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October 26, 2020 Mini-grid data platform for emerging markets with Emily McAteer and Eitan Hochster (Odyssey Energy Solutions)

In this episode, we speak with Emily McAteer, CEO and Cofounder at Odyssey Energy Solutions and Eitan Hochster, VP of Business Development. Odyssey is a web-based platform that is facilitating rapid deployment of microgrids in emerging markets. Their data platform manages how mini-grid data is analyzed and communicated via software tools, data analytics and marketplaces, enabling mini-grid project developers to connect with investors, suppliers, donors and other market stakeholders.

We speak about their work with the Rural Electrification Agency in Nigeria, their work with RBF (Results Based Financing) programs,

how their platform is helping government and finance organisations manage their large scale decentralised energy programmes, and how the minigrid financing landscape is changing. Our conversation highlights the importance of operational data, and why aggregating and standardising minigrid data is necessary to accelerate the deployment of minigrid solutions in emerging markets.

Visit us at www.distributingsolar.com

Show notes:

(2:00) Introduction to Odyssey Energy Solutions, their software platform focused on expanding access and financing into the minigrid sector. How the different stakeholders use their platform

(5:30) Their engagement with government organisations, e.g. REA; funds e.g. CBEA (CrossBoundary Energy Access)

Types of data they work with, e.g. CRMs, customer management systems, smart meters, inverters. The difficulty of investing in large numbers of minigrids due to the smaller size and vast amounts of data

(10:30) Their approach to standardising minigrid data; their work with AMDA

(17:00) The potential for Machine Learning in improving their forecasting and accuracy of their data models; meeting the need for asset owners and asset management

(22:30) How Odyssey interacts with financing and how it encourages and supports financing into minigrids

(26:00) Discussion on Results Based Financing, and how Odyssey works with RBF; strong signs of success in Nigeria

(32:00) Emergence of project finance in minigrids

(33:30) Odyssey's work on COVID19 with Cross Boundary; looking at consumer demand changes and electrification of health facilities

(36:30) Eitan's and Emily's background and how they came into the energy access sector

(39:00) The challenges of building Odyssey: trying to build a product for a future market

(43:00) Their work with NEP (Nigerian Electrification Program)

(44:00) Odyssey's financiers: FACTOR[e] and Shell Foundation

(49:00) Where the name Odyssey comes from

(49:30) Advice to new entrepreneurs in the energy sector

(51:00) Predictions for the next 5 years: more business innovation, greater scale in the off-grid sector, mixing between SHS and mini-grids, maturing of project finance available.

Podcast transcript:

Distributing Solar: Eitan and Emily, thank you so much for joining us on Distributing Solar.

Eitan and Emily: Thank you for having us.

Distributing Solar: Odyssey Energy is a really impactful piece within the energy access sector and we're delighted to have you here because we've already had multiple guests speak about their experiences with Odyssey and how they've already been working with Odyssey Energy Solutions.

According to the latest numbers on your website, you're already working in over 13 countries, have facilitated over $350 million into microgrids and supporting over 500 product developers. It would be great if you could start by providing us with an introduction to Odyssey for our listeners who don't already know about Odyssey and the work that you do.

Emily: Odyssey is a software platform with the mission to enable large-scale capital deployment into solar mini grids, and other types of clean, distributed energy technologies in emerging markets. Our fundamental goal is to get lots of money moving into new types of energy assets to expand access to power.

And the way that we do that is we build a data-driven investment and asset management platform that makes it easy to both evaluate investments in the sector and then manage a portfolio of investments once you've deployed capital.

Distributing Solar: How does a partnership typically work for you? Do you work directly with the mini grid developers or do you work also with financiers?

Eitan: We have all types of different users of our software and part of the theory of Odyssey from the beginning has been that it would make the whole sector move more efficiently if data could be easily shared between stakeholders.

The idea being that if you're going to electrify hundreds of millions of people using distributed energy, that's a lot more data that needs to be evaluated, a lot more smaller projects creating a lot more information. And so, what we want out of Odyssey is to serve as a platform connecting different types of users.

The core software might be the same for everybody, but they're different types of users. So a mini grid developer has the ability to use our tools to evaluate a project that might be in their pipeline. So we have technical and financial feasibility tools that are available. Similarly, an investor might be able to receive a proposal and view the technical and financial analysis has been done on Odyssey.

And then, on top of those types of interactions, we have been focusing a lot on managing these large government and donor backed financing programs, essentially serving as a software platform where a government can collect proposals for publicly-backed financing of mini grids and solar home systems.

And so for them, they have the ability to collect standardized proposals and really run their programs much more efficiently, ultimately allowing them to deploy more capital into these programs and to have these programs run much more efficiently, whereas in the past there has been a lot of delays in program implementation. And so hopefully, you know what we're doing and what we're seeing in our early projects is that the results are happening faster.

Distributing Solar: And if I understand how the platform works it seems as though it's a software platform that allows product developers to enter in key information about a project that they're either planning to do or have started working on. Perhaps, information about the capacity of mini grid, et cetera, and then to match that with financiers who are interested in investing in mini grid projects. And then also then to open up that monitoring process as the grids are installed, implemented, managing information. So maybe if you could speak about the different types of data that you're pulling in, what are the analytical components that are really core to Odyssey's platform.

Emily: Yeah, so just a clarification. We do a little bit less of the matchmaking as you described and typically the way that our platform is deployed is that we will partner with a financier or a financial institution that's looking to deploy capital into the sector. And then we use that platform to standardize all of the data and interactions that that financial institution will have with all of the different stakeholders engaged in the process.

