Making it easier to build distributed energy in the places where it's most needed

Emily McAteer founded Odyssey Solutions in an attempt to provide transparency and predictability to the process of building out distributed energy markets in emerging economies. In this podcast, she discusses the barriers in place, how Odyssey aims to address them, and the potential impact of success.

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David Roberts

For decades, I have been hearing happy talk about how people in emerging economies — people who do not have access to electricity, or whose access is low-quality and unreliable — can "leapfrog" the centralized grid system and move directly to a decentralized system based on solar power, batteries, and microgrids.

It's a compelling idea, but for all the talk, it never seems to amount to much. There’s a constant trickle of feel-good stories, but the market never seems to develop at any kind of scale.

Emily McAteer learned this lesson the hard way, when she helped launch SunEdison's solar and microgrids business in India and East Africa. She quickly found that the habits and structures built up around financing large-scale energy projects are not well-adapted to building thousands of small projects. It was difficult to attract capital, difficult to secure equipment at reasonable prices, and difficult to track the performance of projects once they were built.

These lessons inspired McAteer to found Odyssey Energy Solutions, a company that has set out to standardize these sprawling, disparate markets. The idea is not to directly develop or build projects, but to provide a common platform where projects can be listed in a standardized format, where project developers and vendors can make themselves known and aggregate their orders, and where data on the operation of completed projects can be tracked. The purpose is to offer the kind of transparency and predictability that can de-risk these projects and attract more large-scale finance.

I'm intrigued by the idea, so I called McAteer discuss the potential size of this underserved market, the specific difficulties that Odyssey’s platform is meant to address, and the future of electricity in emerging markets.

Okay, then, without any further ado, Emily McAteer, welcome to Volts. Thanks for coming.

Emily McAteer

Thanks for having me.

David Roberts

This is exciting. I've been interested in this subject, in these markets, for a long time and never really had a chance to do anything dedicated to them. So I'm excited to get to this. So before we talk about solutions and your business and stuff like that, let's just talk about the market itself, the addressable market, as they say. So, give us a sense of sort of how many people out there completely lack electricity still? And then how many also have unreliable electricity that comes and goes that could use some supplementation? How big is the pool of possible customers here?

Emily McAteer

Well, unfortunately, it's quite big. The number that's being used right now is about 600 million people without any access to electricity, and another 3.5 billion that don't have access to reliable electricity or power.

David Roberts

Goodness. And the people who lack electricity entirely, is that mostly in Africa, or are they spread out more?

Emily McAteer

Definitely global. Although many of the countries that we work in, in Africa, do have among the lowest rates of electrification, particularly in rural areas.

David Roberts

As long as I've been in this business, I have heard a lot of happy talk about all these people who don't yet have electricity or don't yet have reliable electricity, and how they're going to "leapfrog" over the traditional, centralized fossil fuel paradigm — into a distributed networked, renewable energy based system. Which is all great, and sounds great. But it's been 15 years, now, and I just never hear anything but the big talk. I never see any solutions, at scale, that seem to be happening. Let's talk about, then, why this is difficult. So, you helped launch Frontier Power, which was SunEdison's microgrid development business in India and East Africa. So you were assigned to go and work on these kinds of solutions in these kinds of places. So talk a little bit about that experience and what you learned as a result.

Emily McAteer

It might be helpful for us to kind of just segment the market and the types of solutions that we're talking about here.

David Roberts

Sure.

Emily McAteer

Because if you think about what it means to provide power to communities that either don't have power or don't have access to reliable power, there's sort of four solutions that can bring power. So, at the smallest level, there's solar home systems or like, solar lights. So this is sort of the most basic access to lighting. Maybe, it'll power your phone and a TV.

David Roberts

Right.

Emily McAteer

And then the next type of access is usually provided by what we call microgrids or mini-grids. And that's what I was developing at SunEdison. There's also a sector called CNI Solar, that's sort of like individual solar systems for commercial, industrial applications. And then finally you've got the grid, right? You've got the central utility grid. So at Sun Edison, we were primarily focused on microgrids, mini-grids. We were working in India and East Africa to build out a large portfolio of microgrids, which are somewhere in the range of 100 to 500 kilowatts, usually sometimes up to a megawatt.

