THE BLOG
08/21/2012 12:10 pm ET Updated Oct 21, 2012

Pay-As-You-Go Solar Technology Spins Off Under New Venture

How's this for a consumer-friendly innovation in Africa: a pay-as-you-go solar system with enough lights and power to replace fast-burning candles and dangerous kerosene lamps, as well as recharge cell phones.

Eight19, the UK-based start-up behind this technology, announced today that it is spinning off the development of its pay-as-you-go IndiGo devices under a new business called Azuri Technologies. The move is part of the venture's attempt to scale up in size, as it aims to grow from tens of thousands in unit sales this year to hundreds of thousands next year while deploying solar devices across Kenya, Malawi, Zambia, South Sudan, Uganda and South Africa.

"It's very much a business in its own right, entirely focused on delivering pay-as-you-go solar in emerging markets," says Simon Bransfield-Garth, the CEO of Azuri Technologies who will remain head of Eight19 as well.

Splitting the enterprise into two distinct identities -- with Eight19 continuing to focus on printing lightweight, flexible plastic solar panels while Azuri Technologies concentrates on distributing the pay-as-you-go units -- will attract more investment capital for expansion. "It makes it easier for Azuri to grow, and it makes it easier for Eight19 to continue to grow as well," says Bransfield-Garth.

Or so is the hope.

In an effort to expand, start-ups and social enterprises may split their venture into different business divisions while marketing their strengths to various investors or potential partners. But doing so will not guarantee a profitable future. Eight19, which launched a little less than two years ago to transform research from Cambridge University into a new generation of printed plastic solar modules, is giving it a try anyway as it seeks to break even financially. "We're still in the growth phase," says Bransfield-Garth. "Certainly both companies have business plans that take us to profitability."

Both Eight19 and Azuri Technologies are banking on the IndiGo pay-as-you-go units to entice enough distributors and sales partners to meet the demands of power-hungry consumers in Africa who reside off-grid with no access to electricity. Each IndiGo unit combines mobile phone and solar power technology, and it unlocks once a consumer purchases credit through a scratch card each week. These scratch cards provide a code that gets punched into a small control box, which allows the IndiGo unit to charge a battery and provide electricity for lighting or fueling a cell phone -- and even bigger devices if consumers upgrade to a larger, more expensive IndiGo model.

In Kenya, each basic IndiGo unit costs about $10 up front, then around $1.40 every week thereafter for 12 to 18 months -- at which point the consumer has paid enough in scratch card credit to own the product outright. Any additional money that would have gone to paying for fuel, say, with kerosene or candles then remains with the consumer. The pay-as-you-go feature helps consumers address issues with accessibility and affordability. There are also certain benefits to pairing this kind of feature with Eight19's plastic panels, as opposed to conventional semiconductor technologies, such as cheaper manufacturing and installation costs.

"While solar power is very effective, it's very difficult for people to afford the initial cost of a solar installation," says Bransfield-Garth. "If somebody is earning $3 a day then they tend to spend what they earn; they tend not to have large amounts of savings. So you get into this thing people call the 'poverty trap,' where essentially you're paying so much for doing things in an inefficient way that you can't afford to save the money that would allow you to do it in a more efficient way."

Partner companies and non-governmental organizations (NGOs) that have been selling Eight19's IndiGo units have included SolarAid, an NGO which selected a team of students from NYU Abu Dhabi and I as winners of the energy track in this year's Hult Global Case Challenge. This contest awarded SolarAid with one-third of a $1 million prize to implement our proposed model, which won, in part, by pitching pay-as-you-go technology and the establishment of consumer trust through after-sales support services.

Still, our initial analysis had found that other, more established ventures may have been more capable than Eight19 of ramping up the manufacturing and warehousing capacity of solar products, given that the start-up was still in the early stages of development. Bransfield-Garth says one of Eight19's greatest challenges to date has been being able to build out distribution channels to get the products into new markets. Another major hurdle: gaining access to the working capital to fund the initial units being deployed in Africa. "Our activity over the past year has been focused on addressing those two key areas," says Bransfield-Garth.

Today's announcement may help on both of these fronts. The true test, however, comes down to whether consumers are interested enough in the pay-as-you-go devices to shine a new light in this corner of Africa's solar market.

Neil Parmar, the author of this article and an alumnus from New York University, was part of the team that won this year's Hult Global Case Challenge within the energy track. Madhav Vaidyanathan, Songyishu Yang, Muhammad Awais Islam and Ruey-Ting (Gary) Chien from NYU Abu Dhabi were the team's other four members.