UK Minister of State for International Development Grant Shapps opening the 4th Off-Grid Lighting Conference in Dubai.

The 4th International Off-Grid Lighting Conference, held in Dubai from the 26th to 29th October, was a great opportunity to bring together key players in the off-grid lighting sector to reflect on the recent evolution of the sector and discuss how mobile is becoming increasingly ingrained in its current evolution.

Enthusiasm in the off-grid energy sector

Much still needs to be done to provide universal access to safe and affordable energy for the 1.2 billion people currently un-electrified, but there was definitely enthusiasm regarding the recent developments and announcements coming from different parts of the off-grid world. As examples:

• Growing sales of solar lights: estimated sales of branded pico-solar lights continue to grow, with more than 20 million products sold in the last 5 years .
• Successful Public Private Partnership: in Bangladesh, IDCOL is connecting more than 65,000 households per month, providing consumer finance and strong aftersales support and maintenance to its customers. The program is still on track to reach 6 million households by 2017, having installed over 3.9 million Solar Home Systems (SHS) to date.
• High quality and affordable solar light: based on a collaboration between d.light, Shell Foundation and DFID , products such as the A1 solar lantern from d.light retailing for USD 5 are directly targeting the lowest-income families to replace kerosene sources.

As a proxy to the “health” of the sector, it was also striking to see the growing number of attendees coming from the financing/investing sectors; including private and philanthropic investors, established banks and private equity. As reported by Bloomberg Energy Finance , more than USD 250 million has been invested in the off-grid energy sector in the last 2 years. Of this total, more than USD 180 million has been channelled to start-ups offering solar under a “Pay-As-You-Go” (PAYG) model.

Mobile-enabled models show impact and generate hopes

From the pilots and early commercial deployments which were discussed in Dakar three years ago at the previous Off-Grid Lighting conference, the model of providing access to solar PAYG solutions, enabled by mobile technologies (mobile money and M2M), has been increasingly adopted by existing providers and has become the norm for upcoming off-grid solar start-ups.

With probably more than 500,000 of such prepaid Solar Home Systems installed to date, pioneers mainly operating in East Africa continue to lead the way and increasingly gain a first mover advantage:

• M-KOPA reaching 250,000 powered and connected homes across Kenya, Uganda and Tanzania;
• Mobisol installing more than 3MW of solar power in over 30,000 homes and businesses in Tanzania and Rwanda;
• Off Grid Electric (OGE) showing strong sales dynamic in Tanzania and connecting more than 50,000 homes per month in Tanzania.

In Sub-Saharan Africa, where the market potential is huge (estimated at 370 million people covered by mobile networks without access to electricity ), these companies use a data-oriented analytic approach to build large databases on their customers behaviours (on usage and payments) and improve their operational efficiency. Aligned with the objectives of local governments to electrify their countries, most of these leaders have gained public support to reach millions over the next few years.

For new entrants and product providers looking to integrate the PAYG functionality in order to offer consumer finance, they can either develop the technology in-house (at a higher cost but with more control), or rely on third party solutions increasingly available from technology specialists such as Angaza Design or Energy Service Companies such as M-Kopa, now licensing its products to third party energy providers, such as Persistent Energy Ghana (PEG).

Creating value for customers and Mobile Operators’ partners

Such energy PAYG services increasingly act as a gateway for financial inclusion and access to more assets for previously unbanked populations. As an example, the detailed records of customer repayments, combined with energy usage patterns, provide an indication of customer creditworthiness. As mentioned by M-KOPA in Kenya, once customers have completed their loans, they can access new products (such as energy efficient stoves, smartphones, etc.) and their repayment profiles are shared with Credit Bureaus which can help them with future credit and banking relationships.

For Mobile Network Operator (MNO) partners, in addition to increased levels of Average Revenue per User (ARPU) and improved customer retention, more evidence is emerging on the impact of energy PAYG services on stimulating the level of activity of mobile money customers (more often rural customers) and creating new clients now regularly paying their energy bills. In their strategy to improve ARPU levels in rural locations and move to richer data services, mobile operators can find strength in such data-oriented energy partners.

Looking beyond East Africa

Although more investments have been flowing into the sector, facilitating access to technical know-how to use and integrate mobile tools will be needed to support the replication of such early signs of success across geographies. There is currently a need for better and faster integration to mobile money platforms through increased levels of collaboration between mobile operators and service providers. New tools could be developed to facilitate such integration, for example a centralised hub that could facilitate micro-payment collection from different mobile money operators with one integration.

Finally, the maturity of mobile money ecosystems in East Africa has also been key to support the early traction of energy PAYG solutions and those models will need different recipes for success, according to market idiosyncrasies. Similarly, in the goal to achieve universal access to safe and affordable energy, more attention will need to be paid to building strong local capacity and technical knowledge to improve access to quality solar products in markets currently not under the spotlight.