Rio de Janeiro, Brazil, June 19, 2012—A
new report from IFC, a member of the World Bank Group, has identified a
$37 billion opportunity for the private sector to improve energy services
for people who live in relative poverty.
The report "From Gap to Opportunity:
Business Models for Scaling Up Energy Access," was released
at the United Nations Conference on Sustainable
Development this week. Published in partnership with the government of
Austria, it breaks new ground by estimating the market for energy services
offered at the household level to low-income people. It also profiles companies
with innovative business models and explores in detail what it takes for
them to succeed.
"Across the world, people spend more
than $37 billion a year on kerosene for lighting and biomass used in open
fires or traditional cooking stoves that pollute the environment,” said
Rashad Kaldany, IFC’s Vice President for Global Industries. “This study
shows that—with the right business models and conditions—the private
sector can play a vital role in providing energy solutions that are better
for people’s health and better for the environment.”
Private enterprises have started to seize
the opportunity. “While this is still a nascent sector, many businesses
are rapidly moving beyond being cottage industries and are successfully
serving tens of thousands to hundreds of thousands of customers,” according
to the report, which studied more than 100 businesses around the world.
“Some companies are seeing profit margins of 10 percent to 30 percent,
often with fairly small subsidies on capital costs…or no subsidies at
To scale up successful business models, the
report offers a series of recommendations for key stakeholders—including
companies, social and commercial investors, governments, policymakers,
and donors. For instance, it suggests that governments resist give-away
programs and unrealistic promises, remove discriminatory taxes on energy
access products, and leverage public-private partnerships and smart subsidies
for extending electricity grids.
For investors seeking both social impact
and financial returns, the report recommends that they keep investment
mandates broad and beyond a single technology, develop a local presence,
provide appropriate funding for each part of the business life cycle, support
enterprise development and business model refinement, and fund the provision
of public goods.
to read the report.
IFC, a member of the World Bank Group, is
the largest global development institution focused exclusively on the private
sector. We help developing countries achieve sustainable growth by financing
investment, providing advisory services to businesses and governments,
and mobilizing capital in the international financial markets. In fiscal
2011, amid economic uncertainty across the globe, we helped our clients
create jobs, strengthen environmental performance, and contribute to their
local communities—all while driving our investments to an all-time high
of nearly $19 billion. For more information, visit www.ifc.org.