on the establishment of quality standards and processes by which countries can set up testing facilities to ensure the quality of the products that are being sold to the consumers. That was done on the back of grant funds. So the MDBs are showing innovation when they have access to these trust funds that are funded by donor grants. The Asian Development Bank has a very successful program called Energy For All which was actually predated the establishment of Sustainable Energy For All which I have the good fortune of working with. So you are seeing innovation. They're just not taking the risk with their own bank capital and that's the barrier we're trying to break down.

Chris Nelder: What's it going to take for them to be persuaded that this flow of data from these micro mobile payments and so on is sufficient evidence of the validity of these investments?

Christine Eibs-Singer: I think one of the areas that's going to have to happen is they're going to need to see the demand from their clients which are the country governments. And we're starting to see that in some of the markets that the Power For All campaign is actually working in. In Rwanda in Nigeria, Sierra Leone, and Zimbabwe. It's also being reported quite clearly that part of the reason the Kenyan market is moving along. There was just a billion dollars approved by the World Bank. A billion. That is the right number. That will be a combination of investment and grant funds from the World Bank that's looking across infrastructure of which off grid will be included. But that was packaged because the government is aware of the ability of decentralized renewables to make a difference in their market. This is where M-KOPA has taken off where MPESA the mobile payment system has been so critical to the ability to service the off grid clients to start with small scale energy moving up the energy ladder to more solar home systems. But there the Kenyan government is aware of what these business models these technologies can deliver and they are the ones who are pushing the World Bank for this kind of capital. So part of the agenda in theory of change if you will for Power For All is to inform and educate governments as to the validity and legitimacy of de-centralized renewables to meet the Universal Energy Access objectives and to give them the information they need to engage and demand from the banks that this is what they want incorporated in their lending packages. So that's one of the first steps is you know we had an opportunity in the spring at the World Bank annual spring meetings to meet with some of the very senior leadership of the World Bank. And we heard quite clearly that energy access is a priority but that the ability to focus on decentralized solutions will be a result of being demanded by their clients that this is what they want. And often in the markets we're working in what they want are large scale projects. That's what they are used to. Thats where they get the big dollars themselves. So theres a whole education process of behavioral change process that's underway in these markets and the more success we have with M-KOPAs and off grid electrics and MOBASOLs with companies like Power Hive and Devergy and Crossboundary Electric and there are many others but those are the ones that come top of mind. The more success we have that we can show to government officials that this is real power that people want and that they'll pay for the more you're going to start to see the reaction from the banks.

Chris Nelder: Well I mean I certainly applaud your efforts and those of other people working in the similar space to try to get these people to come to the table and give them the evidence that they're looking for. And you have to be nice to those people. I don't, however. (laughs) And you know part of me wants to just say you know what we need to do? We need to get one of these underwriters from each of these big banks and we're going to send them to Rwanda and we're going to say you're not coming back until you sit down and figure out what we need to do here to make the data processing and the presentation of the credit worthiness information work. So that we can actually get a pipeline of deals in place and start getting the money flowing. I mean 1 percent is pathetic. And I just think these guys have been sitting back on their heels and not really putting their best foot forward and trying to be thoughtful and creative and helpful and cooperative and really push from their end.

Christine Eibs-Singer: It's interesting that you phrase it that way Chris because a colleague of mine attended the African Development Bank annual meeting in Lusaka last month and had a conversation with someone very high up in the risk department. And basically the comment was you get the powers that be the board of the African Development Bank to relax some of their risk requirements and I'll lend.

Chris Nelder: Yeah.

Christine Eibs-Singer: So you're spot on in the sense that we need to give the evidence that the risk is not what's being perceived on the one hand and you have to create a different incentive system within these multilateral development banks so that they're not just measured on the volume of capital. So it's not just the $100 million deal that's going to get the energy specialist his or her bonus for the year but it's also the impact of what those dollars are going to achieve.

Chris Nelder: Well exactly.

Christine Eibs-Singer: And that's the other piece and we've started some conversations at the board level through the U.S. and the U.K. delegations. And that is a long term process. And what's concerning about what I just said is we don't have a long term. The African Development Bank has stated that they want to achieve universal energy access by 2025. That is nine years. We have nine years in the African context to deliver access to 650 million people, nearly twice the population of the United States. We're not going to do that when we're told that these institutional changes are going to take time.

Chris Nelder: Yeah.

Christine Eibs-Singer: And so there's some real constraints here in terms of the banks. All of the banks' commitment to saying they're you know they're committed to achieving universal energy access and what their actual systems are going to enable them to do. We need real systemic change and we need it in a very short time frame.

