Aspiring energy entrepreneurs in the developing world need the support of thriving ecosystems of people and business development services around them, all accessible at low transaction costs. Energy entrepreneurs also need to partner with other institutions and individuals in order to unlock the knowledge and resources that their companies need for success in a competitive and complex global marketplace.

The World Bank has initiated the creation of eight Climate Innovation Centers (CICs) in Kenya, Ethiopia, India, South Africa, Vietnam, Morocco, the Caribbean, and Ghana. These centers offer early stage start-up support and allow new businesses that provide locally appropriate solutions to find success, and create jobs.

The aim of the CICs is to create a set of thriving entrepreneurial ecosystems in the developing world, each one focused on an open innovation approach to clean energy enterprise. To that end, the CICs provide the following services:

Proof of Concept funding to test the commercial viability of the entrepreneurs’ ideas;

Access to technical facilities and technology information in order to support the iterative testing and prototyping of solutions;

Access to early-stage capital through the provision of targeted pre-investment advisory services and investment facilitation and syndication;

Technology-enabled business development services, networking, mentoring and training programs to support entrepreneurship skill-building within the networks;

Provision of needed sectoral and market information in order to assist entrepreneurs in scoping the local, regional and international market opportunities that are available to their new businesses;

Influencing and advocating for policy coordination and change through creating dialogues and linkages between the public and private sectors;

Promoting internationalization opportunities through creating and managing a network of regional and international partners, raising awareness and facilitating trade and export opportunities;

Holding Energy Entrepreneurship Bootcamp events to attract new talent and ideas to the centers.

Such services help energy entrepreneurs navigate complex market landscapes and develop strategies for success, innovative products, and partnerships that can fill gaps in knowledge and resources to get them to the last mile. This model emphasises an open-innovation approach that sees entrepreneurs as technology brokers – focused on adapting existing technologies and business models to local contexts – rather than inventors seeking to create entirely new products.

Thanks to Fred McBagonluri of Ashesi University for his help in developing this Solution Spotlight.

A solar success story is unfolding in Bangladesh – a lowlying developing country which is perhaps the world’s most vulnerable to climate change. Founded in 2014 as a joint venture with Berlin’s Microenergy International GmbH, ME SOLshare is a highly collaborative enterprise embedded in the international energy research community. Headquartered in Dhaka, SOLshare has designed and piloted the world’s first peer-to-peer DC smart village nano-grid, winning the prestigious 2016 InterSolar Award for Most Outstanding Solar Project along the way.

SOLshare allows anyone with a solar home system (SHS) or other electricity source to buy and sell power with their neighbors through the use of a bi-directional electricity meter, the SOLbox. Each household can be connected through cables to up to three other households linking the SOLboxes together, and even those without a power source can access the energy network and buy power from their neighbors by purchasing the SOLbox and a small battery.

To test their model SOLshare set up a nano-grid encompassing seven households in Shariatpur, 50km south of Dhaka, Bangladesh. Residents of the village include women primarily engaged in household work, and men working either as farmers or local drivers. The average income in the village varies between US$125–250 per month.

Six of the seven households that were connected through the nano-grid had existing SHS. SOLshare installed a buffer SHS to stimulate trading in the small pilot, maintaining majority (60 percent) community ownership of generation and storage assets. An additional household that could not afford a SHS also became part of the SOLshare network after receiving a battery and SOLbox. Each of the boxes were connected through a network of 12VDC cables to neighbouring households, linking them into the network.

The system initially allowed for the operation of multiple LED lights per household, phone chargers and communal street lights. However, since the project was initiated in September 2015, the increased flexibility of being able to use power that otherwise would have been wasted has allowed for the purchase of fans, televisions, and additional lights by some of the households. Usage data also shows that household income has increased due to the ability to sell surplus electricity to neighbors, and also that batteries have maintained a significantly higher state of charge which will very likely lead to an increase in the lifetime of the this critical and expensive component of their pervious SHS purchase.

