Global Off-grid Solar Forum and Expo: Heading toward the “Pay-as-you-go utopia”?

Last week, our team was immersed in the Global Off-grid Solar Forum and Expo, hosted by GOGLA and the World Bank Group’s Lighting Global Program, in Nairobi. The event brought me back to 2016 when our Mobile for Development (M4D) Utilities programme held a session at the GSMA’s Mobile 360 – Africa event around the concept of a “pay-as-you-go utopia”. While ‘utopia’ was certainly an intentional exaggeration, we were witnessing the early proliferation of the pay-as-you-go (PAYG) model, beyond solar home systems, to clean cooking gas, solar irrigation and prepaid water meters. Through our Innovation Fund, we’ve had the privilege to support this convergence of service providers with PAYG technology at the core of their business models.

The recent off-grid solar event confirmed that in many ways, we’re growing toward this future – where low-income consumers can get access to a range of new products and services through small incremental payments enabled by mobile money. On the one hand, this suggests we’re getting closer to helping households see transformational changes, beyond energy access, by combating energy poverty, yet on the other hand, risks and barriers still pose threats. Here’s our take on those opportunities and challenges that were highlighted at this event.

From PAYG solar home systems to PAYG energy for agriculture, cooking, smartphones and more

Compared to two years ago, the event attracted a significantly broader group of companies and ecosystem enablers all trying to reach consumers through PAYG models, and seeking partnerships and funding to make it happen. The expo was impressively decked out with demos of smart/PAYG solar water pumps from Future Pump and Lorentz, with Lorentz also getting a lot of interest on their digital water dispenser for community water points. Companies taking interest included those operating mini-grids, or hub-and-spoke energy service stations like RVE.SOL and OffGridBox. SunCulture and Burn highlighted the emerging opportunity to replace urban charcoal cooking with electric pressure cookers – sold on a PAYG basis, of course – and are working with programmes like MECS (Modern Energy Cooking Services) to further assess the opportunity.

Future pump Expo

The other trend gaining a lot of momentum is PAYG solar home system (SHS) companies expanding into PAYG smartphones. Recently M-KOPA, a previous grantee, launched their PAYG smartphone in partnership with Samsung and Safaricom. Our current grantee, Vitalite, has also launched their PAYG smartphone offering in Zambia. In East Africa, Trend Solar have done the same and in West Africa, Moon are gaining traction with their own version. The GSMA in particular is excited to see how the PAYG solar industry will address the mobile internet “usage gap” of the 3.3 billion people worldwide that live within coverage of a mobile network but are not using mobile internet. The PAYG smartphone model offers obvious and exciting partnership opportunities with mobile operators as they seek solutions that help make a business case for expanding broadband networks to the 750 million people without mobile coverage. You can read more about the work our GSMA Connected Society programme is doing to address these challenges.

It’s encouraging that the conversation across the industry has shifted from ‘energy access’ to ‘powering opportunity’ with important efforts (highlighted by CLASP) to actually measure how electrified appliances are leading to economic development. Let’s not forget, that if PAYG models proliferate, but income does not increase through productivity, this becomes a ‘dystopia’ instead of a ‘utopia’.

Companies pursue interoperability and broader product offerings to grow faster

Interoperability across software providers, along with debates about interoperable hardware (i.e “open solar”), show that the growth appetite in the sector remains high. The fact that customer relationship management providers Solaris PaygOps, PayGee, and market leader, Angaza, have announced interoperability, means that any PAYG solar hardware can function with any of these software platforms, allowing distributors to more easily sell different products to different market segments. At the same time, the conference hosted a healthy debate about the merits and risks of interoperable hardware, to allow customers to more easily connect appliances from one company to solar systems of another.

As featured in our blog last year, off-grid energy providers are continuing to grow in urban contexts, and embrace a more holistic energy mix. BBOXX and Orange Energie have been making a big push to serve urban customers in the Democratic Republic of Congo, where 81 per cent of the urban population lack access. On prominent display in the expo was Zola’s Infinity product which is an integrated power solution that stores power from both solar and the grid to provide a single supply from multiple sources of energy. They’re testing this in Nigeria, where 22 million small generators are used on a daily basis. It’s no wonder that in this same market, companies like Rensource are developing mini-grids in urban contexts. The sector has moved from speaking about the 840 million people that are still off-grid, to also focusing on the one billion with unreliable grid access.

While some of these interoperability and urban initiatives are still in their early days, it’s clear that many companies see a strong opportunity to grow their product offering and serve more market segments by engaging in strategic ‘co-opetition’ with one another, and with urban energy providers.