David Roberts

So would that involve building the individual systems and then networking them, or were you just involved in the networking part?

Emily McAteer

Yeah, exactly. So most of the companies that are developing microgrids, mini-grids, are building the full ... not just the generation system, but the full distribution network as well, and then operating them. So they're acting as a mini utility.

David Roberts

And what problems did you run into trying to do that?

Emily McAteer

Yeah, it's a hard business. So, first of all, you're operating in some of the hardest parts of the world, right? And in really rural communities. I mean, I spent a lot of time just, on motorbikes, getting out to these communities. And so you can imagine building infrastructure in them. And our insight when we were at SunEdison was, just, that we were facing these frictions, kind of. at every step of the way. But they all, kind of, boil down to the same core challenge, which is that this is energy infrastructure. But developing sort of a big portfolio of many small projects is a totally different paradigm than the way energy infrastructure — or any infrastructure — is usually developed, which is like a massive project all at once.

And so because of that challenge, everything that we were trying to do was hard. Preparing the projects, so that they could then be diligent by financiers, was difficult because you have to do a ton of work for each individual project, but then you need to be doing that at scale of thousands. Procuring equipment was hard because you're only procuring for a couple of projects at a time. But again, you need to have economies of scale to get good pricing on equipment. And then the real challenge is like, once you've got — say you're successful in getting tons of these projects operating — you've got this big portfolio of projects. How do you make sure that you can manage them all, and you can operate them, without sending someone out to these rural communities to operate them manually? We think of the project development processes like financing, building, and operating projects. And every step of the way was just hard, when we were trying to, kind of, fit this new type of development into sort of the traditional paradigm that we were used to.

David Roberts

Right. And all the difficulties come back to the same basic thing, which is, you're working on a bunch of small bespoke things rather than one big thing.

Emily McAteer

Yeah, exactly.

David Roberts

And so you said it's difficult to get financing for these projects. If I'm a big project financier — I've got, whatever, a billion dollars. Why is it difficult to pull my money into this? Like, what are my reservations? Because you need the scale people are talking about, electrifying all these homes. That's a lot of money and a lot of financing that's going to be required.

Emily McAteer

Yeah, I would say there's two big challenges. So the first one is related to what I was just describing. Let's say you've got $100 million to deploy. These are infrastructure assets. So you need to make sure that you understand that these projects are going to be built correctly. They're going to be operated correctly. The returns on the investment are going to be close to as modeled. And you want to do that for every single asset in the portfolio. But then if you try and do that, your diligence costs, just, out the roof. So you just can't, sort of, apply the same bespoke, customized, really intensive diligence process that you would for a single big project to each of these individual ones. So that's, like, the first big challenge.

The second one is that this is still a nascent market. There's still not a ton of these assets out there, and we're still learning about kind of how they perform, what the financials look like, and most importantly, especially for mini-grids, the real risk is, like, do we understand if I bring power to a place that's never had access to power, how demand for that power will ... what it'll look like day one and what it will look like in year five.

David Roberts

Right. It's not like developed country demand curve where you have all this data. You're literally a demand curve emerging out of nothing.

Emily McAteer

Exactly. It's not like you can just bring power because there's no power using appliances, right? Or, like, equipment. So then the question is, how quickly does it take for that ... households to start using appliances, businesses to come in? Part of what Odyssey does, like, we're collecting as much data as we can on that and supporting sector players who also are collecting data on it. But there just isn't the long track record to fully understand the unit economics of these assets.

David Roberts

Right. So big money doesn't want to come in because they're not quite sure how these things will perform over the long term. They just don't understand them very well. So, long story short here is, having encountered these frictions, your idea was not to start another project developer business or get directly into this business, but to start a platform to try to ease the process overall. So you mentioned the three barriers that you're trying to overcome with Odyssey as a platform. Walk us through those, and how Odyssey is addressing them.

