synergy network proposal

NREL is a national laboratory of the U.S. Department of Energy Office of Energy Efficiency and Renewable Energy operated by the Alliance for Sustainable Energy, LLC

Death By A Thousand Paper-cuts: A Proposal for a

Viral Revolution in Market Making for New Energy in

the Developing World

Alison Wise

May 4, 2010

National Renewable Energy Laboratory Innovation for Our Energy Future

A Proposal for Micro-Economic Tools and Mobile Technology Infrastructure for Clean Economic Development

Building the Global Clean Economy

“At Speed and Scale”


• This is an alternate way of introducing the concept I’ll talk about today. ―Speed and scale‖ is a very important

context for our discussion. From a very ―30,000‖ foot perspective, the ―synergy‖ in question today is about

recognizing how the right bundling of resources could facilitate a sort of viral development potential for clean

energy and community economic opportunity.

•It is important to recognize that there is already a lot of activity in the space I’ll be talking about today. I will

highlight some of the ways that these partnerships and projects fit into the concept I’m introducing, with the

recognition that there may be activities that are not captured given the time we have. I see this as the start of a

conversation about this idea, with the hope that it may contribute positively to the acceleration of clean economic

opportunities already in development and/or create new opportunities

•The initiation of this particular proposal coincided with conversations I was having with social entrepreneurs for

the need to organize and coordinate with one another in terms that would represent a kind of ―trade association.‖

Met with the response, ―Great idea, but right now we need capital that we can’t seem to access…‖ I thought an

interesting approach might be to explore how we could organize this activity around a new source of capital for

their work.

•The basic story overall is that this idea centers around a pretty heady concept in terms of the virtual identity we

maintain by access to ICT devices. Mo Ibrahim said in a conversation with Charlie Rose that ―mobile devices

brought the possibility of civil society to Africa…‖ Taking that a step further, ICT and portable renewable energy

and the ―mobile Wal-mart‖ concept of appropriate technology distribution, again using mobile devices, aligns

many different governance and humanitarian concepts together, with a decidedly market driven approach:

Slide 2 commentary


Agenda & Objectives

Introduction of the Synergy Network:

To rapidly accelerate the development of clean

economies in rural areas of the ―developing‖ world

To greatly enhance the quality of life of the poorest

members of human society by marrying up the distribution

channels for clean technologies and micro-finance services

To monetize the transactions in this new economic

system so that wealth is both generated and distributed in a

―viral‖ manner


Most basic concept: Synergy Network is the creation of a social venture fund using mobile technologies to

aggregate ―micro-investments‖ that are in turn dispersed using mobile technologies to BOP clean energy

entrepreneurs. Key differentiation is our definition of BOP entrepreneurs as clean economic developers

themselves by bundling clean energy generation services, micro-finance services and CT distribution services

These objectives are my impression of what we should be focusing on in terms of outcomes, but they are up for

discussion. Indeed, I will ask this forum to be ―listening actively‖ as the goal of my discussion today is to begin

down the path of a road map towards implementation and I’m going to be looking for partners in this—

This is a very ―systems based‖ approach to the problem, broadly defined as the current inefficient system in

developing clean economies at the base of the global populations’ pyramid

Slide 4 commentary


Insight & Access

Opportunity Need


• 1) the opportunity and 2) the need and 3) the friction/gap/wall between the two.

•Broadly: Harness the power of networks to align financial resources and human insights with clean economic development, putting the

power of a network approach in the field for a viral penetration strategy…leveraging ICT for impact

•Social Entrepreneurs version. 1.0

•NEED driving down renewable costs to enable BOP entrepreneurs to participate in this game. And by cost reduction I don’t mean

the bleeding edge of research and the industry’s finest equipment; rather I mean constructing the cheapest possible functional systems

within the constraints of a given geography. 5% efficiency is plenty if it gets the job done for 1/100 of the price. Paul Polak and his

book Out of Poverty, ―boots on the ground‖ viewpoint. ..convinced that if you can create business opportunities for entrepreneurs that

cost no more than $1100 (landed total), MF can step up for the funding. His idea is to create franchise-style opportunities, similar to

what I’m suggesting. In the energy arena, he envisions cheap solar troughs on a trailer on the back of a bicycle, riding around to charge

up cell-phones for a fee. Near term..okay BUT we don’t have an entrepreneur base that is sophisticated enough in the BOP to think

about distributed power generation to the degree that it will offset many large carbon-heavy power projects.