Just to give you a couple of examples of what those institutions might look like, one of our biggest customers is the rural electrification agency of Nigeria that's running now about a half a billion dollar program to finance solar home systems and mini grids in Nigeria. And so what our platform does is manages the entire life cycle of the investments that the REA is making and so any private sector company that's looking to receive financing for their distributed energy assets from Rio will go through a process in our platform where they apply for financing, they submit on a rolling basis, proof that they have connected customers. And then finally they received their financial disbursements based on the results that they've achieved in terms of electrifying customers.

Another example, that's the same technology, but kind of a different use case is a commercial investor, like Crossboundary Energy Access.

So, CBEA is a commercial project finance fund for mini grids. They're actually the first mini grid, asset funding in the market and they use our platform to manage their entire portfolio. And so when they need to ask critical questions about are the operators that we've invested in meeting their operational agreements, how is our portfolio performing in terms of system performance and economic performance, we collect all of the data from their systems that are in their portfolio and help them answer those questions.

On the type of data that we collect again, it really spans the life cycle of a project. Upfront we’ll standardize the process of the techno-economic data that needs to go into planning a mini grid project. So that's information about where the project is located, what the capital expenditures of the project are expected to be, what the forecasted energy at the site will be. We run all of that through a standardized financial model and so it becomes easy to aggregate many projects up using this sort of standardized data format into a portfolio that can then be more assessed by a financer who's looking to make an investment into many of these projects.

Then once the project is up and operating, that's when we start collecting operational data and we plug into a number of different data sources, all which feed us very high volumes of granular data directly from the system.

We'll plug into the system inverter, we’ll plug into the smart meter, we'll plug into other operational systems that the developer might be using like a customer relationship management system. And we pull all that together into a standardized data model that then allows for analysis and analytics on the portfolio as a whole.

Distributing Solar: When you're speaking about the data sources that are being poured into the platform, how does that process typically work? Are you connecting with the mini grid operators, their software control systems? Do you have to install smart meters or is there a lot of customization that's required for companies to join your platform?

Eitan: Yes, so on the data monitoring portion of our software, we've built our big data engine to be able to take in data from lots of different sources. And so the most direct way would be to integrate with smart meters and smart inverters to collect data on energy generation, energy consumption and payments. But it can also look like pulling in data from other software platforms, like payment platforms, or CRMs. And then for areas where there aren’t smart meters available, we also have the option for uploading a custom data via something like a CSVs.

We might have an onsite data logger and export data from your site and you can upload it that way. The point being that what we want to make most possible for people is to gather and aggregate all the data surrounding these sites and make it easy to analyze and get their hard questions answered in one place.

Emily: Yeah, and I think, just to provide some more context, the main challenge that we're trying to solve with our platform is it's very hard to invest in a portfolio of mini grids. Unlike, let's say a typical energy project, like a big IPP project, right? Because what you're doing, if you're putting, let's say a hundred million dollars into mini grids versus a grid scale project, that hundred million dollars is going into lots of small projects. And each of those small projects generates about the same level of data, if not more than, you know, a single large energy project would. And so there's a whole new set of challenges that need to be solved in order to move lots of capital into this nascent market.

And so, from our we're really trying to solve that, that data challenge. How do we make it possible for investors to get the questions answered and to get the information that they need to feel confident in their investments and deploy the type of capital that needs to go into the sector for it to really scale.

Distributing Solar: Perfect. That's great. And I'd love to hear more about the standardization. As you were beginning to develop your product and scoping out the product features and the platforms, what were the challenges that you were facing with regards to standardization of either financial information or operational information

Emily: As mentioned, we standardized data at different points in the life cycle of an investment. We have standardized diligence data and then we standardized data once a project is operating. On the diligence side, it’s less of a data and technology problem and more of a mindset, a new way of thinking about how you diligence these assets.

Traditionally, with energy investments you would have a very customized manual process. You'd probably hire a diligence consultant who would build a custom model for that project and really kind of go through a rigorous and project specific process. And what we're trying to do with Odyssey is say, you know, you can't afford to do that if you're trying to diligence a hundred projects at once, right?

And you need to diligence a hundred projects at once if you're trying to move a lot of capital into the sector quickly. And so what we've done is say, you know, what the unit economics of these projects are not fundamentally different. We think that we can basically standardize the process for assessing the opportunity of a project and the way to model out the unit economics of those projects.

And we can do that in a format that can kind of cover lots of different types of projects across different geographies and different technologies. And so it's still an evolving process and it takes a lot of innovative thinking to do something differently than, kind of, the way that investment has happened in adjacent sectors over many years. But we really think it's critical to be able to move money at scale. We feel that standardization is going to be essential to enabling investment in the sector at scale.

Eitan: I would also add that what I think is important to highlight is that what we're doing is standardizing the process of evaluating these sites and then ultimately monitoring them. But in the evaluation stage, we're not standardizing, we're not saying, you know, each mini grid is going to have this many customers with this many kilowatt hours.

We're actually allowing for very specific and granular assumptions to be made about each and every site. But because we're powered by software tools, we can standardize the way that they’re analyzed. And so ultimately, what you end up having is actually probably better analysis because frequently what happens now is that you'll have, you might have a consultant who's saying, trying to evaluate with the feasibility of a hundred sites for a country.

And what they do is they can't go build, you know, a hundred different financial models for each one of these sites. And so they're going to make some best estimates. And they're gonna say on average, you know, each site is going to look like this. But actually, if you have good software and what we're providing, then you can have a hundred different sets of assumptions that actually match each site because we've taken survey data, let's say from each and every site, but because analyzing them through software, we can in more efficient way, get to results that are standardized and easy to evaluate. But B they're more specific to each and every site. I think that's part of the benefits as well.