Emily McAteer

Yeah. So we're, essentially, trying to address them all at once, which maybe is a good idea, maybe a little crazy. But that is the idea of the platform, is that it's really end-to-end for the project development lifecycle. So it covers the finance, build, and operate phases of project development. And what that looks like is, first, a finance platform, that is all about standardizing the way that these assets are prepared and diligence, and, therefore, streamlining the investment process. And that investment could be all different types of capital.

So we ... Odyssey really started as a subsidy platform. So we were helping big institutions, like the World Bank and the government of Nigeria, deploy large amounts of capital into many assets using our platform. But it could also look like an international bank that wants to deploy debt into these projects. So that's the first part of the platform. And then we had this realization that through the work that we were doing on the financing arm, we had an aggregation of project developers using the platform. And we could leverage this aggregation to bring together all of the individual equipment orders that they were placing, and then sort of be this aggregator that places higher volume orders with suppliers, so that we can bring down the pricing that project developers are getting for their equipment.

David Roberts

So you get a little scale by pulling together all the developers.

Emily McAteer

Exactly.

David Roberts

The needs of all the developers.

Emily McAteer

Yeah. So if you're a small project developer, and you've got like three projects that you need to go procure from, you can place that order on our platform. And then we'll go and we'll say, "okay, we've got your orders, and we've got project developer B's orders, and project developer C orders. Let's consolidate them all." And then we look like a much bigger buyer, which is helpful for international suppliers. So that's the procurement side. And then finally, about a year ago, we acquired a company called Ferntech, that has really strong remote management and control technology. So it's a controller that you install on site, and then you can remotely monitor and control all of the aspects of your generation system, so that you can do the majority of your sort of troubleshooting and management from the office, rather than sending someone out to the field.

David Roberts

And that's giving you, then, presumably, a lot of data too, on how these things are performing in the field.

Emily McAteer

Yeah, exactly. And so then you can also kind of feed that back into the finance platform and say, give investors confidence, "hey, we're going to be monitoring these assets. We're going to be delivering key insights to you about these assets. You'll never lose sight of them." And having that full life cycle, or that full feedback loop, means that we'll start to get better and better at forecasting these projects because we're collecting operating data from them.

David Roberts

Right, and it also seems like even on the data side, once you're aggregating a bunch of these projects together, a little bit of the noise fades out and you can get, kind of, a clear signal of this kind of average performance over time.

Emily McAteer

Absolutely.

David Roberts

One of the things that, as I was reading and thinking about this ... kept coming up for me is ... conceptually, this makes all the sense in the world. Like, when you're in a chaotic market with a bunch of small projects and small vendors, and you're trying to bring big money to it, you need standardization, you need some clear expectations, you need some scale, you need some kind of commodification of the process. But then there's the reality, which I come back to, which is — and I'm not an expert in this, so you can tell me if I'm exaggerating — but it just seems like, given the range of places you're talking about, and cultures, and the level of infrastructure. It just seems like you're going to have such an enormous variety of circumstances on the ground that I'm curious how much standardization you think you can impose with this platform. Do you know what I mean? How much is the platform going to solve, and how much is going to wait for the actual projects and infrastructure in itself, to sort of standardize and come along more?

Emily McAteer

Yeah, I think that's the needle to thread. We, certainly, are not going to solve all of the challenges of these markets with our platform. But even if we can get a fraction of the capital flowing that this sector needs, and a fraction of sort of the projects deployed of the total potential of these markets. I mean, that's massive. So it's not like we're out to finance, and every single project out there, or provide our remote management and control technology for every project. But, there's so much potential in these markets and so many low hanging fruit of projects that our job is to make sure that the ones that do have reliable offtakers and the project developers who know what they're doing, have access to this capital and have access to these markets.

David Roberts

And, in order for a developer to take part in your platform, is it just kind of a box checking exercise? Like, if they have the required information, they can do it? Is there any kind of, sort of, quality control? I just imagine soft costs are going to be enormous, dealing with thousands of vendors, unless, you take all the steps you can to kind of minimize them. But I just wonder, is there any quality control and individual interaction with these vendors, or is it just, like, if you come to us with this structured information, you can take part?