Kenya Power Expo marketing Clean Cooking

Mobile money is both the biggest enabler, and the biggest risk for off-grid energy…. representing big opportunities for both industries to grow together

From the very opening of the conference, to the very last session, mobile money and connectivity were mentioned as the biggest enablers for the sector, but also holding some of the greatest risks and barriers to faster growth. This fundamental industry linkage goes back to the initial vision of our programme and our strategic partnership with GOGLA to support greater collaboration across our industries.

Growth in mobile money services has been followed by growth of PAYG solar. The Off-Grid Solar Market Trends Report for 2020 shows that there was a 38 per cent annual increase in PAYG unit sales, compared to a 10 per cent growth in sales for the off-grid solar sector as a whole. West Africa, a region which has also seen significant growth in mobile money penetration over the past five years, has seen the fastest increase in PAYG unit sales in the last year, reaching 47 per cent of all unit sales and 92 per cent of market value in that market in the first half of 2019. It is clear that mobile money penetration is a key driver of PAYG, but recent research has shown that PAYG also provides a positive feedback loop to drive more usage of mobile money.

New data from GSMA and UNCDF has finally quantified the value that mobile operators see from PAYG solar. As we shared in our blog, a mobile operator in Benin saw PAYG clients increase their mobile money transaction frequency by 113 per cent in the first six months of using a PAYG solar product. Even when removing mobile money transactions for solar payments, transaction frequency still increased by 65 per cent showing that PAYG solar increases other mobile money use cases such as person to person transfers. In Benin, as well as in other markets, we saw between 21 and 31 per cent of PAYG solar customers were new to the mobile operator’s mobile money service, or re-activated their mobile money accounts because of the PAYG service. These findings were echoed by a UNCDF paper that found 16 per cent of PAYG solar customers in Uganda were new mobile money subscribers for MTN. The full GSMA report on this research will be published in the near future.

The GSMA’s analysis shows the increased usage of mobile money following PAYG solar adoption.

However, three risks and barriers remain:

  1. Connecting to a mobile operator’s mobile money platform is still expensive and time consuming, creating a barrier for small PAYG service providers in many markets. It was this issue that the GSMA Instant Payment Notification Hub (IPN Hub) set out to address. The IPN Hub provides an API for a single point of integration between PAYG companies’ back-end platforms and multiple mobile money platforms to have real-time notification of customer payments. The solution is now live in five markets with six mobile operators and 13 utility service providers. We’re currently in the midst of transferring this asset to the industry following a competitive selection process. We see there’s still a huge need for this service and are optimistic that this transition will allow the IPN hub to grow more rapidly.
  2. Mobile money tax hikes hurt the PAYG solar industry. The UNCDF study in Uganda was able to demonstrate a clear slow-down in activations of PAYG solar at the same time as a new tax was implemented on mobile money transactions. It shows that mobile money taxes had a nationwide impact on the uptake of PAYG, with the mobile money activation rate of new PayGo customers decreasing in 100 districts (of 112). Beyond this, the tax may have also affected the level of mobile money activity of existing PAYG users decreasing their transaction frequency among other use cases such as P2P transfers. This clearly demonstrates that regulations and policies have an impact far beyond mobile operators, but more broadly on energy access and financial inclusion.
  3. Mobile lending apps may be leading to a ‘dystopia’ of over indebtedness and there are fears this could contaminate the PAYG solar industry. A recent Bloomberg article highlights the predatory nature of some mobile lending apps, which are typically unregulated. This is in contrast with the mobile money industry which is regulated. GOGLA has followed in the footsteps of the GSMA Mobile Money Certification programme to support its members in adhering to a consumer protection code of conduct. Nonetheless, there are reasonable concerns that the negative impacts of mobile lending apps could lead to policies that detrimentally affect financial inclusion and the PAYG solar industry.

Despite these, increasing evidence of the synergy between the mobile industry and energy services suggests there’s far more opportunity to achieve social and commercial impact through collaboration. The GSMA looks forward to continuing to support its members and the off-grid solar industry in fostering successful partnerships.

We would like to end this blog by thanking GOGLA for inviting us to take part in the conference and look forward to our continued collaboration on energy access and financial inclusion.

The GSMA Mobile for Development (M4D) Utilities programme is funded by the UK Department for International Development (DFID), USAID as part of its commitment to Scaling Off-Grid Energy Grand Challenge for Development and supported by the GSMA and its members.

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