As the COVID-19 pandemic hit, USAID was initially asked to help distribute ventilators and vaccines worldwide, to which they immediately replied: “But is there electricity for that?” Examining the issue, they realised a problem, especially in Africa, of power access to keep the vaccines cold. However, unique localised solutions are finding their way into the system.
When distributing vaccines, UNICEF estimates that 30 to 40% go bad because there is no cold storage.
“Power Africa, a US Government partnership led by USAID, estimates that health programmes spend an outsized amount on diesel to power basic health services and cold storage for vaccines,” said Loren Stoddard, a Senior Advisor at Power Africa.
Stoddard was explaining to a panel discussion at Solar Power Africa on How solar power can improve the health of millions of people in Africa why Power Africa and USAID have joined forces with their health offices around energy: “It’s our biggest intervention in Africa – our health offices work on malaria, TB, HIV/Aids programmes and others, but the programmes don’t pay attention to their energy profile.”
“Our health programmes live on data, and we’ve found that everything stops when they’re offline,” he explained. USAID’s Healthcare Electrification and Telecommunications Alliance (HETA) is all about “helping the health folks realise there are good solutions in energy,” shared Stoddard.
Opening up brand new markets
HETA is exploring integration development of the various programmes USAID works on, and they are not the only ones.
For example, at COP27 in Egypt, Ikea Foundation announced $45 million for India’s healthcare programmes. “We’ve got about $155 million from the private sector to electrify clinics in Africa. So good news is, there’s a brand new market you might not have thought about; it’s a big market with big needs,” said Stoddard.
So far, USAID through Power Africa has electrified nearly 500 clinics across the continent, using grants to power clinics through energy-as-a-service contracts.
An off-grid developer bids for a two-year contract, using the clinic as an anchor client while looking for new off-takers to buy the excess power. The agency is trying out a variety of business models depending on the energy needs of the clinics and the potential for more offtakers in the area.
Using remote monitoring provides insight into power usage at the clinics, which can now track how much electricity the various donated equipment uses. “We don’t talk about donating the [energy] equipment to the clinic because the clinic manager cannot handle that [extra responsibility]. There has to be an energy operator close by to deal with it,” explained Stoddard.
Larger hospitals with a bigger energy footprint can sometimes have a multitude of equipment and generators sponsored by various entities, but “the idea is now to rationalise the power and make it greener”.
Joan Chahenza, a HETA energy expert, says they are actively investigating the energy-as- a-service model and moving away from traditional donor-installed solar with no maintenance plan. “Long-term sustainability is the elephant in the room – balancing the concerns of all partners, so healthcare workers aren’t left with the responsibility of the energy project: that is not their core mandate. We need an energy service company staying on long-term, so it’s not just about installation,” she explained.
Thus, HETA is co-designing models for the private sector: “We want to take problems onboard and co-develop different business models to address different concerns.”
Chahenza said it is important to note that interventions for tier one to three businesses differ significantly from those for larger hospitals with a huge capital investment. For lower tier thresholds and facilities, the interventions HETA is looking at include oversizing solar PV projects and using excess electricity to encourage productive use of energy facilities and equipment in local communities.
For large facilities, tier four and upwards, that need 16 to 24 hours of power a day, “we have to think about how to bring in private sector capital. What is critical is risk mitigation measures,” said Chahenza.
HETA is in discussions with the Multilateral Investment Guarantee Agency of the World Bank Group (MIGA) on a framework so that the private sector would not have to directly take on public sector money to make the projects bankable.
PPAs will be key to setting up larger infrastructure projects and there are business models that set up an autonomous agency that then pays the energy service company. “There are many models out there and we have opened our doors to listen to what can be done for long-term sustainability, looking at payment risk and designing bespoke business models,” said Chahenza.
Just who pays for the power?
The World Bank had started down this road, working on the idea that Ministries of Health could sign a distributed energy project deal with IPPs, but that gained little traction. But, Stoddard said, the obvious question then became: Who else could pay for power?
When the idea of providing solar power at rural clinics in Africa was first mooted, there was nominal payments being made from the actual district clinics. Then the idea was bandied about to introduce telecoms as anchor customers. Vodacom has indicated they would be interested in the idea of cross subsidising energy use if the power source is close to both their cell towers and clinics.
Since USAID health programmes directly pay for diesel generators, they are also a potential source of payers of renewable energy. Still, a different way of looking at the payment angle is starting to dominate.
Changing the narrative
Just as distributed renewable energy certificates (D-recs) have the potential to change the African energy market entirely, and Peace Renewable Energy Credits (P-recs) hold much promise for energy procurement in fragile states, health-recs could become a thing.
Stoddard asked: If there are P-recs, why not health ones? “The social benefits associated with them would be enormous. If a big company wants to go net-zero but doesn’t generate much energy, and they bought energy certificates with a health angle, that could be an area to explore because it counts as social ESG.” Stoddard added that corporations make a lot of once-off equipment donations to healthcare centres as part of corporate social responsibility.