SOLshare’s technology helps solve a ubiquitous problem in Bangladesh. In the past decade, over 4 million SHS have been sold in the country. In large part that is thanks to a national solar home system program led by the state-sponsored Infrastructure Development Company Limited (IDCOL). This has allowed a large number of households facing energy poverty to afford these relatively high-tech solutions. However, over 45 million Bangladeshis still have no SHS or access to the national grid. Those that do own SHS are missing out on its full potential due to excess power wasted once the battery is full – an estimated 39 percent of the power generated by SHS in Bangladesh goes unused. On the other hand, due to their small size, a single SHS does not have the nominal peak capacity to provide stable power for larger scale economic activities such as pumping water for irrigation.

SOLshare’s network is highly scalable, allowing for increasing numbers of people to share their community’s electricity resources as the number of households with SOLboxes grows. SOLshare and MicroEnergy International call it swarm electrification alluding to the efficiency gains of intelligently connecting power source and storage hardware together across multiple nodes/households. According to SOLshare, these interconnected nano-grids can even be connected with the national grid, allowing for SOLshare customers to purchase the extra power they need from the grid. In the future, it is also possible that this flow of electricity could be bi-directional, allowing them to sell their excess power to the grid as well.

The flexibility of SOLshare’s nano-grids allows truly demanddriven energy infrastructure expansion with very low capital cost. It also allows for the inclusion of those who cannot afford a SHS into the network, whereas those who can afford a SHS now have an added source of income derived from selling electricity to their neighbors that otherwise would have been wasted. Finally, as these systems increase in size, power capacity from multiple systems can be directed to productive higher load uses such as post-harvest agricultural processing (for which a pilot project is already operating), which can benefit entire communities and spur local economies.

Within the nano-grid network SOLshare works with established local participating organizations (POs) entrusted with management of payment processes and maintenance of the grid. Payments are carried out through a flexible prepayment system, similar to pay-as-you-go systems that have become commonplace in East African solar markets, and the POs enable pre-purchase of renewable electricity from the nano-grid in a similar fashion to mobile phone credit. A local trusted PO agent is also the contact person for SOLshare in the community, and by maintaining a good relationship with the PO, SOLshare ensures the continued operation and maintenance of their systems and learns about what is and isn’t working for customers.

The flexible, bottom-up nano-grid approach employed by SOLshare holds huge promise. Its early success suggests that with innovative energy system management technologies, the lines between solar home systems, micro-grids, and grid access – often seen as very separate tiers of energy access – might become blurred, allowing for increased efficiency and utility for new and existing systems and flexible demanddriven growth of electricity service provision in Bangladesh and beyond.

Thanks to Setu Pelz at ME SOLshare for his help in developing this Solution Spotlight.

SteamaCo began life as a small, private off-grid utility company operating in rural Africa. It now serves other such firms by providing a smart metering platform to improve their operations. The SteamaCo hardware is installed in off-grid energy systems or devices, connecting them to the cloud and allowing for remote monitoring and control. A mobile payment platform allows customers to make payments from their phones. All of this – the processing of payments, remote control of assets, and crunching of usage data – happens continuously, thousands of times per day, in areas where you can’t even make a phone call.

Rural Africa is probably not the first place that comes to mind when anyone thinks of the burgeoning internet of things. However, it seems that this emerging set of platforms for collecting, analyzing and sending data between devices via the cloud has found an unlikely yet promising application in the continent’s emerging off-grid energy sector.

Operators of off-grid systems, including solar home systems and micro-grids, face a number of challenges in rural Africa. A lack of roads and other infrastructure make travelling between assets to inspect them, collecting usage data and carrying out maintenance a major hurdle – even impossible at certain times of the year. Very little is known about current and prospective customers too – their ability and willingness to pay, the services they demand and how they will use the systems offered. Most do not have bank accounts or credit histories.

This is, despite its low-tech appearance, a situation in which the use of advanced data-driven technologies might become critical to greasing the wheels for rapid diffusion of advanced energy technologies.

