Off-grid energy distribution
Off-grid energy distribution
Business Model Description
Distribute accessible renewable electricity services to communities out of reach of the interconnected electric power distribution grid. Companies that install, distribute, and maintain pre-paid solar battery storage kits to homes, schools, hospitals, and businesses through mom-and-pop shops that sell prepaid solar credit to customers, avoiding collection risk.
Expected Impact
This initiative intends to reduce the inequality in the access to energy and diversify the energy matrix towards renewable sources.
How is this information gathered?
Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.
Disclaimer
UNDP, the Private Finance for the SDGs, and their affiliates (collectively “UNDP”) do not seek or solicit investment for programmes, projects, or opportunities described on this site (collectively “Programmes”) or any other Programmes, and nothing on this page should constitute a solicitation for investment. The actors listed on this site are not partners of UNDP, and their inclusion should not be construed as an endorsement or recommendation by UNDP for any relationship or investment.
The descriptions on this page are provided for informational purposes only. Only companies and enterprises that appear under the case study tab have been validated and vetted through UNDP programmes such as the Growth Stage Impact Ventures (GSIV), Business Call to Action (BCtA), or through other UN agencies. Even then, under no circumstances should their appearance on this website be construed as an endorsement for any relationship or investment. UNDP assumes no liability for investment losses directly or indirectly resulting from recommendations made, implied, or inferred by its research. Likewise, UNDP assumes no claim to investment gains directly or indirectly resulting from trading profits, investment management, or advisory fees obtained by following investment recommendations made, implied, or inferred by its research.
Investment involves risk, and all investments should be made with the supervision of a professional investment manager or advisor. The materials on the website are not an offer to sell or a solicitation of an offer to buy any investment, security, or commodity, nor shall any security be offered or sold to any person, in any jurisdiction in which such offer would be unlawful under the securities laws of such jurisdiction.
Country & Regions
- Colombia: Pacific
- Colombia: Orinoquía
- Colombia: Amazon
Sector Classification
Renewable Resources and Alternative Energy
Development need
-44% of green house gases emissions in Colombia come from energy related activities that comprise the burning of fossil fuels in manufacturing, transportation, oil&gas industries.
>Less than 1% of the country's energy sources come from non-conventional renewable sources (1) (2).
Policy priority
-The National Energy Plan 2020-2025 sets the target of diversification of Colombia's energy matrix to be 12-20% non-conventional renewable sourced by 2050 (2).
Gender inequalities and marginalization issues
-86.1% of individuals living in rural areas have access to electricity, compared to 99.6% of individuals living in urban areas (3).
Investment opportunities
-Energy generation through non-conventional sources.
-Energy generation for non-interconnected areas
-Renewable energy auctions (4).
Key bottlenecks
-Colombia has a heavily concentrated energy matrix and new technologies are costly for private investors due to the low development of the non-conventional renewable energy market.
Solar Technology and Project Developers
Pipeline Opportunity
Off-grid energy distribution
Distribute accessible renewable electricity services to communities out of reach of the interconnected electric power distribution grid. Companies that install, distribute, and maintain pre-paid solar battery storage kits to homes, schools, hospitals, and businesses through mom-and-pop shops that sell prepaid solar credit to customers, avoiding collection risk.
Business Case
Market Size and Environment
USD 100 million - USD 1 billion
> 25%
- $ 450 M USD market opportunity assuming $15 Average Revenue per User (ARPU) per month.(6)
- Local investors report an expected IRR of over 25% for off-grid renewable energy distribution (17).
Indicative Return
> 25%
Local investors report an expected IRR of over 25% for off-grid renewable energy distribution (17).
Investment Timeframe
Medium Term (5–10 years)
Local investors report the expected holding period for off-grid energy distribution to be 5-10 years
Ticket Size
USD 1 million - USD 10 million
Market Risks & Scale Obstacles
Capital - CapEx Intensive
Market - High Level of Competition
Market - Highly Regulated
Impact Case
Sustainable Development Need
In 2017 at least 2.5 million Colombians had no access to electricity in remote areas of the country (7)
70% of the electricity is produced from water sources (vulnerable to climate change). 30% comes from thermoelectric plants that use gas, coal and diesel, and 0.13% is renewable energy.(8)
Gender & Marginalisation
86.1% of individuals living in rural areas have access to electricity, compared to 99.6% of individuals living in urban areas (3).
Expected Development Outcome
Guarantee energy coverage to the currently unserved rural population
Improve the quality of the environment by reducing polluting emissions.
Enhance energy efficiency and reduce excess carbon emissions by ensuring reliability of supply.
Guarantee sufficient transmission capacity for energy generation to connect to the national grid and efficiently reach consumers and markets.
Increase the share of renewable energy in the country's total energy generation matrix.
Gender & Marginalisation
Reduce rural gaps in access to public services including electricity, preventing poverty traps.
Primary SDGs addressed
7.2.1 Renewable energy share in the total final energy consumption
7.b.1 Installed renewable energy-generating capacity in developing countries (in watts per capita)
7.1.1 Proportion of population with access to electricity
Current non conventional renewable share (2019):Current non conventional renewable share: 1% (2).
The current level (2019): per capita installed capacity of non-conventional renewables is 3.9kWh (2).
Current level (2018): electricity coverage in Colombia is around 96% (16).
Target level (2050): 7-12% non-conventional renewables share in the total country's energy generation matrix
Target level (2030): 7.7 kWh per capita installed capacity of non-conventional renewables (2).
Target level (2030): 100% national electricity coverage(16).
