Clean Energy Finance Forum

In regions of the developing world where electrical grids are weak or nonexistent, people often rely on kerosene. In a webinar on Sept. 16, staff from four pay-as-you-go solar companies described how they are building rural sales networks in Africa and India to replace kerosene lighting.

The webinar, “Pay as You Go: A Sunny Future?,” was offered by Clean Energy Solutions Center. It featured Simpa Networks, BBOXX, Mobisol GmBH, and Off-Grid Electric. All of these companies are members of the United Nations Energy Access Practitioner Network.

“We want to make an aspirational modern lifestyle accessible to everyone,” said Graham Smith, vice president of business development at Off-Grid Electric. “We have ambitious goals of lighting Africa within the decade.”

Rural solar benefits customers in off-grid regions of Africa immensely, the Mobisol GmBH website says. Having solar lighting at night improves safety, especially for women and children. Children are able to study for longer hours after dark. Buyers of solar power can also start a wide variety of home-based small businesses.

Kerosene, the typical fuel of choice for off-grid communities in developing nations, has many disadvantages when compared to solar power. Its light quality is poor. And kerosene lanterns pose multiple health risks due to fires and toxic smoke.

Although the initial purchase price of a kerosene lantern is low, kerosene use helps to trap families in a cycle of poverty. Over time, using kerosene is much more expensive than relying on solar power.

Access to solar energy can help families educate their children, start businesses, and break the cycle of poverty that goes with kerosene dependence.

“Indian culture is highly aspirational,” said Paul Needham, president and co-founder of Simpa Networks. “The ancient divisions of caste are being challenged. Education is highly valued. Our customers often highlight the value of having lighting and cooling for their children’s studies.”

Until relatively recently, remote regions of India and Africa did not have sales networks set up to offer solar power to local residents.

Leveraging Mobile Phones

The companies participating in this webinar are creating pioneering distribution networks relying on a now-ubiquitous technology – cell phones.

Even in off-grid regions or areas with intermittent power, cell phone service is often available and reliable.

All of these four companies are relying on cell phones to enable their customers to pay for solar power on an as-needed basis. In at least two cases, the customers own the solar systems at the end of a certain number of payments.

“There’s a small initial down payment for the device,” Needham said. “Once the customer has completed the contract, the whole system unlocks permanently, leaving them with energy free and clear.”

Simpa Networks has been able to do business in areas of India that have unreliable cell phone service by designing a technology workaround.

“We were selling in mountainous areas where we couldn’t rely on there being a good cell connection in the home,” Needham said. “As long as a customer has access to a mobile phone, they can receive our codes.”

Simpa Networks uses these downloadable codes to add credit to the solar systems.

Needham said Simpa Networks tries to keep the number of customers who have run out of money below 10 percent at any time.

“Customers pay for the services via their mobile phones and receive codes through SMS,” Smith said. “This eliminates a lot of the costs involved with retail markups. Households are charged a simple daily fee.”

“Our customers pay us via M-Pesa and our employees are paid through M-Pesa, which cuts down corruption,” said Klara Lindner, product and service developer at Mobisol GmBH.

Corruption hasn’t been much of an issue on the customer end of the business, either. Mansoor Hamayun, co-founder and CEO of BBOXX, said few customers tamper with his company’s devices or try to adjust their payment systems.

Customer buy-in helps to reduce tampering, Hamayun said. “We’re trying to demonstrate value for money. At the moment that perception drops across customers, this problem becomes very real.”

Knowing that the solar systems will belong to them eventually may increase customers’ support for BBOXX.

“In our model, the ownership is transferred to the customers,” Hamayun said. “Different players have different approaches to that.”

Facing Rural Challenges

“The key challenge for us to be able to reach a mass market is the physical access – our ability to reach end customers in rural areas,” Hamayun said. “Partnering with local distributors can be tricky at times. We have taken the approach of being able to create our own retail network.”

The other presenters said they agreed. Developing a distribution network is key to success in rural areas in Africa and India.

“We reach beyond the last mile,” Smith said.

“Our customers live in off-grid villages and bad-grid villages,” Needham said. “We focus on bad-grid villages that get less than 12 hours of power per day.”

Training local staff is also an important consideration. Mobisol GmBH has developed a training system to equip rural technicians in Africa with the skill set they need to be able to provide solar to local communities, Lindner said. “We came up with a plug-and-play version where one technician goes through the training and is able to hook up the system within one hour.”

Lindner calls the training system the ‘Mobisol Akademie.’ “We train people for different staff positions and provide them with a job guarantee once they’ve passed their courses.”

According to the Mobisol GmBH website, the company also prioritizes gender equity in employment in all of its sites in Africa and Europe.

To reach isolated locations, Mobisol GmBH has set up a distribution network, Lindner said. “Small decentralized sales spots are everywhere our customers are.”

The company targets customers based on loan preferences and makes use of credit checks, Lindner said.

It has been surprisingly challenging for Mobisol GmBH to partner with microfinance institutions in Africa because these organizations are generally not located in rural areas, Lindner said. Their staff are “going around on motorcycles.”

Unlocking Private Capital

“I’m a firm believer that the only way to end energy poverty is to unlock private capital at scale,” Needham said. “I’m convinced that ‘solar as a service’ or ‘pay-as-you-go’ is the best way to unlock that capital.”

According to Needham’s estimate, it will cost $400 million to fund solar systems to light the homes of 10 million people. “We need to reach a billion people,” he said.

“Real scale needs to be financed by real money, and that’s only going to come from mainstream commercial investors,” Needham said.

Needham described the hierarchy of investors that can contribute to the growth of the industry.

“Impact investors typically come in early when a company’s in its proof-of-concept phase,” Needham said. “Development finance institutions like Africa Finance Corporation and Asian Development Bank can come in next. This is really a precondition for a next phase.”

“To reach universal energy access, our sector needs to unlock private capital,” Needham said. “Private capital doesn’t care about social impact, it cares about financial returns. Capital can be recycled over and over again. It’s a business model that creates new skills and new jobs.”

Needham said he predicts demand will boom in this sector. “When we finally reach a billion people with clean, reliable electricity, I think this sector will only be getting started. Most people will want more power. Energy is opportunity and opportunity cannot be denied.”

This article was originally published by Clean Energy Finance Forum, a news website sponsored by Yale University. To subscribe to our newsletter, please fill out our contact form.