Tag Archives: PAYG

Partnerships for Women’s Economic Empowerment through Clean Energy in Senegal

Access to energy in rural areas of Senegal is a persistent issue. Electrification rates in rural areas of the country can be as low as 4%, and over 89% of the population are still reliant on biomass fuels for thermal energy uses in the home, such as cooking. However, a number of barriers exist to addressing this situation, particularly for female entrepreneurs in the region: other commitments such as domestic work can hamper the amount of time available to establish a business, and technical, financial and organisational capacity is often low. Two non-profit organisations, ENERGIA and Energy4Impact, are partnering with local women entrepreneurs in rural areas of the country to improve energy access and reduce the burdens of unsustainable fuel use on families.

Energy 4 Impact with Women Entrepreneurs in Tambacounda, Senegal. Photo: Judith Quax, July 2017

In the rural Tambacounda region of the country, ENERGIA and Energy4Impact have been training women entrepreneurs to become sales agents for small solar home systems, solar lanterns and improved cookstoves. The organisations have taken an “eco-system” approach to the training, attempting to address the wide range of business, financial, capacity and gender-related barriers to developing women’s energy entrepreneurship as a whole. This has included partnerships with local manufacturers and suppliers to enable access to technologies, as well as business and financial training for entrepreneurs, and sensitising campaigns in the local area to enable homeowners to realise the benefit of engaging with women in the energy product space.

Currently, Energy 4 Impact is supporting 160 women entrepreneurs in Tambacounda to become sales agents of improved cookstoves and solar lanterns. From 2016 to 2017, these entrepreneurs sold 1,132 solar lanterns and 822 efficient biomass cookstoves, helping over 17,000 people access clean thermal energy.

However, the engagement in Senegal by the two non-profit organisations is not solely for the purpose of entrepreneur training. Co-benefits of improved energy access in the business space are also targeted. This is particularly being realised in improved access to solar refrigeration technologies for small-scale agri-businesses. Energy4Impact are partnering with two government organisations to offer technical training for women entrepreneurs in the agri-business sector to use solar refrigeration technologies to diversify their business. The NGO also engaged with private-sector suppliers of equipment to suggest suitable technologies scaled to the size of the women’s business needs. In addition, the NGO also engaged with agri-business owners directly to design and manage credit line mechanisms for leasing solar-powered technologies that could be repaid in instalments, enabling access to technologies on a monthly credit basis applicable to the entrepreneurs’ income.

Finally, the NGOs are partnering directly with women entrepreneurs in the Tambacounda region to offer small solar home systems on an innovative pay-as-you-go basis. This is being conducted in partnership with Boabab+, a social enterprise focusing on PAYG models for solar home systems and solar lanterns. Women entrepreneurs are being trained as distribution agents for the products, and can purchase solar home systems from the enterprise with a 25% down-payment, with the remaining 75% being repaid in three fortnightly instalments with zero interest. Clients are able to access one month’s electricity upon purchase of the system, with further payments able to be made on a daily, weekly or monthly basis through mobile money systems already existing in the region. This gives consumers the flexibility to pay for energy when they need it at a price point appropriate for them, while reducing the economic barriers for entrepreneurs to enter the sector through offering this flexible credit mechanism. The system has proven fairly successful: one entrepreneur in partnership with a local women’s group sold 152 solar lamps from 2016-2017, where they ordinarily would not have had the capital to even begin investing in the technology for sale.

– Daniel Kerr, UCL

References

ENERGIA (2018) Helping women entrepreneurs scale-up rural supply chains to reach last mile markets. Available at: http://www.energia.org/helping-women-entrepreneurs-scale-rural-supply-chains-reach-last-mile-markets/ [Accessed 11th March 2018]

Energy4Impact (2018) Empowered women securing energy access in rural Senegal. Available at: https://www.energy4impact.org/news/empowered-women-securing-energy-access-rural-senegal [Accessed 11th March 2018]

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Energy Access in Uganda – The Effect of PAYG Models on Adoption

UNCDF’s Clean Start Programme, in conjunction with SolarAid/Acumen and the Schatz Energy Research Centre (SERC), are currently conducting a research project in Uganda based on identifying whether innovative financing models, such as pay-as-you-go (PAYG), can enable higher levels of access to renewable energy technologies, as well as the “solar ladder hypothesis”. This hypothesis states that users who gain access to solar energy technologies will then continue to adopt higher levels of technology to further improve their energy access over time, continuing to use solar technology whilst doing so. Some sources reject the solar ladder hypothesis, and suggest that low-income households can “leapfrog” to higher levels of solar energy access directly if appropriate financing mechanisms are made available, and this project aims to investigate whether the hypothesis holds true in the face of innovative end-user financing for solar energy technologies.

