Clean Sweep: Supporting Entrepreneurs in the Energy Sector

In this day and age, most of the world is worried about climate change. That is why instead of delivering energy through top-down initiatives like large-scale utilities, E+Co looks for small enterprises that can take hold locally. Rather than bringing in Western business experts, it hires regional field staff who recruit and support entrepreneurs in their own communities. Moreover, its efforts are inspiring others to see the connections between energy, poverty, and climate change. Alvaro Illanas Cerezo summarizes Susie Boss’s article “Clean Sweep” from Stanford Social Innovation Review, below.

Energizing entrepreneurs

E+Co’s portfolio proves that there’s no shortage of clean energy ideas or entrepreneurs in emerging markets.

A report stated that willing entrepreneurs represent an abundant but largely untapped resource. It also noted, however, that technical assistance for small business is simply not available in many developing markets.

E+Co unleashes this entrepreneurial potential with a three-part model that combines technical assistance with capital.

• Part 1: It helps entrepreneurs develop solid business plans. Field staff use a toolkit and their understanding of local issues to help would-be entrepreneurs analyze their market and select clean energy products. The business development process is thorough but not over-sophisticated. Similarly, the organization prefers proven solutions to cutting edge technologies.
• Part 2: It lends seed capital, typically $25,000 to $500,000 at average annual interest rates ranging from 8 to 12 percent. Getting to yes requires approval from an independent, unpaid investment committee made up of finance professionals. The experts bring a deep understanding of niche energy markets and small- to medium-sized enterprises.
• Part 3: It provides access to growth capital.

Measuring everything

E+Co relies on concrete metrics to convince diverse investors to fund the organization. A triple bottom line scorecard rolls up data from 30 indicators across three categories: financial, social, and environmental. E+Co admits that it can be swayed by stories of lives improved, but he’s also hard-nosed about numbers, and so looks to the scorecard to see that the portfolio’s average annual return is 8 percent.

Grant funding has become a smaller piece of the pie now that loan repayments generate revenue to reinvest.

E+Co is similarly analytical when it comes to evaluating risk. Although the organization steers clear of untested energy ideas, it sometimes approves demonstration projects that bring proven products to new markets.

Growing the space between

E+Co must now make sure the funds keep flowing. Its loans fall into what its CEO calls the space in between: bigger than microfinance but smaller than corporate-size deals. This “missing middle” is unfamiliar territory for many public and private investors. The main goal is to start a movement, so that small and growing enterprises have ready access to capital. Global acceptance of microfinance has taught E+Co the value of aggregating players to speak with one voice.

Have you had any experience in supporting small businesses in the energy sector? Share your experience with us in the comments section.