Emily McAteer

Vendors as in the project developers?

David Roberts

Right. Or project developers. That's what I mean.

Emily McAteer

Yeah, that's what it's a mix. So the platform is free to access for any project developer because we have a set of project planning tools that we want to democratize and make as useful as possible to project developers. And that helps with the standardization right there because you've got all of the data modules about projects the same. They're running through the same financial models. But on the finance side, we are working with our finance partners to sort of qualify project developers and move them through, and we're the technology that makes that a lot easier for the financier.

David Roberts

What is the, kind of, rate of return that investors can expect, here, relative to, like, investing in a big solar farm? Like, give us a sense of kind of the scale of returns. Is this an attractive — assuming you can standardize it somewhat and scale it up somewhat — is it an attractive investment opportunity? Like, what are the kind of returns, relative to other possible clean energy investments?

Emily McAteer

In a lot of cases, the returns are higher than, sort of, other investments, partly because the market is so untapped, and there's a lot less competition than you see in US markets. Yeah, and, obviously, like, higher risk, higher return. So, why we're so excited about the opportunity in emerging markets is that the unit economics make a lot of sense, and, sort of, the macro dimensions of these markets. So these projects, this energy infrastructure needs to be developed anyways, and, often, it's the lowest cost solution. Or in places where the grid is unreliable, backup power is just a requirement to operate. In the US, often, like, adding renewables is kind of a nice thing to do, and it helps with decarbonisation of the grid. Or maybe there's a little savings, but in these markets, it's often a necessity.

David Roberts

And have you had any ... I guess I'm wondering sort of what problems you've run into so far. Have you had problems with project developers not delivering on what they say they're going to do? Or vendors dealing with such a variety of small customers, and vendors, and project developers. Have you had any quality control issues, or was this ready to happen and just needed a seed, and there was a lot of potential there already?

Emily McAteer

I mean, there's a million and one challenges. I would say the biggest challenge we face is just projects not getting off the ground. Because our business works if we're supporting projects that are getting developed, and we're getting financing. Then you need to, obviously, be moving a project forward if you're at the procurement stage, and we're helping you procure. So the biggest challenge we face is like various things happening so that a project gets delayed or doesn't end up happening. There's all different types of stuff happening in these markets that can lead to a project delay. One of the biggest things we're dealing with now, is just some of the foreign exchange challenges in the markets, where we work. And so that's making it difficult to even buy equipment. In Nigeria, project developers are having trouble changing their Naira into dollars, so they can purchase from international suppliers, or we can purchase on their behalf. So, those are the challenges that the project developers are navigating, and then we're experiencing as we try and support them.

David Roberts

And is the supply chain screwed up for these, too, like it is for everything else?

Emily McAteer

Yeah, of course. So like, really long lead times on key solar equipment is a challenge for getting the projects off the ground.

David Roberts

Give us a sense of how long this thing has been running and, sort of, how many projects are involved now. How close are we toward the kind of standardized, robust, scaled-up market that you envision? What sort of stage of progress would you say you're at?

Emily McAteer

Well, it depends. We have different parts of the platform, and so we have about 1,000 projects that we're monitoring, on the asset management side, and that's growing pretty quickly. And so we're starting to get a lot of good insights from those projects. The other metric that we measure is the number of project developers on the platform, which is about 1,500, and then the total, sort of, size of funding or facilities that are using the platform to deploy capital. And that is at about 1.3 billion. But that's all different types of capital, right? Subsidy programs, government debt programs, commercial capital.

So yeah, lots of different kinds of metrics. But I think what we're really excited about and where we're headed is that we have every project getting financing, moving through the procurement phase, and then getting this remote management control technology, kind of, in that order, and having the full spectrum of support that they need.

