This article is taken from the May/June issue of Renewable Energy Focus magazine. To register to receive a digital copy click here.
Increasing access to solar power in poor countries will be key to achieving the UN's goal of achieving sustainable energy for all by 2050. But what hope is there of achieving this goal when a third of the world's population are still using kerosene lamps?
It's easy to be overwhelmed by the scale of the challenge. But – and sorry for the pun – there is a new energy in the solar power sector. Some might even say there's a revolution going on. And that revolution is being led not by government programmes or charitable aid, but by enterprise.
2013's line-up of Ashden Award finalists operated in countries as diverse as Tanzania and Vanuatu. They were involved in helping increase energy access in different ways – some working directly with the poor, others with distributors and microfinance providers.
What united them all was their use of business models to tackle the energy access challenge. In the words of eminent development economist C.K. Prahalad, they have spotted the "fortune at the bottom of the pyramid".
Most excitingly, they are also rapidly learning how to overcome some of the biggest hurdles to increasing energy access in poor countries.
Reaching the last mile
Solar technology has come a long way in recent years. But while engineers have taken great strides in getting their products right, less attention has been paid on how to actually get new products to where they're most needed.
Rick Hooper, CEO of past Ashden winner Barefoot neatly describes the scale of the challenge: “The Democratic Republic of Congo has a population of over 75 million people, with only 300 miles of tarmacked roads.” In other words, most people living off the grid can't just pop to their local cornershop to buy the latest solar lantern.
Ashden 2013 finalist (and eventual Winner) SolarAid gets this. With an audacious goal of ‘eliminating the kerosene lamp from Africa by 2020’, in the absence of retail distribution networks it's working with schools in rural Tanzania to sell solar lanterns to families that will enable their children to do their homework in the evening.
Meanwhile in India, while 2013 Ashden finalist OMC Power (and eventual Runner Up) uses solar-diesel power plants to power telecom masts, it also rents out solar lanterns to off-grid villages in remote rural areas.
Access to finance
A second challenge being tackled is the upfront costs for end users.
Although kerosene is cripplingly expensive – up to a fifth of some families' incomes in some countries – at around US$7, even the cheapest solar lanterns can be out of reach for the poorest.
This is compounded by the fact that poor people are often not in the habit of saving, more focused on products that help them meet their immediate needs than those that may enhance their lives in the longer term.
Microfinance can help, though microfinance providers often lack the operational expertise and funding needed to establish their own clean energy programmes. The US business Microenergy Credits, another 2013 Ashden finalist, helps in this by using carbon markets to enable MFIs overcome these hurdles.
The next step up in the solar power ladder is solar home systems. These mean people can start to use equipment like fridges, as well as radios and TVs that offer a window on the wider world. Yet with even the most basic systems starting at around US$200 they are often inaccessible.
The good news is, the mobile revolution in Africa has normalised another financial model: pay-as-you-go. Business start-up Azuri Technologies has spotted this. Its Indigo Duo uses a pay-as-you-go scratchcard system that means people to pay for their new systems in monthly instalments. And once they have completed payments for starter systems, they have the opportunity to upgrade to larger systems, allowing them to progressively climb out of poverty.
Building trust
But even if you have cracked the nuts of physical and financial access, how do you create demand for life-changing products?
As Donn Tice, CEO of 2011 Ashden winner d.light says: “The average consumer in developing countries has used more or less the same products and services as their parents and grandparents, so people are often fundamentally cautious about buying new products. It's just not in their frame of reference to be worrying about when the next version of the iphone is going to come out!”
"What makes these finalists stand out is the way they are using traditional business models to make a truly meaningful difference"....read more of the editor's blog here...
That means giving people the opportunity to see, touch and try a product before buying, as well as having trusted sources acting as product endorsers – be they a school teacher, church leader, self-help circle or youth group.
Third party endorsement from microfinance providers can also help. For example, 2012 Ashden Gold Award winner the Shri Kshethra Dharmasthala Rural Development Project (SKDRDP) is a microfinance organisation in India that tests out renewable energy suppliers before adding them to an ‘approved list’, then provides information on the different technologies and suppliers available at village meetings.
Trust is also increased by building quality, and the fact that SolarAid uses competitive procurement is helping manufacturers increase product quality and cost – so helping raise standards in the industry as a whole.
The 2013 Ashden Awards – spreading the word
Through their creativity and dogged determination, our finalists are showing that it is possible to make rapid progress in increasing the poor's access to clean electricity. They have unlocked secrets of marketing to the poor that must be shared far more widely if we are to achieve our own goal of one billion more people whose lives are transformed by sustainable energy.
The winners and runners up at this year's Ashden Awards can be found here.