Catalysing Inclusive Energy Markets: Lessons Learned

Energy is the bedrock of sustainable development – impacting health, education and earning opportunities – yet nearly two billion people across the world lack access to reliable and affordable power. For the last 14 years our charity, Shell Foundation, has been trying to work out what can be done to spur the growth of “inclusive” markets to serve low-income consumers, and generate socio-economic, health and environmental benefits at scale, with access to energy a core focus.

Over this time we’ve supported over 100 organisations to support the innovation of technology and sustainable business models to provide decentralised energy – such as affordable solar lighting, clean cooking stoves and rural micro-grids – to the “Bottom of the Pyramid”, with varying degrees of success. On the one hand, this work has led to the co-creation of several successful social enterprise partners who now operate across Asia, Africa and Latin America, and improved the lives of over 16 million people to-date. On the other, achieving scale has proven extremely difficult, and with the odds severely stacked against them, most pioneers in these markets will struggle. We’ve recently released a report, Accelerating Access to Energy, that seeks to answer why.

We’ve found that while foundations can play a crucial catalytic role to take early-stage risk on possibly transformative innovation, the evidence from our programme challenges common expectations of the size, patience and flexibility of the support required to develop sustainable business models, delivering brand new product and service categories, in the world’s toughest markets. In reality, it can take anywhere from 6 to 10 years, between $5-20 million and extensive business support for a pioneer to demonstrate viability and scalability.

The new report contains a frank and open analysis of our efforts as we have sought to improve the efficiency to deliver large-scale development impact. We analyse the common features of the most promising of these solutions, and the learning from failed efforts which informs our current strategy. We also identify six structural barriers that impede the growth of even the most advanced inclusive energy businesses serving this market today – and suggest opportunities for foundations, social investors, governments and corporates to combine differently to solve them. We believe an emerging set of “market enablers” – new supply chain intermediaries, financial vehicles and global industry institutions – will be critical to help promising entrepreneurs to overcome these obstacles

In recent years, we’ve been buoyed by the emergence of new markets in Africa, Asia and Latin America, generating power from renewable sources, improving the efficiency of energy appliances, and transforming the way the poor access and pay for energy. The challenge for donors, social investors, governments and corporates alike, is how to accelerate the growth of these nascent markets to meet the growing energy needs of nearly one third of the world’s population.

Shell Foundation is an independent charity, established by the Shell Group in 2000, that catalyses sustainable business-based solutions to tackle global development challenges at scale.