Although it is small, there is no more innovative market than that of off-grid solar. From pay-as-you-go solutions to M2M technology, entrepreneurs are developing solutions tailored to the energy needs of the 1.3 billion people living in energy poverty around the world.
And thanks to support from U.S. Agency for International Development (USAID), Elephant Energy and Divi Power, we can add yet another innovation to this exciting space: a concept known as "solar in a bottle."
Most of the 1.3 billion (20 percent of the world’s population) who lack access to electricity rely on kerosene for lighting. Consumption of kerosene and other forms of fuel-based energy can make up 30 percent of an impoverished household's energy budget in Africa. These households keep buying kerosene because it has a low upfront cost and they can buy it in incremental amounts that reflect their minimal and unpredictable cash flow.
Solar is an appropriate technology for meeting many of the basic energy needs which kerosene currently serves, such as providing light for studying or cooking and electricity for charging mobile phones. But solar's upfront costs have made it prohibitively expensive for many of those most in need of energy solutions. If an entrepreneur could "bottle" solar energy -- making it just like kerosene -- the poor would likely pay for this cleaner form of energy.
Enter Elephant Energy and Divi Power. Elephant Energy is a Denver-based nonprofit organization which operates market-based distribution networks in Namibia, Zambia and the Navajo Nation. The group works with entrepreneurs and business leaders in the local areas to deliver solar energy products in rural communities, while also providing sales and marketing training to these agents. Divi has developed a pay-to-own credit system for solar charging devices and solar lights.
The two firms were just awarded $500,000 in a second stage funding grant from USAID’s Development Innovation Ventures program to support the Creating Digital Kerosene Project. This project uses Divi's credit system to make solar energy products affordable by payment through weekly installments. The goal is to provide light to 16,000 homes in the next two years.
Their unique innovation is a Bluetooth chip that allows solar devices to talk to other devices. For rural communities, this means that sales agents can “unlock” solar lamps when customers pay their bills and “lock” them when they don’t. Once the customer has paid the installments adding up to the full cost of the light, the product becomes permanently unlocked.
This pay-as-you-go technology isn’t entirely new; indeed, we’ve covered it before. The new element is Divi's platform, which allows customers to swap credits through M2M technology. It’s like a community member having the ability to borrow or sell kerosene depending on their cash flow. That is a truly exciting innovation that makes solar energy a fungible commodity; in essence, it "bottles" solar energy.
Elephant Energy is already exploiting financial innovations that are unlocking much-needed capital for the off-grid markets. The organization has already taken advantage of solar crowdfunding using theKiva and GlobalGiving platforms. But the $500,000 from USAID was crucial in helping unlock this latest innovation. It’s a great example of what targeted support for off-grid clean energy access can do to help spur entirely new business models.
With the Electrify Africa Act moving through Congress, this type of innovation could have even more support in the future. But that’s only if lawmakers prioritize mini-grid and off-grid solutions to energy poverty.
The International Energy Agency has suggested that the majority of investment should flow to these types of solutions. However, current investment from large international banks overwhelmingly favors centralized power projects at the expense of distributed renewable energy technologies. It’s time that more institutions follow USAID’s lead and help support these new business models.
***Justin Guay leads the Sierra Club's international program. Vrinda Manglik is an associate campaign representative for Sierra Club's energy access program.