The data infrastructure that SteamaCo provides allows operators to identify and troubleshoot problems before they become serious and require on-site maintenance. It gives the opportunity to direct spare capacity to other uses, and monitor the energy use of customers against their remaining balance. The platform essentially provides a simple and easy to use means of monetizing energy service assets anywhere customers can be found.

Vulcan Impact Investing has struck up a partnership with SteamaCo in the name of data sharing to build market intelligence for the off-grid sector. Having set up ten mini-grids in rural Kenya, Vulcan collaborated with SteamaCo to publish a white paper that presents and explores the data harvested through the use of SteamaCo’s hardware. This level of data and market intelligence sharing may seem unlikely coming from private sector firms operating in a competitive marketplace. However, in the off-grid energy sector, where the untapped markets are so huge, sharing reliable data about consumer behaviour can be profitable for everyone. That’s because it can drive the creation of forecasts and construction of service delivery strategies that enable the entire sector to grow.

Continuing the effort to generate new insights will hopefully provide a shot in the arm for the whole off-grid sector. Continued growth in accessible market intelligence will diminish the ‘Wild West’ perception that currently limits investment in this sector. Increasing financiers’ confidence in the promise and profitability of off-grid assets will open up opportunities to get new energy systems online and boost economic opportunities across the board.

Thanks to Emily Moder (SteamaCo) for her assistance in developing this Solution Spotlight.

Lighting Global, an initiative of the World Bank Group, has pioneered a comprehensive promotional approach to grow demand for life-enhancing technologies. Its Lighting Africa and Asia campaigns, for example, have driven demand for solar lighting technologies in rural markets by using a variety of media to reach rural customers.

A particularly successful format is the ‘roadshow’. This involves representatives from Lighting Global and their partners – crucially the solar companies that operate in the targeted regions – travelling to rural villages to engage locals on the benefits and opportunities that these products can provide. They also offer information on how they can be purchased.

The roadshows allow people to touch and use a range of product offerings, speak to sales representatives, and learn about them through a variety of community events that feature music and live theatre – often at night, to showcase the lighting products. These campaigns have been developed in partnership with professional marketing firms that have experience marketing to bottom of the pyramid consumers and feature emotional messages and lifestyle appeals that employ well-tested advertising techniques.

The participation of companies that offer the products in question is of paramount importance. The ultimate aim is to sell high quality products that can improve lives, so while awareness is important, sales are the end goal. Consumers therefore have an avenue to follow-up with sales representatives at or after the event. To date, these events have been major catalysts for sales in remote markets where the ‘last-mile’ of rural sales is so often the biggest barrier facing distributors.

The success of Lighting Global’s Africa (Kenya) and Asia (India) campaigns has inspired efforts in other markets as well. The Netherlands Development Organization (SNV) in Cambodia is one example. With the target of catalyzing sales of 25,000 SHS and solar lighting products, the campaign is projected to engage with over 100,000 Cambodians by 2018. In addition to holding road shows and employing other marketing best practices in close collaboration with Cambodia’s nascent solar industry, SNV has also aided the market through providing business development and financial services.

A business development services hub was created to provide access to training and business support for solar companies, with many companies using these services to improve their operational efficiency and build relationships with other institutions that they can learn from and work with.

One critical partner for such firms are financial institutions. SNV developed their program in collaboration with a number of micro-finance institutions (MFIs) who provided small low-interest loans to help customers pay for the systems and also directed cash into a results-based financing program that rewarded firms for their sales. This extra cash is most critical for new firms that need capital for developing their distribution networks and operations, and therefore the incentives are reduced at higher sales volume, favoring financing to smaller companies that are most in need of capital.

Thanks to Leo Blyth (Lighting Global), Praveen Kumar & Anjali Garg (Lighting Asia), Arthur Itotia Njagi & Nana Nuamoah Asamoah-Manu (Lighting Africa), Sarina Bolla (International Finance Corporation) and Dennis Barbian (SNV) for their help in developing this Solution Spotlight.