David Roberts

Yeah. So I guess one of the things I'm trying to wrap my head around is the scale, the potential scale here. So say you have 1,000 projects that have been built, and you're, now, monitoring the performance of. What could that number be in five years or ten years? How many sort of potential projects are out there? I want to, sort of, get a sense of is 1,000 a lot? Is that covering a lot of a market? Is that just a beginning, tiny fraction of what's possible?

Emily McAteer

I mean, the market, itself, is just very untapped. I mean, we need hundreds of thousands of these projects built in order to, sort of, fill the energy gap in emerging markets. Sure, 1,000 projects is, I mean, that's a great start. It's a sizable amount of the market and projects that are being developed, today. But in general, every single stakeholder in this ecosystem needs to be scaling 100 x, 1,000 x where we are today.

David Roberts

Right. This is a question that may be incoherent, so just tell me if so. But when I think about markets full of small operators, and I think about efforts to standardize and do quality control and make things more predictable for big investors to come in. I think about some of the perils of that. My wife is in coffee, and she does a lot of traveling and working with small vendors, in Africa, and Colombia, and various countries. And one of the things that she's told me about is, kind of, the Fairtrade standard, which in some sense, is, sort of, like, trying to standardize and commodify certain practices, so that the wealthy coffee buyers in the West, who want the nice coffee, will have a reliable way to get it.

But another thing she said has happened, is that the bureaucracy around Fairtrade has kind of grown up to the point that it's actually quite a hassle now to get Fairtrade certification. And it's having the effect of boxing out lots of small vendors and, sort of, creating an impetus toward consolidation, bigger and bigger players starting to dominate that market, which is somewhat contrary to the spirit of the thing, which was to support the small vendors. So, it's a very roundabout way of saying, like, I see the need to standardize these things and to have sort of standard metrics and things like that. But do you worry about small, local — either project developers or vendors — getting boxed out of this? Or are you making efforts to, sort of, encourage local businesses, local participation, or is that whole set of issues on your radar at all?

Emily McAteer

So my philosophy, and the way I think about this, is that project developers have so much on their plate, like so much hard work, right? If you think about a mini-grid developer, they are identifying communities that need power. They're going into these communities. They're having conversations with the local government. They are meeting with all of the community members and trying to understand how those community members would use power, just even get to the project development stage, where they're then designing a system and going through everything else. So our job is to try and make the parts of that process, that can be standardized, easier, right? Like, maybe they don't need to start from scratch.

And this is what I was doing at SunEdison. I was just building so much stuff from scratch, and knowing that others were doing the same thing, and that technology could be useful there. So, like, everyone's using similar processes to forecast demand. Let's give them tools to do that, and then they can sort of add their own assumptions into those tools, which might be like, that piece would be relying on their market knowledge or unique experience. So we're certainly not trying to create this like, one-size-fits-all mold in any way. We're just trying to standardize the things that can make the process a little bit more streamlined, and then leave that really nuanced work that project developers need to do based on their experience in the markets to developers.

David Roberts

Give a sense of the scale of the savings. I can see the attraction of this for project developers, obviously, to just have some of this work taken off, and some of this stuff commodified. But at the current scale you're working at, as a small project developer, how much would I save by ordering my equipment through this aggregated process versus ordering it just for myself? Like, what are the scale of savings possible? And I assume that the savings you can save more and more, the more people are involved in this, the bigger your orders get, basically. Is that accurate?

Emily McAteer

Yeah, exactly. And we're still at early stages, so, obviously, the scale we have is not as big as it will be in the coming years. And even at the scale that we're at, we're seeing savings of up to 20%, and we're targeting 30%. So there is significant room to have cost savings, here. We also do offer equipment financing, which is very helpful to project developers. So we've got a fund that sits next to our procurement arm that actually pays for the equipment directly, and then the project developers pay back in 12 to 24 months. So we're trying to kind of solve two pain points at once. One is the price of this equipment, and two is working capital constraints that are stopping project developers from being able to, even, aggregate within their own operations, right. Order for the next six projects rather than project at a time, because that's what cash allows.