Distributing Solar: I'll be curious to understand how much of it is facilitating that analytical process and how much of it is leveraging historical data and historical information that has been collected in the past that helps you better produce a model that's able to predict future financial cash flows, or financial information from the site.

Is it purely a question of fine tuning and adding additional resolution to the models that you can create? Or is it also about, leveraging, as you say, the big data that you have access to and the historical information that's available.

Eitan: So, first I want to point out that it's important to point out that we don't own the data that developers or governments or financiers put into our software. And so we can't necessarily be using that data, in ways, uh, you know, we can't be like publishing benchmarks or anything without consent from our users.

So that's that's first. But I do think what you're hitting on is correct that what we're trying to do by putting all of the data from the lifecycle in one place is allow people to learn over time and get better in how we evaluate these sites. And so if you have, your feasibility study, if you have your financial projections in the same database as your actual results, then you can learn as you go and you can.

And then you can fine tune your assumptions because, ultimately, we don't really know the answers to what will energy growth look like in year three or four or five or 10 when a mini grid arrives in a community. People have guesses, but we don't really have hard answers powered by data. And so that's what we're trying to provide to people, to ultimately, make better decisions and deploy capital more efficiently.

Emily: one of the reasons why we originally built the Odyssey platform was my co founder and I were mini grid project developers ourselves, and we were spending a lot of time talking to investors, trying to get them to invest in a large portfolio of mini grids in India and Tanzania.

And the response that we kept getting from investors was, well, there isn't enough data in the market for me to benchmark anything that you're telling me. So we we'd build these models, we'd say, okay, we expect our average revenue per user to be X or, you know, the average cost per connection to be Y and the investors would tell us, you know, there, there's just not enough data out there for us to evaluate whether or not these are reasonable assumptions.

So fundamentally, what we thought is, hey, can we standardize the way that these metrics are collected and reported so that we can get that information into the sector and increase investor confidence from the data. So one of our partners on the Odyssey platform is the African Mini Grid Developers Association and what's really exciting about the way that we're working with them is we intake data from all of their members who are reporting on all of those metrics that investors care about. You know, key cost and sort of financial parameters and scale parameters and we're standardizing on that in the platform and then enabling AMDA through data agreements with their members to publish that into the market.

And, actually, their benchmarking report just came out which is super exciting and it's the first time the market has had really comprehensive data on various parameters of nearly every mini grid that's operating in Africa. And that type of information that comes from a centralized place in a standardized is going to be absolutely critical for moving the market forward because it gives investors something to benchmark when they're receiving investment materials from new projects.

Distributing Solar: That's great. I think that's a really helpful context to think about. And, building on from that and some of your comments about the challenge of innovation, what do you see as the next steps and the next goal for Odyssey? What are you building towards and what are your aspirations for the next, say, two to five years. And, similarly, what are the challenges that you're facing at the moment?

Emily: Yeah, lots of things in our plans. So one thing that just to kind of tie what we were just talking about, to tie that in, I really believe that there's a ton of opportunity for machine learning. Now that we've kind of completed the loop in terms of the data from project origination through operations.

So we're really excited about the possibilities of having enough data in the platform that we can start to train our system to understand, okay, here's what we forecasted about this site. And then here's how the site is operating. Can we get better at improving our models for forecasting and get more accurate about our predictions for a site.

And of course, that's going to be the most important for facilitating investment into the sector if we can say, hey, our models are getting really good at saying, this is how people in this we'll use power. This is the size system that we know we need. And so these are the financial returns that we expect from this project.

So as we build up more data in the platform, there's a ton of opportunity for machine learning and that'll be a big thing that we focus on. And then the other thing that we're really focusing on is meeting all of the needs of asset owners in the market. And we say asset owners because it could be investors that are owning a portfolio of microgrids or it could be actual operators of microgrids that have investors, have special purpose vehicles (SPV) for their investments, and need to report to investors and need to do really good data analytics across lots of different systems.

So we see in more developed markets the need for asset management for investors across the board. I mean, it's a very common technology need. There's a number of software solutions. And our goal is to serve that market, for the mini grid in industry with the energy sector in Sub-saharan Africa.

We've got a number of anchor customers on the platform that are helping us understand what is unique to the mini grid sector and what is required for full investment asset management. And there's lots of new features and functionalities that we'll be building over the next few years to continue to meet those needs, especially as more and more of these types of users join our platform and start to scale their investments.

Distributing Solar: And one of the things that you just mentioned that I thought it was useful in trying to hel, mini grid developers actually understand how people will use power is, we hear a lot about how a lot of mini grid developers will initially start out by sizing their mini grids to say, you know, 40 kiloWatt hours, because they've conducted a survey and people think they will be watching the TV for five hours a day and running the fan, et cetera. But when it comes to actually using it on a longer term basis, there is a lot of interest at the beginning typically and people all willing to pay for it. But eventually, some of the cost constraints kick in, and perhaps it's also an issue about the novelty wearing off. Have you seen that reflected in the data that you've been collecting or have you had to program that into your models at all to reflect some of the behavioral elements behind the mini grid sizing and the financial opportunity?

Eitan: It's largely a mix, right? I mean we are seeing a lot of different results from different countries and different types of developers. I mean, I think that it is rather idiosyncratic, right? I mean, you have, some mini grids are more based in marketplaces and some are based in communities. Some you have developers who are doing demands stimulation interventions. And so therefore, hopefully they're seeing stronger results. And so, I think we do see a wide gamut, in that regard. We're not going to reflect that in our models per se, only because we're going to leave that up to the developer to put in their assumptions about the growth over the long term.