Solar thermal systems, which can provide heating, cooling and hot water, have become mature, useful technologies. They are modular and simple to operate and can take advantage of the large solar energy resources available in Africa. Mindful of this, Austria’s AEE INTEC initiated a solar thermal project, SOLTRAIN, in five southern African countries in 2009. The project is funded by the Austrian Development Agency and OFID. SOLTRAIN’s aim is to enhance the resilience of the region’s thermal energy system, and lessen thermal energy demands on existing electricity grids, thereby reducing blackouts.

The SOLTRAIN approach values training and capacity building as critical enablers for the diffusion of solar thermal technology. Rather than being a one-off development aid project, it aims to create the conditions where participating countries are provided with the know-how to sustainably implement a nationwide roll-out of solar thermal systems.

The first step was the creation of training hubs – mostly at universities – within each target country including outfitting them with solar thermal equipment for use in the training. These hubs ran over 80 training courses, reaching over 2,000 individuals in the first phases of the project. A focus on ‘train the trainer’ courses provided hundreds of individuals with the skills to not only design, install, operate and maintain systems but also to train others in these areas. There were additional courses on policy, administration and financing, along with 25 stakeholder engagement workshops focused on the collaborative development of solar thermal technology visions and roadmaps for each country. The hubs also co-ordinated public awareness campaigns through various media including TV, newspapers and radio. Finally, the universities involved were given support to develop courses on renewable energy.

These comprehensive capacity building initiatives provided a foundation of knowledge and resources to support the development of solar thermal demonstration projects – 187 of them have been completed so far. SOLTRAIN selected its demonstration project sites to benefit marginalized groups and social institutions including hospitals, retirement homes, orphanages, social housing projects, and community buildings. These demonstration projects benefit approximately 5,000 people annually and have shown considerable CO2 and cost saving outcomes (522 tonnes of carbon and US$250,000 per year).

As with the market-building approach utilized to grow demand for solar lighting products, SOLTRAIN owes its success to this comprehensive approach. However, there is a difference: SOLTRAIN’s approach is focused more on support for the public than private sector. To cement this aspect, SOLTRAIN has given more than 150 policymakers tours of the demonstration projects, educating them on the benefits of the systems. A final phase of the project is now focused on further engagement with policy and energy system planners to develop the solar thermal technology roadmaps for each country.

Having achieved remarkable success, SOLTRAIN has expanded its reach to West Africa and is beginning a similar initiative in collaboration with ECOWAS. Thanks to Werner Weiss of AEE – Institute for Sustainable Technologies for his help in developing this Solution Spotlight.

Thanks to Werner Weiss of AEE – Institute for Sustainable Technologies for his help in developing this Solution Spotlight.

Energising Development (EnDev) is a multi-donor energy access partnership currently funded by six donors – the Netherlands, Germany, Norway, the United Kingdom, Switzerland, and Sweden – and managed by Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) and the Netherlands Enterprise Agency (RVO). The programme is piloting a set of 17 ‘results-based financing’ (RBF) schemes across 14 developing world countries. The aim is to incentivize provision of energy access by paying private sector service providers based on performance. In so doing, financial risk is transferred from donors to the private sector.

EnDev aims to incentivize the development of energy access markets across a variety of contexts where private sector actors currently face market barriers. It also aims to learn (and share) important lessons about the potential effectiveness of RBF programs to support energy access.

Importantly, many of the RBF projects are being carried out in partnership with financial institutions. The primary aim of including financial institutions is to provide an opportunity for these institutions to gain experience in, and become better acquainted with, the energy access sector. This helps to address a crucial need in the development of the sector at large.

