The report "From Gap to Opportunity: Business Models for Scaling Up Energy Access," was released at the United Nations Conference on Sustainable Development this week. Published in partnership with the government of Austria, it breaks new ground by estimating the market for energy services offered at the household level to low-income people. It also profiles companies with innovative business models and explores in detail what it takes for them to succeed.

"Across the world, people spend more than $37 billion a year on kerosene for lighting and biomass used in open fires or traditional cooking stoves that pollute the environment,” said Rashad Kaldany, IFC’s Vice President for Global Industries. “This study shows that—with the right business models and conditions—the private sector can play a vital role in providing energy solutions that are better for people’s health and better for the environment.”

Private enterprises have started to seize the opportunity. “While this is still a nascent sector, many businesses are rapidly moving beyond being cottage industries and are successfully serving tens of thousands to hundreds of thousands of customers,” according to the report, which studied more than 100 businesses around the world. “Some companies are seeing profit margins of 10 percent to 30 percent, often with fairly small subsidies on capital costs…or no subsidies at all.”

To scale up successful business models, the report offers a series of recommendations for key stakeholders—including companies, social and commercial investors, governments, policymakers, and donors. For instance, it suggests that governments resist give-away programs and unrealistic promises, remove discriminatory taxes on energy access products, and leverage public-private partnerships and smart subsidies for extending electricity grids.

For investors seeking both social impact and financial returns, the report recommends that they keep investment mandates broad and beyond a single technology, develop a local presence, provide appropriate funding for each part of the business life cycle, support enterprise development and business model refinement, and fund the provision of public goods.

To view the report, click here.

About IFC
IFC, a member of the World Bank Group, is the largest global development institution focused exclusively on the private sector. We help developing countries achieve sustainable growth by financing investment, providing advisory services to businesses and governments, and mobilizing capital in the international financial markets. In fiscal 2011, amid economic uncertainty across the globe, we helped our clients create jobs, strengthen environmental performance, and contribute to their local communities—all while driving our investments to an all-time high of nearly $19 billion. For more information, visit www.ifc.org.