And then, you know, ultimately when we monitor sites we can see how the reality stacks up against projections. I mean, I think we are doing some interesting work. We're working with the CrossBoundary Innovation Lab which is out there to test different strategies in the sector and they're using Odyssey to test these different interventions or different types of appliances, or are least, in communities where there are many grids. And ultimately they're using Odyssey to track how these interventions affect demand. And so, we're hoping to be part of some of these solutions that help and is trying to really answer some of these hard questions.

Emily: Yeah, I mean, if I had a dream, it would be that, one day, our models are so good that they can say, okay, if X, Y, and Z is true in a community, your demand will be this many kilowatt hours per day and this is a size system you need. No one's there yet in the second. But our job as a data platform is to enable all the efforts to crunch the information that will eventually get us there. So, as Eitan mentioned, this work with the innovation lab is really exciting because we're processing something like a billion data points for them on consumption and payment data so that they can draw conclusions about what happens when you provide a loan for an appliance to a household. Or, some of the other things are prototyping. And the goal is that then they can draw conclusions about which business models make the most sense. And which variables play the biggest role in improving the unit economics of a mini grid.

Eitan: And I think also the other thing I'd say is that Emily mentioned machine learning but we're also just learning ourselves in that through our software we've run a few large scale feasibility studies for government entities in different countries in Africa, and that involves taking ground survey data. So asking people, what appliances do you have? How much would you be willing to spend? And then turning that into load projections andProjected energy consumption. And so, I think that we're getting better at translating the survey answers into actual projections.

Certainly machine learning down the line, but also just, we're getting better at that and I think the whole sector is as well.

Distributing Solar: Great So I think that's provided us with a great overview of what Odyssey does and what your product focus is. For you as a company, what is your business model? Are you looking to be a software provider for this platform, or, do you also have goals on the financing side as well? We'd love to hear more about that.

Emily: Our goal is to be the underlying software and technology for financing institutions. So we don't have plans to be one ourselves but rather to support any fund or facility that's putting money to work in the distributed energy sector.

Eitan: Originally we had the theory that we could have a financing marketplace for distributed energy projects. And so developers would design a portfolio of projects, standardize it, make it easy to understand and then publish it and raise capital through Odyssey.

I think what we realized pretty quickly thereafter is that the market wasn't quite there yet in terms of having enough volume of investors to make that a worthwhile approach. Instead what we uncovered from spending some time in the sector is that the market is being driven and the capital, the larger portion of the capital being invested is still driven by these government and donor programs.

And so, we shifted a bit instead of an open marketplace, kind of a, you know, like Airbnb type thing for mini grids, instead it's more of a we're providing a platform for large financial institutions or governments who are financing these projects to run their funds and their facilities through the portal.

So that's on the financing side and then there's a whole other aspect of the asset management and the asset monitoring once sites are operating, which is sometimes connected but at different revenue streams in a different business model approach.

Emily: Yeah, and the asset management piece was really built around the understanding or the realization that every financier's needs are going to be different in terms of the questions that they need to answer for their portfolio and the types of data that they need to collect across projects and across different operators.

And so what we really focus on is having a way to standardize the data model that's underlying all of the analytics so that we can essentially serve the data up and say, okay, you've got questions that you want answered, we're going to present very complex and high volume data to you in a way that you can actually work with it and get your questions answered.

So those questions look very different for a user of our platform, like the Rural Electrification Agency or the World Bank who want to know, let's say, how many connections have been electrified or what's the greenhouse gas impact of our financing program versus a commercial investor that might need to know something more like what's the average revenue per user of my investments in this Northern region of Tanzania or compare that to Nigeria or whatever the kind of investment analysis they need to do are.

And so we're starting to recognize that, while the questions are always different, the kind of underlying technology and data needs are the same. And we can meet a lot of those needs with our asset management platform.

Distributing Solar: And how have you seen the market evolve in the past few years? I guess it's an incredibly fast moving market. It seems as though every year there's records being hit with regards to investments or commitments from the World Bank and so on. Has that impacted your business and what has been your observations in working in the sector over the last few years?

Emily: So one of the biggest market developments that's impacted our business and the sector as a whole is the emergence of results-based financing mechanisms to provide subsidies to mini grids and solar home systems. You know, when I first started working in the sector, everyone was afraid to talk about the fact that many of these projects require a subsidy to be economically viable, even though in, developed countries when we embarked on our, you know, let's say our rural electrification plans here in the US, it was all heavily subsidized.

That framework has now shifted in the market and there's a growing acceptance and understanding that subsidies are an inherent part of rural electrification and if you get them right and if you make them very systematic, it becomes much easier to get the other types of capital into the market that are required for scale. And so we've, over the past few years, have been working on an initiative that's now being led by the Sustainable Energy For All called the Universal Energy Facility.

And the the principles behind it are, if you have a facility that's very streamlined, and has a very clear systematic per-connection subsidy for a mini grid project or for a solar home system project, that's something that commercial investors can then rely on and they can come in alongside that systematic subsidy and provide the commercial capital necessary to get the project off the ground.

And this was a pretty new and radical concept a few years ago. And now it's one that's being widely accepted across the market and we're seeing more and more governments and development, finance institutions, institutions, and donors realize the benefits of a more streamlined RBF. And what was exciting about that for us is our software really helps to speed up the process of facilitating this type of funding.

Cause you can imagine that if you're trying to issue funds on a per-connection basis, that is a lot of data to process, right? You've got like tens of hundreds of thousands of kids, actions being submitted and you've got information about each of those connections that you need to review. You need to be certain that it's a live connection before you disperse funding based on it.