A number of lessons have already been drawn from the first three years of EnDev’s RBF program. One is that, given the complexity of these markets, schemes must be developed in close collaboration with private and public sector stakeholders. Another is that significant market research of the specific context is essential in order to design a successful RBF scheme. Both the RBF approach and the energy access sector are novel for financial institutions, and they must inject significant resources if they are to understand how it operates. The inclusion of comprehensive research, consultations and bringing financial institutions on board caused delays in implementing some of the schemes. However, ensuring that all stakeholders understand the scope of such a new approach as well as the participation of the financial sector can be crucial to a successful outcome, and so such delays were worth the trouble.

The incentive structure itself also deserves careful consideration: who gets it, when, how much and based on which results. Incentivizing companies that deliver energy access products directly to consumers may seem like the most obvious way to achieve this. But barriers to energy access are often down to market failures across the supply chain. An incentive structure that targets one or more points in the supply chain may in the end contribute more to the set goal than directly delivering the product. In this regard, it is also critical to understand how the incentives fit within broader technical assistance frameworks and to ensure co-ordination between various donors and policy actors operating in the same markets. For example, by the time one EnDev RBF scheme – for pico-PV systems in Rwanda – was launched, a World Bank incentive program that provided up-front financing was already in place, making the RBF a redundant double incentive.

Another crucial lesson has to do with the verification process. Before payment is made to the service providers, independent verifiers provide third-party monitoring of RBF results. This can be another time and resource-intensive measure, largely because of the dispersed and remote nature of the markets being served and especially if it comes to portable technologies like solar lanterns. Verification generally involves contacting individual customers by phone to check if they received service as claimed by the provider. The process doesn’t benefit from economies of scale, and puts an added burden on service providers: they must collect the required personal information from all of their customers. The efficiency of the verification process is crucial to the success of RBF schemes because service providers need to be confident that their claims will be processed quickly and payment for their services will be prompt. If that goes awry too often, the incentive becomes less attractive and can fail to bring in service providers.

Perhaps the most salient lesson learned thus far however is the importance of working in close collaboration with private sector actors when designing incentives. RBF puts the risk on the shoulders of service providers by only releasing funding for achieved results according to its stipulations. This results in high up-front costs, which are a challenge for energy access enterprises across the spectrum of energy access technologies. A major lesson is that in order to make RBF an attractive source of financing to companies, the rules and expectations of the schemes must be clear and simple, and their administration should take into account the financial cycles and constraints of service providers. Incentives must reflect what is seen as both achievable and attractive to these actors. Donors therefore need to adopt the perspective of service providers in order to develop effective RBF schemes at the outset.

Despite the challenges, the EnDev RBF program has proved successful across a variety of contexts. One winning strategy has been to build on a service provider’s success by pushing it into underserved markets. In Tanzania for example, a number of solar companies had already found a comfortable position serving urban and peri-urban customers. The surrounding rural areas, particularly in Tanzania’s Lake Zone were not being served by these actors, however. A custom-designed RBF scheme incentivized them to move into the surrounding rural region, resulting in significant shift into these markets from Mobisol, Off-Grid Electric and other major players already operating in Tanzania.

By providing service providers with a guarantee of payment (contingent on performance), RBFs can also de-risk outside investments in service providers. This is especially reassuring to investments in bottom of the pyramid markets where customer payment reliability is in question. In Benin, for example, an RBF program that guaranteed future resultsbased revenues enabled a triad of pico-PV companies to attract up-front financing from banks.

After three years of trial and error, the EnDev RBF program shows significant promise and has developed critical insights into the effectiveness of RBF as a means for spurring energy provision in underserved markets. Perhaps the most important lesson learned so far is that RBF schemes are only one of several tools to develop energy access markets.

In the majority of underserved energy markets in the developing world there are multiple barriers to entry. To unlock these requires that RBF schemes be implemented in concert with a larger set of technical assistance programs. These include reform of tariff and regulatory structures, local skills and supply chain development initiatives, consumer awareness campaigns, support for development of investmentworthy mini-grid business plans, certifications and product standard development, and others, depending on context.

Thanks to Elina Weber and EnDev for their help in developing this Solution Spotlight.

