Humanitarian Energy: quality sustainable energy services for all

The project is implemented by Humanitarian Energy PLC (HumEn) in Ethiopia. The project began in January 2022. HumEn is developing and deploying self-sustaining commercial vehicles around the world, which will grow and impact an exponential number of displaced communities and humanitarian agencies through their operations. 

Can the private sector provide new and better solutions to the overarching problem of unstainable energy supply in the humanitarian world? And can humanitarian agencies create a conducive environment for this to happen, while ensuring protection for the most vulnerable beneficiaries? HumEn – Humanitarian Energy strongly believes so! HumEn is a for-profit, social vehicle of Mercy Corps bridging the two worlds, towards a more sustainable approach to humanitarian energy, in Ethiopia and globally.

HumEn's goal is to provide more sustainable solutions in the field of humanitarian energy to the benefit of displaced and host communities, recipient governments, and humanitarian agencies around the world. They believe the involvement of the responsible private sector is key to ensuring longer-lasting, more environmentally friendly, more efficient, and less public funds-dependent solutions. We seek impact over profit, but we also acknowledge that profit drives innovation and opportunities, when managed responsibly. HumEn aims to provide that synthesis: a socially responsible, impact-oriented private sector with innovative solutions to new opportunities in the humanitarian energy space. 

Main activities of the Good Practice

Power supply is often a prerogative of Governments, given its social relevance as a human right. This is especially critical for the most vulnerable communities, such as refugees. So, how is it possible for the private sector to intervene? Through HumEn, we provide a clear path to sustainability through the following good practices: renewable energy-based solutions (solar PV); a high-quality service at lower price than other available solutions (diesel-based); Energy-as-Service (EaaS), hence internalising the risks of assets financing, deployment and maintenance; a reliable protection mechanism guaranteed by Mercy Corps in consultation with UNHCR and the Government Agency for the protection of refugees; a self-sustaining model which forces operations for many years to reach viability (at least 8 years to just breakeven), and allows organic expansion of services through revenues generation and reinvestment (as agreed among shareholders); a continuous multi-stakeholder consultative approach, from the community level (through the establishment and operationalisation of electricity committees) up to the national government (through licensing), passing through regional governments (through coordination units) and refugee protection agencies (UNHCR, RRS); partnership with global sector leaders for the engineering, procurement and construction of our assets, hence ensuring the highest standard of quality of our infrastructures, way beyond the national requirements; a credible value propositions not only for refugee and host communities and associated social institutions and businesses, but also for humanitarian agencies seeking for service-based solutions to improve their (often unsustainable, diesel-based) energy supply; credibility and accountability through majority shareholding of Mercy Corps, hence ensuring the humanitarian mandate. 

Elements which helped facilitate the implementation of the good practice

In Ethiopia, HumEn has secured the first (and sole, to date) privately-run mini-grid license under the current legislation. It will serve up to 12,000 people, social institutions and businesses belonging to the refugee and host communities of Sheder. This would have never been possible without a credible business model to be channelled through HumEn Private Limited Company (PLC), a fully Ethiopian entity owned by Mercy Corps and a national for-profit partner, which reassured the Government of Ethiopia about HumEn's capability to deliver reliable, continuous affordable and sustainable energy services for decades to vulnerable communities. Such milestone would also not been possible without the strenuous and coordinated support of Mercy Corps, UNHCR and various Government Agencies to create a conducive environment, something that will surely be replicate in our expansion strategy. 

Partners involved

• Mercy Corps
• UNHCR 
• Refugees and Returnees Service (RRS)
• Petroleum and Energy Authority (PEA)
• Ministry of Water and Energy (MoWE)
• Somali Regional State (SRS) Bureau of Finance (BoF)
• Community Electricity Committee (CRC)

What challenges were encountered in delivering the project and how were they overcome?

Challenges

• Humanitarian stakeholders cautiously approached the idea of private sector interventions in displacement settings, wanting to ensure protection considerations are thoroughly addressed to prevent any potential exploitation of beneficiaries. 
• Challenging and unexplored regulatory environment related to mini grids, exacerbated by intervening in humanitarian contexts.
• Challenging and underdeveloped business environment, especially given the presence foreign shareholding into the venture.
• Agreement on tariffs with beneficiaries and regulatory body, to ensure at the same time affordability and sustainability of operations.
• Challenges related to FOREX availability in country which limits business growth.
• Challenging, monopolistic government approach to import and import duty exemptions.

How they were overcome

• Allowing Mercy Corps as main shareholder in the venture, hence ensuring protection of beneficiaries.
• Support of legal experts and continuous active engagement and involvement with regulatory body, government and humanitarian agencies.
• Involvement of national technical and strategic industrial partner as minority shareholder and business facilitation by Mercy Corps.
• Regular consultative processes with stakeholders and partial subsidization of the investment by donors to reach affordability and sustainability alike.
• Strategic financing mix from shareholders and donors through direct injection of FOREX and patient approach to equity returns.
• Strong local team with vast experience in similar contexts, supported by legal advisors.

Results of the Good Practice

• Up to 12,000 refugees and associated businesses and social institutions benefitting from continuous, reliable, affordable power supply by Q2 2025.
• Up to 6,000 hosts benefitting from access to electricity for productive uses and public street lighting by Q2 2025.
• Indirect benefits across various value chains thanks to livelihood support activities implemented by Mercy Corps to support productive uses of energy by Q2 2024.
• Employment opportunities for contractors and local labour during construction and operations since Q3 2023.
• Indirect national impact in terms of improve regulatory and business environment for new players to enter the sector since Q2 2023.

In what way does the good practice meet one or more of the four objectives of the Global Compact on Refugees?

Objective 1: Ease the pressures on host countries

By providing sustainable solutions that reduce the environmental impact of energy supply, the depending on public funds for temporary solutions, the dependency on imports of fuels, and the social conflicts among the communities.

Objective 2: Enhance refugee self-reliance

By providing sustainable energy services that enable and improve supply of social services (powering of fridges for vaccines, lighting for education, water pumping, etc) as well as productive uses of energy for livelihood opportunities (carpentry, milling, etc).

Next steps

The HumEn model is self-sustaining and not bound to donors’ funding cycles. Its expansion is exponential, and its rate will depend on the number of projects that the model can deploy in the next five years, and as a result the amount or revenues it can generate for reinvestment. While the HumEn model is being developed and deployed in other countries that have strong need for humanitarian energy intervention, Ethiopia is the country in which our first pilot has been deployed, and for which we already have a pipeline of projects. Specifically, we are planning to deploy additional 2.1 MWp capacity worth of solar PV mini-grids and systems for captive use of humanitarian agencies within the next 36 months, in addition to our first 254 kWp pilot mini-grid. These systems will be clustered in a well-defined geographical area, hence mutualising costs and reaching economy of scale. This approach shall in-turn, increase the amount of available revenues for investment, hence gradually reducing dependency on external contributions for the model to sustain.

Are there areas in which support would be required to continue and/or scale up your good practice?

Investment and buy-in at scale. The more funding available, the quicker the scale-up phase and revenue generation for expansion, resulting in the gradual reduction of dependency from external funds for growth. Depending on each project, the financing mix would vary and include various mixes of subsidies for projects with the highest social impact but more fragile financials, such as targeting the base of the pyramid, as well as loans and even minority equity contributions for more remunerative projects such as providing asset leasing for captive uses of humanitarian agencies and operations.