Catalyst with Shayle Kann - Climatetech for developing economies

Episode Date: October 27, 2022

Utilities in developing countries are juggling a complex set of problems: How to extend electricity to those who don’t have it; how to deploy large-scale power generation to power economic growth; and how to pursue these goals while decarbonizing.  In this episode, guest host Lara Pierpoint talks to Kate Steel, CEO of Nithio, a finance company focused on off-grid clean energy in Africa. Kate and Lara discuss the options for separating economic growth from fossil fuels. And she argues that we have the technology to develop low-carbon electrified economies in developing economies; we just need to deploy it. Lara and Kate weigh in on:  The tension between expanding access to low-cost power and attracting investment in large-scale baseload generation Why off-grid solar is often more economically viable than diesel generators for rural electrification How canceled power purchase agreements have stymied the development of renewables and how to solve these financing challenges  “Reverse” tech transfer from developing countries to developed ones, such as hyper-efficient appliances  Options for off-grid power, such as lanterns, microgrids, microhydro, biogas and liquefied petroleum gas canisters. How transportation may leapfrog fossil fuels in developing countries with electric motorbikes, buses and cars Recommended Resources: Canary Media: COP26 players pledge funding to shut down coal plants Bloomberg: A New Era of Climate Disasters Revives Calls for Climate Reparations Canary Media: Expanding solar access in Africa through artificial intelligence Columbia University’s Center on Sustainable Investment: Roadmap to Zero-Carbon Electrification of Africa  Catalyst is a co-production of Post Script Media and Canary Media. Catalyst is supported by Scale Microgrid Solutions, your comprehensive source for all distributed energy financing. Distributed generation can be complex. Scale makes financing it easy. Visit scalecapitalsolutions.com to learn more. Catalyst is supported by CohnReznick, a trusted partner for navigating the complex and evolving financial, tax and regulatory landscape of the renewable sector. Visit cohnreznick.com to learn more.

from the studios of PostScript Media and Canary Media. I'm Laura Pierpoint, and this is Catalyst. Is there anything wild and crazy on the technical horizon that you're keeping an eye on? No, we just need to deploy what we've got. Because in some ways we're out of time on this. We're barreling towards 2030 is when we're supposed to have universal access for all estimates or we're nowhere close on that. It's kind of unconscionable that in 2022, we have 10% of the world without access

to electricity. Far too often in our climate tech innovation bubbles, we're thinking about developed world problems. We're thinking about huge established electricity grids, and we're thinking about big industry. Far too seldom are we thinking about the fact that there are still millions and millions of people that lack access to electricity and are using fossil fuels for cooking. It's time that we start thinking more about problems that are global and figuring out how we can help with the developing world. Today's session is on developing world energy. When utilities need flexible capacity they can count on, they turn to Energy Hub. Energy Hub works with more than 170 utilities, coordinating over 2.5 million devices to manage 3.4

gigawatts of flexibility, built for the moments when utilities can't afford uncertainty. Energy Hub builds and operates virtual power plants that utilities actually stake their grid planning on, coordinating EVs, batteries, thermostats, and more through a single platform built for utility scale. predictive, verifiable, and designed to perform when it counts. Learn more at energy hub.com. Trillions of dollars are flowing into clean and critical infrastructure, but those investments aren't driven by technology alone. They're shaped by markets, by policy, by capital,

and by the institutions that connect them. I'm Alfred Johnson, CEO of Crux, and host of a brand new podcast, Critical Capital. Each episode, I talk with people deploying capital, shaping policy and building the clean economy. Tune in as we unpack how progress is actually made. Listen to Critical Capital on Spotify, Apple, or wherever you get your podcasts. I'm Laura Peerpoint filling in for Shale Khan while he's out this week.

I'm the CEO of Actuate Climate. It's a nonprofit focused on systems innovation to scale greenhouse gas emissions reductions. It's pretty obvious that the world is not the same everywhere when it comes to energy needs and uses, both now and in the future. Within my organization, for example, we're fond of saying that we need to do more than just solve Palo Alto problems. Today, Kate Steele, the founder and CEO of Nithio, and I discuss the status of energy in the developing world, and we talk about where it's going. While the developed world is working to decarbonize, we need to remember that 940 million people still lack access to electricity, and 3 billion people, literally 40% of the planet, do not have access to clean fuels for cooking. So while we cheer California's latest ban on subsidies for new natural gas hookups and New York following shortly behind, we need to remember that solving problems at home does not mean we're solving problems next door.

So how can we decarbonize? Well, enabling the developing world to develop as fast as it can. What makes it hard or different to help get energy solutions where they need to be in the developing world? Are there sneaky, up-and-coming technology solutions that will change the picture? And most importantly, how do we put the people in these countries in the driver's seat and stop assuming that those of us in the developed world know how this is supposed to go? Kate and I discussed these questions and more in this session on developing world energy. Here's my conversation with Kate. Kate, it is awesome to be here with you today to talk about energy in the developing world.

