A new report has put total annual investment in the off-grid energy access sector above $500 million in 2018 globally.
The report by natural resources consultancy Wood Mackenzie and Renewables, and Energy 4 Impact, a non-profit organisation, titled ‘Strategic investments in off-grid energy access: Scaling the utility of the future for the last mile’ highlights the acceleration in investment across the energy access sector.
It said nearly $1.7 billion in cumulative disclosed investment was deployed into energy access markets by the end of 2018, with over $1.2 billion deployed since the beginning of 2016.
“Investments in the energy access space have accelerated rapidly in the last few years but total volumes still fall well short of the total estimated financing needed to reach universal electricity access globally by 2030,” said Benjamin Attia, the lead author of the report and a power & renewables analyst with Wood Mackenzie.
He added the pace and the manner at which electricity is provided to around 1 billion people who still do not have access to energy will have a dramatic impact on power demand, electricity generation, grid infrastructure investments and future carbon emissions reductions.
In 2017, year-on-year transaction volume grew 37 per cent and total capital composition by volume shifted to over 50 per cent debt, signalling scale-up and further maturation of the sector. In 2018, total transaction volumes grew another 22 per cent year-on-year, and the average equity investments doubled and debt increased nearly five-and-a-half times.
Attia said the emerging sector has seen a steep uptick in investments and partnerships from strategic groups within many of the oil and gas majors, European utilities and IPPs, clean energy OEMs, and the technology sector looking to capitalise on new opportunities in fast-growing emerging economies.
The report finds that for utility-minded strategic investors like Engie, Shell, EDF, and Total there is strong interest in evolving the utility business model beyond electricity service provision. It says 75 per cent of all strategic activity in the off-grid energy access sector is commercial in nature. Of that figure, direct investments and M&A represent nearly 25 per cent.
“Strategic investors and their affiliates have made or been involved in over 110 direct investments in the energy access sector – worth over $383 million in disclosed value,” it said.
It further added that the strategic investors have also participated in indirect fund investments worth over $461 million.