FOSTERING LIVELIHOODS WITH DECENTRALISED RENEWABLE ENERGY AN ECOSYSTEMS APPROACH

Access to modern energy is a pre-requisite for socio-economic development. Yet, over 750 million people continued to live without electricity access in 2019 and many more had to contend with unreliable supply. The consequent economic and social cost is significant and a key argument for mobilising urgent action and investments to reach universal access by 2030 – as targeted under Sustainable Development Goal 7. An integral part of achieving the 2030 Agenda and building back better from the COVID 19 pandemic will be steps to catalyse rural economies, create local jobs and ensure resilient public infrastructure. Access to modern energy should be a central pillar of such recovery and will contribute to a more inclusive and just energy system in the long-term.

Figure ES.1. Ecosystem needs for livelihood-centric approach

The absence of any one of the above components of the ecosystem compromises the sustainability of the whole. There are also strong interconnections between the parts. The efficiency of technology, for instance, influences the overall energy needs and viability of solutions, which in turn affect the appropriate ownership models and suitable cashflow-based financial products. Delivering on such an ecosystem in a given area requires co-ordinated efforts across stakeholders. Certain cross-cutting elements – relevant to each ecosystem component – must also be in place for optimal and inclusive outcomes. These include inclusive partnerships, a gender lens and knowledge sharing across communities, countries and regions.

Access to affordable, modern and reliable energy services is a pre-requisite to support sustainable livelihoods 1 and advance socio-economic development. In recent years, political and financial commitment towards universal energy access has grown, catalysed in part by the adoption of a dedicated target under Sustainable Development Goal 7 of the 2030 Agenda for Sustainable Development. Falling costs and improved reliability of decentralised energy solutions have provided further impetus to energy access efforts with the stronger involvement of communities, local entrepreneurs and the private sector.

Linking decentralised energy supply to livelihoods

Decentralised renewable energy solutions promise to play an important role in reaching universal electricity access in a timely manner. Linking deployment of such solutions to people’s livelihoods can translate into improved incomes, reduced drudgery, greater resilience and longterm social security, thus contributing to multiple SDGs. This chapter first discusses the evolution of livelihoods’ perspective in the rural development context and highlights the implications for decisions around energy supply. It then outlines the progress made to date, and key gaps to be addressed to maximise benefits.

POVERTY, LIVELIHOODS AND ENERGY ACCESS
Poverty is a persistent challenge that has been understood and measured in different ways over the past several decades. Since the 1990s, the conceptual thinking has evolved to encompass poverty’s economic, ecological, social, cultural and political dimensions. Although different approaches emphasise different aspects of poverty at the individual or collective level – such as income, capabilities and quality of life – poverty is generally seen as multi-dimensional (UNDP, 2020).

The case for tailored energy services to support diverse livelihoods. The interconnections among poverty, livelihoods and energy are increasingly well known and established. A lack of access to reliable, affordable and sufficient energy remains a critical infrastructure gap in many emerging economies that hinders people’s ability to strengthen existing or explore new livelihood opportunities. Access to energy enables opportunities that can help people reduce drudgery, improve productivity, raise incomes and enhance resilience to external shocks and stresses. The indirect benefits are also multi-fold in terms of improved access to education, health care and information. In the agriculture sector, for instance, which supports livelihoods of over 2.5 billion people globally (FAO, 2016), growth in energy use for various activities is directly linked to improved yields, incomes, resilience and food security outcomes (FAO, 2000). The provision of affordable and reliable energy services at each stage of the value chain – primary production to post-harvest processing to consumption – can bring substantial benefits for farmers’ and other stakeholders’ incomes, productivity and resilience (IRENA, 2016b; IRENA and FAO, 2021).

In practice, this entails mapping out energy flows throughout relevant economic value chains (from production to consumption/consumer), identifying existing or potential income-generating activities
where energy can enable value, assessing current landscape of access to financing and skill levels and assessing opportunities where decentralised renewables could be introduced in a viable manner. It is important to emphasise that while the topology of value chains, whether for agriculture or handicrafts or tourism, may be the same, the energy needs at each step vary from context to context depending on the scale and mechanisation of processes, existing market linkages and access to energy. A dairy farmer in Kenya, for instance, likely requires energy solutions for lighting, water pumping and chilling at the farm level. But in India, which has a well-developed milk collection system, chilling need not be done at the farm level (REEEP, 2017).

