Decentralized Renewable Energy: the unexpected engine of employment
The decentralized renewable energy (DRE) sector, which includes small solar appliances as well as solar stand-alone and mini-grid systems, has been playing a crucial role in reducing energy poverty. Since 2000, over 150 million people in developing countries have gained energy access via DRE solutions. In addition, the DRE sector has evolved into a large and resilient employer, creating close to half a million jobs globally—or an impressive 1.7 million if we include indirect and induced employment—with Sub-Saharan Africa (SSA) and India being top contributors.
These job creation figures debunk the idea that only traditional fossil fuel companies, such as oil and gas or utilities, are large employers, and thus a transition to cleaner energy would imply job losses. As an example, Nigeria’s DRE sector directly created an estimated 50,000 jobs which is close to the number of jobs created by the country’s oil and gas sector. In addition, solar DRE companies in Kenya employ at least 6 times as many workers as the country’s largest utility company, Kenya Power and Lighting Company (KPLC). Furthermore, DRE companies rely on a customer-centric approach that aims to maximize connections and consumption within their sites of operation. In some instances, this entails facilitating productive uses of energy equipment that create additional indirect and induced jobs. For example, it is common for solar mini-grid developers to partner with appliance finance companies to sell energy equipment in both peri-urban and rural areas that can be used for productive purposes, as when local restaurants take up pressure cookers and chest freezers, or farmers obtain solar water pumps.
Despite the DRE market being quite young, especially in SSA, it proved its resilience throughout the pandemic. While income declined abruptly in low and medium-income countries, households have largely continued to pay for electricity access, helping many DRE companies navigate the crisis. Employment drops in DRE were also relatively small and bounced back quickly in SSA and India. Figure 1 below illustrates that the Indian DRE sector is almost back at pre-pandemic levels after registering a 2.5% loss in the labor force (compared to a 6% decrease in the overall economy). Similarly, Nigeria also exemplifies the resilience of the DRE sector. After a slight job drop in 2020, DRE employment bounced back with 50,000 jobs in 2021, nearly twice the number of jobs recorded in 2019.
Employment prospects in DRE look bright, as these technologies are proving to deliver faster and cheaper electrification than the business-as-usual grid extension approach in many markets. One indicator is the increasing number of developing countries that have mainstreamed DRE into their national energy policies. As a result of increased attention and investment, employment in the DRE sector is also expected to grow in the short term. According to analysis by Power for All, India, Kenya, and Nigeria are poised to register a 5% annual growth in total employment in 2023, (Figure 1), though many uncertainties and potential setbacks could threaten this growth opportunity.
Figure 1: Major DRE markets expected to show growth in employment (Source: Powering Jobs Census 2022)
Growth in DRE employment is also reflected in the type and quality of jobs created. Many customers are demanding advanced DRE solutions that can provide services beyond basic lighting. This transition to bigger and more advanced systems, such as larger stand-alone systems and mini-grids, has implications for the type of workforce needed. Initially, the DRE sector created mostly low-skill, low-pay jobs such as sales agents. But with growing sales for larger systems, skills such as installation technicians and electricians are becoming highly demanded. According to DRE companies in Nigeria, Kenya, and India, jobs related to installation and maintenance of DRE systems are expected to be the fastest-growing jobs in the sector.
To sustain momentum, the DRE sector needs to put greater emphasis on addressing the skills shortage and ensuring marginalized groups have equal opportunities for jobs. In interviews with Power for All, DRE companies cited the shortage of skilled workers as a major growth inhibitor, hampering efforts to achieve energy access for all. Different types of reskilling and upskilling programs, such as training, short-term internships, and experience-sharing sessions need to be designed to address the current and future skills gap in the sector. Initiatives like Shortlist’s Off-Grid Talent Initiative (OGTI), which aims to attract youth into energy sector jobs and develop their mid-level management skills, are already underway and should be supported and amplified by governments and donors.
Skills development programs also need to focus on integrating women into the DRE workforce. Among countries studied in the Powering Jobs census, Kenya has the highest share of women in its DRE workforce ( 41%), while India’s share of women in the DRE workforce is the lowest amongst the focus countries (21%). The shares from the census closely mirror those in the overall labor force of each country. In addition, women tend to be overrepresented in administrative roles (such as assistant) and underrepresented in technical and leadership roles. DRE stakeholders should thus consider implementing short- and long-term interventions to close the gender gap. Long-term interventions might include increasing the availability of capital to female entrepreneurs or adopting gender-equality-based selection criteria for grants and tenders. In the meantime, the DRE can adopt short-term interventions such as expanding efforts to recruit female candidates and increasing their participation in reskilling and upskilling programs.
The sector has come a long way since its beginning in the late 2000s. It has proven to be a large and resilient employer while also providing energy access to millions around the world. There is still much more room for growth and development of the sector, especially as economies transition from rooftop solar to larger and more complex energy systems. To ensure a smooth transition and maximize the DRE potential, both in terms of energy access as well as jobs, private and public players must join their efforts. Investing in the DRE sector will thus result in a profound acceleration in socio-economic development in developing countries, improving the livelihoods of millions of people.