Guest post: Energy engagement series — April 2015 RECAP


April 30th, 2015

The following is a guest post from Lily Ordano, an Associate with the Energy Program and the World Resources Institute (WRI). Practical Action is working in conjunction with WRI to produce a monthly Energy Engagement Series in Washington, DC, which focuses on energy access issues around the world.

Lily Odarno from WRI

Lily Odarno from WRI

The anchor-tenant approach in mini-grid development is considered a promising method for promoting the financial viability of mini-grids in expanding energy access. The approach focuses on securing a ‘reliable load’ for energy service companies to provide electricity to populations without access. In rural communities with very limited demand anchor loads, like cell phone towers, may provide the scale of demand needed to make mini-grid operations financially viable for energy service companies.

In this month’s Energy Engagement Series, we discussed the challenges and opportunities that come with this approach in the latest edition of the Energy Engagement Series – a monthly, salon-style discussion focused on energy access issues hosted by the World Resources Institute and Practical Action. This month’s event featured panelist Clare Boland, Associate Director and VP for Innovation and Strategy for the Rockefeller Foundation, who shared the Foundation’s experience implementing this method in India. Experts from both policy and practice arenas also gathered to share ideas and experiences in this growing area of mini-grid development.

The key takeaway from the event is that much remains to be learned about the anchor-tenant approach and there is an obvious need for knowledge sharing amongst actors implementing this method in mini-grid development.

Here are some more outcomes from the discussion:

  1. The anchor tenant and consistent demand: Mobile phone towers have been seen as attractive candidates for this approach primarily because they represent consistent demand.  The amount of power needed by a cell phone tower is predetermined and comes with no seasonal variations. An anchor tenant such as an agro industry, on the other hand, is associated with a great deal of uncertainty owing to the seasonal nature of agriculture. This makes the agro-industry an unattractive anchor tenant to some participants.
  1. The anchor load approach comes with much operational complexity. Satisfying the needs of an anchor customer could be challenging given the anchor tenant’s demand for quality and consistent power. For mobile phone towers, down times below 99.5% could mean a potential loss of market for entrepreneurs. Energy service companies must have the capacity to provide anchor tenants with the highest quality services required to ensure their continued patronage.
  1. Experiences with the anchor tenant approach indicate that anchor tenants are often disinterested in providing electricity to communities without access beyond CSR commitments (in India, for example, companies are required to invest in CSR-corporate social responsibility). The major driver for mobile phone tower operators who buy into this idea is high diesel costs. The need to have an assured alternative supply of electricity at a reasonable cost is the major determinant of an anchor tenant’s decision to participate in this approach. That an energy source is from renewables or satisfies community energy needs does not in itself serve as sufficient reason for an anchor customer to buy into the approach.
  1. In this discussion there was a general recognition of the critical role that community engagement plays in ensuring the sustainability of mini-grids over time. Willingness to pay for electricity services is critical and community engagement is necessary for obtaining the needed willingness to pay information.
  1. Even though the anchor tenant approach is seen as a promising approach with the potential of ensuring the financial viability of mini-grids, it is itself laced with some uncertainties. Questions remain about the impact of potential changes in demand resulting for instance, from the adoption of more efficient technologies by the anchor tenant. How well positioned are energy service companies to meet the necessary potential growth in demand as household and productive use loads in local communities grow?
  1. Balancing anchor tenant needs and the needs of the energy poor. Even though some participants saw the anchor tenant approach as key to providing the critical demand that ensures the financial viability of energy service companies it’s important to keep in mind that the approach runs the risk of prioritizing anchor customer needs over community energy needs. To this end, we discussed how anchor loads could be linked to other development efforts. For example, a computer center providing social/educational benefits could serve as an anchor load. In this case, the anchor load itself may provide direct development benefits for the recipient communities.
  1. Discussions on energy access should ensure a sustained focus on energy efficiency as a critical input for driving down the overall potential demand that will have to be met. The role of super-efficient appliances in driving down demand especially in energy constrained areas with significant energy access challenges needs further exploration.

So, what do you think? Are anchor tenants the key to supplying energy to the world? Or is it one of many tools in a toolkit that we need to consider as we try to expand energy access? Let us know in the comments below, or, better yet join us for our next event!

 

The Energy Engagement Series is a monthly event in Washington DC hosted by WRI and Practical Action. We are very excited for next month’s event on May 12, which will focus on the nexus of agriculture and energy. Practical Action’s own Aaron Leopold will be one of our featured speakers for the event. If you’d like to sign up to join us, click here.

One response to “Guest post: Energy engagement series — April 2015 RECAP”

  1. Alice Says:

    Very helpful tips.

Leave a reply