Investments in this strategy aim to improve energy alternatives for businesses, which can contribute to increased production, diversified product offerings, increased local market efficiency, and reduced reliance on diesel generators. The sections below include an overview of the strategy for achieving desired goals, supporting evidence, core metrics that help measure performance toward goals, and a curated list of resources to support collecting, reporting on, and using data for decision-making.

What

Dimensions of Impact: WHAT

Investors interested in deploying this strategy should consider the scale of the addressable problem, what positive outcomes might be, and how important the change would be to the people (or planet) experiencing it.

Key questions in this dimension include:

What is the problem the investment is trying to address? For the people experiencing the problem, how important is this change?

Micro-, small-, and medium-sized businesses in emerging countries, especially those in rural areas, often lack access to reliable grid electricity; without consistent power, many businesses run diesel generators, which are bad for the environment and extremely costly (1). Most business owners cannot afford to run generators for the entire day, thereby limiting their access to electricity. Access to renewable energy options that bypass the electric grid or supplant the need for diesel generators can help businesses in several ways:

  • Businesses can increase production and possibly jobsóby extending their hours and increasing operational reliability.
  • Businesses can diversify their product offerings to include services reliant on electricity, such as charging personal phones and lights.
  • Local markets become more efficient by increasing business hours and opportunities for communication.
  • Combined, these factors can contribute to building stronger local and national economies. In the agricultural industry, such shifts can also help increase food security, farm profitability, and community resilience (6).

What is the scale of the problem?

Between 365 and 445 million formal and informal micro-, small-, and medium-sized enterprises operate worldwide, and many lack access to electricity. While rates vary regionally, over half of African businesses state that lack of access to reliable power affects their operations and growth (1, 7). Approximately 1.1 billion people worldwide lack access to grid electricity, and many more can access only an inconsistent supply (1). Strong demand for cell phones throughout Africa and emerging markets also drives demand for reliable electricity.

Who

Dimensions of Impact: WHO

Investors interested in deploying this strategy should consider whom they want to target, as almost every strategy has a host of potential beneficiaries. While some investors may target women of color living in a particular rural area, others may set targets more broadly, e.g., women. Investors interested in targeting particular populations should focus on strategies that have been shown to benefit those populations.

Key questions in this dimension include:

Who/What is helped through this strategy?

Businesses with Previously Inconsistent or Unreliable Electricity Supplies: Many businesses lack access to reliable electricity, which hinders their ability to operate and grow. Off-grid solutions like solar products can provide these businesses with cleaner, cheaper, and more reliable energy. Consistency and reliability reduce risk and enable investment (1).

Farmers Lacking Power for Irrigation: Farmers in emerging markets often use grid power to pump water for irrigation. New solar pump systems can increase irrigation reliability and may even generate surplus electricity for sale back to the grid, providing farmers with an additional revenue source. Switching to solar may also encourage farmers to switch to water-efficient drip irrigation, potentially increasing both water savings and farm output (2).

Microbusiness Owners: Evidence shows that solar development in microbusinesses -- defined as enterprises with fewer than 10 employees according to the International Finance Corporation -- enables individuals to start new businesses or expand existing ones, especially businesses that offer phone charging and electric hair cutting services. These electricity-enabled options for expansion can lead to a small increase in jobs and an overall increase in market activity (3).

Small Businesses Lacking Access Clients and Markets: Access to electricity enables greater use of cell phones, allowing shopkeepers, electricians, and veterinarians, among others, to connect with clients, make business deals, and more efficiently serve more clients (4).

What are the geographic attributes of those who benefit?

Of the 1.1 billion people worldwide without access to electricity, 95% live in emerging countries in either sub-Saharan Africa or Asia, and approximately 80% reside in rural areas (5). Over half of African businesses surveyed state that lack of access to reliable power affects their operations and growth (1).

Contribution

Dimensions of Impact: CONTRIBUTION

Investors considering investing in a company or portfolio aligned with this strategy should consider whether the effect they want to have compares to what is likely to happen anyway. Is the investment's contribution ‘likely better’ or ‘likely worse’ than what is likely to occur anyway across What, How much and Who?