David Roberts

In operating these things, now, for a while, what have we learned about these demand curves that materialize out of nothing? It's fascinating to me — and, obviously, my speculations as an affluent, white guy, sitting here in Seattle — about what people would do given electricity, having never had it, are all but worthless. What have you learned about these demand curves? Is there more robust demand than you thought or less? Or are they being used at different times and ways than you thought? What have we learned about how these projects are used once they're built?

Emily McAteer

I think that the biggest learning, from the early stages of the mini-grid market, is that making sure that, there is what we call "productive uses electricity" in the community, is really important. And often that looks like the project developers themselves offering, sort of, financing for productive use equipment. There's a number of, sort of, subsidy programs that we run on the platform specifically aimed at supporting project developers and doing that. But there's sort of a realization that if you're going to bring in the supply of power, you need to also support the demand of power.

David Roberts

Interesting. So they're trying to sell like, here's some electricity, and then here's some stuff to use the electricity.

Emily McAteer

Yes. And, particularly, what the reason we call them productive uses is it's not just kind of like TVs and fans in the home, it's more, kind of, industrial applications. Things that can run, for example, during the day, when the sun is shining, and use the lower cost power, so that you're not having these just these massive spikes draining into batteries from residential households, turning their power on in the evening.

David Roberts

As a side question, do all these projects involve batteries, or are they mostly solar and storage packages, now? Or what's the balance there?

Emily McAteer

What I've just been describing is mini-grids, and those are almost all, yes, solar and storage, and a diesel generator for occasional backup. We also support commercial, industrial solar. And that doesn't necessarily always have a battery. That could just be sort of like rooftop TV.

David Roberts

Right. But in, like, your rural village situation.

Emily McAteer

You'd have a battery.

David Roberts

Batteries come along with it.

Emily McAteer

Yeah.

David Roberts

Everything about this makes total sense to me. And it seems like something that the participants in these markets themselves would be quite excited to have. So what do you see as, kind of, the landmines, here, the problems you might run into, as you're expanding? What could go wrong here?

Emily McAteer

The underlying risk profile of these assets, right, if we're trying to get them financed — and we're trying to procure for them — there needs to be comfort with the international markets of these assets. And that risk profile can be, hey, we haven't seen a lot of these assets before. We don't know how demand is going to grow. Or for CNI projects, can we underwrite the offtaker, right? Are there enough offtakers that we know we'll keep paying this power and is as solid a PPA as one that you'd see in the US? We can only do so much to provide support to project developers and standardize and aggregate and all of that. But at the end of the day, the most critical piece of the puzzle is: can we de-risk these assets so that they can get financed by commercial players that want to ...?

David Roberts

Right. And do we have any — for those outside the business world and the money finance world — is there an easy way to measure what is currently ... if I'm a big bank or whatever, I'm sitting on a billion dollars, I could invest it in a few big projects, or I could invest it in this. Is there a way of measuring the sort of risk differential, like, how much riskier these are currently? I don't know if there's like a scale or a metric or something.

Emily McAteer

Yeah, I think you model out the risks, and then you model out, sort of, the internal rate of return on the projects, essentially, or the expected internal rate of return on the projects. At the end of the day, everything comes down to how much it costs to build it and then how certain are the revenues. And so, if you're building utility scale project and you're selling that into the grid, you can kind of be certain that that contract to sell power into the grid is going to be upheld, and you'll have a buyer of the kilowatt hours you produce.

David Roberts

And a big reason that market has grown so quickly is that there are so many of those, now, that it's very well understood what the risk profile is like. There's just a million examples.

Emily McAteer

Yeah, exactly. And so, then, if you, kind of, go down and you look at smaller projects — if you're in commercial industrial projects and the real risk is okay, is the customer that I'm contracting with, which is going to be, let's say a retail chain or shopping mall or something, can I trust that they're going to keep buying power?

David Roberts

Right?

Emily McAteer

And then if you go to microgrids, it's like there isn't an offtake agreement. There's no power purchase agreement. It's just are people going to use power if they get connected?