And we really built a lot of technology in our platform to make that process very straight forward, both for the company that's looking for the financing and then also the facility that's running the results based financing facility. And with the introduction of smart meters into the market, we're able to actually reduce the burden of verifying a live connection.

So we can actually plug into a smart meter, run an algorithm on the data that's coming from that smart meter to determine whether or not it's a valid live connection and basically put a stamp of approval on a connection in order for a financier to feel comfortable paying out that connection on a results based basis.

Distributing Solar: That's great. So you're also providing the investors and I guess the donors with evidence of the connection actually existing and just taking the mini grid developers word for it, or having to go on the ground and validate that data. What are your general thoughts and perspectives on the importance of results-based financing? It certainly seems to have a lot of, Strong supporters I would say within the energy space would be really curious to hear what your perspectives on it are.

Emily: There's two things that I really like about results-based financing. One is that it directly ties capital to results. And so I think it's one of the most efficient ways to put concessionary finance to work. So just to give you an example, we're running a large results based financing program right now for mini grids and solar home systems in Nigeria.

And the World Bank, and it's part of the Nigeria Rural Electrification Agency, they can log into our platform and see directly how many connections their money has gone to fund. And so you can get some really great statistics on whether or not the capital that you've allocated for a financing program is going to the intended results. And they can see it, you know, how many of the connections are households versus businesses? How many households are the head of the house was a woman. I mean, all types of metrics that they care about, they can actually directly tie to their financing, which is something that's pretty hard to do for other types of financing programs.

And then the other thing is, I mentioned this earlier, but the other reason why I think results based financing makes so much sense is that it's very systematic. It's something that a company and then it's commercial investors can rely on. They can say, okay, if you go execute, you will get this subsidy in the same way that, you know, other countries had things like feed in tariffs.

Whereas it was a form of subsidy that could be built into the financial model so that commercial investors know what their returns will be, taking into account the subsidy, which of course improves the unit economics of the project and makes it easier to invest in these projects.

Eitan: Yeah, I would just add that I think to a certain extent it's an elegantly designed thing because you're allowing the private sector to sort of do its thing to a certain degree without the government deciding from a top down perspective what are the best sites. You're actually allowing the people who will be owning the assets and managing the assets, if you're building your RBF and sort of this open call model, like in Nigeria, they're the ones who are finding sites, and submitting them for RBF. And like Emily said, they're only getting grants or concessionary finance once they build the sites.

And I think, you know, if you look at the actual results so far in Nigeria, it's very encouraging that these RBF programs are seeing results way faster than what we've seen in the sector before. And I think that's in large part due to this RBF structure and the fact that, as you were mentioning before, through Odyssey it does allow for running these programs at a much bigger scale.

Distributing Solar: How do you see the market, especially for mini grids evolving, and it would be great to hear your thoughts on this. Certainly, I think the need for subsidies is really paramount, as you've already mentioned Emily, and we've heard that from a number of guests as well, because recognizing that subsidies are required to reach in particular last mile customers or particularly remote communities or particularly low income communities as well.

How do you see the market evolving? Do you think it will continue to be driven by a mixture of government funding, multilateral institutional funding, for instance, or impact investors and philanthropy? Have you seen kind of shifts with regards to the market dynamics and how do you think it will evolve in the next five to 10 years?

Eitan:I think, and again, going back to Nigeria, because it is sort of the most ambitious program in the World Bank's NEP program, you know, part of their theory was we're going to have these grants, these concessionary finance, and that will bring in private capital because it will lower the risk.

And that was the theory. I think it was a real question at the beginning whether or not that would actually. And I think that what's exciting is that we're actually seeing that activity on our platform now where the local commercial banks are coming in and they're saying, all right, these projects are getting built, are getting financed. The grants are happening. This is sort of working as designed. We're ready to start looking at this in a serious way, right. We're ready to allocate resources to understand the sector, which is a big step for these banks which are rather risk averse.

And so I do think that this model is proving to be effective and that the combination of concessionary finance from multilateral Institute and local commercial capital can be the path forward for the sector.

Emily: I think the other trends that we are starting to see, and we'll see more of over the coming years, is availability of project finance. So, in the early days of the mini grid sector, the only available finance for mini grid developers was corporate level, basically mostly corporate level equity, right?

Like there were impact investment firms that were willing to fund the company, they would build projects on their balance sheet. And that's obviously a pretty inefficient way to do project development because then you've got the money tied up in those projects for a long period of time. And I think with CrossBoundary leading the way and the other investors following suit, we'll see more project finance available, either in the form of project equity or project debt, which will enable much faster development and, therefore, significant scale in project development.

Distributing Solar: Great, so it seems as though you are seeing also the effectiveness of commercial capital being crowded into either grant funding or philanthropic funding as well. So that's great to hear.

Perfect. I'd like to hear and discuss the impact of COVID-19. It seems as though suddenly, from publications and news reports and articles that you've produced, Odyssey has been doing quite a lot of work within the COVID-19 and coronavirus response, and particularly in partnerships with Rockefeller Foundation and Shell Foundation in recent months.

We'd love to hear more about the work that Odyssey has been doing in the sector and what your focus has been so far.

Emily: Sure we have been doing a lot of different things related to COVID-19 and thinking about its impact on the African countries where we work. So, one thing we've been doing is we've partnered with the CrossBoundary innovation lab to analyze the impact of COVID-19 on consumer behavior of mini grid customers.

So we've been publishing a monthly update with CrossBoundary pulling together all of the data from operating projects on the ground to say, are we seeing things like a drop in consumption or a drop in revenues from mini grids due to COVID-19? And it's actually been really interesting because we'd expected a much more dramatic impact on mini grid operations.

