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Energy service companies (ESCOs) and S3IDF’s social merchant bank approach (SMBA) – economic innovation in the service of bottom of the pyramid entities

Panel: 6. The role of financing to improve industrial efficiency, global perspective

This is a peer-reviewed paper.

Authors:
Russell deLucia, The Small-Scale Sustainable Infrastructure Development Fund (S3IDF), Inc., USA
Nikhil Desai, The Small-Scale Sustainable Infrastructure Development Fund (S3IDF), Inc., USA

Abstract

The paper will discuss issues relating to energy efficiency potentials in micro- and small-scale enterprises in developing countries and the ecosystem of “energy poverty” these enterprises are part of. These “Bottom of the Pyramid (BOP)” enterprises are frequently in the informal sector and outside the reach of formal financial and administrative networks. The paper will examine aspects of the “energy poverty” ecosystem where the poor suffer energy inefficiency – continued reliance on fuels and technologies with low productivity because they cannot surmount the information and financing barriers for transition to cleaner, more efficient fuels and/or technologies – in two ways: as owner/employees in the BOP enterprises, and as consumers of lower-quality goods and services from those enterprises. This is in addition to their own household “energy poverty” - the inability to finance similar transitions to cleaner, more efficient fuels and/or technologies. The paper will contend that the transformation of BOP entities necessitates efficient energy use and clean energy sources, a process critical to increasing productive-use and associated human capital development. The paper will argue for explicitly pro-poor interventions that help achieve these efficiency potentials and related reductions in GHG and black carbon emissions. It will outline the non-profit S3IDF’s paradigm-shifting SMBA for addressing the “energy poverty” challenges. And it will discuss the economic innovation and the implications of using the ESCO concept to addresses “energy poverty,” an area where ESCOs have largely been absent. The paper will present this innovation in the context of adding a for-profit (albeit limited profit) ESCO into the SMBA toolkit. The exposition will be articulated with possible micro-enterprise applications.

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