Energy Access

DNV’s corporate goal is to support the UNs’ Sustainable Development Goals, especially SDG #7 to “Ensure access to affordable, reliable, sustainable, and modern energy” for everyone on the planet by 2030.

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In the developed world, the push for ‘electrification’ is focused on shifting existing fossil energy demand to electricity. However, according to the World Bank , as of 2019 there were still 759 million people without access to electricity, mostly clustered in Sub-Saharan Africa, with some portions in Southeast Asia and Latin America. In these regions, electrification has the same meaning it held for most the world in the early 20th century: the life-changing connection to electricity, a fundamental ingredient for participation in the modern world. Numerous studies  have documented the reduction in poverty, increase in small businesses, and growth of women-owned businesses in the wake of electrification.

The work to extend grids to these populations is a financial and technical challenge, as many of the towns are in remote regions where it is not feasible to extend existing grids. However, there is a strong business case to be made since the current customers’ needs are being met through high rates of sale for individual services such as charging cell phones, which result in fees that often exceed USD 10.00/kWh. While the individual grids are quite small (typically less than 1 MW of generation), they have recently been packaged into portfolios which reach the scale that allows them to be funded as traditional project finance transactions; this means that the ownership of the assets is within a “special-purpose vehicle,” or SPV. This way the project is backed by the assets themselves, rather than by the balance sheet of the developer. Structuring projects this way, often referred to as “non-recourse finance” facilitates equity and debt investment in the project, while limiting the risk exposure of the sponsor.

Project finance transactions have been recently developed to respond to the demand by a wide variety of actors in the space:

• Utility companies running lines to new service areas, often incentivized by pay-per-connection bonuses
• Startup ‘micro-utilities’ like Sunkofa, Winch Energy, Standard Microgrid, and PowerGen Renewable Energy
• Development finance institutions, such as the IFC, US DFC, and the European development banks
• Impact investors seeking to support the transition
• Government entities providing grants to help bring down the cost of renewable energy.

DNV serves these entities by offering a suite of services to the developers, banks, and investors via the Energy Access team, a part of the Energy Storage Advisory Department. The recently formed practice supports projects that DNV has been doing for years with customers like World Bank, USTDA, USAID, and some private investors working in emerging markets. The work is aligned with DNV’s corporate goal to support the United Nations’ Sustainable Development Goals (SDGs), which set global targets for a variety of metrics. SDG #7 is to “Ensure access to affordable, reliable, sustainable, and modern energy” for everyone on the planet by 2030. Energy Access services span three main categories:

Off-grid Mini-grids

Mini-grids are small-scale microgrids which are totally islanded from the main power grid. The World Bank estimates that nearly 210,000 mini-grids could provide power to 490 million people, requiring an investment of USD 62 billion. DNV supports all aspects of microgrid transactions from the finance, operation, and regulatory perspectives. DNV has provided Owner’s Engineering (OE) services to these developers and served as Independent Engineer (IE) performing technical due diligence on some of the first off-balance sheet transactions in this space.

Additionally, DNV offers assistance in site assessments, GIS analysis, and revenue model reviews. This work often includes sell-side bankability reports of portfolios of microgrids.

Greening the Grid

Throughout emerging markets there is a strong dependence on fossil fuel power generation, especially from sources like heavy fuel oil (HFO) and diesel. As a result of falling costs of renewables and growing incentives to lower carbon footprints, there is a strong push to incorporate wind, solar, and battery assets onto power grids. DNV provides a wide range of services to support the transition from fossil fuels to renewables. These services include:

• Preparation of technical specifications and issuance of tenders for renewable projects: DNV has a vast library of technical specifications from projects in all types of renewables. Our team of engineers can help size a project to your budget, design a technical specification and initial design package, and evaluate and select bidders to execute successful renewable energy projects
• Owner’s engineering for renewables integration: As a part of integrating renewables into existing power grids, DNV performs studies to analyze grid performance, supports integrated resource plans (IRPs), and provides a full suite of services to utilities and governments pursuing renewable energy projects
• Long-term (5-20 year) energy transition planning: Our team can model existing and future loads, generation, transmission, and distribution to help clients in emerging markets transition to renewable energy sources
• Greenhouse gas reductions: DNV can help analyze the current greenhouse gas emissions of a power grid.

Grid strengthening

Many grids in the developing world suffer from daily or seasonal load-shedding events, causing disruption across the economies that often have to depend on diesel energy to fil in these gaps. Even where service is continuous, frequency and voltage fluctuations often present barriers to commercial and industrial customers. DNV offers services in the following areas to help address these issues:

• Grid stability: Our experts perform analyses of how grids can be stabilized by the addition of new generation, integration of energy storage, and development of new market mechanisms to stabilize grids with frequent outages or low quality of service (QOS)
• Grid expansion: Many grids face pressure to expand their service area, and often there are incentives available for doing so. Our team can develop plans for expansion of distribution and transmission, reach more customers, and provide better coverage in areas that already have access to energy
• Energy storage: DNV has assisted in trial deployments of battery energy storage systems (BESS), which can provide services such as frequency response, frequency regulation, voltage regulation, and black-start. BESS may also be used to support microgrids for critical infrastructure such as hospitals, schools, or military installations.

DNV’s Energy Access work is in its early days – our team consists of three people as of July 2022. However, by combining large longer-term government projects with smaller scale commercial efforts, we look to be well positioned to provide advisory services in this sector and continue to grow. Contact Drew Lebowitz if you or your customers are interested in learning more about the Energy Access team. Register for our webinar on Aug. 30, 2022 at 12:00 PM ET.