Chris Nelder: Well exactly. And as you pointed out it really comes down to incentive structure right? Like if there were just to say internally with the stroke of a pen, tell you what every dollar that you actually get funded in you know one of these developing countries projects now is a 100X weight in terms of your personal bonus.

Christine Eibs-Singer: Correct.

Chris Nelder: That's it. It's just a decision. It's an internal decision. The stroke of a pen. That's all it is. And all of a sudden oh hey guess what we're relaxing our risk requirements here or we're changing the way that we're packaging things.

Christine Eibs-Singer: And that is certainly you know a topic that we're trying to stimulate the dialogue on. Power For All is a coalition of private sector and civil society organizations founded by some of the leaders in this space. And there is an acknowledgment that it's this collective voice bringing these together that's going to get the attention of the banks and begin to plant these seeds and then to go around the back end if you will to both the governments to give them, as I said before the ammunition they need to ask for this and then to start pounding on the donors. That the donors also need to be looking for this kind of change. And we do see in a number of donors the awareness that their capital has to be used differently. We are seeing that and you're seeing some bilateral donors take some very innovative steps to work in the decentralized space. You have the U.K. government which is a funder of Power For All through the Department of International Development. They are now progressing in Africa something called the Energy Africa campaign. And at the national levels they're creating bilateral compacts that set forth very clearly what the national government will be prepared to do for accelerating energy access, very specifically household energy access, through decentralized renewables and then what the British government will be able to support when these policy changes begin to happen. And you're seeing collaboration with Power Africa and their Beyond The Grid program in a number of markets. So you're starting to see the donor bilateral community respond to these changes at the national level and where an entity like Power For All is playing, we're kind of if you will the nag the nudge the conscious that's pushing that together to push the emphasis to government that they need to go to the banks and say this is how we want to spend your money.

Chris Nelder: Well good on you there. So now I tell you what. Let me let me just play the devil's advocate here and flip this whole question around. So what is the risk or the cost in having MDBs favor these big conventional solutions? I mean put another way why does it matter if they haven't made distributed solutions a priority wouldn't it be good if all the above got built eventually?

Christine Eibs-Singer: Why do the energy poor have to wait? The World Bank account self-analysis indicates that a typical business as usual grid connected project takes nine years which happens to be the same period of time till we have to deliver universal energy access in Africa coincidentally. You can have household solar, a pico lantern, you can have at the moment the consumer makes the decision that they want that. They want to offset the dirty expensive kerosene or the poor lighting that might come from a candle. They can make that decision instantly. So the risk or the cost is nine years of nothing. Nine years of dirty fuel. Expensive fuel. $38 billion a year is spent in kerosene by the energy poor. That $38 billion could be spent on smart energy products like picos solar lanterns or small solar home systems as a start. One of the areas that we've put forth in the Power For All discussion, Chris, is the concept of the energy access opportunity cost which is really a methodology that we're in conversations with some economists both the World Bank and the African Development Bank to develop an approach for decision makers at the national level who are deciding about how to allocate their budgets to say okay well I can wait nine years but by waiting nine years what's not happening? What's the opportunity cost to energy poor households in terms of health? Kerosene is you know it's it's clear that indoor air pollution from both cooking and lighting takes about 4.5 million lives a year. Some of that can be avoided when you switch from kerosene to solar lighting. So you have immediate health impacts, you have micro-business impacts, you have job impacts from these companies. So you get economic development impacts health impacts education impacts over a nine year period that you wouldn't have if you waited for the grid to come. One of those statements that really seems to resonate in the African context is that if we were to wait the nine years - seven to nine years that it may take for grid - you're basically missing a whole primary secondary school education for a child. A whole generation is missing that opportunity. They're missing that opportunity of clean air in their homes when they're trying to study or when they're trying to have you know nighttime entertainment. And there is no access to television when you're waiting for the grid. So I think the concept of the energy access opportunity cost is to begin to put a value on time. What is the value to these households to the country of having access sooner through de-centralized renewables?

Chris Nelder: Well those are important questions and I like your framing there. Why should they have to wait?

Christine Eibs-Singer: We have the technology. They're already spending the money. So they shouldn't need to wait. The other piece is you know the concept of the energy ladder is a very important one to put out there. You know there's evidence that while many households in the developing world will start with a very small pico lantern or a torch they're be getting introduced to the concept of electricity and there is evidence that's showing and you see this in the work of Lighting Africa. You see it in the recent market trends report from Bloomberg New Energy Finance and Gogola that households and customers actually will move up the energy ladder. They'll go from a pico lantern to a small solar home system. And then when you begin to introduce these energy efficient appliances... Televisions. M-KOPA has 20 watt systems that are now incorporating TVs in them and fans. MOBASOL, one of their highest selling products is an iron, because households parents mothers want to ensure that their children go to school in ironed clothes. And so they're buying these more energy efficient irons. As those appliances start to come out, they're actually going to drive people moving up the energy ladder as well. And if in nine years the grid is extended you will have created the culture and the payment philosophy to pay for electricity. So it really is a win win situation on many levels.