And we've seen it's sort of been a bit of a mix but we're continuing to watch really closely and engage with what the data is telling us about how COVID is impacting mini grid power consumption and payments. The other big piece of work that we've embarked on is supporting efforts to electrify health facilities. So I think this is something that has been a topic for a long time, but has certainly been highlighted with the COVID crisis is that there are many many rural hospitals and clinics and even peri-urban hospitals and clinics that do not have access to reliable power.

And it is impossible to provide high quality healthcare if you can't do things like refrigerate medicines or vaccines or run ventilators. And so, we partnered with the Rockefeller Foundation and the Shell Foundation to provide our software technologies in support of donor programs that are being launched to accelerate electrification of health facilities. And so those resources look like using our data platform to identify and prioritize health facilities that need distributed energy projects deployed onsite. And then to manage the kind of rollout of large scale health electrification programs.

And one of the key reasons why we structured our work with the Rockefeller and Shell Foundations in the way that we did is that, you know, in moments of crisis, it's easy to kind of say, okay, we've just got to deploy lots of energy projects. We need to get them out there quickly and let's just focus on kind of the emergency response. But these are long term assets that are going to be operating for a decade and so, you know, a lot of thought also needs to be put into how do we make sure that these are sustainable projects that even when the CVOID crisis is over, these hospitals have access to reliable power and have the right agreements in place for The project operators to continue to maintain and operate the system.

And our software enables tracking projects over the lifetime of a project and even plugging into that system and making sure that it's continually providing reliable power over the lifetime of the of the project. And so we've partnered with a number of governments and donor institutions and development finance institutions to deploy this technology and give them the resources they need to think about the long term sustainability of these health electrification programs that they're initiating.

Distributing Solar: Great, thank you. And I'd love to discuss more about both of your personal backgrounds and your route to working both in the off grid space and Emily for you as well, and, starting Odyssey as a company.

Eitan: Yeah, so my background is in financing renewable energy. So early in my career, I was working in venture capital, private equity, focused on renewable energy and clean tech. And then, after doing a year working at mobile payments software focused on emerging markets, I did, graduate studies, an MBA and a master's of environmental studies and that's where I really spend time focusing on renewable energy finance.

And from there went to Lumos Global, a solar home system provider with operations in Nigeria and Ivory Coast. And so that was my first experience in the off grid space where I, you know, directed business development and I was in charge of our asset financing strategy and how we wanted to go about, you know, much like we were talking before, is turning this from a corporate equity financing to an asset back project finance type financing. So I worked there for a few years before very happily joining Odyssey a couple of years ago.

Distributing Solar: Great, and how about you Emily? How did you come to start Odyssey? And what was the path for you like?

Emily: Yeah. So I got into the energy access sector about a decade ago. I had a Fulbright fellowship to study off grid solar in India. What's pretty amazing is like, looking back in, let's say around 2010, the question was how our company is going to convince rural communities that, you know, small solar lanterns made sense.

And if you go into any rural community in India today, it's like a no brainer. You see solar lights everywhere. I've seen the sector change so dramatically over the past decade. But I definitely never expected to start a company in the space.

I kind of call myself a reluctant entrepreneur. I was never someone that thought I would be an entrepreneur. But Odyssey really came out of my experience. My cofounder and I built a mini grid development business that was a subsidiary of a large renewable energy company based in the US.

And so we were developing projects in India and Tanzania and we saw the market emerging, kind of, went through a lot of the challenges of trying to develop and finance mini grid projects ourselves, and felt like there were some things that we could build for the sector that would streamline the process quite a bit.

And so, in some ways, we sort of fell into building Odyssey cause we felt like the sector needed it and then, obviously, as the market has kind of changed and matured over the past three and a half years, our product and our business has as well.

Distributing Solar: And I'd love to hear a bit more about that process of building the company. What were the most difficult things that you had to deal with? What were the biggest challenges for you as you built the company? And were there any significant changes in direction or strategy that you had to deploy?

Emily: Yeah. One of the biggest challenges in the early days of envisioning Odyssey was that we were building a solution for the direction that we expected the market to go, right? So the mini grid market is still nascent. And it was quite nascent, three and a half, four years ago when we were starting to kind of envision Odyssey, but we knew that it was going to scale and we wanted it to be part of the solution that helped at scale.

So unlike, let's say an eCommerce company, right. Where it's like, okay, I know that there's a market of consumers out there and I just need to build the right product to sell to them, we were building the product that would allow those customers to be there. And so our platform is intended to catalyze the market rather than serve an existing market.

And that's always been the challenge of Odyssey is, kind of, understanding where the market is going. Making sure that we're kind of building at the pace of the market and building what the market needs today but with an eye towards, where we want the market, where we expect the market to be in five to 10 years.

Distributing Solar: And as a result, have you had to change strategy? Has the pace of the market hasn't grown quite as quickly as you expected? What were the implications for how you had to go about running and building the business?

Emily: Yeah, I think Eitan mentioned our original plan was to develop a pipeline of projects, standardize those, aggregate them into a portfolio and put them into a marketplace where investors could, diligence them and invest. And the market clearly wasn't ready for that framework yet.

And, part of that was because the, so much of the capital that was being deployed into the market and is in today is continually being deployed into the market is concessionary financing from governments and donors and DFIs. And so I wouldn't say it was a pivot, but we certainly launched a new version of our product that was aimed at those types of financiers. And that was really essential for us because it enabled us to get lots of capital on our platform, lots of projects on our platform and then start to see projects getting financed and moved.

And in terms of scale, I wouldn't say that the market is scaling slower than we expected. I think it's scaling pretty much at the pace that we expected and we've been kind of following that scale. So our newest, our newest products are really oriented around companies, either commercial investors or asset owners, who are starting to see the type of scale required to have asset manage technologies.