This project exists under the purview of the UNCDF’s co-investment initiatives in innovative and novel financing mechanisms and business models for off-grid energy access. In Uganda, the organisation is particularly promoting energy service company models offering asset financing for users, using a digitally-enabled pay-as-you-go model through proven mobile money technologies. The technologies used in this project are well-proven, such as small portable solar lanterns, and small- and large-scale solar home systems. The substitution of solar energy for unsustainable fuels is demonstrated well by the research so far: 55% of respondents to the 600 phone interviews and 114 face-to-face interviews conducted by the project to date say they have completely substituted fuels such as kerosene and dry-cell batteries, as well as services such as paid mobile phone charging, with solar energy use.

Of particular interest to the research conducted under the STEPs project, however, is the demonstration that PAYG models offer significant benefits over traditional financing and purchasing models, such as cash-purchase or deferred-purchase. The PAYG model investigated under the Ugandan research has led to households with lower incomes being able to afford proportionally-larger systems: household incomes for purchasers of small-scale solar home systems under the PAYG model were comparable to those who were outright purchasing portable solar lanterns, with the model enabling a higher level of access.

Entrepreneur and solar home system purchasers in Uganda. Image: Goyal, Jacobsen & Gravesteijn (2017)

However, whilst the PAYG model enables users to access higher levels of service immediately, it does not have any effect on the payback period for the larger systems. Net-present-value analysis conducted under the project suggested that whilst solar lantern outright purchasers paid back their initial costs quickly, small- and large-scale solar home system users experienced a net cash outflow for the warranty period of their systems, in the region of $130-$740 per year depending on system size. This suggests that economic concerns are possibly lower on the priority list of users than previously thought in other projects, and that levels of service may be more important to users than initially suspected. The project conclusion on this point is that adopters of small- and large-scale solar home systems make the purchases to achieve quality-of-life improvements, rather than as an economic investment.

In addition, the research so far has suggested that the introduction of mobile money systems as a method for both payments for systems and savings for users has been equally adopted throughout household income scales. This suggests that potential co-benefits of a PAYG model when targeting poorer consumers, such as improving financial inclusion and money-saving access through the mobile payments scheme, may not be realised in actuality, given the equal adoption across household income levels. However, an encouraging sign is that mobile savings are being used by a very large proportion of the respondents to the research: 83%. In addition, new systems such as the MoKash savings option launched by mobile money pioneers MTN in Uganda recently may further increase this proportion.

– Daniel Kerr, UCL

References

Goyal, Jacobsen & Gravesteijn (2017) Spotlight: Does PAYGO unlock energy access and financial inclusion? Available at: https://spark.adobe.com/page/iGBgXjIQIGG9F/ [Accessed 11th March 2018]

UNCDF (2018) UNCDF CleanStart. Available at: http://www.uncdf.org/en/cleanstart [Accessed 11th March 2018]

Pay-As-You-Go (PAYG) Models for Cooking Fuels – Innovation for the Poorest Consumers

Daniel Kerr from UCL writes on innovative pay-as-you-go models in use for cooking energy service provision.

In the last 2-3 years, a handful of thermal energy services companies in the developing world, specifically in Sub-Saharan African countries, have begun to take advantage of pay-as-you-go (PAYG) consumer financing models in their energy businesses. These models have significant advantages in comparison to direct purchase, hire-purchase or micro-credit models when dealing with the poorest consumers in societies, for example those living in informal settlements in urban or rural areas. Some companies are taking advantage of these models for selling clean cooking products, such as stoves themselves, whereas others are using this payment structure for cooking fuels.

One company in Kenya taking advantage of these innovations is KOKO Networks. This organisation seeks to offer an integrated neighbourhood-level clean cooking solution with smart technology, via their KOKO points, cloud-connected commerce hubs where consumers and vendors can come to refill the products on sale or make purchases. Currently the company is offering the SmartCook product at these sales points, which is a two-burner clean cookstove with an integrated fuel canister. The fuel used is marketed as Mafuta smart, which is an ethanol fuel derived from molasses manufacture.