Chris Nelder: You know I think about the disconnects. When I hear you talk about this it makes me think about the disconnects between sort of the mentality of the person on the ground in Tanzania or Rwanda or what have you versus the mentality of a banker sitting in a comfy office in London. And how do we get them to really think together and work together? I mean one of the longstanding critiques of past efforts that MDBs and NGOs have made to build infrastructure especially energy infrastructure in the developing world is that these projects tend to be structured as one shot deals and they don't have sufficient follow on support. So they'll helicopter in with some funding, build an off grid solar system, irrigation system or a hospital or some rocket stoves or what have you. And then they walk away and in a few years when something breaks there's no capacity to fix it. And sometimes these projects never even get connected or integrated into the day to day activities of the people in those countries. And so those people I think must get used to having broken down relics of these once promising foreign aid projects just laying around and decaying and then I would think that that would tend to make them a bit cynical about the next NGO that wants to ride in on a white horse and fix things for them. I mean how can we break this cycle and ensure that the energy access work that we're doing now has enduring value?

Christine Eibs-Singer: Part of the answer to that is that what you're seeing now so successfully on the brink of scale is that these are market based approaches. Long ago when I started, when I was a co-founder of the company IanCo, we experienced what you've just described. We would go into markets with entrepreneurs and some aid program would have already been there. They would have provided technology. They would have trained technicians or you know one great instance was an aid program in Ghana that trained artisans to make fuel efficient cook stoves. You know and one of the things about the projects you're talking about and the problem is they have a beginning and an end. And in this instance they trained all these artisans, and they created the awareness in the community about fuel efficient cookstove, and then the project ended and the responsible party produced their report to the donor. And there you go. Well there happened to be an entrepreneur amongst that group who has now gone on organized it received capital and created the sustainable process that you're referring to. And that's what's different what you're seeing and in particularly in Africa but also in developing Asia you're seeing entrepreneurs who are creating market based solutions. In the pay-go space when you have customers who need to pay you over time you need to ensure those systems are working. You're creating a customer relationship because when they're finished paying off their solar home system you want them to now take on a television or a fan or the next energy efficient clients that comes along. So you're building a customer relationship and that's what's different today than you've seen in the past. Even some NGO programs like solar aid that have gone out and created... Basically done the pre commercial market development. Places like Tanzania a couple of years ago now Malawi... What's successful there is again they are creating an awareness of the product they're bringing in quality products because they're abiding by the Lighting Global standards. So the products are going to be working over time. They're not going to break down you know when the sales guy closes the sales and moves on. But here you've got companies and entrepreneurs who are not seeing the end. They're actually seeing the beginning of growth, of sales growth, of scale of their business, and that is a big difference today than the NGO projects of old. We still run into some problems of quality of product and market spoiling particularly with some of the counterfeit products that are now coming into Africa. But there's significant efforts underway to try to manage that. Always that threat of counterfeit products. But clearly the difference now is market based approach long term relationships with your customers and really using the energy transaction as the means to inclusion for this household and community. Inclusion for energy inclusion for education entertainment. Financial inclusion. So you're seeing... You know we always talked about energy as being a means to an end. And what you're seeing with these new business models and the way that it's being integrated with the mobile money systems it's actually now a means to social inclusion.

Chris Nelder: You know one of the interesting exciting projects I'm aware of as we've just been discussing are in fact these for profit enterprises. They're not the typical sort of A projects of the past. And we've talked about some of these enterprises and episodes 5 and 12 in particular companies like Off Grid Electric or Sunny Money or as you were saying the Solar Aid Foundation, M-KOPA, BBOX... What is the potential for just leveraging MDB money to support and accelerate the work of these for profit companies?

Christine Eibs-Singer: I think there's a significant role that the MDBs can play to leverage. And one of the major issues that these companies are facing is local currency. They're borrowing in dollars or euros and they're selling to their customers in local currency. They have experience in setting up local currency funds. They have experience in setting up lines of credit with local financial institutions. In fact I am aware that the African Development Bank is exploring the concept of basically lines of credit to local financial institutions specifically for household solar which would be quite significant for these customers. So when you move outside of traditional energy projects business as usual projects in the banks and you move into the space of what they're doing with small and medium enterprises what they're doing with financial inclusion what they've learned in working with micro-finance institutions, there are in my opinion and in the opinion of Power For All and others, there are financial products and approaches that would help these companies scale faster. And part of what we are pushing for the banks is look outside your normal way of doing energy business and see what you've learned that can be applied elsewhere.

