|A solar engineer cleans a solar array in a rural village of Puttur|
in Karnataka state in India. The solar array powers a school that
now has extra classes for students at night thanks to the
As reported by the New York Times: Gaurav Gupta, the director for Asia of the development consulting firm Dalberg, tells a story about the untethered life. “You want to sit next to a beach and have a laptop on your lap, and you want to be connected to the world,” Gaurav says. “But you don’t want any wires.”
We go off the electrical and phone grids by choice, Gaurav says. We buy cellphones, install Wi-Fi, buy eco-friendly high-end camping stoves and water purifiers. But around the world, billions of people are off-grid by necessity: they live without wired electricity, piped gas and water, or sewers. The two worlds are linked. “What we want, they need,” he said in a TEDx talk in February in Mumbai. “There is huge innovation going on around the world to serve your needs because you want to play Angry Birds longer.”
Tech innovators don’t see the rural poor as a viable market. They don’t put money into inventing better and cheaper ways for very poor people to light their homes, cook or run appliances off the grid. “But because of the things you desire, these things have become reality,” Gaurav said. “LED technology, very efficient batteries and a falling solar panel price have suddenly allowed lights to be delivered to off-grid households at a fraction of the cost. “
In 2009 there were some 300,000 solar lamps in use in Africa. By the end of 2012, there were 4 million, and sales are doubling each year. Gaurav points out that solar lighting is not only a service. It can also come in the form of a product a family can buy at a local store for $10. This shift is useful, as products are rapidly improving; battery hours and brightness are increasing even as prices drop.
One light is often not enough, so there are other models. A family can buy a more ambitious solar lighting system that offers several lights and phone charging.
There are also new products for village entrepreneurs. A set of solar panels and rechargeable lights, for example, creates a business that delivers lanterns to customers every morning and evening, picking up the spent lanterns at the same time.
Or a village entrepreneur can buy a power plant in a box: solar panels and wiring for 20 or so households. That person is now the village power company, but his wiring need only be a few hundred yards of cable, rather than a few hundred miles.
Compared to mobile phones, off-grid power is still in its infancy. The technology is advancing; the bottleneck is the business model. To grow to mobile phone proportions, off-grid power needs solutions to two different financing problems.
The macro problem is how to attract investment to the sector. “Commercial institutions don’t see this as bankable yet,” said Guay. “It’s not true — many business models are quite sustainable — but it’s a question of belief. Bankers are quite conservative and they are not comfortable in these markets, with a new segment of the population and a new business model.”
International banks and development agencies are helping to lower the barriers. The World Bank and its private-sector development arm, the International Finance Corporation, set up Lighting Africa, Lighting Asia and Lighting Global to try to bring down barriers to entry in the market. These organizations provide information about consumers and what they want, set quality standards and certify products that meet them.
Guay argues that it’s not enough: public money is needed to get private investment started. A recent letter from 20 off-grid power entrepreneurs and nongovernmental groups asks the World Bank to use the I.F.C. to create a pool of capital that can be invested at lower rates of return. That capital would “reduce perceived risk and raise awareness of the viability of this sector,” the letter said.
One valuable source of financing for off-grid energy is the U.S. Overseas Private Investment Corporation. Because of a cap on the greenhouse gas emissions of OPIC’s energy investments, a quarter of those investments are now in clean energy — among them, off-grid projects. But in June the House of Representatives passed a bill that could have the effect of shifting OPIC’s energy portfolio towards fossil fuels.The Senate is now considering a more severe version which would remove the cap entirely.
This legislation is brought to you by gas companies. Surely if the United States government should listen to any industry’s special pleading, it should be that of the off-grid entrepreneurs. There is a market failure here, and a temporary pool of loans might solve it.
Anil Raj, the chief executive of OMC Power in Uttar Pradesh, India, signed the letter. But the growth of his own business has convinced him no heroic measures are necessary. “What’s needed for [the sector] to grow is for it to be profitable,” he said. “Then you don’t need any extra stimulus. We’re almost there.”
OMC Power has 11 micropower plants using sun, wind and biogas in Uttar Pradesh, India’s most populous state, and is growing so fast it expects to have 100 plants by April, 2014. (That scale, he said, will allow OMC to deliver power next year at the same cost as the grid — and OMC’s cost, Raj predicts, will continue to drop.)
OMC’s plants charge lanterns and power boxes (these can run a few lights and appliances) that are delivered to customers’ homes twice a day. But what sets OMC apart is that each of its plants also has an anchor client — a mobile phone network tower, connected by cable to the micropower plant. These towers would otherwise run on diesel, expensively — fuel and power eat up 40 percent of a mobile network operator’s cost. But OMC has signed 10-year contracts with mobile tower companies — including the giant Bharti Infratel — to supply them with power.
Raj said that OMC expects to earn more from its consumer products than its tower contracts. “But they give stability and confidence to investors,” he said. These anchor clients have allowed OMC to grow with loans from Indian commercial banks. “There are going to be a thousand OMC-like companies in the next two years,” Raj said.
The micro problem is finding ways for the poor to pay. Some will be able to afford single lights or light packages, especially if they see the savings these will bring — many of the world’s very poorest people have found ways to buy mobile phones, after all. But more will need to pay as they go, with the savings from what they’d be spending on kerosene. Simpa Networks in Karnataka, India, uses a progressive purchase model: customers install a solar system and pay for energy in small increments, as they do for phone airtime. When they have paid the full cost of the system, it is theirs — free energy from that point on.
M-KOPA in Kenya uses a similar system — with the twist that it takes advantage of Kenya’s hugely popular mobile banking system, M-PESA. Former M-PESA executives founded M-KOPA, which markets a $200 system made by d.light that provides three bright lights and phone charging, and sells it in stores all over Kenya. Buyers put down an initial deposit and then pay 40 shillings (45 cents) for each day’s light via M-PESA. (They would be paying 50 shillings a day for kerosene.) When they have completed payments, usually within a year, they own the system. M-KOPA has so far sold 25,000 units — 5,000 in the last month.
“When you have villagers who are interested in putting up solar panels on the roof or want a solar lantern, they can go buy it off the shelf and bring it home the very same day,” said Guay. “You see an immediate impact — you can displace kerosene and allow your children to study at night without waiting. It’s no longer about building a huge centralized station and waiting for that power to trickle down to poor. It’s about the time that matters — now.”