Q&A: How Pact is building sustainable energy access & productive energy use around the globeSeptember 27, 2022
Globally, more than 1 billion people lack access to reliable, affordable energy. This presents a significant roadblock to development. Pact is working to end energy poverty and build a future in which all people have the knowledge and resources they need to enjoy the many benefits of modern power. From solar home systems and mini grids to commercial and industrial solar and grid extension, Pact is advancing reliable solutions that are safer, cheaper and cleaner than alternatives such as wood, kerosene and diesel. With reliable energy, the communities we serve are growing businesses, improving local healthcare, building sanitation systems and more.
What is the goal of Pact’s energy work?
Overall, our mission is to increase access to energy and the means to use energy productively as part of an integrated approach to development that leads to economic growth and improved health outcomes. Making sure that energy is both reliable and affordable is key. So many people around the world have unreliable access to energy, meaning that even if they have a grid connection, it often doesn't work for part of the day. This makes it extremely difficult to use energy productively for things like running a business or operating a health clinic.
Why is the productive use of energy so important?
Pact believes in helping communities to realize the full benefits of modern energy. While powering households is important, there is another level of energy use that leads to improved educational, economic, health and general development outcomes – and that is the productive use of power. Beyond helping communities gain energy access, our approach helps entrepreneurs and local officials use this newfound resource to improve the productivity of their businesses and public facilities, start new enterprises and drive mechanization to build lasting livelihoods and stronger communities.
Pact’s approach is set apart by its focus on financial services and capacity development for energy access. Explain.
Infrastructure development is very capital intensive. It requires a lot of money and strong technical skills to build, operate and maintain energy infrastructure. We work to remove these barriers by building the capacity of financial institutions, energy project developers and community groups, and by providing financing solutions to make it easier, cheaper and faster to expand energy access.
What types of financial services does Pact provide?
We provide loans to rural households and small businesses for connection fees and productive use equipment. Oftentimes, there is a cost associated with connecting to either the national utility grid or a solar mini grid. Rural households and small businesses often can't afford the upfront cost, and they don’t have options to finance it over time. The same is true for commercial and industrial equipment that would allow small businesses to use energy productively. This could include a small freezer to store fish or oil pressing machinery for producing groundnut oil, to larger agricultural processing equipment. By connecting people with affordable financing options, we’re removing that financing barrier.
How about Pact’s capacity development work?
We provide technical assistance to a range of actors for project preparation and transaction support, for raising equity and debt financing, and to de-risk project development through guarantees and other mechanisms. Pact’s focus on capacity development is really about ensuring that all actors involved in the ecosystem of energy project development have the skills and resources they need to build out this infrastructure into the future without large-scale subsidies from the international community.
For example, we provide project preparation support for evaluating whether a project makes sense – for instance, looking at the economics of a solar project for powering a large grain mill. We help the project developer determine the best location for the project and the best way to finance it, and then we provide them with transaction support to negotiate with commercial banks.
"Pact acts as the glue between the various parts of the energy ecosystem to get projects successfully completed."
What kind of impact is Pact making?
We’ve helped hundreds of thousands of people in rural communities gain access to energy, as well as businesses that are contributing to communities’ economic development. Here are a few examples of what that looks like.
In Myanmar, there is a national electricity grid, but many households aren’t yet reached, or they could be, but they’ve chosen not to pay the connection fee because they simply can’t afford it, and there were no options for paying in installments over time. Through Pact’s microfinance entity, PGMF, we began offering loans in 2020 to individual households for connecting to the national grid. It was a lifeline and extremely successful. In 2020 alone, PGMF distributed over 31,000 loans totaling over $12 million across Myanmar in over 2,000 villages for individuals to connect to the national grid.
In Nigeria, we’re working to ensure that communities served by solar mini grids are able to use energy productively. We’re providing technical assistance to understand productive use opportunities within those communities, conducting surveys, engaging with small businesses and providing training and procurement support. We help small businesses identify vendors that they can purchase commercial and industrial equipment from, and then we provide financing through a community-based model. We're now at the phase where we've purchased and are dispersing equipment. We're so excited to see the results and scale up.
In the Democratic Republic of Congo, we’re expanding access to energy and economic opportunities as a tool in conflict mitigation. Pact’s energy program works in some of the most sensitive and unstable areas, often in the absence of formal governance systems.
What’s next for Pact’s energy work?
We’re working to integrate improved energy access into more and more of our projects around the world – into peacebuilding efforts, into health projects where we can improve health services by electrifying off-grid rural clinics. We are seeking to develop solutions that will allow millions of people to afford access to energy and machinery that will allow them to prosper, while offering training to financial institutions, small businesses and solar developers to strengthen their ability to deliver these solutions at scale.