As many developing countries are still in the process of rolling out electricity networks, they have an opportunity to leapfrog to smart grid technology. Less than 50% of people in the least developed countries have meaningful access to electricity and it is a priority of many governments to extend grid access to those missing out. Instead of being upgraded later, these grid extensions could be made smart from the outset.
Smart grids could bring significant economic and social benefits to developing countries. Advanced metering infrastructure can help crack down on electricity theft, which costs utilities in developing countries tens of billions of dollars annually, reducing their ability to provide reliable and affordable electricity. Smart grids can also help prevent the blackouts that plague many developing nations, at an estimated economic cost of billions of dollars each year.
However, the upfront cost of smart grid technology is a major barrier for developing countries. While the benefits of smart grid projects – if executed properly – can be considerably higher than costs, a lot of those costs need to be paid upfront. This is a problem for many developing countries who have limited access to debt and budgets that are already stretched thin.
Startups can help overcome this barrier by finding low-cost solutions. Startups have the tendency to develop goods and services at lower costs than previously possible. One way they often achieve this is by leveraging existing assets. In the smart grid context, this might involve coordinating appliances such as air conditioners to provide demand management services.
There is a lot that governments and other organisations can do to encourage entrepreneurs to focus on smart grid problems. Governments that wish to leverage startups in this area can extend smart grid tendering practices and establish relevant price signals. Funders, NGOs, multilateral organisations and existing businesses can use their resources and local knowledge to help overcome the lack of information, contacts and reputation that might otherwise hold back startup activity.