Why So Many Remote Renewable Energy Projects Fail: A Literature Review

As Schmidt et al (2013) point out, despite the fact that the market for bringing electricity to the rural poor is estimated at $4-5 b. per year, and heavy promotion by development agencies working with states, large-scale diffusion has been very slow. Moreover, the private sector has not yet found ways to develop a profitable business model around such markets. While the rapid and ubiquitous adoption of mobile phones across the world demonstrates that if costs are cheap enough, poor households will readily adopt modern technology. Renewable energy systems are, unfortunately, still too costly for many individuals to afford. Many governments in the South have not extended their electricity grids to remote rural areas, thus creating pockets of serious poverty. Geographic barriers are likely a cause as well as a symptom of energy poverty. In addition, a weak or non-functioning financial system exacerbates a situation of low resources, thus making borrowing for the purchase of capital goods, such as a renewable energy system, challenging. To pay off a good based on borrowing requires that there are reliable monitoring and information systems for renewable energy equipment usage, provisions for its maintenance, and a system for paying back the loans over time. Lemaire (2011) describes the case of South Africa, where the government abandoned an ambitious plan in 2000 to install more than 300,000 solar home systems through concessions to the private sector. The government’s inability to reach a long-term agreement with private sector vendors led to the program being abandoned with only three concessions operational as of 2011. In general, the literature is dominated by models and simulations of different energy solutions that are site specific and thus do not provide generalizable lessons. In the review below, we concentrate on the lessons from the more limited literature based on actual experience.