A partnership between four students of the Stanford Ford Dorsey Master’s in International Policy (MIP) program and the U.S. National Renewable Energy Laboratory (NREL) under the auspices of the U.S. Department of Energy has culminated in a long-awaited and direly needed coalition to help micro, small and medium sized businesses (MIPyMEs) in the Yucatan Peninsula, Mexico.
With the support of Blas L. Pérez Henríquez of Stanford’s Mexico Clean Economy 2050 and MIP faculty and administration, the graduating students hosted a widely attended and highly commended co-creation workshop that brought together almost 50 government officials, universities and research centers, funders and development banks as well as community leaders and business associations over the course of two days.
Committed to Solutions
Every year, graduating students of the MIP program, part of Stanford’s Freeman Spogli Institute for International Studies (FSI), are assigned a real policy problem with an external partner to apply their two-year learning experience and produce innovative solutions. The experience is part of the Capstone Practicum of the Policy Change Studio taught by professors Francis Fukuyama and Jeremy Weinstein.
When Angela Ortega Pastor, Hallie Lucas, Samantha Lee and Serage Amatory were assigned NREL as their partner, they were tasked to address the “lack of access to reliable, inexpensive, and clean energy for microbusinesses in the Yucatan Peninsula.” At that point their work could have either become a successful completion of a graduation requirement or been taken beyond the limits of the classroom and turned into a real, sustainable and concrete solution. Samantha Lee confirms that her team has opted for the latter. “As a team, we had decided right from the start that we wanted this project to have real impact on real people,” said Lee. “That goal drove us to reach out to more stakeholders on the ground and be more thoughtful about the solutions we were developing, which eventually culminated in this co-creation workshop.”
The team organized their two-day workshop around key themes of problem identification, solution development and implementation. They concluded that access to affordable finance remains the ultimate obstacle for businesses in the Yucatán Peninsula who seek to invest in energy efficiency and clean generation upgrades.
Team member Hallie Lucas further contextualized the problem: “MIPyMEs in the Yucatan pay the second highest electricity tariff in Mexico, so there is significant potential for energy cost-savings on both the generation and demand side…However, the upfront capital needed to finance these systems is cost-prohibitive for many MIPyMEs that operate in the informal economy and are assessed a high risk premium by formal lending institutions.”
From their extensive work, research, and conversations with vital stakeholders over the past six months, the team engendered three critical action points to address the barriers to clean energy investments:
- access to finance
- cost of finance
- financial and technical literacy.
Team member Angela Ortega Pastor expressed her pride in “the level of enthusiasm and commitment from participants.’’ She said that the team “could not have pulled it together without the guidance and feedback of all partners — especially FSI who provided great insights into how to host a successful zoom conference and allowed us to have live interpretation, which was a serious game changer and took our event to the next level.”
In light of the pandemic restrictions, costs of the workshop were covered by MIP in lieu of the usual funding dedicated for a field trip.
Defining the Action Plan
Following the April MIPyMEs Verdes co-creation workshop series, the Stanford-NREL team remains determined to work alongside local partners to address each of the three key barriers in turn. The team has proposed a solution that leverages payment of month-to-month electricity bills as an alternative measure of credit and establishes a community revolving fund to help MIPyMEs build or improve their formal credit history through microloan energy efficiency investments.
The team has recommended a pilot phase in the form of a social impact lab, implemented by partners in local government and academia to test this theory of change. Additionally, the team sees significant potential for a fintech solution in the form of an online platform that integrates publicly available financial data and utility payments to automate alternative credit-ratings and provide recommendations on suitable financing schemes. By using simple user-input metrics and decreasing informational asymmetries between lenders and borrowers, such a platform could help more MIPyMEs gain access to the affordable financing they need.
Putting Community First
From the outset, the Stanford team has sought to center community agency and leadership and to maximize social and environmental co-benefits of energy cost savings wherever possible. Serage Amatory affirmed his team’s vehement belief in the importance of meticulously considering the social impact of the program, stating that “any intervention that fails to consider the well-being of the community, the environment and the end-users will be rendered incomplete and probably counter-productive.” He proceeded to explain that besides aspiring to create a scalable model of a clean economy, their project will empower micro, small and medium sized business owners and will promote access to credit for indigenous and women-business owners who face disproportionate barriers to doing so.
After the end of their Stanford journeys this June, Samantha Lee and Angela Ortega Pastor reiterate that “the team remains committed to our goals and looks forward to continuing our work with partners in the region.” Discussions with NREL, the Stanford Mexico Clean Economy 2050 and MIP are ongoing regarding taking this initiative forward.