• Academic rigor would be to measure and compare impact from small projects, and figure out where to invest. The Gates’ did this with

malaria and treated nets; Wilson’s work with cookstoves and lung health; IDE and water management. What is the best ROI for an

affordable solar energy production solution in the BOP? This is a Design for the Other 90% question…

•Silicon Valley:

•Need: Access to financing, in a value chain whose participants are all boxed out of systems that can't support them given assumptions

of risk and value propositions

•Opportunity: Flow of insight from information coming from first hand, on-the-ground intelligence to "inventor/entrepreneur in the

garage" for specs in terms of the engineering of low-tech/energy efficient/innovative solutions for BOP market need

•

•Value proposition: friction between inventors in organizations that can't foster external IP in ―under-valued‖ markets and lack of good

feedback from potential applications

•Madison Avenue: Hearts-and-minds, see SolarVision.org

•Wall Street/Corporate America: Corporate sponsorship for hybrid philanthropy to gain BOP market intelligence Need: Better

intelligence about new market and “workforce,” Opportunity: brand identity with mission driven SE approach, real value in BOP

feedback.

•Global Governance/Humanitarian: More direct link between people for information, ideas and financial flows

Slide 6 commentary


The Synergy Network

Social Entrepreneurial

Fund

Micro-Utilities/Micro-

Lenders

Recipients of Synergy Power

and Loans

Dividends Back to Micro-Investors

Micro Investments

Bottom-of-the-Pyramid Clean

Economic Development

Portable renewable energy

generation & social

entrepreneurship

Mobile communications

for micro-investments and

micro-lending


―The idea is to build a global network for clean economic development. The network itself will define how we create this

new world, but in a very basic sense we want to align the better angels of our nature with the cleanest technologies we

have for a viral spread of the pursuit of happiness.‖

First graphic: The approach here is to look at this in terms of designing a system that creates a positive feedback

mechanism for accelerating clean economic development: (virtuous cycle in every sense of the word)

•1) Micro-investments are made using handheld technologies like cell-phones and blackberries. The relationship between

our iPhones, cell phones, etc. allows us to instantaneously access communications to anyone in the world at any time

provided they have a cell phone as well. It also extends our persona to the electronic/cyber realm in that newer versions of

these technologies allow us to browse the internet from our handheld devices. In a real sense, we as individuals have a

cyber identity as well, an extension of global citizenship in terms of our engagement with global communications platforms.

At the same time, messages to us as individuals through other media channels can capitalize on the way in which we are

so closely connected to the ability to engage at any given time (more on this in a moment).

•2) Micro-investments go to a Social Entrepreneurs Fund, modeled on the premises of many aggregated investments such

as mutual funds, only the companies in our portfolio are assessed by different metrics than a traditional mutual fund.

Again, more on this in a moment.

•3) Aggregated micro-investments are distributed through the SE Fund to SME’s that are aligning micro-finance with

renewable energy generation. The idea is to prioritize financial access to the SE Fund to those that are working on the

systemic issue of creating a clean energy base for economic development, using the best micro-economic tools available

to create opportunities for a better quality of life.

•4) The BOP community members who are recipients of the entrepreneurs services (power delivery and micro-loans both

for traditional and clean/appropriate tech purchases and funding) will be paying for these services that go back to the SE

Fund as returns on investments, and whose

•5) dividends are then distributed back to the micro-investors

Comment from a conversation I had…‖This is ―marrying up‖ the distribution channels for clean energy development and

community finance…‖

Slide 8 commentary


Background


At the Tallberg Forum in 2008, I was part of the working group looking at how renewables could positively impact

climate change. As context, in our 5 person team, Gerhard deVries was responsible for reporting back to the

larger conference audience on large scale RE approaches (he is one of the co-founders of the DESERTEC

project). I was responsible for reporting back on small scale/distributed RE approaches

Slide 10 commentary


Why the developing world?


