08/18/2014 06:27 pm ET | Updated Oct 18, 2014

Pay-as-You-Go Solar Financing Can Finally Eliminate the Kerosene Lamp

Today in Africa over 600 million people live without access to electricity; that's between 60 - 65% of the continent's population. To meet basic energy needs like lighting, the majority of the off-grid population burns kerosene fuel. Kerosene produces smoke that is devastating to health, and releases black carbon that contributes disproportionately to global warming. It is also shockingly expensive. An energy consumer in the US pays about 10-15 cents per kilowatt-hour (kWh) for electricity from a utility. The same consumer in rural Kenya pays an equivalent cost of $8 per kWh for kerosene. These expenditures easily add up to 10% or more of an African family's income.

How can this situation change? One possibility is grid extension. Unfortunately, extension requires significant investment and there is no indication that it will keep pace with population growth. Another possibility is distributed solar. If there's one thing Africa has in abundance, it's sun.

There are now several companies (e.g., Greenlight Planet, d.light Design, Nokero) producing rugged, thoughtfully designed solar lamps that are ideal entry-level replacements for kerosene. With technological advances in LEDs and increases in photovoltaic efficiency, a bright, solar-powered lamp can now retail for as little as $10 for several years of product life. Even ignoring the superiority of the light they produce, these lamps should be crushing the kerosene market on cost alone, but they aren't. Why not?

Cashflow and trust are two major factors. To take them in turn:

Cashflow: Kerosene can be bought by the liter, or half liter, or quarter liter, depending on how much cash is available. Ten dollars, by contrast, requires saving, and saving is hard, particularly for those living on a daily budget.

Trust: Turning sunshine into a light that burns at night is uncanny. Add to that the reputational damage done in some markets by poor-quality solar products introduced in the past.

It is within this framework that pay-as-you-go financing for solar lamps makes sense. People pay a dollar or two upfront to take a solar lamp home and try it out. Then each week they purchase an allotment of energy for their lamp, just like buying kerosene, or airtime for a prepaid phone. Africa's expansive cellular network and sophisticated mobile money platforms (like Safaricom M-Pesa) have provided a foundation for elegant technical approaches to "remotely enforce" these micro-loans and drive down servicing costs: if the customer misses a payment, the lamp deactivates until they pay again. But unlike kerosene or airtime, each payment accrues towards the final price. When the customer reaches this price, the lamp is permanently unlocked and the energy is free. Families save hundreds of dollars in offset kerosene expenses.

The majority of the current effort in pay-as-you-go technology is being applied to higher wattage solar-powered devices and home systems (see Fenix ReadyPay, M-Kopa Solar, Mobisol among others). Angaza is among the few companies focused on designing pay-as-you-go technology for all product tiers, including $10 study lamps. When purchased over time, for $1-2 per week, these lamps are truly affordable to all families living beyond the grid. By breaking through the cashflow and trust barriers with a non-threatening, accessible, entry-level solar lamp, off-grid energy consumers of all income levels can finally be free of kerosene. This first step paves the way to meeting the energy needs of off-grid populations with clean distributed solar for perpetuity, with powerful concomitant benefits to community health and the environment.