by Seth Silverman and Morgan DeFoort, Factor[e] Ventures

Smallholder farmers are among the most underserved populations in the world – and there are a lot of them. Over 2 billion livelihoods are supported by small farms, with the majority residing in the developing world [1]. We know that smallholders can be more productive and can drive sustainable rural economic growth. Energy has the potential to unlock agriculture’s substantial potential to drive development; studies now show us that growth in agriculture is 2-3 times more effective at poverty reduction over growth in other sectors [2], yet smallholder farmers are also the population least likely to have access to modern energy services, which prevents this potential from being realized.

So why isn’t the opportunity for transformative rural development at the intersection of agriculture and energy being seized? There are a series of practical, finance, operational, technical, and policy challenges that explain why this cross-sectoral opportunity isn’t yet being realized. Chief among those are:

• Agricultural value chains are complex. They require comprehensive, systems-oriented, and interdisciplinary, cross-sectoral approaches. Unlike in other fields attracting social entrepreneurs, agriculture won’t be “solved” by singular apps, platforms, or products. Standalone solutions are not enough without the infrastructure to deliver, finance, and power those solutions.
  
• Many agriculture energy needs are not naturally suited for renewable or distributed energy.  The lowest cost power in most of Africa is solar.  However, many agricultural applications require relatively large amounts of power at relatively infrequent or even seasonal intervals. Irrigation is a great example: flood irrigated crops may require a large amount of water to be moved just a few times per growing season. Of course, there are approaches to adapting technologies to distributed, renewable contexts. Shifting to drip irrigation, for example, makes the energy requirement lower and more regular and can align it with when solar energy is available. As a further result, massive water storage is not required . To extend the example, however, shifting to drip irrigation requires additional hardware (which also requires financing), new farming practices (including irrigation itself as many smallholders do not have access to irrigation), and, in most cases, crop switching and attendant behavior change. These challenges generally prevent solutions from scaling rapidly or even being demonstrated.
• Solutions need to be agriculture led. While we often talk about the “nexus” of energy and agriculture, the energy side of the equation is in many ways simpler (not simple, but simpler).  Energy, whether electrical, thermal, or mechanical, is more or less a commodity. Agricultural applications are generally much more nuanced and diverse. Agricultural processing is often seasonal, requiring physical assets to be moved or managed in order to be fully and effectively utilized. Crops in one region may have different uses or processes than others. There is a wide variety of agricultural outputs and inputs. Importantly, references to agricultural development opportunities generally refer to smallholder farmers, which can limit the scope of solutions to primary producers. However, small and growing agribusinesses are often the best partners for making productive use of energy and converting the potential of energy resources into impact for rural development. We cannot turn away from agribusinesses as key partners in realizing the opportunity at the agriculture energy nexus.
• Support and investment is too often siloed. Supporters of the sector – whether private, public, or philanthropic – often organize around energy OR agriculture. Each sector has its priorities, actors, experts, and even language. This divide can even result in turf or resource battles internally, leaving the agriculture energy opportunities orphaned when an opportunity isn’t clearly just energy or just agriculture.

While these points help explain why agriculture energy opportunities aren’t yet being realized at scale, they are not reasons to leave so much impact and value on the table. With the right resources, all of these challenges are surmountable. And, given the powerful synergies that are possible, they are well worth overcoming in a targeted way. In a recent example from our portfolio, InspiraFarms has rolled out super-efficient off-grid cold storage units in partnership with the Rwandan government. These units use 70% less energy than traditional systems, have thermal backup capacity, and are expected to benefit as many as 100,000 rural smallholder farmers as they seek to become connected to larger markets.

Only through increased collaboration can  new solutions be identified and introduced and used jumpstart exciting ventures and innovations in the agriculture energy nexus. Breaking down the barriers between those working, investing, and developing the agriculture and energy sectors is a critical first step. We recently convened a group of stakeholders for a 3-day workshop to outline an international agriculture-energy agenda focused on sub-Saharan Africa. In addition to continuing our work directly investing in innovative enterprises that capture this opportunity, we must all continue cultivating this growing community of practice. Over the next year, we will work with our new partners to develop  demonstration projects that manifest the positive relationship between agriculture and energy to drive rural development on the continent. We look forward to growing this community of practice and to seeing more innovators inspired by the opportunity and taking up the challenge.

[1] D. Sumba, “Africa Agriculture Status Report 2017: The Business of Smallholder Agriculture in Sub-Saharan Africa,” Alliance for a Green Revolution in Africa, 2017.
[2] “The (evolving) role of agriculture in poverty reduction – An empirical perspective” by L Christiaensen, L Demery and Jesper Kuhlc. Journal of Development Economics, Volume 96, Issue 2, November 2011, Pages 239-254

This article was originally published by Power for All