Social finance

These vehicles occupy a midpoint between conventional finance and charity with the objective to use financial products and services as a way to achieve a positive impact on society, the environment, or sustainable development. Social finance can be broadly categorized in three categories: 1) social banking 2) impact investment and 3) microfinance, each of which are currently and will continue to be important sources of finance, especially for smaller off-grid projects and energy service companies.

Debt

In December 2015, the first leasing platform for off-grid solar in Africa, with specialist company Off-Grid Electric raised US$45 million in debt from the David and Lucile Packard Foundation and a number of other investors including USAID’s Development Innovation Ventures program. This serves as a model which can be leveraged elsewhere, especially for fast-growing energy access enterprises.

Equity

Equity investment can come from a utility that is financing the whole cost of a project or from a developer that is contributing equity to cover a fraction (often 20 to 40 percent) of the investment cost. Equity can also come from outside investors such as infrastructure funds, private equity funds, insurance companies and pension funds. Cost of equity is higher for investors and very clear policies and visibility in returns backed by international guarantee such as the World Bank’s Multilateral Investment Guarantee Agency (MIGA) may be required to attract equity in difficult financial environments such as sub-Saharan Africa.

Institutional investors

These large investment pools are a major source of equity financing however most are risk averse and currently focused on established markets in developed countries with mature policies. However, the OECD estimates that around US$2.80 trillion annually is potentially available from pension funds and insurance companies for new clean energy investment. Enticing these large investors to support the energy access sector could be hugely powerful.

Third party leasing models

In these arrangements, developers enter into an agreement with building owners to lease their roof for installation of rooftop solar. The model has made strong inroads in North America, growing sixteen-fold since 2008. In the developing world context this model can be exploited in public buildings and other structures where feasible. This model is best suited to urban areas, and with urbanization exploding in the developing world it is poised for further growth. Alliances and partnerships between financiers and developers need to be established to leverage such a model.

Venture capital funds

The Silicon Valley-based Fenix International, for instance, was successful in raising US$12.6 million in Series B funding from a number of firms to help it supply mobile-enabled solar systems to off-grid communities in Africa. Investors included Engie, operator of Europe’s biggest natural-gas network, power management firm Schneider Electric and telecommunications giant Orange. Sector or region specific venture capital funds are needed to increase investments. National and international incentives for such funds – for example establishment of publicprivate funding partnerships – will stimulate venture capital investments in energy projects in developing countries.

Advance market commitments or market-pull mechanisms

The UK’s Department for International Development (DFID) is currently implementing an advance market commitments (AMCs) project in in Rwanda, which aims to demonstrate the wider potential of market-pull approaches to supporting low carbon development, and to catalyze private sector investment in renewable energy projects such as biogas and off-grid micro-hydro power. The model can be extended to other developing world nations.

Results-based finance (RBF) refers to a mechanism where financing bodies make payments only after the pre-agreed results or output has been achieved (See RBF solution spotlight on page 50).

Green bonds

The green bond market is plagued by illiquidity and lack of policy support which needs to be urgently resolved. January 2016 saw the first bond issue (of US$500,000) for residential solar in Africa. Oikocredit, BBOXX and Persistent Energy bundled 2,500 active contracts for solar energy in Kenya, offering an interest rate of 21 percent and an average maturity of 2.5 years. Bond issues backed by international and national governments can attract investments in other underserved energy markets.

Structured finance

Standardized finance models can help increase investment volumes by reducing due diligence costs. Standardization of project documents and aggregation can be a vehicle that allows smaller projects to be pooled together in diversified investment portfolios. These mechanisms can also help securitize renewable energy assets for the purpose of trading in capital markets.

The trouble with diesel

For the people of Inukjuak, Quebec, a community of about 1,800, to have energy access, each year a single oil tanker makes a slow, plodding voyage across the Gulf of Saint Lawrence and north into the Labrador Sea. It rounds the horn of Quebec’s Ungava Peninsula, which has a land area larger than Western Europe, tracing the southern coastline of Baffin Island before descending into Hudson Bay toward the 14 coastal communities of Nunavik. This annual ‘sea-lift’ of diesel is limited to a narrow, increasingly unpredictable ice-free shipping season that begins around late June and ends before Hudson Bay freezes solid – historically by late fall.

