Over five years ago, two simple ideas had been developed and were slowly but surely taking hold around the world - mobile money and crowd-funding. Little did we know then that what we were building at Nuru Energy would rely on the existence of these two innovations to stand a chance of working. Afterall, what possibly could mobile money and crowd-funding have to do with providing the poorest of the poor with low-power electricity?
We started five years ago with a simple notion - that we could build a sustainable, scalable solution that would once and for all displace the dirty kerosene that over 2 billion people in the world still burn in order to have light after dark. Study after study showed that the poorest of the poor were spending upwards of 25 percent of their income on kerosene for light, amounting to 17 billion USD per year in Africa alone. Many of these studies, some from over 20 years ago, clearly and accurately describe the difficulties in changing the status quo.
For example, a 1991 study looking at the status and potential of PV Systems in Rwanda cited the following - "Wide scale commercialization [of solar technology] is hampered by a few barriers... including high investment costs, unavailability of credit and maintenance and repair problems."
Interestingly, just last year in 2012, a study looking at the off-grid lighting market in Africa cited similar barriers to long term scalability. It seems not much has changed.
That being said, there are finally some organizations on the scene (including ours) that are serious about innovating to overcome these barriers. For us, the starting point was to better understand the context in which our solution would be used before we went to the drawing board.
Once we understood the context, we looked at other innovative solutions to address some of the barriers that we saw in our market. The poorest of the poor have the same desire to have reliable, affordable energy as everyone else in the world. Unfortunately, the options that they have been presented to date have been neither reliable nor affordable.
For a reliable and efficient energy source, we looked at human power, instead of solar, and in particular technology commercialized by a social enterprise pioneer, Freeplay Energy. Pedal power, as archaic as it may seem to some, is one of the most efficient ways to create low-power electricity and is available virtually for free, anywhere and anytime.
Next, to address the issue of affordability, we looked at two successful business models. The first was from the mobile telecom industry. Given the explosive growth of mobile subscribers in rural markets, mobile network operators have clearly tackled the issue of affordability. Their model is to build the towers and make money on talk-time rather than on margins from selling handsets.
The second model we drew inspiration from was one that relied on collaborative consumption as a means to bring down the per user cost for consumers. Examples here include Netflix and Zipcar - you don't have to purchase the car or the movie, you just pay for using it when you need it.
How about then stand-alone pedal generators that are easy to use anytime and anywhere, located centrally, and owned and operated by village level entrepreneurs (VLEs) who don't take a margin on the portable LED lights that they sell to consumers, but only make money on recharging those lights. Consumers don't have to pay anything substantial upfront - other than a simple yet high quality and long-lasting bright light that combines an LED and a rechargeable battery. They then pay as and when they recharge the light. We knew we were onto something.
We have scaled to over 1200 of these VLEs across East Africa, but this scale-up has not been linear. We have had to evolve and adjust as we went along. For example, when we realized that we could not make any profit on the upfront sales of the rechargeable LED light, we decided to instead take what we called a "microfranchise fee" from our VLEs. With 70 VLEs, this was physically doable. With 1200, forget it! We looked again at other technologies that could help. Mobile money came to the rescue here...what better way to easily transact with our very remote and at times physically inaccessible VLEs. Now all of our POWERCycle generators are "mobile-money enabled".
To further increase market penetration, our VLEs have started selling the lights at below cost as a loss leader, knowing that they can recoup the loss through recharge revenue. Crowd-funding has proven very effective in helping here. Social lenders offer VLEs a loan to cover the full cost of the lights and wait to get their principal returned, which is paid over time from a portion of the VLEs recharge revenue (recouped via mobile money!).
Innovation builds on innovation. Our technology and business model five years ago could not have worked. But today, as we combine both old and new technology, we have a fighting chance to alleviate energy poverty... once and for all.
Follow Sameer Hajee on Twitter: www.twitter.com/NuruEnergy