Talking to ET Digital, Per Heggenes, CEO of IKEA Foundation, the philanthropic arm of IKEA, tells ET Digital how India can use solar for last-mile consumers, on the sidelines of The Energy Transition Dialogue organised by the Global Energy Alliance for People and Planet (GEAPP) in Delhi on November 1-3. Edited excerpts:
ET: In terms of diversifying renewable energy supply chains, where do you see India? In which sector can India dominate?
Per Heggenes (PH): Well, India has a huge opportunity in solar because, first and foremost, you are in a country where the sun shines most of the year. The nice thing about solar is if you can afford technical investment, the rest of the energy is free. Our challenge is to find a way to finance the development of various types of renewable energy systems, which is what we focus on in GEAPP.
So we look at how you can bring more renewable energy into the grid, by using big solar farms, which is a big opportunity if we can actually find the financing to do that. That is how we work with possible partners to create that enabling environment that allows for financing to go into this.
The second area that we think is very interesting is the opportunity and the potential for distributed renewable energy, which includes microgrids. These grids are a cost-efficient opportunity for local communities. So, there we are experimenting with various models and building the evidence for what works and what does not work. The benefit of a foundation and philanthropy is that we can actually take those early investments, we can take the risk and develop the models. We can afford to fail because it has no consequences; but in the end, it will benefit the larger development. We can provide that evidence to larger players who are able to scale it up at a level that we as a philanthropy would never be able to do.
ET: The production cost in renewable energy, such as making components for both solar and hydrogen, can be very expensive. How can we bring a cost-effective solution here in order to give affordable energy access to people?
PH: Well, the beauty of renewable energy, especially solar, is that the prices come down so much that it is competitive towards the more traditional sources of energy. Then, if we talk about renewable energy access in rural areas, in relatively poor communities, we will have to find a coalition of partners to come together and provide that opportunity to them. But we have to do it in a way that we also focus not only on energy access, but we need to focus on the demand side. So, people need to be able to pay for it, otherwise it is not sustainable.
The beauty of access to energy is that you can use it to drive business development and smaller businesses; crafts people can either start using renewable energy with energy efficient appliances to improve productivity.
If we look at the supply side and the demand side at the same time, we can generate power in a way that it is affordable to more people and people will be able to make money necessary to pay for the energy. We have lots of examples of how that works in household systems as well as in microgrid systems.
ET: It is estimated that the world will see a huge pile of solar equipment waste as solar panels will end up in landfills. Are there any research and initiatives happening around the world for this?
PH: Take a look at what is going on with batteries, for example. In the last year, one in 25 vehicles were electric. Today it is one in five. It is an extreme rise which means that the manufacturing of batteries is going on at a high speed. Now, we know that over time these batteries will have to be replaced. They might go to be used for something else in an intermediate period. But in the end they will have to be recycled.
So, I guess I am making this example to say that when we see that there is a business opportunity in recycling solar panels, I am sure the business will find ways to do that. This will come at the point where we start to see that solar panels are coming back and getting out of commission just as we see with batteries where there is a huge effort and focus.
In the same way, we look at the battery energy storing system, which is of course necessary to provide a 24×7 baseload in the microgrid. You really have to combine solar panels and battery systems for a good, efficient solar management system. This is how you manage to optimise the energy that you take from the sun.
I am very convinced that these businesses will pop up and see an opportunity in recycling — just as we are seeing increased recycling efforts in waste management, in textile management, in technical equipment and utilities. So, right now this is not a focus for the Foundation as such but I am sure it will come.
ET: You have also spoken a lot about broad-based governance and including government as a stakeholder in the entire agenda of climate change. Can you give any examples of how governance and regulations around the world can cause hindrance in this agenda as well as what kind of inclusive governance are you looking for? If you have to give an example from India, what kind of government regulations can come that can perhaps enhance this process?
PH: In order to be successful in driving and accelerating the access to renewable energy, you need all partners to sit around the table and everyone needs to understand what are the incentives and what are the barriers. They should have a very open and frank discussion about that and remove those barriers together. That might be regulatory barriers, tax barriers, import barriers or manufacturing barriers. But I do believe in having that dialogue and coming to a point where everyone agrees that this is important to do and this is what is required for this to happen.
I will give an example. So, IKEA Foundation has a collaboration with Selco Foundation in India. With Selco and their many partners, we are working with Indian governments and we will electrify 25,000 health centres. That means you take out these generators that are not necessarily providing reliable energy because they break down. Usually at night, when somebody gives birth and it is all dark, the doctor will have to use the phone to get some light. We will be able to replace those generators with renewable energy that works 24×7 because it is battery backed-up.
This is not only a huge increase in quality for the people who work there and for the people who come to the health centres, but it also means a significant amount of carbon cuts. This is a collaboration very closely with Indian governments, with the ministries, and with the regional government in 11 states.
Hopefully this will also help create the necessary evidence, the models, that will make electrification of the next 25,000 centres less expensive and more efficient because we will learn a lot about implementation from those 11 states. So, I think that is the kind of collaboration you are looking for and this would not have happened if it was not for a mixed financing of players and us going in together with the Indian government and agreeing on this platform and providing significant funding for it.
ET: How unlikely or likely are we to reach the UN SDG 2030? What exactly is causing the challenge for us to reach the goals and what needs to be done about that?
PH: That is a very broad question. I think if we take this down to SDG 7, which is about energy, what prevents us from making progress faster is lack of finance. If you look at the projected numbers to actually get the world from fossil fuel-based energy to renewable energy, that finance is … it represents a huge number.
I think we can make it happen as most technologies are available. The blended finance models are available. But we need to get the private sector, get governments, get the multinational development banks to be part of taking that risk to drive it faster forward.
That is where we also see the role of philanthropy, not only helping create an investable plan, an enabling environment by bringing all the parties together, but also de-risking some of these investments to make it more attractive for others.
For me, as a philanthropist, that is very interesting because I could take $500 million, which we put into this initiative, and build solar farms and give them away to people. I could do that but that would give me only so much impact for the money. If I use the money to de-risk and leverage other types of financing, I can probably help 10 times as many people or 20 times as many people.