Chris Nelder: Yeah that's one of the things actually that I discussed in Episode 19 with Adam James. We were talking about some of the problems related to finance and distributed energy projects, you know small residential projects in Latin America was this currency risk problem. You know where they're having to borrow in and dollars in euros and they're having to actually get paid in local currencies. And in some cases the currency risk loan has destroyed viable projects over the course of just 12 months or whatever.

Christine Eibs-Singer: Yes.

Chris Nelder: And so we were kicking around some ideas of how that risk might be dampened or mitigated. And I think there's actually maybe a role here for the governments in these host countries to say tell you what we'll create some sort of a mezzanine currency facility to sort of smooth out those fluctuations. Or maybe there's actually a role the MDBs can play to offer some sort of special credit facility that mitigates that currency risk.

Christine Eibs-Singer: I think the answer to that is yes. They've shown an ability to do it in other sectors. I mean clearly if you think about particularly solar as a commodity it's not the only commodity that faces currency risk. So there have been products in lending facilities that have been put in place that enable these other types of commodity companies to deal with this. And here again we just need to start applying these lessons learned to energy. So I think there is an opportunity for the bank to look out... You know one of the things we realize and this is not new to energy either is how siloed these institutions are. You know you've got you've got energy lending and they do large scale projects. That's what they do. So when you talk to the energy team about decentralized renewables and products like you know solar home systems or small scale projects like mini grids and development company models you know the energy teams in most of these organizations just don't know what to do with it. They're not versed in it. So there's this whole education process that has to go on with them, on the one hand. Or there could be some cross intra department sharing in these markets to say okay well what's worked in agriculture? What's worked in SME lending that we can apply? And you know we're hoping to be just pushing that. It sounds so easy and logical yet it's very difficult for these large scale institutions to do that.

Chris Nelder: Yeah they're not literally walking down the hall to the guy in the Ag group and saying hey how do you deal with the currency risk of shipping wheat and soybeans?

Christine Eibs-Singer: Correct. Correct. You know they've gotten some more matrix type structures that they're experimenting with but it's not there yet. So the more we can push them and show them how again using the SME model, how an SME approach is working in certain markets in stimulating local capital, let's just apply that in the energy space.

Chris Nelder: Right. Right. You know I want to go back to what you were saying about how the real sustainable outcome of some of these projects is when you have a local entrepreneur to sort of pick up where the NGO left off and turn it into a really sustainable and ongoing enterprise. Sometimes I wonder if and when the residents of these developing countries will actually be able to shoulder the task of building out their own energy systems and they won't need the assistance and investment and intervention of Western companies and NGOs or maybe that's not even a desirable goal? I mean what are your thoughts on that?

Christine Eibs-Singer: Well I think we just recall how our own country built our electric system. It was with government support with the Rural Electrification Administration. So we in our own development had a government body very much at the head of pushing that through and of creating the standards and the basis of electricity provision. So there is the concept of a national organization. I think that's one of the areas by which we can expedite letting the countries take control of their energy access future. If you look at the experience in Bangladesh with the Infrastructure Development Company Limited or IDCL it's been a very successful public entity that's tasked with infrastructure development but was given the responsibility by the government to take on the task of energy access so it has a dedicated energy access program body of work funding. It brought together it blended 11 different donors' capital to put in place different sorts of responses to what the Bangladesh market needed. And if you look now they're at well over three million solar home systems in the market and I think their goal is $6 million in the near term. So they've had some significant impacts and they've done it at the national level. It's definitely a success story and something to learn from. The World Bank played a very important role and the Asian Development Bank played a very important role as well as bilateral donors. Why can't we replicate that? Here you would have the ability for national governments to create if you will development companies at the national level that have the ability to focus on delivering energy access and blending not just donor capital and bank capital. And when I say donor it's not all grants. This is also investment capital that's being put in. And look at the whole continuum from market development all the way through to the growth capital needs of these companies. That's one of the recommendations that we've put out there that would really give the national governments the responsibility for their own energy access future with a model that has shown itself to work in other markets in agriculture. Many countries have agricultural development companies. Tourism development companies. In Kenya they've actually created a geothermal development company so that they have expertise that's focused explicitly on the delivery of geothermal for the economic development of the country. In the United States we have the Port Authority of New York and New Jersey. I'm not sure I'd use that as an example today but when it was established back you know 70-80 years ago its purpose was to develop the regional transportation system. The public sector made a decision that that issue was worthy of a dedicated entity to deliver it. So I think there's examples there that the MDBs can replicate. Now it's not going to... You have to adapt to each of these to replicate in different markets. But there are examples of ways by which national governments and their constituents can take control of their destiny.