Secondary SDGs addressed
Directly impacted stakeholders
People
Public sector
Planet
Indirectly impacted stakeholders
People
Corporates
Outcome Risks
The high level of investment required to provide renewable energy creates an opportunity cost and trade-off: the investment that could be used to provide traditional sources of energy to vulnerable populations faster. Focusing on non-conventional renewables can delay achieving electricity coverage.
Increased prices of energy at peak demand times due to the high cost of renewable energy in the short term.
Implementation of technology could affect the way communities live and lead to cultural rejection of the projects.
Impact Risks
Execution risk: - Neglecting the importance of community participation in the selection of the correct technology to supply energy could cause disputes and hinder the process.
Drop off risks: - Despite communities are being used to prepaid cell phones, prepaid electricity services might require some cultural and financial adaptation and system usage training.
External risk: - Drastic changes in the environment that are not accounted for such as earthquakes, weather changes, and other natural disasters affecting ability to source energy.
Impact Classification
What
Positive and significant outcome due to improved basic services coverage and sustainability.
Risk
Failing to diversify the energy matrix could lead to energy shortages, lack of access and environmental health problems.
Impact Thesis
This initiative intends to reduce the inequality in the access to energy and diversify the energy matrix towards renewable sources.
Enabling Environment
Policy Environment
(National Energy Plan 2020-2025): sets the target of diversification of Colombia's energy matrix to be 12-20% non-conventional renewable sourced by 2050 (designed by UPME) (2).
(Plan Nacional de Desarrollo): Pact for the quality and efficiency of public services - Implement alternative solutions for access to electricity in most remote areas for at least 100 new homes leveraged by the National Rural Electrification Plan (PNER), which defines prioritization criteria and plans electrification investments in rural populations with higher unsatisfied basic needs.(10)
(Estrategia Colombiana de Desarrollo Bajo en Carbono): Decouple the growth of GHG emissions from economic growth by promoting the alternative sector development.(11)
Financial Environment
Fiscal incentives: Income tax: 50% deduction from total investments in renewable energy. Equipment, machinery purchases, and services for new and existing investments and measurement and evaluation of the acquisition of potential resources in renewable energy projects VAT excluded .(4)
Financial incentives: Bancoldex and the Ministry of Commerce, Industry and Tourism, launched $ 100 billion pesos credit line to promote investment projects in sustainable development and energy efficiency.(4)
Financial incentives: FAER (a fund created by the Ministry of Energy) allows Territorial Entities, to manage investment plans, programs and projects prioritized for the construction and installation of electrical infrastructure and coverage expansion (4).
Regulatory Environment
(Law 1715 of 2014): regulates the integration of URES into the national electricity system encouraging investment, R&D in the sector, by: (1) Authorizing auto-generators to sell their surpluses to the distribution network and the development of projects based on URES is promoted.(12)
(Law 629 of 2000): this law approved joining the international Kyoto Protocol with the purpose of committing to greenhouse gases emission reduction (13).
(Energy and Gas Regulation Commission (CREG) resolution 098 of 2019): first regulation on renewable energy storage through batteries (14).
Marketplace Participants
Private Sector
PeopleFund, Engie, SEAF, FCP Innovación, Proparco, Low Carbon Enterprise Fund, Global Partnerships, IDB, FMO, Cabef are organizations that have funded community solar projects.
Government
UPME, Ministry of Energy and National Government working towards a common goal, carrying out renewable auctions and providing investment incentives.
Non-Profit
Ferdescol and Asorenovables are NGOs promoting the importance of the use of renewable energy in the country.
Multilaterals
Multilateral organizations such as BID Invest are financing renewable energy projects for over USD 1bn in the La Guajira department through Bancoldex (15).
Target Locations
Colombia: Pacific
Colombia: Orinoquía
Colombia: Amazon
References
- (1)IDEAM (2012) – Inventario de efecto invernadero. Accessed May 22nd 2020
- (2) UPME (2019) -Plan Energético Nacional
- (3) DANE (2018) Mujeres Rurales en Colombia
- (4) Colombia Investment Summit (2020) - Energy. Accessed February 8th 2021.
- (5) Kingo. Accessed February 8th 2020 (https://www.kingoenergy.com/)
- (6) Hirmer (2017) – The benefits of energy appliances in the off-grid energy sector based on seven off-grid initiatives. Accessed May 15 2020
- (7) Sáenz (2017) En penumbras 25 millones de colombianos no tienen energía eléctrica. Acceso 3 de Mayo 2020
- (8) WWF (2018) – Petición por las energías renovables. Acceso 2 de Mayo 2020
- (9) Camacol (2019) – Informe de gestión 2018-2019. Accessed May 13 2020
- (10) DNP (2017) – Plan Nacional de Desarrollo.Accessed May 13 2020
- (11) MinAmbiente (2011) – Estrategia Colombiana de Desarrrollo Bajo en Carbono. Accessed June 3rd 2020
- (12) ICEX (2019) – Energías Renovables en Colombia.Accessed May 13 2020.
- (13) Cámara de comercio de Cali (2016)- Normatividad para las Energías Renovables en Colombia. Accessed February 8th 2021.
- (14) Energía estratégica (2019) -El Gobierno de Colombia expide su primera regulación para la acumulación de renovables mediante baterías. Accessed February 8th 2021
- (15) Energía estratégica (2019) Multilaterales financiarán proyectos de energías renovables por 1.000 millones de dólares en Colombia. Accessed February 8th 2020.
- (16) Minenergia (2014) Energía eléctrica
- (17) Valora Analitik (2021) Colombia llegaría a 734 mw de capacidad instalada de energías renovables en 2021. Accessed February 8th 2021.