And we've launched that product with the leaders in the space. And then we're sort of expecting that we'll start to see more companies that look like those leaders as the market as a whole starts to scale

And so we are very much building what we think the market will need over the next five to 10 years. And it's fun because it allows us to build according to our vision and our dream of where we want the sector to be. But it's also often a challenge too, as one of my mentors said to me that, you know, being early in a market often feels a lot like being wrong.

And I think that that's something that we think about a lot, like, how confident are we that we're building what the market needs? How confident are we that the market is going to go in the direction that we expect, that we will start seeing solar mini grids be the primary way that unelectrified communities are electrified over the coming years.

You have to have a lot of optimism to work in the sector and in a lot of faith that the sector is going to go in the way that we want it to go.

Eitan: I think from that, the flip side is there’s a level of excitement there, right? Because we, as Emily was saying, A) we have the ability to kind of co-develop our products along with the market. And 2), you know, it kind of forces us to be flexible and listen to the market a lot because we have our ideas and we consider ourselves a leader in the sector and we have opinions about where things should go, but we also have to do a lot of listening.

And so I think that lets us be part of the conversations we're reflecting in our software where we're sort of the go-between between different stakeholders.

Emily: Yeah, I think that like early days of the Nigeria Electrification Project is a good case study of this because it's not like they necessarily knew at the outset of this project that they needed software to manage NEP. Like now it seems very obvious that if you're managing a project of that scale, you would need technologies to help you streamline it.

But the origins of us getting involved in NEP is that I was presented being at a small workshop. And this was back in the days when we still had this kind of more marketplace concept to Odyssey. And one of the World Bank folks who was working on NEP saw what we'd built and said, Oh my gosh, this is exactly what we need for Nigeria, we're about to launch the largest rural electrification program in history. There's going to be so many dimensions to it. So much data. We need something to manage that all and nothing really existed. Right?

And so we were able to kind of repurpose and adapt and customize and build our platform in lockstep with NEP as it was launching so that, you know, by the time that it got off the ground, we had the right solution in place to support that project. And then obviously our goal is that we're going to see lots more of these really large scale financing projects come online in the next few years.

But it's definitely been a very iterative process. It wasn't totally clear exactly what the market was going to need. And we started building and we kept building and we kept building until I feel like we're in a really good spot and have built what the market needs where it is today.

Distributing Solar: Yeah, absolutely. And so my day job is a VC and I work in the energy space as well. And I think that is exactly one of the challenges that we think about. Are we right to make that investment and that bet on the company, or are we either just too early or totally wrong and that's not what the customer wants as well.

And I guess related to that, if I understand correctly, I think Odyssey is at least partially VC backed. We'd love to hear about your fundraising process. Have you had it be a challenge to bring investors on for other people to see the vision that you have and to get other people and investors excited about your company.

Emily: We have incredible funding partners. We're very lucky for that. Odyssey was, sort of, co- built, with Factor[E] Ventures, which is a venture firm that's based here in Colorado, and is actually the reason why Odyssey is also in Colorado. I was an entrepreneur in residence with Factor[E] for about four to five months as we were coming up with the concept of Odyssey and thinking really hard about, you know, what we thought the sector needed to scale.

And then once we'd gotten it to a place where we'd workshopped enough with key financiers in the sector, key stakeholders in the sector, we spun it out into its own business and then took it from there. So Factor[E] is both a kind of co-founder and our seed investor.

And then since then our partner has been the Shell Foundation who supports for profit or commercial companies in hard markets like the energy access market. And they've just been an incredible partner to us because they very much see the market in the same way that we do, understand those challenges, but also understand, kind of, the enormous opportunities there are to build technologies and products to help it scale.

Distributing Solar: That's great. And we've spoken a bit about Nigeria already, but I'm curious to hear which projects have you most enjoyed working on, which countries are you the most excited about for the growth of either the mini grid or off grid energy solutions in the future?

Emily: We obviously love working in Nigeria. We have a great partnership with the Nigeria Rural Electrification Agency. They are doing incredible, incredible things. And they're just sort of like a very smart, motivated group of people that have had a vision that we've gotten to help carry forward from the very early days to operations which is where we are now. That said, if you'd asked me a year ago, I probably would have been hard pressed to name other countries that I thought would follow suit. And I would say even in the past year, we've seen so many other countries start to plan really ambitious programs for solar mini grids and solar home systems.

I mean, we're seeing activity in many West African countries, in Southern African countries like Zambia. The DRC is starting to see quite a lot of mini grid development and mini grid planning. And so it really does sort of feel like at the time that Nigeria led the way but a lot of other countries are starting to plan for large-scale programs that will meet the rural electrification needs through mini grids and distributed energy.

Eitan: Yeah, I would say that that's ultimately the one of the most exciting things about the scale of the Nigeria program is it is really proving to all these other countries that this is a viable model. And I think that off-grid energy is now consistently part of these national electrification plans, which I think even when, you know, five years ago when I started the sector, that was a debate, right?

Whether or not you could even think about mini grids as a viable national strategy. And now that's not the case, right? It's very clear that it is the most efficient way to bring electricity to a large percent of the population. That's now, I think, is taken as a given then. And now with the NEP in Nigeria being so successful, you can now say that there is the ability to do it at scale.

And that hopefully we're moving to a place, and we're seeing that, where it's not just, you know, a dozen small programs where, you know, this donor is financing for mini grids here and some there, there isn't really a coherent plan. I think seeing it done at scale is what we're hoping to see or already starting to see, but I think we'll really see in the next, three to five years.

