By Stefan Zelazny, Mobisol
For decades, the only accepted idea of electrification was access to the grid implemented by big utilities, served by huge power plants.
This concept worked fairly well in the developed world — if leaving out of consideration the environmental aspects of the massive use of fossil fuels. Billions of dollars have been invested to transfer this model to emerging markets. This attempt has failed. Even today, less than 25% of sub-Saharan households have access to the grid; and those who do have access encounter ongoing problems with load shedding and poor reliability. Grid extension has proven to be logistically difficult, expensive to implement and not adapted to lower consumption rates. Full electrification from the grid has become an unachievable goal for the fast-growing countries of sub-Saharan Africa.
Looking at the developments over the last five to six years, one can see that this shortfall of traditional grid development might turn into a long-term advantage of these economies. Falling solar panel prices have led to a steep surge of economically viable off-grid solutions all over the world — as well, and especially, in sub-Saharan Africa.
Combining a small solar panel with a storage battery and energy efficient LED lights creates a very affordable lighting solution for rural off-grid households in India, Kenya, and Tanzania. Millions of these lanterns and small solar home systems have been sold in recent years, improving the lives of families all over the developing world. But real electrification does not end with the provision of lighting and phone charging. The demand for more powerful off grid solutions has steadily increased over the last years. Alongside the development of more and more highly energy efficient DC household appliances, larger off-grid solar electrification solutions developed into a very compelling alternative to the grid. Reliable and decentralized electrification through solar home systems is becoming the standard rather than the exception in most East African rural areas.
Larger solar home systems — often bundled up with appliances like TVs, stereos, fridges, and even irons result in higher purchase costs for each household. Given the economic realities in East Africa, this is a challenge to overcome. As almost no consumer financing institutions are active in remote rural areas, new solutions had to be developed. PayAsYouGo technology (PAYG) evolved as a solution to overcome the lack of availability of other financing instruments. PAYG means that an off-grid solar system can be purchased on an installment plan but can be remotely shut off, in case the customer stops paying the agreed installments. This allows for high flexibility for the customer but also ensures a high repayment likelihood — and therefore forms the foundation of the scalability of the underlying business model. PAYG technology has paved the way for the financial inclusion of millions of unbanked rural households ever since.
The economic success of this model attracts more and more international and local financing into these emerging markets. The PAYG energy sector is on the brink of taking off all over Africa and other markets in South Asia and the Pacific Islands and to deliver decentralized, sustainable energy solutions to hundreds of millions underserved households.
One major challenge of this expected scale up is the ability to master business operations on the ground. This requires a deep knowledge of last mile solar distribution in some of the most challenging business environments worldwide.
Technology can help distributing companies to overcome this challenge. Hardware enabled PAYG technology, powered by mobile money payments and last-mile-centric software solutions can ease the steep learning curve for companies entering the distribution business. This includes profound customer affordability predictions as well as logistics and stock management adopted to suit the requirements of the target markets.
The off-grid solar sector today avails itself of the condensed learnings and experiences of the past six years of PAYG based distribution, supported by ready-to-use and affordable software solutions — such as Mobisol’s PAYGEE software suite. This expertise helps distributors all over the world to choose the most appropriate hardware and software solutions as well as the best-fitting business model for their specific geographic location and customer segment.
Sophisticated soft- and hardware solutions will additionally enable a much higher transparency within the entire sector and allow financial institutions as well as private investors to support this growth with a risk-controlled impact oriented investment. Crowd investing platforms — such as Sweden based Trine — have seen a steady surge in investment interest into the off-grid energy sector and embrace the real-time transparency through Mobisol’s PAYGEE software suite towards their investors. Crowd-based investment into decentralised energy solutions in emerging markets, facilitated by high tech software platforms, will turn into a commercially attractive way to bypass today’s financing challenges and big energy structures — leaving room for an enormous scale-up potential and a real impact for both communities on the ground gaining energy access and the global climate.
Stefan Zelazny, Chief Innovation Officer Mobisol