Fantastic. I'm so excited to talk to you too, Laura. So the state of energy usage in the developing world, it varies obviously locality by locality, country by country. but how would you characterize where things stand with respect to things like energy access, the kinds of energy that people are using and how that's different from what we understand in the U.S. in European countries? Sure. So I'm going to jump right in and split this into actually two problems because I think when we talk about emerging markets or whatever we're going to use for the appropriate term,

we're talking about two problems. One is energy access. There's flat out a lot of people who still lack access to electricity, don't even have basic access. There's kind of a separate problem of countries that don't have sufficient power to really grow their economies, industrialize. Solving both of those at the same time is almost impossible because your priorities are just going to be different. So kind of taking those as separate, let's look at energy access first. That's a little bit more where I focus. Right now globally, I'll use round numbers just because I think it's easier to anchor on that. Say 750 million people

globally who don't have access to electricity. 600 million of those are based in sub-Saharan Africa. And I think we see increasingly that's going to be the concentration of where energy access is really an issue. By 2030, 90% of people who don't have access to electricity will be living in Africa. And this is something, this isn't to say there hasn't been progress. There's actually pretty significant progress up until COVID that you're looking at between the, you know, pre-COVID we've gotten from down to about 75% of people.

didn't have access to electricity. That was actually an improvement. And COVID it rose a little bit. It's back up to around 77%. So there are a significant number of people in Africa without access to electricity. So we focus there. If you're looking at like energy usage, if we're going to compare to, say, U.S. markets, average U.S. person uses, you probably know this, but a 12 megawatt hours per year, roughly. If we're looking at some of the markets in Africa, we focus a lot on Kenya. Kenya's about a 150 kilowatt hours per year, a little bit above that. You know, we're looking at places like Rwanda, it's more like 60. And so I think if we're looking at what the difference is, that means the average person in the U.S. is using 75 times more electricity per year. That's a really significant

change. And if we're to not make this entirely polarizing kind of U.S. and African countries, if you're looking at developing Asia, it's kind of somewhere in the middle. That, you know, Indonesia, I'd say, you know, developing Asia, it's about a megawatt hour per year. But then looking at the countries where the kind of the total installed capacity, this is where you get to see a really big difference. And this is where you get that what's driving the economy in terms of like how much the like electricity capacity there is installed. Big numbers. China, two terawatts. U.S. one terawatt, roughly. Using the same countries, Kenya, three gigawatts. So yeah, so U.S. installed capacity is about 300 times bigger. They're in Rwanda, same like 2,000. 150 megawatts. These are small systems, small countries in a lot of cases too. But you're really looking at a pretty small

installation that's kind of powering the whole country. So you have these two problems that you're trying to solve. How do you get electricity access to way more people and get them consuming at a level that's really going to improve quality of life and improve the kind of household situation? And then how do you get these big megawatts, gigawatts online that are really going to drive the economy? I'm going to ask a naive question, and I should probably just say up front that many of my questions are going to be a little bit that. because we all know I'm a very domestic creature in terms of where my career has focused. But I mean, it sounds like it's not maybe quite as simple as how we think about, like, the residential sector versus commercial industrial sector in terms of energy access, that you're really talking about, like, energy that powers the economy versus energy that powers people's lives. Is there, I mean, is it a fair comparison to think about it as commercial industrial versus residential or not entirely?

I think of it a bit more as urban and rural, that I think if you're looking at where, is likely to be electrified by the grid in the future. If you're close into an urban industrial area, you should be connected to the grid, most likely. It's going to be cost-effective to do so. So you can think of that central grid as being really central, empowering commercial, industrial, and households that are close into that. You then have pretty low population density still in a lot of developing countries, especially in Africa, where you're going to have people who are really remote from the grid. It's not going to make sense to necessarily run long grid lines out. to those remote areas. So that's when you start to get into a lot more decentralized options

where a microgrid or a home system is going to make a lot more sense. So for me, the split is, and you might have a microgrid in a remote area that powers the commercial center of that rural area. But it doesn't need to be connected to a larger centralized grid. That makes sense. Well, this is a great segue because, you know, we're going to get deep into nerding out on some of the future technology options. But let's talk about existing technology options. So what exactly is powering this energy usage right now? in all of these different contexts. I mean, it's a big mix.

It's the same mix you see in a lot of different countries. If you're looking at the centralized grid, there's quite a bit of fossil fuel still in some places. I think we're seeing that, of course, in industrialized Asia, where there's heavy dependence on coal still. You see that in, you know, half of the power generated in Africa is from South Africa. A lot of that is coal-dominated as well. You do start to get more of a mix.

There's gas resources across a number of areas. but you also see emerging players in Kenya has a lot of geothermal capacity installed. Kenya's grid is actually about 75% installed capacity is renewable right now, and about 90% of the energy they produce is renewable. A lot of that is because of the focus on geothermal. But you also get large-scale wind, large-scale solar.