Key questions in this dimension include:

Is the investment’s contribution ‘likely better’ or ‘likely worse’ than what is likely to occur anyway across What, How Much and Who?

Increasing access to sources of energy and lighting of comparatively better quality and better design than those currently on the market would likely make an investment’s impact better than what would likely occur without it. The extent to which this strategy can address businessesí access to energy depends on the specific investee business and the product they are bringing to market.

How Much

Dimensions of Impact: HOW MUCH

Investors deploying capital into investments aligned with this strategy should think about how significant the investment's effect might be. What is likely to be the change's breadth, depth, and duration?

Key questions in this dimension include:

How many can receive the outcome through this strategy?

The potential breadth of impact depends on the number of businesses that lack consistent or adequate access to power, but robust estimates in this regard do not exist. Though varying by region and product, at least half of the 365 to 445 million formal and informal micro-, small, and medium-sized enterprises could benefit in some way from increased access to alternative power sources.

How much change can beneficiaries experience through this strategy?

The amount of change that end beneficiaries derive from this strategy depends on the product delivered and the extent to which it can effectively power businesses. Examples of change aligned with this strategy include:

  • In one study, 98% respondents who use solar lights for their businesses said that the lights had positively affected their hours of business and 76% reported positive effects in terms of their customersí interactions with their business (8).
  • A 2011 study found that a phone-charging business in Tanzania could earn revenues of $100 per month, while a solar-power system required to serve that level of business costs around $480 (excluding installation)ómeaning that the solar-power system could pay for itself in five months (9).
  • A study in Ghana found that solar electrification was associated with 82% higher income compared to non-electrified enterprises, though other factors may have contributed to this difference (10).

Illustrative Investment

Jain Irrigation Systems is a large, publicly traded company that is a leading provider of drip irrigation systems, including a line of solar pumps for smallholder farmers who previously relied on grid electricity-powered pumps to water their fields (11). These electric pumps relied on older technology that leads to excessive water extraction and over-application of water, both of which have negative, long-term effects on agriculture. The Indian government hopes to replace 26 million grid-powered pumps with solar pumps, which would help stabilize the energy grid and improve other businessesí and consumersí access to electricity. For farmers, use of more effective irrigation systems based on solar power can help increase harvests, leading to greater income and food security from both sales income and production. In some cases, farmers can also sell electricity from their solar panels back to the grid, giving them both an incentive to use less electricity and an extra source of income to help stabilize their annual incomes and support their families.

Draw on Evidence

This mapped evidence shows what outcomes and impacts this strategy can have, based on academic and field research.

NESTA: 3
Impacts of Rural Electrification in Rwanda

Gunther Bensch, Jochen Kluve, and Jörg Peters. “Impacts of Rural Electrification in Rwanda.” Journal of Development Effectiveness 3, no. 4 (2011): 567–88.

NESTA: 1
Accelerating Access to Electricity in Africa with Off-Grid Solar: The Impact of Solar Household Solutions

Kat Harrison, Andrew Scott, and Ryan Hogarth. Accelerating Access to Electricity in Africa with Off-Grid Solar: The Impact of Solar Household Solutions. London: Overseas Development Institute, 2016.

NESTA: 2
Self-Reported Impacts of LED Lighting Technology Compared to Fuel-Based Lighting on Night Market Business Prosperity in Kenya

Peter Johnstone, Arne Jacobson, Evan Mills, and Maina Mumbi. Self-Reported Impacts of LED Lighting Technology Compared to Fuel-Based Lighting on Night Market Business Prosperity in Kenya. Berkeley, CA: The Lumina Project at Lawrence Berkeley Lab, February 2009.

NESTA: 1
Energy, Gender, and Development: What Are the Linkages? Where Is the Evidence?

Gunnar Köhlin, Erin O. Sills, Subhrendu K. Pattanayak, and Christopher Wilfong. Energy, Gender and Development: What Are the Linkages? Where Is the Evidence? Background Paper No. 125 for the World Development Report 2012 on Gender Equality and Development. Washington, DC: World Bank, August 2011.

