Sunday, December 26, 2010

The global energy deficit

Large parts of the world remain without access to electricity. Over a quarter of the global population are deprived off even the first generation uses of electricity - lighting their homes and charging mobile phones.

The United Nations estimates that 1.5 billion people across the globe still live without electricity, including 85% of Kenyans, and that three billion still cook and heat with primitive fuels like wood or charcoal.

Given the massive investments required with conventional electricity generation, transmission and distribution, off-grid electricity using cheap solar panels and high-efficiency LED lights is the most realistic option for many areas.

However, it suffers from a massive administration challenge. The dispersed nature and small size of such electricity generation makes it impractical for government agencies to administer. As the Times writes, "A $300 million solar project is much easier to finance and monitor than 10 million home-scale solar systems in mud huts spread across a continent."

Such systems have to be run either by the local community or by private operators. However, a reliable and sustainable business model for such investments remains elusive. Investors naturally see the poor rural consumer base as too risky to yield reasonable returns.

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