I don't think the mix in developing world is going to be necessarily that much different if they're able to develop the resources that they have in gas as well. Okay, well, so there's a big sort of if there. Well, actually, before we get into the question about, like, what development is going to look like, on the energy access side, I know that there are also kind of, you know, some non-traditional, I guess, or, you know, different sources of energy that people use. And so you get, like, a lot more wood. You get a lot more, you know, other kinds of things that people are doing in order to provide heat and power for their homes. So do we still see a lot of that? Is that still a significant fraction of the energy usage in a lot of these countries? Or is it shrinking? What's the status there? Yeah, I think you see that kind of the elephant in the room with people who work on energy access or people who work on electricity access is cooking. That cooking is very much biomass base. It is in a lot of cases, open fire, biomass cooking. There's a lot of improved cookstows, but it's kind of such a thorny problem. I think a lot of people are like, oh, let's just solve electricity because the clean cooking is almost more challenging. It's really challenging from an admissions perspective in terms of land clearing, in terms of black carbon that's produced from. burning of wood fuel. But it is really challenging on a commercial level

to come up with commercial solutions that are really working there. You are starting to see some electrification of cooking with electric pressure cookers and highly efficient electric options for cooking. But absolutely, there's still a very heavy reliance on biomass across the developing world. And I think that is, like I said,

almost the trickier piece to solve. on electricity access, it has really narrowed down to a couple of things. I think where possible, microhydropower has been great, obviously extremely site-specific in terms of where you can develop microhydropower, but a great solution, low-cost solution relatively where you can do that, almost everywhere else, solar. It's the, it is the decentralized option. I think in part because you can tailor it so much to the need where, you know, I've worked with companies that have lanterns that are powered by a, you know, couple-watt panel. Or you can have a

household system that's 20 watts, 50 watts, 100 watts, but you can really up and downsize it very easily. So for a remote solution, it really has been the best option. So is it fair to say that on the residential side, on the, you know, in UCM already, you know, falling into the vernacular that I'm used to in the domestic world, but on the energy access side for, you know, people and individuals, is the goal really, you think, to kind of electrify those systems? Or are there are other kinds of energy that we should be talking about in that context? I think it's largely to electrify. I mean, I think there are, you know, this is, maybe gets into our, still our question of

fossil fuels and how they're used. But I think there are cases where distributed gas makes sense, either through LPG canisters or, you know, there are biogas options that can be used. There hasn't been a really large-scale uptake of that, but I think that would be an option and obviously far superior to burning biomass. And then I think for everything else, pretty much, it looks like electricity is going to be the way to go. So we've got a lot of people that we need to electrify their existing energy usage

and provide obviously much more access and much more power to what they're doing. We need to provide a lot more energy for the bigger economic development end of the scale here. And really hoping that we can pull out of people in a lot of countries out of poverty in the near future. And the big question is, how do we do that without relying almost exclusively on fossil fuels? And maybe that's unfair. I think already, you know, Kenya, as you mentioned, is an example where we're relying on things that are not fossil fuels. But I think this is a big issue, right? And I know that I know from talking to you for a long time that this has been a real challenge in the international development world that folks are really concerned about how is it

that you, is there, about this tension if there is one, you know, between basically economic development and fossil fuel usage. So let's talk about that. How is the future looking with respect to development and fossil fuel usage and potentially trying to decouple those things? Yeah, it's a big thorny question. And same as before, I'll kind of split it into the two categories. So I think if you look at household energy access, maybe I'll look at like off grid and grid. So for off-grid, the lower-cost solution actually is solar, and the logistically easier solution is solar in almost all cases. So I think if you looked at places that did rural electrification 20, 30 years ago on a large scale, if they wanted to do it quickly, they frequently set up diesel generators, set up a little mini-grid. I mean, that's what the U.S. has done in remote areas in the U.S. too.

I mean, Alaska has a lot of small-scale diesel microgrids. So I think that was the scene as the way to do it. That's not really proposed anywhere that I've worked in the last 20 years on electrification because it's one year subject to the fluctuating prices of diesel, but also you have to get diesel to the site. And so if you can do it through, like I said, microhydro or you can do it through a solar installation that really takes care of that supply chain problem. You still have to do maintenance.

You still have to do a lot of monitoring of the system. But it is really easier and cheaper for, in most cases, to do a household system that is not fossil fuel. So I think that problem in a lot of ways takes care of itself. I think you still have challenges. In Nigeria, more people get power from a diesel generator than they do from the grid. But I think that the market eventually will take over on that and people will find it superior to get power from solar. It'll be lower cost and just easier to maintain.

on the grid side, I think that's the more challenging one because this is the same challenge we have in the U.S. or Europe or wherever you want to look with, you want to have large-scale baseload power. You know, a lot of developing Asia or in Africa has large-scale hydro. That's a great baseload solution. If you look at kind of what you layer on top of that,

there are a lot of gas resources in countries where I've worked that are just being exploited, just being discovered in some cases. And really, the question is, this is a very preneralistic way to say, but does the world let them develop that and let them kind of grow their economies based on that? And I think the way that the funding has been set up, a lot of people have said no. And I think that's, that brings up the real ethical question as far as these are countries that have not been traditionally high emitters. You look at the entire continent of Africa, you know, produces 2 to 3 percent of global emissions. And so kind of this argument of, well, let's not let those countries develop their own fossil fuel resources, even though we did. And that's how we built our economy. I think you're on a bit of shake your ground with that argument. But it's a really contentious issue. I mean, so what do you think is the future of that issue? I mean, obviously, I guess it plays out in real time and folks are arguing about this. And I mean, I guess maybe what's the current status in terms of the international development funding that's available, would you say most of it prevents fossil fuel development? Or is there still a fair amount that does? Okay. So we've sort of made that decision, I guess, as an international community for better or for worse. Within the large development institutions, yes. I mean, I can give my personal views on it. I think there's so many other ways that you can reduce emissions with countries that are already emitting.

