Productive uses of energy to jumpstart livelihoods
Stimulating productive uses of energy is critical to catalyse income-generating activities and for the sustainability of energy systems, especially in rural communities.
IIED’s work has shown that electricity demand does not grow automatically when energy services arrive. Many low-income communities in the global South require further support to increase their income and productivity, and in turn pay for energy services.
Targeted interventions that develop community skills, build access to financing, connect value chains and build market access will enable communities to use electricity more effectively and support progress to achieving Sustainable Development Goal 7 – ensuring access to affordable, reliable, sustainable and modern energy for all.
Electricity use among poorer households is often limited to low-power appliances, such as lightbulbs and phone chargers. Rural electrification programmes have, in the past, used units to demonstrate and raise awareness of how electricity can be used at home and for developing businesses.
But awareness-raising is rarely enough. Many remote communities in Africa and Asia have limited access to markets, skills, and financing, all of which are crucial to building out productive uses of energy (PUE).
And to stimulate business activities, financing must meet the unique needs of smaller, rural entrepreneurs. There is often an unserved ’missing middle‘ of finance, where the capital needs of a small business are too great for local savings groups but considered too small or risky by rural banks or enterprise funds.
Integrating solutions to these challenges is not easy for decentralised renewable energy developers, many of which are keen to focus on their core business: providing reliable energy services. Boosting PUE requires targeting and strengthening existing value chains and activities and identifying opportunities for investments. Energy then becomes an enabler of other sectors rather than an end goal.
What is IIED doing?
IIED has been conducting action research on the productive uses of energy in East Africa since 2014.
Testing out PUE solutions in Tanzania
Tanzania has a lively energy access community, with a mixture of domestic and foreign enterprises and NGOs, all experimenting with different technologies and delivery models. IIED’s initial research looked at the design and impact of solar-diesel mini-grids serving fishing communities on Lake Victoria, and hydropower-based mini-grids in the Southern Highlands that had combined energy services with community involvement and supporting agri-businesses.
The Energy Change Lab is a joint programme we implement with Hivos in Tanzania. One of our key contributions has been to bring together stakeholders from within and outside the energy sector for in-depth discussion and problem-solving around PUE. Avoiding the traditional conference format, we use techniques such as systems mapping, learning journeys and prototyping to help people develop a shared understanding of the root problems and be creative in solving these together.
We also support practical experimentation. Through the lab we partnered with mini-grid developers PowerCorner, Rafiki Power (now PowerGen), the European Committee for Training and Agriculture (CEFA), and the Matembwe Village Company (MVC) to implement several PUE prototypes. Our prototyping tests ideas in the real world, but on a smaller scale than a pilot. It involves a deliberate process of designing a scalable intervention, testing it, learning from and improving it, with the aim of supporting systems-wide change.
A prototype with PowerCorner focused on training up ‘community PUE champions’ to overcome local skills gaps. It sought to provide a low-cost alternative to formal training in distant cities, and be easily replicable. The prototype offered ‘training of trainers’ sessions, video tutorials, appliance demonstrations and a partnership with Tanzania’s Vocational Educational Training Authority (VETA).
Entrepreneurs did gain confidence to invest – later buying wood lathes and popcorn machines, for instance. And the training created space for the company to take on local feedback to revise their tariff structure, making electricity more affordable for businesses.
But we also learnt that scaling this model needs a longer-term partnership among energy actors and nationwide training bodies like VETA; time and funding to adapt training modules for off-grid applications; and innovation in distance learning platforms – for instance to overcome connectivity issues.
Meanwhile, the prototype with Rafiki Power took on the thorny problem of equipment supply and servicing. Selling to customers in remote areas really adds costs for distributors and retailers who have to transport the equipment over long distances, plus these customers have lower purchasing power, so adding costs into the purchase price makes for a difficult business case.
We worked to extend supply chains by brokering a partnership between Dar Es Salaam-based retailers and local distribution companies; negotiating to lower customer down payments; finding ways to upskill a local technician to repair equipment; and preparing user manuals in Kiswahili (for example for a welding machine, a meat mincer). The user manuals are popular and partnering with retailers is promising, but solving finance constraints along the chain is an ongoing challenge.
Integrating PUE into Kenya’s county energy plans
Kenya has been at the forefront of investment in the off-grid energy sector. IIED’s research in Kenya started by investigating innovations targeting agricultural and fishing communities – namely, community and private-sector run micro-grids, and solar water pumps.
Our current work focuses on supporting the development of the Kitui County Energy Plan, which aims to increase energy access and maximise development impacts for communities in Kitui.
Using a bottom-up, inclusive planning approach – the Energy Delivery Model Toolkit – we are working with partners to develop holistic solutions that address the energy (and non-energy) needs of the small and medium enterprises, livestock farmers and of farmers growing cash crops on irrigated land.
IIED is working to identify viable pathways to scale PUE activities across a range of communities and contexts. We welcome opportunities to partner with others committed to finding solutions which help stimulate rural livelihoods while making energy systems sustainable.
Productive uses of energy for resilient livelihoods in LDCs, Kevin Johnstone (2021), IIED Briefing
Blog: Getting personal: tailoring support to power up Tanzania’s rural businesses, by Sarah Best (2020)
Remote but productive: practical lessons from productive uses of energy in Tanzania, Kevin Johnstone, Kavita Rai, Frederick Mushi (2019), IIED discussion paper
Off-grid productivity: powering universal energy access, Kevin Johnstone (2019), IIED briefing paper
Blog: Power that changes lives: three lessons from a rural energy champion, by Basil Malak (2018)
Blog: Shining a light on energy consumers in rural Tanzania, by Chih-Jung Lee (2018)
Blog: How energy can generate growth in Tanzania's rural economy, Basil Malaki (2017)
Making mini-grids work: productive uses of electricity in Tanzania, Arthur Contejean, Louis Verin (2017), IIED working paper
Blog: Powering local development in Tanzania, by Sarah Best (2017)
Blog: Four challenges to powering local economies, by Sarah Best (2017)
Energising local economies: experiences of solar start-ups in Kenya’s small-scale fishing and agriculture sectors, Sarah Best (2016), IIED research report
Remote but productive: using energy access investments to catalyse enterprises and income in Tanzania’s rural communities, Sarah Best, Ben Garside (2016), IIED working paper
Growing power: exploring energy needs in smallholder agriculture, Sarah Best (2014), IIED discussion paper
Kevin Johnstone (email@example.com), researcher, IIED's Shaping Sustainable Markets research group