“It’s something we take for granted – that nothing is going to happen to those tankers coming to Inukjuak to supply the fuel that everyone needs,” says Pituvik’s general manager Mike Carroll. “But if those tankers don’t come, this town’s in big trouble.”

Arctic remoteness can be a blessing and a curse. While distance acts as a buffer protecting culture (virtually everyone here speaks Inuktitut), it also makes everything from the outside prohibitively expensive. A return flight to Inukjuak from Montreal costs about CA$2,700; a small package of bologna in the town’s co-op store costs nearly CA$10, after taxes. If you live up here, at least half of your food must come from the land. That food must then be preserved in a freezer powered by the diesel generators – that hum and spew particulates – on the town’s northwest corner, situated adjacent to a tank farm storing millions of litres of fossil fuel.

Dependence on diesel comes at a great cost, both financial and otherwise. In July 2015, human error during tank filling caused 13,000 litres of diesel to soak into the ground adjacent to the tank farm. Every particle of contaminated soil and rock had to be scooped up, loaded onto a tanker and shipped south for disposal. By October 2016, the final phase of a diesel spill cleanup was just wrapping up. Two other communities in the region have had to deal with similarly severe spills in recent years. “The risk [of spills] from diesel plants is always going to be there,” says Eric Atagotaaluk, the president of Pituvik Landholding Corporation (PLC). “It’s giving us a good reason to be more positive about renewable energy.”

Stuck on the slow track

Finding a better way to generate energy is not a new idea in Inukjuak. A hydro project was introduced back in the early 1990s by the local municipality, but was rejected by residents. A decade later, Hydro-Quebec explored building a pilot wind project near town, but when that idea fizzled, PLC turned their attention to the Inukjuak River. Hydro was back on the table. Four sites on the river were identified as promising for a small ‘run-of-river’ hydro plant, considered greener than Quebec’s system of large-scale hydro projects because it requires a much smaller reservoir, pipes water through turbines and then returns it downstream. Atagotaaluk says the waterfall Pituvik visited in October was by far the best of four scouted on the river: just 10 kilometres from town, it has the best gravitational drop and will impact fish less than other sites.

But progress on the project has been slow. It’s been in the works since at least 2006, stalled after 2010 by an impasse with Hydro-Quebec while negotiating a power purchase agreement (which sets the price the utility will pay for PLC’s hydro).

Among the biggest challenges of developing this hydro project is the astronomical cost of construction. It is among the biggest infrastructure projects ever planned in Nunavik, requiring the greatest single mobilization of resources, both human and material. A proposed 2.2-megawatt small hydro project on the remote northern coast of British Columbia was widely considered prohibitively expensive costing just over CA$25 million; Inukjuak’s 7.5-megawatt hydro plant is projected to cost almost CA$100 million in all.

Barriers to overcome

Addressing this cost has necessitated sharing the project risk by taking on a Montreal-based private sector partner, Innergex Renewable Energy. Innergex is an established clean energy developer with experience navigating the complex web of federal and provincial agencies and outside funders. By 2012, PLC had secured federal funding for 25 percent of the project cost, contingent on matching funds from the province of Quebec. Atagotaaluk says this arrangement is no longer in place, but discussions continue with both Quebec and the federal government to secure funding. The next pivotal step for the project, he says, is to negotiate a power purchase agreement that will finalize the price Hydro-Quebec will pay PLC to generate the hydro power. The power will then be sold to Hydro-Quebec and delivered back to Inukjuak residents by the utility.

“That will be the determining factor if it’s a go-ahead or not,” says Atagotaaluk of the purchase agreement, which is currently being renegotiated.