The US carbon footprint dominates the global impact of human activity on climate change, so some think that the

real focus should be on the US cleaning up our own act in clean economic development acceleration. But

developing nations aspire to achieve much of our lifestyle; if they were to realize that type of quality of life with

existing technologies (or worse, the most polluting forms of those technologies since currently many are also the

least expensive) the exponential negative carbon impact could drastically accelerate GHG emissions thus

reversing any or all positive steps other nation-states may have achieved.

The real reason is that energy efficiency is already done. Use the cell phone to land lines example. Less

committed to existing infrastructure

This is a market opportunity regardless of C02

Slide 12 commentary


Synergy Network Proposal

BOP as Workforce/Entrepreneurs in Clean Economic Development

What is the current micro-economic tool box & what does the current landscape look like?

What is the current portable renewable landscape?

What is the current social investor landscape?

What is the current mobile giving landscape?

What is the current ―appropriate technology‖ landscape?

Where do we already see synergy?


I’ve just begun to tackle the answers to these questions, and the presentation today is based on what I’ve

gathered so far, but this effort is ongoing

The over-arching focus for the approach is to come up with ways that can act exponentially in terms of the

creation of localized clean economic infrastructure

The premise is that by leveraging information communications technology and social media, combined with

innovations in micro-finance and portable renewables, we can create the potential for a viral expansion of local

clean economic communities in the developing world. In terms of tools in the toolbox for combating the

exponential impacts of human activity on the earth’s ecosystems, it seems an appropriate strategy to look for

exponential solutions

Current global population with no access to electricity= 1,456,000 people 1.5 Billion people

Slide 14 commentary


Synergy Network


Fund


Lenders


and Loans


Micro Investments

BOP as ED entity


Vision for BOP as Network of Entrepreneurs

BOP as workforce

New conception of ―head of

household‖

Win-win: Better quality of life

through sustainable opportunity,

investment has return

Mobile networks= ICT for

infrastructure


•BOP as workforce, not market for consumer goods

New conception of ―head of household‖

As BOP entrepreneurs, economic value to global infrastructure is win-win: Better quality of life through

sustainable opportunity, investment has return

•Entrepreneur= working for yourself, not recipient of donations or ―target market‖ for consumption

•Mobile networks= can ―tax‖ transactions electronically so quality of life benefits are monetized and fluid

•BOP Markets are quantified to represent $36 B dollars by some accounts, or $15 trillion by others. Much of the

criticism about a BOP approach to economic development has been levied by assessments that 1) Narrowly

restrict economic opportunities to those of purchase of consumable goods and 2) Rely heavily on defining these

BOP consumer behaviors based on a ―head of household‖ surveys that misrepresent different behaviors of

different genders (e.g. the notion that households living on $2/day spend a disproportionate % of that income on

alcohol, television and cigarettes)

•Aside: a couple of people I talked with just didn’t understand why mobile technology in terms of financial

transactions was important at the BOP. I think the disconnect for them may have been that I wasn’t adequately

framing these BOP in the right context, i.e. not a ―market‖ but as a ―workforce‖

Slide 17 commentary


BOP Entrepreneur Model

BOP Clean Economic Development

Distributor of clean tech

(mobile Wal-Mart)

Portable renewable

power (micro ESCO)

Micro-loans to community (mobile bank)


Components of a healthy economic system : clean energy powering clean technologies facilitated by services

that are ―owned‖ by the community

Aside: many conversations with social entrepreneurs brought up inherent dis-incentives for truly ―triple-bottom-

line‖ metrics…economic, environmental and social. For example, developers of renewable community power in

the current landscape were described as being largely ―big players‖ who dominate the field and don’t prioritize

the economic benefits to those communities in which projects are being built

Slide 19 commentary


Vision for Value Chain- Why mobile technology?


•Again, immediacy of access to decision of micro-investor for financial

•Mobile renewable generation allows fluidity of power distribution to community leap-frogging infrastructure

(Debate: Stationary renewables benefit to communities?)