So I think it's fair to say, okay, no one in the world does a gas plan and U.S. ceases all gas operations. or Europe ceases all gas operations, uses no more coal, then I think it's fair. But I think if we're continuing to develop those resources in industrialized markets, it's kind of hard to say, like, well, don't do it in these markets that are still emerging. Well, great. So here's the Biden administration's official call to cease all gas plant development brought to you biking steel. And we'll go to lower your point on that one. Fair enough. I may have said that.

is putting words in your mouth. Okay, so fair enough. I want to key back on something that you said, which was really exciting, and I almost never hear, which is that problem is going to take care of itself when it comes to climate and energy. Like the number of times that I get excited and optimistic because we've got tailwinds and not headwinds on something is very seldom. So let's talk about this. Let's talk about like residential individual energy access. And let's talk about the technology options. You've already mentioned that, you know, solar and microhydro are two great ways of doing this. It sounds like geothermal has been used effectively in Kenya, although maybe in larger senses. What do you think are the technology supply options?

What's the future of batteries being part of the mix or other kinds of ways of managing renewables variability? How do we think about micro goods versus individual installations that go house by house? What do you think this is going to look like? Such an exciting question. It's funny because I get asked all the time about technology transfer from like the U.S. to emerging markets and how that works. There's so much happening in emerging markets that I think we need to bring back to other markets.

And just one example is on these solar home systems, honestly the great thing about this is that there's very little technology development that needs to happen. There's been, and batteries are already kind of where they need to be at. PV is where it needs to be out, the electronics, all of that. But I think the real innovation has happened on the appliance side where, you know, if you're working with a system,

that is 20, 50 watts, you're going to squeeze every possible bit of power out of that that you can. And it means that people have developed, you know, 7 watt televisions and are using all LED lighting and have, you know, cell phone charging and, but basically, like, it's, it's really being able to eke out every bit of electricity. And I feel like that's something that could come back to, you know, we could use that in the U.S. I'd love to have more energy, like highly efficient appliances, all D.C. systems. So, you know, If you're using in the U.S., you have all of your power as AC. If you're getting solar on your house, you would have kind of, it's DC power that then you convert

to AC and there's efficiency losses. This is a fully enclosed DC system. So you have a battery. You have a PV panel is generating the power. You have a battery. And then you have all DC appliances. There's no loss on that conversion. So I think there's a lot of things that are happening with that are really, really exciting.

And so that's something where I think of the technology is, is that, point where it needs to be. And that's, I occasionally get frustrated when people are like, well, what's the next leap? I'm like, no, we're here. We just need to deploy. This is, we need to get these out to a lot of households if possible. But the question on microgrids, so this is, this is always a bit of a divide as well. So of the population, let's take just Africa, because as I said, that's where the majority of people who are going to be off-grid for the next 10 years are, like, basically estimates are that kind of 40% of those people, a little bit more than that, will probably be connected to a grid or best position to be connected to the grid.

And of the remaining 60% is kind of split a little bit evenly between a home system versus a microgrid. And I think that's where, like, for that to happen, we really need to figure out microgrids if that's really going to go work. I think they have worked in a number of cases, but in some ways they're this hybrid where they have all of the challenges an off-grid system and all of the challenges of a grid. And so figuring out the financing model, the operational model, like how you actually do it scalably,

grid's going to happen. It's got a lot of inertia behind it. I think the independent systems, the home systems are going to happen. It's all about deployment. I think microgrids are still in a little bit of gray area where there's a lot of things that work, but there kind of hasn't been that model

that just like is going to scale on its own. Yeah, I mean, I can see how it has kind of the problems of a grid system and the problems of some of the sort of individualized, you're not connected to like a national grid system. So what's the advantage? Is it that it could potentially be cheaper if you've got like a community scale source of power? Is that really why folks are focused on that? Or are there other reasons to do it? Yeah. I mean, it's if you go back to like the early development of the U.S. grid and kind of the balance of power that you could have basically smoothing out the load curve where, you know, residential people, they turn on the

lights in the morning, they turn on the lights in the evening and kind of their energy. consumption is really in those times. And then if you can have in the middle of the day commercial or other users who are kind of flattening that, that you can just size the system more efficiently, that you don't have to size it to like one peak that you're getting for the household level. So that's the advantage is it should be cheaper. But to be actually able to grow the system and size it correctly for a community that hasn't had electricity and now does and how they might use it. That's the piece that gets really complicated.