David Roberts

And also is the project going to be maintained? I'm thinking some of these are just villages. It's not like they have local solar maintenance businesses set up there. Is that a challenge? Just finding the staffing and time and just the habits necessary to maintain these systems? Is that proving to be a problem? Because this is something I've heard from a lot of people in this area, is that a lot of big, excited philanthropy money goes in. They build these pretty projects, and then a couple of months later, they find out no one flipped the switch, or no one's cleaned them, or something like that. How big of an issue is that?

Emily McAteer

Well, most of the projects in our platform are developer and operator of the project. So the companies are owning and operating them, and so they're on the hook for maintaining them. And that's why we felt it was so important that we offered this remote management and control technology because you, simply, can't scale if you are needing to send someone into the field to make sure everything is working. And so, our job is to provide them the technology that they need in order to manage the fleet as remotely as possible. But also know, right away, if something's not working.

We also focus on automated, what we call, logic loops. And so, these are, sort of, algorithms you can set that say, okay, if this happens with this component on the generation system, do y with this other component, then you can start getting the grids operating as optimally as possible to bring down operating costs, as well. Because once you've invested, obviously, the big risk there is: are operating costs going to grow beyond what we modeled and kill the returns of the project, in that way.

David Roberts

Yeah, I don't have a good sense of how much maintenance, day-to-day operations and maintenance, can be done remotely. Obviously, you probably can't eliminate the need for someone at some point to go physically and look at the thing, but can you get down pretty low? Can you do most of the work remotely these days?

Emily McAteer

A lot of it, yeah. You can get super granular in our system and look at every single component of the generation system, and they all send data. So you can get a ton of data of what's happening, and, often, troubleshoot remotely or at least know exactly what ... if you do need to go fix something, you're sending someone out with the right information, the right person out. You're just starting from scratch by just sending someone out and say, "Hey, poke around." You kind of know what the issue is already.

David Roberts

As a way to wrap up ... I'm sort of curious to get you, maybe, speculating a little bit. Obviously, there's enormous appetite for these projects and a big, untapped market for these projects. I think that's pretty clear and pretty well demonstrated, already. But I'm, sort of, curious about your thoughts about the larger debate about "leapfrogging." There are people who will argue, these projects are fine, having light is better than having no light, like, having a washing machine is better than having no washing machine. But as these places grow, and develop, and become sort of industrialized nations, you're going to have to go to the grid, the big grid. That's the only way to support, kind of, a modern, industrialized economy.

So, in that sense, these distributed projects are a stop-gap stepping stone to big grids. And then, of course, you have this true believers who say no, that you can just start small, expand, do your microgrids, connect up your microgrids, and you never have to go to the giant, centralized grid paradigm. This is obviously a huge question, but where do you sort of come down on that? I mean obviously you're a believer in the distributed stuff. You wouldn't have devoted your career to it. But do you see that "leapfrogging" story? Are you a believer in that?

Emily McAteer

I mean I have to be a believer to be in the business I am. But I do think that the "leapfrogging" metaphor is a little bit too binary. In my mind, it's not going to be like, "Okay, all development on the grid is going to stop, and then we're going to do all distributed renewables." Both the grid and distributed renewables are going to play a role, and it's really going to come down to the unit economics.

Like in a given situation, does it make sense to build another transmission line or to build a power plant on site? That decision is going to be made thousands and thousands of times until we get to a place where the grid is serving power in the right places and distributed renewables are serving power in the right places. And the thing is, there's going to be a lot more, sort of, symbiotic relationships between distributed renewables and the private operators that are building them, and the central utility and the grid.

So, to give you an example, a growing market in Nigeria is this concept of interconnected mini-grids, and those are a lot of the projects that are on our platform, which is a mini-grid that's built in the territory of the distribution company. But it's actually more efficient for the mini-grid developer to service those customers through a mini-grid, than for the distribution company to do so. And so there's a relationship between the mini-grid company and the distribution company, in agreement, that those customers will be served with a different energy source, and, maybe, there's even, sort of, buying and selling between the mini-grid and the grid. So it's really not going to be an either/or, it's going to be like ... it's going to be an all-hands approach.