•GIS and visualization tools for tracking field operations of BOP entrepreneurs

• Again, electronic financial transactions allow for security of BOP entrepreneurs in the field as well as the ability

to track the stream of transactions in the system (i.e. the BOP entrepreneurs works from their handheld device

as opposed to a phone and PC in a cubicle)

•To answer questions about the availability of wireless communications in the developing world as a necessary

component of the Synergy Network, describe briefly work that Fab Labs is doing ―to create elements of a

communications

infrastructure in developing countries: http://fabfi.fablab.af/ In this case,

parabolic reflectors are built from locally available materials (USAID oil cans in some cases) and boost the

capabilities of off-the-shelf access points to create long links in a wireless mesh. We're taking this further to

explore the value of an off- grid network to local communities (since Internet connections are still

slow or prohibitively expensive in many parts of the world).‖

Slide 21 commentary

http://fabfi.fablab.af/


Vision for Value Chain- Why mobile technology?

The ―text‖ donations are highlighted, aligned

with organizational mapping, as well as

uploaded YouTube videos for sharing of

experience


Innovation in BOP PPA?


Innovation for micro-PPA…BOP social entrepreneur could enter PPA from provider of portable RE technology

when bundled with micro-lending to fellow community members, represents economic development base

Slide 24 commentary


Portable Renewables


I am going to focus on solar today, but there are other portables in this space including micro-wind generation

that could, for example, be bundled with existing trucking fleets in places like India and Asia. And again, there

are community scale stationary renewable power plants that are at an early stage in their industry as well.

Slide 26 commentary


Why Innovation in Finance is Necessary: Portable

Renewables

0 50 100 150 200 250 300 350 400

Coal Fired

Natural Gas CCGT

Geothermal - Flash Plant

Geothermal - Binary Plant

Municipal Solid Waste

Landfill Gas

Wind - Onshore

Biomass - Incineration

Biomass - Gasification

Biomass - Anaerobic Digestion

Wind - Offshore

STEG - Parabolic Trough

STEG - Parabolic Trough + Storage

PV - c-Si Tracking

PV - Thin Film

PV - c-Si

Marine - Tidal

Marine - Wave

LCOE Carbon: 21 USD Carbon: NEF Estimates Central Scenario

Source: Bloomberg New Energy Finance

LCOE Q4 2009 ($/kWh):


Renewables Near Term Potential

Source: Kurtz 2009

Thin-film organic cells are now approaching 8% efficiency, with

prospects for inexpensive manufacturing at scale. These new

materials will compete with CdTe (cadmium telluride) and CIGS

(copper indium gallium selenide) thin films, which are commercial

today and gaining economies-of-scale advantages


Renewables Longer Term Potential

“Theoretical calculations of electrical conversion efficiencies up to 80% may be possible……”


Synergy Network


Fund


Lenders


and Loans


Micro Investments

Economic development

“base”


Micro-loans to Community


•Bundling micro-finance to community members with renewable energy generation

•Current micro-finance landscape:

•According to the Consultative Group to Assist the Poor (CGAP), in 2007 the total estimated number of

microfinance customers was $100 million. Microfinance clients are predominantly engaged in income-generating

activities in the informal economy in emerging countries, as a means to self-reliance in the face of high, systemic

unemployment. They are street and market vendors, small-scale farmers, cottage industry participants such as

weavers, and in some cases medium-enterprise business owners not eligible for loans from mainstream

banks. Globally, clients number over 100 million including both borrowers and savers. Many MFIs target women

borrowers since research shows that they devote a larger percentage of income to improving the family’s

dwelling, nutrition and health care, and to keeping children in school.

•Microborrowers may access loans either through a group lending model or through individual loans. In the first

instance, the joint liability of all group members to repay a defaulted loan provides ―moral collateral‖ in the

absence of a material guarantee. This solidarity system has proven extremely successful in generating high loan

repayment rates. Loans can be as small as $100 per borrower (higher in dollarized economies), tenors are short

(six to 18 months) and loan repayments rates are 95-98% across the industry. Under the individual loan model,

the borrower has sole liability and provides some type of collateral. Such borrowers usually manage more stable

microenterprises and may be creating jobs for others in the community, an important social benefit. However,

repayment rates in this lending model are lower at 80-90%.

•Microfinance lending has high operating costs which are covered by elevated interest rates. These vary

according to country and effective rates can top 100% in some markets, but the average is around 30% on an

annualized basis. While astronomical by mainstream lending standards, MFI rates are cheaper than those

offered by informal moneylenders, which can reach 30% per month. Borrowers are able repay MFI loans

because the incremental income from a small amount of capital in their labor-intensive businesses outpaces the

interest burden.