And you have to do metering, you have to do payments collection, you have to make sure that no one's overloading the system. So that's where you get a lot of the complications of a grid system without being really large scale. Virtual power plants are becoming a reliable way for utilities to manage capacity. But enrolling devices is just the start. What really matters is confidence, knowing those resources will perform when dispatched

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to manage over 2.5 million devices delivering 3.4 gigawatts of flexible capacity. See what that looks like at energy hub.com. We're living through a profound economic shift, and energy sits at the center of all of it. Trillions of dollars are flowing into power plants, transmission lines, battery factories, data centers, but the future of energy isn't shaped by technology alone. It's shaped by markets, by policy, by capital, and by the institutions that connect them. I'm Alfred Johnson, CEO of Crux, the capital platform for the clean economy.

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You had said a little earlier that batteries are where they need to be with respect to sort of solar and other installations for energy access. When you say that, do you mean that they're in the sweet spot now. I assume we're talking lithium ion here and like as the cost and the materials gathering issues associated with batteries, do you think this is all actually, you know, they're in an okay spot?

I'll caveat with like good enough, not necessarily a sweet spot with, yeah, I think they could always be, they could always be better. They could always be more energy dense. You could always have ones that can cycle for longer. That would be great. Cheaper is always a benefit. But there's not like, a big breakthrough that has to happen where that's like holding back the ability to scale systems. So even of the 600 million people without access, by our estimates at Nithio, we think about half of those people could afford a financed solar home system that's available right now. So obviously, it still leaves a portion of the market that's hard to reach, but that's a lot of people.

So there doesn't need to be like a breakthrough for that to be deployable. Right. Well, one of the things I think about is in terms of scale. and cost reduction, we've got a pretty good partner in the EV markets right now, right? So assuming that the batteries that we use in EVs are relevant for some of these home systems, that seems like a pretty good place to watch for some of the scaling and learning effects to bring those costs down. Is that fair to say? Or do you think that it's another kind of battery we're needing here? No, I think that's fair to say. And I think that's where initially it was lanterns,

and they were really pulling from cell phone batteries. As it's gone up, the batteries that most places need are quite a bit smaller than the EV batteries. I could see EV batteries going into microcontrines. grid as a storage solution. But yeah, I think there, I mean, there's a possibility this market will be large enough to drive something else. But right now it's really been able to benefit from the economies of scale that other larger markets have been able to produce. Same on PV. It's, I mean, they're very small panels. They're not really driving the industry, but have been able to benefit from the costs coming down significantly. Well, so before we leave this topic of technology, let's just talk for one more second about kind of the technology options for the bigger,

of grid scale side of the equation here. So we've talked a bit about fossil and Lauren Kate's views on how that should move forward. You've mentioned geothermal in Kenya. So are really all of the technology options for centralized generation on the table? Are there any that you think or not? Like nuclear is one of the things that comes to mind. I mean, you were going to say nuclear. You knew I was going to say nuclear. It was going to happen eventually. So like, so yeah, what do we think about nuclear? And are there other kinds of technologies that definitely should or shouldn't be on the table here? Yeah, I mean, I think we shouldn't think of developing world as,

I really feel like this is just country by country. It doesn't matter what you're trying to power. It's how do you get baseload? How do you get peaking? Like, how do you do it in a cost-effective way where you can actually have, like, pretty reasonable cost of power? And so, but so many things are site-specific.

Like, a lot of places have really large-scale hydro. Awesome. Then you get into a transmission issue and, like, developing better transmission infrastructure. And that's a big, question across Africa's power pooling and an ability to transfer power better between countries. And then you can, yeah, geothermal is great baseload. Geothermal is really, really site-specific. So you can develop that wherever it's actually possible and where it's feasible.

East Africa has great resources. Not a lot of places in the world do. I mean, obviously, Indonesia, Philippines, like a lot do, but it's very focused to certain areas. And then, yeah, you put wind wherever possible. Most of Africa is actually not great wind resources. So that's just given location. So I think you start to kind of build up that stack of like what's feasible. And with solar, I think one of the things that's actually held it back, this is kind of an odd thing, but the prices were dropping so fast. It was actually hard for countries to keep up with what the pricing should be because you'd see, you know, bids coming in from Dubai, Mexico, $0.3 a kilowatt hour. which was extremely low cost and well below the cost of generation for other sources

and a lot of the countries where I work. But is that what's going to be the price in those new markets that are much smaller installations or where you have to have a lot more land issues or transmission infrastructure? So I think trying to keep up with like what is the market pricing is a challenge there and obviously land usage too. But yeah, I don't think we need to take kind of what's the mix as any different from any other country because I think it's the same challenges of how you build up your your system. That makes a lot of sense. Well, and that's a great segue into, I think, my next set of questions

around, you know, what are the sort of market incentive structures, what's working, what isn't there. And so maybe this time we'll go the other way and sort of start with a centralized generation thing. Maybe you can say a bit more about what you mean about, like, keeping up with the pricing, because it seems like low pricing is a good thing. I imagine that like just understanding how to price things and how to make the system work is challenging when things are changing pretty rapidly. But so what, what? What are some of the challenges? Like, why, why isn't their more centralized generation getting built more quickly in a lot of these countries? Yeah, and I think this is one of the questions about