Distributing Solar: Great. And how have you thought about your team? You're headquartered in Colorado in the U S, but obviously service countries all around the world, primarily in Sub-Saharan Africa, but also other areas as well. How have you thought about your team and how have you structured your team to support your customers in the best way possible?

Emily: We've been really conscious about building a quite diverse team. I think it's, you know, it's certainly a challenge starting a company based in Colorado, that's focused on Sub-Saharan Africa and, over the years, as we built out Odyssey, we've really focused on that, how we can bring different skill sets and then also different experiences to our team.

So to give you an example, our Vice President of engineering, so our teammate who built the whole architecture of our platform, is based here in Boulder with us but grew up in Tanzania and spent many years of his childhood without access to electricity. And so it's been a really exciting process for us to allow him to kind of go crazy and have great ideas about what product we want to build, but do so in a way that's anchored on the fundamental problem that we're trying to solve.

Like, he understands it better than anybody why we're doing this work and why it is so important that our technology plays a role in scaling mini grids. And since then we've actually been working on building our team in Africa because, well, so we've got data scientists that are based in Rwanda. We have one of our key business development managers based in Nigeria. And it's been a really fun process learning to work as a team across many different time zones, across different cultures and geographies and skill sets. And, you know, it's something that we're, always evolving on and improving on.

Distributing Solar: Great. One question I always really like to ask is where did your company's name come from? And why Odyssey?

Emily: So, Factor[E] Ventures, as I mentioned, is our seed investor and it was actually Morgan DeFoort idea. He's the head of Factor[E]. And it came from our relationship with Homer which is a microgrid optimization software. We plug into them where we kind of sit on top of them as a web based version of Homer.

And so we thought it'd be a fun plan to have Odyssey and Homer.

Distributing Solar: Great. And what advice would you give to someone who is looking to join the energy as a sector

Eitan: Yeah, I think on advice on people looking to get into this sector, certainly anybody's trying to start a company and the sector I think is, the same advice is true for almost any business, which is knowing your end user. I think that, probably more so in our sector than many others, there's a lot of assumptions about the end user and people from far away places who are assuming that, you know, electricity might do this or might do that in a rural village. I think that having a humility about your assumptions is really important in our sector.

Emily: You know, folks are often intimidated. I talked to a lot of younger folks that are interested in getting into the energy access sector, but it's intimidating because it's, you know, if you live in the US it's a far away market, or, you know, it's a market that's constantly changing and it's hard to map.

And I think Eitan and I both wrote our graduate school essays on wanting to go work in a startup in the energy access space after graduate school. And that's obviously what we both did. And you know, if I have any advice, it's just go do it. I mean, I've learned so so much working in the sector. I don't think I could have learned as much in any other job that I could have done in my career. And, it just comes from, you know, on the ground experience and just trying something that's doing lots of new things.

Eitan: Yeah. And I, I think also the market is so big. And, I think there is a sense of there are a couple of business models that have been tried and then had been copied a bunch of times, but I still feel as though we're very early in the business model innovation in the energy access space

Distributing Solar: Great. So, to close up the conversation, I always like to ask our guests, what are your predictions for the off grid solar sector for the next five years?

Eitan: I think over the next five years, we're gonna see a lot more scale. We're gonna see a lot more capital deployed. I think it will still be led, even in five years time, I think it will still will be led by some of these multilateral and government programs, although with more and more commercial capital coming in. And I think there will be more business model innovation in the sense that, we're already starting to see, desegregation between, the developer of the mini grid doesn't have to be the same company that's doing the O&M and that might not be the same as doing customer management.

And so I think, perhaps the disintegration of that whole business, where you could have companies who specialize in certain aspects of distributed energy could be interesting. And then I think also related to that, there's probably, a lot of, blending the lines between solar home systems, commercial/industrial projects and mini grids, which are frequently treated as like three different buckets. And I think that there probably will be more and more companies who are blurring those lines.

Distributing Solar: And I guess to that last point, which is something I've heard from a number of companies as well and I find really interesting, do you think it will be that the companies working on these projects will start to provide different product offerings because they need to diversify their customer base or products that they're offering?

Or do you think it comes more from the side of, you're building various types of infrastructure and at some point you want some kind of interconnection and integration between those different units?

Eitan: I think it's, actually more that getting a sense of what your core skill set is and that it may be that if it is in selling electricity and managing customers relationship then it may not make a big difference in the infrastructure behind it. Or on the flip side, if your, specialty really is

raising capital and developing projects, then those skill sets might apply in any event, whether that's a C&I project or a mini grid. And so, I think it's a bit tied towards the disintegration I was mentioning before where, you know, if you're taking only a certain phase of the project development life cycle, then it may not matter what the underlying asset is as much.

Distributing Solar: That makes sense. So you're catering more towards your specific strengths or new skill sets and the technology doesn't matter too much as a result.

Emily: Yeah. I mean, I think to build on that, and I mentioned this earlier, I think we'll start to see more types of project finance vehicles that look like other sectors, and the type of infrastructure financing that has happened in either the other energy sectors or either, more broadly, just other infrastructure sectors.

So we'll see the market maturing in the type of capital that project developers can access. And then I think we'll see many grids and lots more countries. As we mentioned earlier, we're just starting to see lots and lots of new countries in the planning process for how to scale mini grids and I'm really excited to see a lot of those programs come to fruition in the next five years.

Distributing Solar: Great. Fantastic. Well, thank you, Emily. And thank you, Eitan, for joining us on Distributing Solar. It's been a pleasure to have you here and thanks for your time.

Emily and Eitan: Yeah, absolutely. Thanks so much for having us.

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