Chris Nelder: Yeah absolutely. Those are really good ideas, creative ideas, and useful analogies. And I really hope that get some traction with what you're trying to do.

Christine Eibs-Singer: Well I think we've certainly getting as I mentioned traction with the concept of putting a value on time, on the opportunity cost of not achieving access. There are discussions under way that we are elevating and pushing forward in the public domain on the replication of IDCL. And what it would take to adapt and replicate that model in markets like Nigeria where you have dense population and an ability to create that kind of a structure. In terms of the super funds I mentioned that you're seeing the beginnings of thinking in places like the African Development Bank on dedicated debt funds and local lines of credit to financial institutions. And I think there are people in these institutions who care. They're our champions. And part of the goal of Power For All and part of what SEforAll wants to do is take these leaders and help them succeed. There are leaders at the government level in many of the markets we're working who really want to effect this change and want to make these demands if you will to the MDBs. Let's empower them. Let's give them the data and the information they need to have credible requests. And so that's really I think how entities like Power For All are going to try to expedite the delivery of energy access, is it really ramp up the volume of what's working, ensure that we're investing in what's working that we're not just you know going out and reinventing things for the sake of reinventing. Let's invest in what works.

Chris Nelder: Yeah yeah I agree. Wow. Well that was zippy hour. Thank you Christine.

Christine Eibs-Singer: Gosh. Great. I think the one topic I would like to come back to is this concept of integrated national planning and of really the multilateral development banks being in such a good position to facilitate the analysis and the implementation of the power sector of the future. And one of the comments that was made by a senior person in the World Bank which I think is so relevant to this is that it's easier to build new than to break old. And so let's build power systems that are reflective of the fact that we have decentralized solutions, that we have customers who are using wireless payments. Let's integrate these new business models in how the utilities and regulatory frameworks will evolve. And there's a good body of work underway being led by NREL that's looking at the distributed generation under the Clean Energy ministerial process and the opportunity to look at what that thinking is in the more developed markets and how we can apply that to the developing world... Because we do have an opportunity to leap frog business as usual and to leap frog the processes that really hinder innovation in the power sector. And so I think that's an area where we need more collaboration amongst the individuals and institutions who are thinking about this and then really begin to build the capacity in the developing country utilities and regulators to be able to contribute and really help in the design of this to their local context.

Chris Nelder: Right. Maybe there's an example we could point to, a successful project that would sort of help illuminate what needs to be done there.

Christine Eibs-Singer: The sad point is I don't have one. You know this is really the beginnings of the cutting edge in the developing world market. As we build out the legitimacy of decentralized solutions to meet the access, you're just starting to have these conversations and that's why you know the context of trying... Let's make it happen in a more expeditious fashion by pulling together the good thinking that's being done in different places. I think this is one of those areas where there's going to be a to and fro between what the developing world is doing and what the developed world is doing. You know the whole concept of smart grids. You know in most of these places in Africa we don't have grids. So we can leap frog. We can build new smart grids as opposed to breaking what we have and retrofitting it.

Chris Nelder: Yup. And I've often said that chances are very good that we're going to actually create some of this technology in the west and then we're going to deploy it at scale for the first time in developing countries. And then we're going to discover there how it really ought to work. And then we're going to import those lessons back to the west.

Christine Eibs-Singer: I agree with you and I think the one point that we're not hearing enough of because of the different markets needs in the United States and the developed world. We need to just elevate the role of a decentralized distributed generation solutions. And in the context of the developing world it doesn't necessarily mean connected to the grid or connected to the utility. And that's part of what we have to try to balance so it may be a conversation for the future.

Chris Nelder: Well I look forward to having that conversation with you in the future. Or maybe we can actually have some real world examples to talk about in a year or so.

Christine Eibs-Singer: That would be desirable. I know that Sustainable Energy For All is also thinking about how the role that it can play in collaborating and elevating this topic at the country level.

Chris Nelder: Very good. Well I'll make sure to link to them in the show notes as well. Well thank you so much Christine. I really appreciate you being on the show.

Christine Eibs-Singer: You're welcome. Thank you so much Chris. It was a pleasure.