kind of climate finance flows and why they're going so much into developed markets is they're going to bankable projects. And I think that's one of the biggest challenges when you look at investing in large-scale power in emerging markets, you have to look at the off-taker. And if you're looking at in most cases it's a government utility. You're looking at credibility of, are you going to be able to sell the power? Is the power purchase agreement going to hold up in court if there was an issue? And I think that's where you see a really high concentration of projects in certain countries,

attracting a lot of international investment and other countries being really challenging because of that inability to guarantee that you're going to have an off-taker. And if you can't guarantee that agreement or you can't guarantee that that agreement is going to be held to, then it's hard for investors to come in. I think, you know, my previous role at Power Africa, we saw that a lot with, you know, there are countries that canceled PPAs over the power purchase agreements. And I think that's hard to get the next set of investors in or the next set of developers in if that's been established as a precedent. Or if, you know, projects are being developed and the utility can't guarantee that they're going to take that on or the government won't backstop

that the utility is going to continue to make payments, that's really where it breaks down is on the financing side. It's less about the technical details. Because like I said, it's not, there's not a revolution that's needed. We've kind of got the technologies we need. It's more about deployment. And deployment is very frequently about financing. Well, let's take another layer into kind of what are the risks that are really creating the problem here? Because I think, you know, obviously the governments are interested in seeing more investment and more energy, you know, access, particularly at the economic development level. Utilities are interested in, you know, selling power and making money. So why is it that these concerns exist about an inability to pay or problematic off-takers?

Is it about, like, variability within the economy? And, like, you're not sure that that industrial off-taker is still going to be there, or is there something else that's really driving the risk here? So this actually comes back again to the two problems and trying to solve them at once, that if you're running a utility in a lot of these countries, you are trying to bring low-cost power to as many people as possible and bring in new investment to kind of the megawatt industrialized side of things. Those don't go together. That if you, because you're trying to extend the grid to kind of the far reaches, that's a huge investment. And that's probably households that are going to pay very little for electricity. The government has an interest in

subsidizing electricity so that it's low cost because, you know, it's a social good and for people to have cheap electricity, or it's considered in a lot of cases to be a social good. So you end up with utilities that are basically insolvent because they're trying to do too many things at once and prioritize access, which is great. But that really holds back sometimes this ability to get investment on the large scale side. And so that's why I say, like, these problems almost need to be attacked separately because when you try to do them together, the incentives just aren't aligned. Oh, that's really interesting. Okay. Well, so let's talk about that other piece of the problem then in terms of, you know, individuals and energy access and how

you get cheap electricity to them. And this is, this is now core to Nethio's business, right, where you're really working on figuring out, like, what, how do you approach people and their credit risk and make sure that they can basically get what they need in order to actually install the electricity and the power sources that they want. So say a bit more about what, what doesn't work there and what Nethio's doing about that. Yeah, so basically we were looking at kind of this point I made it earlier about the the technology is there. There's good product market fit. There's a technology that provides the electricity access level that works for a lot of households. There's a financing model that's really flexible. It's called pay as you go where people kind of pay as they're using the system.

And then if they can't make a payment, they basically just stop for a period of time. There's no penalty for it. So it creates a lot of flexibility for rural households. And that's where we see up to half the people in Africa could currently afford that solution as it is. No innovation needed on that. But we saw it wasn't scaling. I mean, it's reaching millions of people. It should be reaching tens of millions of people. And so we really saw that one of the challenges with that was this inability to understand household credit risk. So if you're a distributor supplying these solar home systems, you know that you're giving flexibility, but you don't actually know how people are going to pay you back, especially when you're selling the system. It's, you know, it's not quite as bad

as like hoping people pay you back, but you typically don't have a really strong underwriting for that. really hard to understand your cash flows because of the flexibility. But it's also really hard to turn around to investors and say, like, no, no, no, trust us. These 10,000 rural households are going to continue to make payments. And so we felt like that was one issue. And the other issue was just there wasn't this large-scale infrastructure for providing scalable financing. There was a lot of kind of discrete deals that were happening. And a lot of great companies in the space that are doing those deals.

And so we saw if we could, we developed this model for understanding household credit risk, being able to actually identify where are the characteristics that put you on those different payment paths. And then we provide financing to the companies that are against that. So we offer receivables-backed financing based on what we assess

those cash flows are going to look like. So we feel like we kind of developed this model for understanding credit risks that we use ourselves, but we also provide to other investors in the space, hoping that will unlock more capital for them too. And then we have a financing vehicle, NIFUFI, where we offer financing

to companies in the space, and really try and help them scale and work across a really wide range from kind of market leaders to really small companies who are more local. This is awesome. So what's the future for you guys as a company? Is it that Nithio takes over the world and provides the financing for like, you know, billions of people across the globe? Or is it that the big banks put you out of a job because they start to understand

how to do a better job of assessing credit risk here? So the entire off-grid sector, you know, last year it was for the first time kind of over four, $400 million in investment. That's great. It's progress, but it used to be billions. And so that's what we really didn't see was this large scale financing coming in. So yeah, our goal, we're very impact-focused. So we'd love for it to be us that does that, but we'd also love for everyone to get in the game. And, you know, especially as we've seen a lot of financial institutions make promises around investment in climate finance, like, this would be a great place to put that. Like, 90% of climate finance right now goes to mitigation.

it's all emissions reduction. Not that there's any problem with emissions reduction. Like, absolutely, we need to be putting a very heavy focus there. But we're at the adaptation point. We're at the resilience point. Like, we're seeing climate change. And I think if you look across developing world, they've been seeing climate change for a very long time.