NESTA: 3
Electricity and Sustainable Development: Impacts of Solar Home Systems in Rural Bangladesh

Michael Blunck. “Electricity and Sustainable Development: Impacts of Solar Home Systems in Rural Bangladesh.” Diploma Thesis, Johannes Gutenberg University Mainz, 2007.

NESTA: 2
Impact Assessment of the Solar Electrification of Micro Enterprises, Households and the Development of the Rural Solar Market

Marek Harsdorff and Patricia Bamanyaki. Impact Assessment of the Solar Electrification of Micro Enterprises, Households, and the Development of the Rural Solar Market. Kampala: Promotion of Renewable Energy and Energy Efficiency Programme, 2009.

NESTA: 1
Access to Clean Lighting and Its Impact on Children: An Exploration of SolarAid's SunnyMoney 

Heather Esper, Ted London, and Yaquta Kanchwala. Access to Clean Lighting and Its Impact on Children: An Exploration of SolarAid’s SunnyMoney. Child Impact Case Study No. 4. Ann Arbor, MI: The William Davidson Institute, 2013.

NESTA: 1
Social Impact Assessment of BBOXX in Uganda

Enea Consulting. Social Impact Assessment of BBOXX in Uganda. Paris: Enea Consulting, December 2012.

NESTA: 2
Welfare Impacts of Rural Electrification: Evidence from Vietnam

Douglas F. Barnes, Shahidur R. Khandker, Hussain Samad, and Nguyen Huu Minh. Welfare Impacts of Rural Electrification: Evidence from Vietnam. Impact Evaluation Series No. 38. Policy Research Working Paper No. 5057. Washington, DC: World Bank, September 2009.

NESTA: 3
Access to Energy in Rwanda: Impact Evaluation of Activities Supported by The Dutch Promoting Renewable Energy Programme

Policy and Operations Evaluation Department (IOB). Access to Energy in Rwanda: Impact Evaluation of Activities Supported by the Dutch Promoting Renewable Energy Programme. IOB Evaluation No. 396. The Hague: Ministry of Foreign Affairs, August 2014.

NESTA: 2
Stiftung Solarenergie (Sts) & Hybrid Social Solutions (HSSi): Social Impact Assessment

Planète d’Entrepreneurs. “Stiftung Solarenergie (Sts) & Hybrid Social Solutions (Hssi): Social Impact Assessment.” December 2011.

NESTA: 2
Off-Grid Energy Services for the Poor: Introducing LED Lighting in the Millennium Villages Project in Malawi

Edwin Adkins, Sandy Eapen, Flora Kaluwile, Gautam Nair, and Vijay Modi. “Off-Grid Energy Services for the Poor: Introducing LED Lighting in the Millennium Villages Project in Malawi.” Energy Policy 38, no. 2 (2010): 1087–97.

NESTA: 2
Affordability and Expenditure Patterns for Electricity and Kerosene in Urban Households in Tanzania

Raymond Mnenwa and Emmanuel Maliti. Affordability and Expenditure Patterns for Electricity and Kerosene in Urban Households in Tanzania. Research Report 11/2. Dar es Salaam: Research on Poverty Alleviation, 2011.

NESTA: 1
Black Carbon and Kerosene Lighting: An Opportunity for Rapid Action on Climate Change and Clean Energy for Development

Arne Jacobson, Tami C. Bond, Nicholas L. Lam, and Nathan Hultman. Black Carbon and Kerosene Lighting: An Opportunity for Rapid Action on Climate Change and Clean Energy for Development. Washington, DC: Global Economy and Development at Brookings, 2013.

Each resource is assigned a rating of rigor according to the NESTA Standards of Evidence.

Define Metrics

Core Metrics

This starter set of core metrics — chosen from the IRIS catalog with the input of impact investors who work in this area — indicate performance toward objectives within this strategy. They can help with setting targets, tracking performance, and managing toward success.

Additional Metrics

While the above core metrics provide a starter set of measurements that can show outcomes of a portfolio targeted toward this goal, the additional metrics below — or others from the IRIS catalog — can provide more nuance and depth to understanding your impact.