What is particularly innovative about this system is that the sales hubs for the company have in the automated purchasing stations for the fuel for the cookstove system. These dispensers refill the provided fuel canister (known as a kibuya smart canister) with the cookstove system, and customers can refill their canister from as little as KHS30 (US$0.29) at a time, offering significant flexibility for the consumer, without the “poor people’s premium” (higher per-unit prices charged for small amounts of consumable products) seen in other commodities. The company operates on a concession business model, with interested parties either setting up their own fuel supply arrangements for the fuel to service their settlement, or purchasing equipment and fuels from KOKO themselves.

KOKO Networks KOKOPoint in store in Nairobi. Customers can purchase a stove or replacement fuel from the kiosk. Image: http://www.globalhearthworks.org/koko/

Other companies in Kenya are taking advantage of PAYG models to enable greater access to their products and services as well. In Nairobi, PayGo Energy is a distribution service for LPG fuels that is using pay-as-you-go services to bring LPG fuel access to a greater number of consumers. The service begins with the installation of an LPG stove, cylinder and smart fuel meter in the home. This smart meter is at the core of the service the company offers, as it automatically communicates to the company when the fuel level is running low, whereupon the company arranges delivery of a replacement, full cylinder to the household. In addition, the system support mobile payments and ordering of fuel replacements, allowing customers to purchase as little as a day’s worth of LPG (around US$0.50) at a time. This logistics system has been adapted to informal settlements, allowing uninterrupted supply to households in informal settlements via motorcycle.

Other organisations are beginning to see the benefits of integrating mobile payment technology with a pay-as-you-go fuel payments model for energy services. KopaGas in Tanzania are another company using smart LPG metering to minimize the challenges posed by last-mile distribution which are typical in providing thermal energy services to communities. This smart gas meter system allows the company to deliver cylinder filling services or replacement full cylinders to communities efficiently, minimising distribution costs. In addition, the company offers a pay-as-you-go service for LPG fuel, as well as offering pay-over-time services for both fuels and cooking equipment. KopaGas has been partnering with EnviroFit, an established LPG equipment and fuel distributor in East and West Africa, in order to scale their service reach.

Through these cases, the market opportunity for offering clean cooking fuels and technologies as an energy service, using innovative fuel and equipment payment models to enable access for the widest range of consumers, can be clearly demonstrated. KOKO Services and KopaGas/PayGo Energy may be using different technology options, but the commonalities in approach exist: offering consumers the ability to purchase small amounts of fuel at a time, via a convenient payment method (either via mobile, at a central filling station, or both), and in the case of the LPG companies, offering consumers the option of household delivery. Through this combination of factors, these companies are breaking the traditional barriers to household thermal energy service delivery, allowing consumers who previously would not have had the financial capacity to afford modern cooking fuels the ability to access these technologies.

– Daniel Kerr, UCL Energy Institute

References

Global Alliance of Clean Cookstoves (2017) “Pay-as-you-go” technology to boost access to cooking fuel. Available at: http://cleancookstoves.org/about/news/05-30-2017–pay-as-you-go-technology-to-boost-access-to-cooking-fuel.html

KOKO Networks Home: http://kokonetworks.com/

PayGo Energy Home: https://www.paygoenergy.org/

KopaGas Home: https://www.kopagas.com/

Kitonyoni Solar Mini-grid and Integration of Thermal Energy Services

Binu Parthan from SEA writes on his recent visit to the Kitonyoni Solar Mini-Grid project, part of the University of Southampton’s efforts for the Energy for Development (E4D) project they lead.

The solar mini-grid at Kitonyoni near Machakos in Makueni County was financed by the UK government and commissioned in 2012 by the STEPs partner The Sustainable Energy Research Group at University of Southampton. The Kitonyoni Solar mini-grid is managed by Makueni County Solar Energy Co-op Society Ltd which is owned and managed by the community.

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Management of the Solar Electric Cooperative and manager of the mini-grid business. Image: Sustainable Energy Associates

In July 2016, I travelled to Kitonyoni to visit the solar min-grid and meet with the community. While at Kitonyoni, I met with Joseph, Monicah, William and Shadrack from the management Makueni County Solar Energy Co-op Society Ltd and also with Stephen, the manager of the mini-grid and energy service business. With the community leaders and the manager of the mini-grid, I visited several businesses and households that were consuming electricity from the cooperative to understand the business model. The solar electric cooperative seems to be professionally managed and financially sustainable. They operate on a for-profit business basis and the financial accounts reveal that the operation is financially sustainable. The electricity cooperative uses a pre-paid card system for electricity sales and payments which seems to be working well. The electricity consumers are more conscious of energy use and payments and the cooperative is also happy with the upfront collections. The number of shops in the Kitonyoni market has significantly increased since the solar mini-grid was commissioned and the value of the land in the area has also almost tripled. However, the tariff charged by the solar electric cooperative is considerably higher than the public electricity utility but the community has been willing to pay a higher tariff due to better availability and reliability.

