In Search of Viable Business Models for Development: Sustainable Energy in Developing Countries

Purpose – Although the crucial role of business, and of business-based approaches, in development is increasingly emphasised by academics and practitioners, we lack insight into the ‘whether and how’ of viable business models, in environmental, social and economical terms. This article analyses private-sector involvement in development, including a business perspective of firm-level factors, taking the case of sustainable energy in developing countries.

Design/methodology/approach – In the framework of the international business and development debate, we examine the ‘state of the art’ on sustainable energy and business involvement, and present our own research on illustrative cases from local companies involved in renewable, off-grid rural electrification. Implications are discussed, viewed from the broader perspective of business models.

Findings – Existing studies on sustainable energy take macro-economic and/or policy-oriented approaches, containing specific case studies of rural electrification and/or recommended financing/delivery models. We categorize them on two dimensions (levels of subsidies and public/private involvement) and conclude that market-based models operating without subsidies do hardly exist in theory – and also not in practice, as our study shows that companies can at best have part of their portfolio non-subsidized based on customer segmentation or require socially-oriented investors/funders.

Research limitations/applications – This exploratory study can be a starting point for further in-depth analyses.

Practical implications – The article outlines challenges faced by companies/entrepreneurs when aiming for viable business models, and provides insights to policy-makers who want to further the role of business in sustainable (energy) development.

Societal implications – Sustainable energy and development are crucial and interlinked issues highly relevant to global society, as exemplified by the UN year of Sustainable Energy for All and Rio 20.

Originality/value – The article contributes new dimensions and perspectives that have been left unexplored, and that are crucial for reducing poverty and stimulating sustainable (energy) development.