David Roberts

And, obviously, in these places that just have unreliable electricity, in a sense, the grid is already there, halfway there, but not quite doing its work. So, in a sense, it's going to have to be symbiotic in those places.

Emily McAteer

Yeah, exactly.

David Roberts

That was always the model that made sense to me, which is: do what you can locally maximize your local resources, and then have the big grid there as backup. So you need less big grid if you have distributed energy doing most of the work, but you still have it doing its main thing which is reliable around the clock backup.

Emily McAteer

Yeah, exactly.

David Roberts

You're talking about these thousands of decisions, like, on the unit economics, is it better to extend the central grid here or to build something local here? But as we know, those unit economics change, and part of what I hear people worried about — especially, sort of, the distributed, the "leapfrog" enthusiasts — part of what they seem to be worried about is that the unit economics of central grid building do not appear to be changing or, even, seem to be going up, getting more difficult, but the unit economics of distributed renewables and networked microgrids are headed down, even now. Like, this is part of what you're involved in, right? Like this is sort of the whole impetus of your project is to bring down the unit economics of these things.

And, sort of, the "leapfrog" people will say, given time and scale, it's just like solar versus coal or whatever. Like, given time and scale, inevitably, solar is going to be cheaper. And they say the same thing, like given time and scale, inevitably this distributed stuff is going to be cheaper. But we're just making these ... we just have these sort of vested interests trying to make these decisions, earlier than they need to, based on pessimistic forecasts. So do you think that it's true, that the kind of unit economics of distributed energy, are going to follow a cost curve in the same way that the unit economics of like solar and wind, itself, have done? Or do you, sort of, envision a, kind of, plateau? Again, very huge and difficult question to answer about the future, but feel free to speculate wildly.

Emily McAteer

Yeah, I mean, I think there's no question that the costs are going to keep coming down, and then, that will open up more and more opportunities where distributed energy projects are the lowest cost option for electrifying an area. There's a partner of ours called Cross Boundary, that did a great report on this and, kind of, looked at today, in a number of places, what is the lowest cost option for electrifying communities, and found — I can't remember what the number was — hundreds of thousands of places where mini-grids was the lowest cost option. And I think that's only going to continue to grow as the cost of mini-grids come down.

What's happening now is, basically, efforts to accelerate that. So one of the biggest programs that we run on the platform is called the Nigeria Electrification Project, which is, essentially, a subsidy for every single household that's connected to a mini grid. What that's doing is just improving unit economics, right, and making it make more sense for a project developer to go into an area, especially a rural area, that may not have made economic sense without that subsidy, and electrify it sooner to accelerate that process.

David Roberts

Does that mean there are a bunch of distributed solar microgrids being built in Nigeria right now? Is that a big wave happening, or is it a trickle? Is it just a few pilot projects? This is something I come back to and over and over again, like I've been hearing talk about this for so long. Is it starting to scale up? Are we starting to see something like a wave of projects?

Emily McAteer

It really is starting to scale up. I mean, even five years ago, when I was first getting started in this market, there was just a handful of mini-grids in the entire country of Nigeria. And now, this program has fostered many more project developers building these projects. Tons more projects in the pipeline. I mean, I think everyone would want to see it go even faster, but it's been a total shift in the landscape, just in the time that I've been working in Nigeria.

David Roberts

Interesting. This is all fascinating. I love talking about platforms, and this seems like the paradigm example of where a platform is needed, or some platform and standardization is needed. So it'll be really fascinating to see how this goes. Thanks for coming on and talking about it, and good luck with your expansion.

Emily McAteer

Yeah, thanks for having me. This was really fun.

David Roberts

Thank you for listening to the Volts podcast. It is ad-free, powered entirely by listeners like you. If you value conversations like this, please consider becoming a paid Volts subscriber at volts.wtf. Yes, that's volts.wtf, so that I can continue doing this work. Thank you so much, and I'll see you next time.