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One of the new businesses established in the Kitonyoni market powered by the solar mini-grid. Image: Sustainable Energy Associates/span>

STEPs project team at University of Southampton had carried out a survey to examine the possibility of integrating thermal energy services into the existing electrical energy service business model. The results showed that 90% of the households in Kitonyoni use firewood for cooking which is available without cost to the community (Bahaj and Kanani, 2016). While the households spends over 5 hours to gather firewood, there is limited interest in switching to cleaner cooking options such as LPG which involve additional financial expenditure. The opportunity to integrate a solar thermal energy service along with the electricity service seems rather limited due to limited scope and demand for commercial fuels. The firewood is available freely in the area and LPG distribution networks are not available in the village.  Therefore currently, there does not seem to be a business case for introduction of an LPG franchise model and integrate the model into the solar electricity business. However some thoughts that I shared with the community were:

Since households and restaurants are cooking in separate rooms than their houses and as there is a preference for community schemes, will a community electric cooking scheme succeed? This may be relevant as on most days the battery bank of the solar mini-grid seems to be fully charged in the early afternoon and this could provide an opportunity for a central cluster of electric induction cookers which people can use to cook on a pay per use basis(similar to battery charging) to the cooperative.

It is possible that people may opt for efficient Cookstoves/Jikos if available on a hire-purchase/PAYG basis and reduce the amount of firewood to be collected resulting in time savings. An efficient Jiko will cost 45 $ which could be offered on a loan basis with daily/weekly/monthly payments to people by the cooperative for 6 months to 1 year tenure. These funds could be revolved over the time period to reach other members.

A differential tariff with a lower tier-tariff for the shops and establishments that use electricity during the day will likely improve the revenue model of the cooperative and can increase the utilisation levels. Such a tariff regime could allow the use of induction electric cookers at households during the day. Such a development could result in increasing sales and revenue and improving the business viability.

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Cooking using firewood and a metallic stove in Kitonyoni. Image: Sustainable Energy Associates

Therefore the technology options for thermal energy and cooking in Kitonyoni is electric cooking or efficient Cookstoves with the possible business models of pay-per-use or hire-purchase respectively. A differential tariff with lower off-peak tariff could also allow electric cooking during the day time and improve the business model. These options are not entirely obvious and needs to be investigated and defined. This approach will certainly face stiff competition from free biomass availability and availability of free time for fire-wood collection.

Dr. Binu Parthan

STEPs Presentation at the Bengaluru SE4All Workshop

A presentation on ‘Rethinking Finance and Business Approaches for Energy Access’ was made by me at the Third International Triennial Workshop on Sustainable Energy For All : Transforming Commitments into Action. The workshop was organised by the NAM Science & Technology Centre and Society for Energy Managers (SEEM) at the green Christ University Campus at Kengeri, Bangalore during the period 21-24 February 2014. This was the third energy-related international event organised by NAM S&T Centre and SEEM and brought together a large number of energy sector experts from about 20 countries including 15 developing countries and several of them  from Asia and Africa. The five countries participating from Sub-Saharan Africa were from Nigeria, Mauritius, Tanzania, Zambia, and Zimbabwe. The workshop also adopted the Bengaluru declaration on sustainable energy for all.

An expert talk was given by me, presenting the current business and finance approaches to energy access and highlighting some of the new and emerging thinking in this space. The talk exhorted equal priority to thermal energy access alongside electricity and also encouraged the use of Public-Private Partnerships (PPPs). Several energy service business models such as PPPs, PAYG and emerging financing concepts such as crowdfunding, cryptocurrency etc were also presented. The STEPs project and its plans were also presented alongside a number of other progressive finance/business frameworks.. The interventions from the floor showed a keen interest in the issues of finance & business.

So the participation at the third triennial workshop on SE4All provided an opportunity to highlight the challenges with business and finance models in energy access and to encourage new approaches. The workshop also provided an opportunity to introduce the STEPs project, its objectives and plans to clean energy, energy access and development practitioners in Asian and African developing countries.

SE4All BP

Dr Parthan presenting at the SE4All Workshop. Image: Sustainable Energy Associates

Rethinking Finance and Business Approaches for Energy Access – Presentation – Sustainable Energy Associates

Dr. Binu Parthan, SEA