11.3 Innovating sustainable energy for the rural BOP: The case of mini-hydro power in rural Ethiopia

Minna M. Halme , Marketing and management, Helsinki School of Economics, Helsinki, Finland
Sara Lindeman , Marketing and management, Helsinki School of Economics, Helsinki, Finland
Full Papers
  • Halme_Lindeman_JACCC_final.pdf (153.0 kB)
  • Joint action on climate change, Aalborg, June 2009

    Paper & presentation:

    Innovating sustainable energy for the rural BOP: The case of mini-hydro power in rural Ethiopia


    Minna Halme, Helsinki School of Economics, Finland

    Sara Lindeman, Hanken School of Economics, Finland


    In recent years, the corporate and academic interest in entrepreneurial solutions to poverty alleviation has increased significantly. The Base of the Pyramid (BOP) proposition suggests that business involvement can be mutually beneficial for companies and the very poor. The idea of including the very poor in the global economy, both as producers and consumers, has been presented as a fresh approach to poverty reduction. It is self-evident that increased production and consumption activities in these population segments are intrinsically linked to the global environmental challenges. Nevertheless, there are few studies addressing this issue: products, services and business models that combat poverty without causing extensive stress on the natural environment. There is an urgent need to gain knowledge on how to create intelligent solutions that are economically, environmentally and socially sustainable.

    Energy poverty is prevalent at the base of the economic pyramid. Nearly two thirds of the population of the world live without electricity, most of them in the rural communities. Although not as dramatic as lack of nutrition or shelter, the lack of electricity indirectly influences the lives of poor in a number of ways. It often means lack of light or high costs of other sources of light, such as kerosene for lamps. Often it means that cooking energy comes from wood, causing indoor air pollution and respiratory diseases. It also means that basic activities such as grinding of grain or pumping water in rural communities have to be conducted manually. These are laborious tasks for women and young girls. Much of their time goes to fetching water, preparing food without help of even simplest appliances that would require electricity. It also means that people have to spend a considerable amount of their income to sources of power (e.g. wood, kerosene, batteries for radio) that the wealthier ones get cheaper since they can fulfill their needs with the help of electricity.

    This paper presents a case study of a corporate initiative where a new CO2 emission free energy technology  - mini-hydro power – is implemented in one of the poorest countries in the world, Ethiopia. Over 80% of the population live in the countryside and only around 2% of the population have access to electricity. The recent history of Ethiopia is similar to that of many other developing countries: Despite an abundance of natural resources, failing governance has led the country into deep poverty and dependence on foreign food and development aid. Somewhat contradictory to the common imagery of drought and famine in Ethiopia, this high altitude country is in fact the source of 84% of the Niles water. However, less than 10% of the renewable natural resource of ”falling water” is electrified. This would not be as tragic a fact if not coupled with the fact that most households use wood as cooking fuel, which has lead to deforestation and erosion. From the original 60 %, today only less than 2 % of the land area is covered by forest. Deforestation has left parts of the Ethiopian population without arable land, and led to mass migration of others from unlivable areas to those which can support. But the pressure on the land is constantly increasing and fuel-switch alternatives to wood are desperately called for.

    The mini-hydro power plant technology allows for decentralised electrification, that utilises this natural resource in a way that is respectful of the surrounding environment. This is an entirely new approach compared to the traditional large scale centralised power plants. The primary aim of the mini-hydro power plant project is to electrify rural villages in Ethiopia. However, in order to ensure a steady demand and thus a market-driven business model, the project strives to support local small-scale entrepreneurship and to create a non aid-reliant, dynamic socio-economic ecosystem surrounding the new source of electricity. This is a challenging ambition which requires innovative multi-stakeholder solutions. The technological innovation is not enough per se since a successful implementation requires additional business model innovations.

    As in many other developing countries, an additional challenge is the institutional situation. For years, the Ethiopian government has promised to electrify the Ethiopian countryside but has not lived up to its promises. Despite this, companies that invest in rural electrification have to work closely with the government due to regulations and their projects risk being taken over by the national energy company. Since the villagers, local small businesses and cooperatives have been repetedly dissappointed by the government, close cooperation with the national energy ageny undermines the credibility of the new electricity provider. Thus the company managers have to walk a fine line between the need for cooperation with the goverrnment yet avoiding to be associated with them.

    The vision of the company is to scale up operations throughout Ethiopia, and to introduce the concept in the many other developing countries where ”falling water” is still under utilised. If successful, this is can be an example of one type of innovative, multidimensionally sustainable solutions addressing climate change alongside with poverty.

    At the June conference in Alborg, we will share field insights as well as video and photo material from our most recent visit to Ethiopia in February- March 2009. We also hope to spur the theoretical discussion on ways of creating environmentally sustainable BOP solutions in difficult institutional settings.