Slide 32 commentary


Distribution of Clean Technologies

The mobile ―Wal-mart‖ approach…catalogue of CT (see PowerMundo, etc.)

available for purchase by community (solar cookstoves, solar water purifiers, etc).

Partnership opportunity here for folks working on the digital divide, so look to

marrying the power/banking service with education for community.


Synergy Network


Fund


Lenders


and Loans


Micro Investments

Leverage Social Media


Vision for Global Network of Micro-Investors


Importance of mobile technology for financial transactions:

1) Thinking several steps ahead in terms of the ability to create economic opportunities without hard currency

for security of BOP entrepreneurs as well as enhanced fluidity of financial resources that can create more

efficiencies in transactions…also several steps ahead but may address issues of governance corruption in

conflict ridden nation-states

2) Madison Avenue and Social Entrepreneurship: ―Hearts and minds‖ example of where players used to

leveraging consumer behavior from corporate perspective (MasterCard ad firm example) now turning attention to

clean energy opportunities. The immediacy of message can be synergized with micro-investment opportunity.

Debate: Haitian model of text message for $10 donation…would this same strategy work with micro-

investments.? Paint the picture, woman watching Oprah given the message on women helping women through

SE Fund…would that resonate?

3) Building on ―hearts and minds‖ leveraging interactive platforms (YouTube) to show development in the field

to expand communications to more Synergy Network investors

Slide 36 commentary


Leveraging Current Media

Social Media opportunity- acceleration of Synergy Network approach through access

to other existing networks (Highlands Mommies example).

Viral nature of communications and awareness using this approach– use YouTube

example of uploading one’s own perspectives ―from the field‖


Synergy Network


Fund


Lenders


and Loans


Micro Investments

Managed for flows of

insights and access


SE Fund/ Micro-Investment Model

Social Entrepreneurship Fund

Start-up capital for SME (“wholesalers” of app. tech)

Funds for micro-loans to BO P community

Funds for financing portable renewables

Funds for communications to new investors & BOP recruitment/training

R&D Funds for “garage project” development


Further definition of content & strategy, oversight and management of SE Fund- each basket of activity

represents its own IRR and level of risk

Need for micro-investment approach…mitigation of risk to individual investor as small scale investments are

aggregated; unintended consequence of exponential participation in clean economic infrastructure by greater

number of individual investors (again, hearts and minds part of the equation)

Paypal approach for financial transactions

Mobile technology billing versus dividend statements

Question of complexity…have been pointed towards software and other supporting technologies; options trading

online is possible so this should be manageable…again, emphasis on innovation in terms of access to capital

and finance facilitated by non- hard currency transactions…

Slide 40 commentary


Why Innovation in Finance is Necessary: Current

Social Entrepreneurs for BOP


•Bangladesh model: The Solar Home System (SHS) dissemination program in Bangladesh is considered to be

one of the most successful of its kind in the world, bringing power to rural areas where grid electricity supply is

neither available nor expected in the medium term. Between January 2005 and July 2009, nearly 350,000 SHSs

have been installed in the country. Supported by grants and soft loans from the World Bank, GTZ, KfW and the

Asian Development Bank, installation rates have increased to a rate of more than 15,000 per month. The

Bangladesh program is implemented on the ground by micro-finance institutions, known as Partner

Organizations (POs), which finance the SHSs through a loan scheme which involves a less than 10% grant

funding element

•Grameen Shakti model: Grameen Bank intensively developed its energy division, Grameen Shakti (GS), during

the last six years and is now responsible for two thirds of all installations under the SHS. Second to GS comes

the BRAC Foundation, part of BRAC which is the biggest NGO in the world.

•Solar Electric Light Fund/ Solar Cookstove International:

•KIVA model

•ASME model

•Sample SE work: PowerMundo, TerraEndeavors, MannaEnergy

Slide 42 commentary


Kiva example- SE and $


ASME example- SE and Ideas


Synergy Network Project Roadmap

TechnologyWhat are the best models right now

for aligning CT with BOP markets?

“Best practices” guidelines for development

MarketWho are the best

partners for deployment?

Identified and committed

partnerships

PolicyWhere are the roadblocks for transactional

flows?

Best “work-arounds” for

interim development


Many thanks…

synergy network proposal

Education