And so I think that's where we see off-grid energy as a really, it's a way that brings household resilience. You're owning your own energy supply. It could be moved if you need to. but it's also just not reliant on a really long gridline out into a remote area. So I think that that's where we see it's, it is emissions reduction because it's solar in most cases, but it's also really more on the adaptation resilience side, and I think a lot more funding needs to go that direction. Let's talk for one more second, just about the adaptation resilience piece of this,

because I think, you know, that feels very front of mind, especially for me having read lately about the floods in Pakistan. So solar plus batteries, particularly on an individualized basis, seems like, like a particularly sort of resilient approach to getting energy access. Are there others that you think are important or other ways that we should focus differently on certain kinds of technologies or systems in order to ensure that not only do these systems work now, but they work in the warming world we're about to see? Yeah, I mean, solar jumps out. I mean, I even saw a picture from Pakistan of someone in the floods, you know, waist deep with their family, with their solar panel held up, walking to their new location.

And you can only imagine where they were actually headed. But yeah, they took their energy supply with them. So wherever they land, they're going to have the fan and their cell phone charging and lights at night. And there's an incredible resilience to that. And I think that's, you know, it's not ideal. You don't want anyone to be moving their home and moving their energy supply with them. But that's better than the alternative than wherever they land. They're in darkness and they have no communication.

and a blazing hot on top of that. So, yeah, I mean, I think just the portability of it really makes that the, what I see is the best solution because of that. Yeah, that makes a lot of sense. Okay, great. So we've talked a lot about electricity today. Let's talk a little bit about transportation, because transportation is something that obviously is changing and hopefully increasing the world over. and all of us still rely very heavily, despite our best electrification efforts on fossil fuels, to make those transportation systems go.

So how is that working in some of the areas that you know best? And do you think there's a good chance for a transition away from fossil fuels there in a way that helps fuel this economic engine? Or is that going to be a harder problem to solve than the electricity access problem? I actually, I'm very bullish on this. I think it's going to be another case of leapfrogging. I think you see not on. cars initially, although there are definitely places in developing Asia that are having high

penetration of electric vehicles too, or electric cars, but electric motorbikes and electric public transit, I think is going to happen possibly faster in places like East Africa than in the U.S. And I think that's incredibly exciting. But I think you see, one, just motorbikes are commonly used, even for taxi services across large parts of Africa. If you can get a model, and there's a lot of people working on this model where you're actually paying for the charging the same way you would with diesel and people kind of trust that it's reliable, I think that's really going to take off. And there's a lot of interest in it and a lot of investment happening in it right now. But I think that's going to be a really exciting development. And I think it's partly, I think it'll be driven in part. It's funny because we always talk about capacity constraints in terms of those small grids. But some of those countries actually have excess capacity or you have excess hydropower that has to go somewhere.

If you can figure out creative models where how that gets used for vehicle charging, it'll be fantastic. That would be pretty cool. And potentially for sort of industrial uses of power too, maybe. Yeah, or nighttime charging. If you've got large-scale hydro, that's a great off-taker. So I think there's a lot of people are going to be really creative with that, I think. So as we kind of get close to wrapping up here, I want to, I'm going to throw a technology bone now to all of the catalyst listeners who, make it to the end of each episode. I want to ask you, are there any wild and crazy technology approaches out there that you think actually can make a big difference or solve some sort of problem that exists? Because certainly solar seems like it's going to be core to this. But I know that

there are other folks who talk about using space-based satellites to beam down electricity to Earth and how that could be a solution potentially in some areas where it's hard to get energy access. Is there anything wild and crazy on the technical horizon that you're keeping an eye on? So it's going to be a bit contrary, and I'll start with that, to say, no, we just need to deploy what we've got. Because in some ways, we're out of time on this. Like, we, you know, we're barreling towards 2030 is when we're supposed to have universal access for all estimates, or we're never close on that. it's kind of unconscionable that in 2022, we have 10% of the world without access to electricity.

And we have no more time on clean development of electricity. So I feel very strongly just like the deploy what we've got is really where my head's up, both on the energy access side, but also on a large-scale grid. Like we have all the tools we need. Like, yeah, it'd be great to get some more efficiency gains. It'd be great to get everything lower cost.

But we just need to start building and building like crazy. And I think that's, you know, we have a mutual friend. You always talked about, like, the problem is this is almost a conservative, renewable people are more conservationists. And what really needs to happen is actually just a large-scale building. And that's people are not always in that mindset. But I will say something that would be really beneficial is actually wireless electricity. And I think we have seen some developments in that.