In past negotiations, Hydro-Quebec has offered to pay just half (about 42 cents per kilowatt hour) of what it costs on average to generate Inukjuak’s electricity, space heating and water heating with diesel. This price gap illustrates one of the biggest challenges for Canada’s estimated 200 plus diesel-dependent remote communities, most of them Indigenous. Christopher Henderson, a project advisor to PLC and author of Aboriginal Power: Clean Energy & the Future of Canada’s First Peoples, says utilities will often lowball the amount they will pay a developer like PLC to produce clean energy. They’ll only pay what it currently costs to supply diesel.

“Why 42 cents? Because it’s the cost of diesel fuel alone. They don’t price in the costs for capital systems, [diesel site] management, things like that, so you end up with this really weird situation where the true value of alternatives is not being credited in the contracting context,” Henderson says. “As a result, many of these projects cannot proceed because they don’t have the revenue basis to proceed.”

“You end up with this really weird situation where the true value of alternatives is not being credited.”

The price gap combined with a general lack of capacity in many Indigenous communities to navigate complex capital projects, says Henderson, are the two main barriers to clean energy across the North. “It’s why we have not yet made as big a dent in remote sustainable energy as we might.”

The downside of clean energy leadership

Call it the downside to being a clean energy leader: not only will building the project potentially open the floodgates for clean energy across the diesel-dependent region, but the price for Inukjuak’s hydro will set a precedent that the communities coming after will expect, at minimum, to receive.

Progress is similarly slow across the 25 diesel-dependent communities of neighbouring Nunavut, home to about 28,000 Inuit. Sheldon Nimchuk, who oversees clean energy projects for a subsidiary of the Nunavut-based Qikiqtaaluk Corporation, says the only other Arctic clean energy project approaching the size of Innavik is a hydro project designed to power Iqaluit, Nunavut’s capital. He says this project was suspended about two years ago, largely because there were so many urgent competing priorities. “Do you build water treatment facilities and sewage lagoons, or do you invest in hydro?”

Nimchuk remains upbeat about clean energy prospects for the Arctic. Wind and solar technologies are plummeting in cost. In October 2016, Prime Minister Justin Trudeau announced that Canadian provinces and territories must impose a price on carbon, starting at CA$10 per tonne in 2018 and rising to CA$50 per tonne by 2022.

On February 10, 2017, CBC reported that the government is planning to commit CA$50 million dollars in their 2017 budget to help get remote communities off of diesel. This funding comes on the tail of Trudeau’s signing of the Pan-Canadian Framework on Clean Growth and Climate Change in December 2016, a pact with eight provinces and three territories promising to ramp up clean energy and cut greenhouse gas emissions. No funds have been committed to this latter initiative yet, but even if more money is allocated it seems unlikely to be enough to have a significant impact.

The cost of the small hydro project in Inukjuak’s is projected to cost almost CA$100 million, double what the federal government is promising to help remote communities. In Canada there are over 200 communities that depend on diesel. Nimchuk says many of the diesel generation stations across Northern Canada – in Nunavut, Yukon, the Northwest Territories and Nunavik – are now decades old, necessitating hundreds of millions of dollars in investment to keep the same plants humming. Nunavut alone has requested CA$250 million from Ottawa to replace and upgrade its diesel plants and infrastructure. The national project of ending northern diesel dependence remains underfunded and stuck on a slow track.

So what can be done? Perhaps the greatest immediate opportunity for change involves end-of-life diesel plants says Nimchuk. “Would it make sense for the government of Canada to provide hundreds of millions of dollars to upgrade [diesel] facilities, or is the time right to move that money to clean energy projects as a contribution from Canada toward addressing climate change in the Arctic?”

“Would it make sense for the government of Canada to provide hundreds of millions of dollars to upgrade [diesel] facilities, or is the time right to move that money to clean energy projects?”

Excerpt from What will it take to get Canada’s Arctic off diesel? Reported by Christopher Pollon for Discourse Media’s Power Struggle project.