An enabling ecosystem for supporting livelihoods with decentralised renewables

Creating long-term, resilient livelihood opportunities for under-served populations requires an inclusive approach with solutions and policies that are customised to local conditions and conducive to local entrepreneurship and innovations. Over the past decades, across geographies, most efforts to foster livelihoods focus on the poor as a labour force. The labour opportunities provided have often led to the destruction of inter-generational rural livelihoods and facilitated migration to urban areas. Such opportunities are often in the informal sector, involve mismatched skills sets and generally involve working arrangements that do not advance decent work conditions (Suttie and Vargas-Lundius, 2016). Perceived barriers to the large-scale creation and sustenance of grassroots-based livelihoods include a lack of financing and skills, insufficient access to support ecosystem for local entrepreneurs and community leaders, unreliable access to energy and other infrastructure services, inefficient and outdated technology, and high transaction costs for market linkages. Decentralised renewables offer opportunities for local ownership, innovation and entrepreneurship in an effective manner, allowing tailored access at the grassroots level. Improving efficiency of existing appliances make energy solutions more affordable, thus reducing drudgery and in many cases catalysing socio-economic development. To realise these benefits and have a sustained impact, an inclusive ecosystem approach is needed for decentralised renewables.

The absence of any one of the above parts of the ecosystem compromises the sustainability of the whole. There are also strong interconnections between the parts. The efficiency of technology, for instance, influences the overall energy needs and viability of solutions, which in turn affect the appropriate ownership models and suitable cashflow-based financial products. Delivering on such an ecosystem in a given area requires co-ordinated efforts across stakeholders (Box 6).

Forward and backward linkages
Securing stable backward linkages and forward linkages is critical to the financial and business models of any enterprise. Forward linkages refer to commercial platforms, community-based organisations, market aggregators and distribution channels, while backward linkages refer to aspects related to the supply of all inputs, including raw material, labour, credit, technology, ownership models and cropping patterns, among others (Figure 5).

Decentralised renewable energy solutions allow enterprises to diversify their products/services and capture greater value by undertaking a larger number of value chain activities locally i.e. closer to where the raw material is produced. The agroprocessing of pulses, millet, cereals, spices and fruits by one entity can result in value addition (in terms of increased sales price) of up to 90% (SELCO Foundation, 2019). However, income levels, cash flows and ownership models, as well as the overall resilience of an enterprise, depend on strong and reliable forward and backward linkages. Literature has shown that additional income generation potential is modest at best in the face of market access limitations in rural areas (Ministry of Foreign Affairs of the Netherlands, 2013).

Creating the ecosystem for supporting sustainable livelihoods with decentralised renewables

Access to modern energy solutions is often cited as one of the pre-requisites for socio-economic development. Yet, over 750 million people continued to live without electricity access in 2019 and many more had to contend with unreliable supply. The consequent economic and social cost is significant and a key argument for mobilising urgent action and investments to reach universal access in a timely manner. An integral part of building back better from the COVID 19 pandemic will be steps to catalyse rural economies, create local jobs and ensure resilient public infrastructure. Access to modern energy will be a central pillar of such a recovery and of building a more inclusive and just energy system in the long-term. Linking decentralised renewable energy supply with livelihoods is an important step. It offers the opportunity to translate investments in electricity connections and kilowatt hours into higher incomes for communities and enterprises, local livelihood opportunities and well-being for large populations in rural and peri-urban areas, although it is not the only pre-requisite. Achieving this transformative change requires greater efforts than simply deploying decentralised systems or delivering units of electricity. As noted in this brief, it requires investing in an ecosystem that can foster technology solutions tailored to livelihood needs and deliver the financing, capacity and skills, market access and policy support to realise the full benefits of decentralised renewable energy.

Executive summary

Access to modern energy is a pre-requisite for socio-economic development. Yet, over 750 million people continued to live without electricity access in 2019 and many more had to contend with unreliable supply. The consequent economic and social cost is significant and a key argument for mobilising urgent action and investments to reach universal access by 2030 – as targeted under Sustainable Development Goal 7. An integral part of achieving the 2030 Agenda and building back better from the COVID 19 pandemic will be steps to catalyse rural economies, create local jobs and ensure resilient public infrastructure. Access to modern energy should be a central pillar of such recovery and will contribute to a more inclusive and just energy system in the long-term. Decentralised renewable energy solutions promise to play an essential role in reaching universal energy access in a timely manner. Linking decentralised renewables with livelihoods is an important step. It offers the opportunity to translate investments in electricity connections and kilowatt-hours into higher incomes for communities and enterprises, local livelihood opportunities and well-being for large populations in rural and peri-urban areas. However, it is not the only pre-requisite. Achieving this transformative change requires greater efforts than simply deploying decentralised systems or delivering units of electricity. It requires investing in an ecosystem that positions the diversity of people’s livelihoods (rather than technological solutions) at the centre of energy access efforts, and delivers tailored energy solutions, the financing, capacity and skills, market access and policy support to realise the full benefits of decentralised renewable energy.

Source:IRENA

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