He positions this as a better social investment than many companies already make. Therefore, D-recs could help with the operations and maintenance, and the donation can be the capex. “If we can spend the health money more efficiently, we help the programmes do better,” said Stoddard.
“There’s a lot of promise in coupling health with renewable energy certificates. This is an innovation that can be used to get additional revenue for HETA projects,” said Chahenza.
Investing in a results-based financing model
Session moderator and HETA Project Director at Abt Associates Brian Smith noted that results-based financing has long been a model explored in healthcare services. “They don’t pay until the work has produced an outcome. So, how to combine health and electrification,” asked Smith.
Martjie Cloete, Climate and Utilities Champion for Western Cape Government Health, says performance-based contracts have worked well for the Western Cape provincial government.
“If you have the right partner, you can move mountains,” said Cloete. In the face of unpredictable loadshedding ‘power outages’ in countries other than South Africa), they are trying various business models to procure direct energy for hospitals and clinics in the Western Cape.
She advised they are implementing solar at 12 hospitals with the performance based/ shared savings model. “You need to have the right model and a strict tender process; you need someone with credibility and experience,” she furthered. Regarding liability, Cloete says some form of backup is essential. “We still have to keep the generators going, so the primary power can come from an IPP, but then we must ensure there is no power failure,” she insisted.
Cloete says relationship building with electricity providers has been very important for their hospitals across the province when dealing with loadshedding. “When we have had a crisis, we have gone to Eskom, City of Cape Town or any other local municipality for help and we can say that we have not had any loss of life because of loadshedding,” said Cloete.
While the bigger hospitals in the province, such as Tygerberg and Groote Schuur, stay online during loadshedding, they also practice load-responsive demand measures. For example, Red Cross Children’s Hospital has started an energy efficiency programme (like switching out incandescent lightbulbs).
They are also installing inverters plus batteries at 51 clinics in 2023 and a further 70 next year. This initiative started with energy audits and actively looking for other ways to save electricity but is now at the point where installing solar PV systems is the next step. The solar PV installation funding is cross-subsidised by other hospital interventions, such as retrofitting.
From a private sector perspective
David de Villiers, Head of Business Development (solar home; and mini-grids) at ENGIE Energy Access, said they have an inclusive view on the electrification of healthcare facilities. They deal with a variety of sizes when it comes to healthcare facilities, from remote clinics which can operate on a solar businesshsystem solution sized under 10kW to health clinics that consume 1MW or more and need a mini-grid that can stay online 24/7 for cold storage, power for medical procedures and lighting.
“For us to get involved, as a private entity, we have to reconcile the public service nature of electrifying healthcare facilities with the question of financial sustainability,” explained de Villiers. Indeed, while the private sector can be expected to commit on respecting technical performances, sufficient guarantees must be present to overcome two barriers to the bankability of such an operation, he pointed out.
The first barrier to financial stability is guaranteeing the flow of revenue (whether capital or operational) by involving an entity such as a government or development financing institute. The risk of failure is just too high otherwise. The second barrier is the liability when things go wrong.
De Villiers said ENGIE Energy Access has also been looking into D-recs and selling their own carbon certificates. They contribute equity and debt-coupled financing to projects in conjunction with financing and capital expenditures to make mini-grid projects bankable. “If it’s not looked after, it’s pointless. If it’s a 20-year project, we look after it,” De Villiers explained. They use Service Level Agreements to provide a guarantee on paper around what can realistically be done, “but the deficit must be met somewhere”.
A huge source of financing could also come from redirecting the current amount mobilised to purchase diesel for the generators used by healthcare facilities to purchase and pay for the maintenance of electrification solutions relying on renewable energy sources, such as solar and battery storage technologies. Stoddard said the expectation, for most cases providing energy to a healthcare facility in Africa, is going to be a risky agreement “so it’s more about reducing risk. Whereas for a rural clinic, which doesn’t have anything in the first place, that’s a different story”.
Making an institutional difference on a personal level
Chahenza pointed out that technology transfer and localisation is going to be very important in this burgeoning sector. “There are countries that enforce localisation and others that don’t. It is imperative for the skills transfer to happen – most of the operation and maintenance at facility level can be done by locals, if trained, so the energy service companies must transfer the skills to the locals. That saves costs for the companies.”
Stoddard sees an opportunity for entrepreneurs to step into the energy service provision niche. “It’s almost a new class of entrepreneur that sells power and connectivity, whether working for the developer or the finance facility.” He mused that there is a broad push by all donors saying we need workforce development in this sector. While Smith concluded there is a huge opportunity for this sector to make a difference to people directly. It’s a humanitarian motivation, but there is a business opportunity too. ESI
Source: https://www.esi-africa.com/industry-sectors/future-energy/how-solar-power-can-improve-healthcare/
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