But that being able to not have the wiring within the home reduces costs. if you, assuming you could get wireless electricity cheaper, but if you could do even wireless kind of small scale grids, things like that, like, I don't know that that's the absolute game changer as opposed to beaming it down from space, but that would be cool and beneficial. Yeah, definitely agree that wireless charging would be cool. We used to envision when I was at X-on that like your windows would just power your phone as you walked by like through some sort of commercial building, which would be pretty great. So folks can work on that. That would be good. I want to push on just one more facet of this, though, because I remember when we were in graduate school,

there was a bit of a controversial discussion, actually, about the idea of building sort of energy tools and or appliances that could be much more easily and quickly built in remote regions, in places without access to a lot of, like, industrial goods. And I say controversial because, you know, while it may be very, very cool and helpful for folks to have, like, earthen stoves, you also have a lot of folks in these areas who want actual. like, you know, high-quality appliances and they want to have access to the same sorts of appliances that the rest of the world has access to. So I'm curious to know where that has gone in the, you know, decades since we were in grad school. Is this still something? Like, are there still folks trying to figure out how to, how to, you know, create and deploy those kinds of resources in these areas? Is that helpful? Is it really better to think about, like, how to actually just get the electrification so people can have the things they want? What do you think is sort of the

future of some of that kind of work? Yeah, it's a big question. Because I, I, think there are certain situations where people just need whatever they can get. I think that is, there is that category, but for the most part, it's not the case. I think anyone who thinks, you know, very, very low-income people are not aspirational is not talking to anyone who's living in those situations. Absolutely people want cool stuff. People on, like, cell phones that are the latest and greatest and that actually work and have, like, all the gadgets related to them. So yeah, like trying to sell people on like, well, this is low cost, but it looks terrible, is kind of a poor business practice. And I think that's actually where the solar home system and lanterns have done a pretty good job of like, it looks pretty cool. And it's something you would be kind of proud to have in your house. I think that needs to continue in that direction. Because I think people are absolutely aspirational. And it's funny, I think there's a lot of people who regard solar, you know, solar in the U.S. is more high tech. And I think I talk to a lot of people who are like, oh, yeah, solar is like, like what you use if you don't have another option. So I think the perception of it is,

is a little bit different. But I think that is still a debate because of just cost and kind of how you can get products in the hands of people more quickly. But yeah, people definitely want something that is, looks cool, latest and greatest, proud to have it. Okay. Last question for you, Kate. If you could change one thing, like make one big change to, I don't know, policy or international financial finance or the structure of certain companies and how they interact with, with, you know, developing world access, what would you change right now if you had a magic wand to make things move faster and deploy and scale? This is, because I'm not going to say anything related to technology or even really

finance, it's perception that I wish I, that I could show more people. I'll use the U.S. because I think Europe is more connected to Africa. like how advanced a lot of places in Africa are, how fast those economies are moving, how dynamic their young populations are, especially in certain countries. I mean, I think if you go to Nigeria, go to Kenya, like it's kind of unbelievable what's happening

with the entrepreneurship and tech scene. And I think so much of the U.S. still thinks war, famine, poverty, you know, why would I look for investment opportunities there? and I think they are really missing the boat. You know, in the next 15 years, Nigeria's population is going to pass the U.S. So it'll be the third most populous country in the world. So that market is rising, and that's the biggest thing I would change is the perception, because I think everything would flow from that.

That's awesome. Well, hopefully this discussion that we've had today can help in changing that perception because it sounds like it would be really great for everyone, all of us, all over the world, if this goes better. I think maybe we need a better name than developing, though, if we're bringing it back to your initial point, maybe dynamic markets or... There we go. I like that. Yeah, something that actually indicates the promise here, right? Because there really is so much of it. So that's another task we're leaving to Catalyst listeners. If you can help us come up with a new phrase that we can really use to explain the dynamism and get people on board with working together to do more in these countries and invest more. I think that sounds like a good plan. Well, thank you so much. much, Kate. This has been really fun. Yes, it was great to talk to you. And I know we've had many conversations about this over the years, but nice to do it in a recorded fashion. Agreed. All right, until next time. Kate Steele is the CEO of Nithio, an AI-driven platform for clean energy investment.

What did you think? What did we miss? Let us know. Find the show on Twitter at Catalyst Pot. You can find me on LinkedIn. And if you liked the show today, go over to Spotify or Apple Podcast and leave us a rating and review. The show is a co-production of PostScript Media and Cano. media. You can head over to canarymedia.com to find more links on information for today's episode. And as always, PostScript is supported by Prelude Ventures, a venture capital firm that partners with entrepreneurs to address climate change across a range of sectors. These include advanced energy, food and agriculture, transportation and logistics, advanced materials and manufacturing and advanced computing. This episode was produced by Daniel Waldorf and

Dalvin Avojee, mixing by Greg Velfranck and Sean Marquand, theme song by Sean Markwant, or managing producer is Cecily Mesa Martinez. I'm Laura Peerpoint and this is Catalyst.