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June 05, 2014

President Obama and Private Investors Move $1 Billion Beyond The Grid

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For a while it seemed as though the Power Africa Initiative was more about powering oil and gas profits than delivering energy access to those that need it most. However, thanks to recent bipartisan leadership in the House of Representatives, this threat has passed, and the future for this initiative has become much brighter.

And while we welcome this shift in energy focus, it’s what U.S. Secretary of Energy Ernest Moniz announced just this week that has us really excited -- the first real leadership on clean energy access from the Obama Administration by way of  the Beyond the Grid initiative.

This new dedicated off-grid clean energy access program includes 27 new investors who, over the next five years, will have committed a combined $1 billion exclusively for off-grid and small scale energy access solutions to African energy poverty. This increased energy access will reach homes, businesses, schools, and public places and will ultimately benefit the more than 240 million Africans currently living without electricity.

It’s hard to understate just how big a shift this is for Power Africa. When it was first announced last year, less than two percent of the $7 billion in energy investment was earmarked for off-grid solutions. At the same time, large corporations like General Electric (GE) were eyeing it as an opportunity to increase their investments in dirty fossil fuels and not expand energy access. Many in civil society were openly skeptical about Power Africa’s motives.

Beyond the Grid changes all that. It begins to align the Power Africa Initiative with what the International Energy Agency (IEA) has made clear is necessary to achieve universal electrification - diverting over 60 percent of all new energy access finance to off-grid and mini-grid solutions. Now, thanks to Beyond the Grid, not only are those investment flows looking more balanced but the international community also has its first major political leadership recognizing the cheapest, fastest, and most effective tool for the energy access job -- off-grid clean energy solutions.

That’s critical because while the off-grid clean energy sector has posted eye popping growth rates (an estimated 95 percent compound annual growth rate in sub-Saharan Africa according to Lighting Africa) and rapidly growing private investment, it’s had very little help in the way of policy support. Instead, policymakers have continued to dump billions of dollars into centralized power plants and grid extensions that have done little to alleviate energy poverty in sub-Saharan Africa. As a result, off-grid clean energy entrepreneurs have been seemingly banging their heads against a brick wall of institutional inertia and are demanding $500 million for their sector.  

Now, this rapidly expanding energy sector finally has political momentum and a legacy-defining initiative behind it. If nothing else, Beyond the Grid will be a success for casting a spotlight on a booming market that has been under the radar for far too long.

But that’s not nearly enough given how important this is to the president’s legacy. While this is an important first step, it’s time the Obama Administration put some skin in the game and announce a new loan guarantee program to back up Beyond the Grid. That will potentially unlock billions of dollars in private sector investments that will enable these entrepreneurs to finally deliver where the centralized grid has failed.

And at the end of the day, this isn't just about climate, it's about 21st century technological progress.  Remember, mobile phones have leapfrogged centralized landline networks in Africa. That’s why nearly every household in sub-Saharan Africa has access to a mobile phone and no one is proposing land lines for all to solve communications needs. The same can be true for the hundreds of millions of people that lack access to a centralized energy extension.

Beyond the Grid is the very first initiative to recognize that it’s time to make a break with the status quo and finally light the lives of hundreds of millions of people. Here’s to moving beyond failure, and here’s to moving beyond the grid.  

--Justin Guay, Associate Director, International Climate Program, and Vrinda Manglik, Associate Campaign Representative, International Clean Energy Access

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