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Guest blog: The first rung on the energy ladder?

There are continuing discussions in the off-grid lighting world about the merits of small hand-held solar lights Vs larger solar home systems. This was touched upon in a great article in the Economist recently and is an issue that crops up regularly. Here we hear from Victoria Arch, who echoes our own sentiment, that small solar lights are the perfect gateway to larger home systems. And with the introduction of Pay-As-You-Go systems this first rung on the energy ladder is going to be even easier to get a foot on. The perfect news to kick-start the UN International Year of Light.

 


Victoria Arch is the Director of Strategy at Angaza Design, a San Francisco-based social enterprise providing Pay-As-You-Go solutions for solar devices.  She has a BS from Stanford, and a PhD from UCLA.

 

‘What is the role of the solar lantern in energy access? In July of last year, I attended an Engineering for Change Webinar called“Off Grid Technology Perspectives, The Case of the Solar Lantern”that explored this question. The webinar included thoughtful, context-setting presentations from Guarav Manchanda of One Degree Solar, Ned Tozun of d.light Design, and Dr. Harald Schützeichel of Sun-Connect eG. The presentations were followed by a discussion that included an interesting exchange between Dr. Schützeichel and the webinar moderator Russell Sturm, who is Head of the Energy Access Advisory at the International Finance Corporation. In publications and presentations (including this webinar), Dr. Schützeichel has openly challenged a perceived focus by the international aid, finance and social enterprise communities on solar lanterns as the primary means to combat energy poverty in emerging markets.

He argues that there is a discrepancy between what the energy poor in emerging markets want, which is essentially energy access on parity with grid connection, and what he believes the Western world thinks they need, which is a replacement for kerosene wick lamps. As a result, there is a Western-driven overemphasis on the distribution of small solar lamps that force off-grid energy consumers to remain, essentially, under-electrified.

The core tenet of this argument is not new. As SolarAid mentions in a previous post, a debate over the benefits of solar lamps versus full solar home systems (SHSs) has recently “been rumbling”, with some practitioners suggesting that there is an inherent trade-off between the two that makes it an either/or situation.

During the webinar discussion, Mr. Sturm presented a lucid argument that the challenge of full electrification is less one of Western perception than one of financial practicality. Outright purchases of SHSs are only possible for a higher-income band of the off-grid population. This necessarily leaves out a considerable percentage of the 1.3 billion people beyond the grid. Financing can facilitate access, and certainly has in the stunningly successful Bangladesh SHS market. But replicating the Bangladeshi success requires a similarly massive pool of low-interest capital that is not readily available outside of targeted government programmes. Mr. Sturm argued that to truly and rapidly scale energy access to billions of people, an incremental process is needed whereby people are able to affordably grab the first “rung” of the energy ladder in order to then move to the second.

PAYG solar is set to revolutionise off-grid energy access.

This webinar and discussion was brought to my mind by Greenlight Planet and Angaza’s recent announcement of the Sun King Eco Easy Buy solar lantern. The Eco Easy Buy is the first commercially available Pay-As-You-Go (PAYG) entry level solar lamp, designed to be within financial reach of every kerosene-dependent household in emerging markets. It is purchased incrementally over approximately 2 months, at a weekly price below a household’s average kerosene expenditure.

This radically affordable solar product represents the true first rung of the modern energy ladder. Pilot sales of the Eco Easy Buy with SolarAid’s wholly owned social enterprise SunnyMoney have shown that introducing PAYG pricing can more than quadruple sales volumes (a proxy for the product’s market reach). In addition, SunnyMoney customers that purchase a PAYG lamp gain an informal “credit” score on Angaza’s software system; SunnyMoney can leverage this data to evaluate the risk of financing the customer’s purchase of a higher-wattage solar device, thus moving them to the next rung of the ladder. Data-driven distribution and decreased financing risk increases the likelihood of private capital deployment into the market (to join innovative leaders like SunFunder), easing working capital constraints throughout the value chain and facilitating scale.

The Sun King Eco Easy Buy is set to revolutionize energy access for Base of the Pyramid customers and finally ensure no one is left in the dark. Even the most affordable light currently sold by SunnyMoney is still out of reach for some. By introducing PAYG pricing at the lowest rung, we have a chance to realize the energy ladder that Mr. Sturm discussed, with the end goal of achieving full universal energy access. Debates aside, I believe this is what all practitioners understand that energy consumers around the world both want, and deserve.’


 

For more on this you can follow Victoria on @tori_arch.