Over the course of the past decade, the off-grid solar sector has seen impressive growth in emerging markets, offering affordable and clean energy solutions to people living without access to the grid. By-mid 2015, Bloomberg New Energy Finance estimated that the off-grid solar market had lifted 21 million individuals to the first rung of the energy ladder (BNEF, 2016, Off-Grid Solar Market Trends report 2016).
In 2013, when the Mobile for Development Utilities Innovation Fund was launched, interaction between the off-grid energy sector and the mobile industry was still nascent. With the reach of mobile technology stretched far beyond the energy grid, the GSMA recognised the potential for mobile to become a key enabler for energy access. In fact, 770 million of the 1.2 billion people living without access to energy are covered by mobile networks.
Today the Mobile for Development Utilities programme has funded 22 projects that leverage mobile technology to extend the reach of affordable, clean energy, and their success has demonstrated the proof of concept for these models. This is particularly clear in rapid growth of the pay-as-you-go solar model, which leverages mobile payments, machine-to-machine connectivity and other mobile assets. Up to 40,000 new solar home systems were being installed each month (GSMA, 2017, Lessons from the use of mobile in utility pay-as-you-go models).
Our very first energy grantees pioneered the use of mobile channels to trial pay-as-you-go energy solutions, and today are amongst the largest players in the sector. We caught up with them to learn more about their progress, how they achieved scale and what additional products or services they are offering. Across the portfolio, we identified the following trends:
Our early energy grantees are reaching impressive scale and expanding to new geographic locations
Fenix International, received a grant to scale their ReadyPay power system, which reached 13,000 units installed in 2014. Today, ReadyPay has reached over 115,000 households with clean energy, payable through small instalments via mobile money. Fenix estimates that about 700,000 Ugandans are benefiting from bright lights and clean power. Fenix has launched into new markets in West Africa, piloting their products through Orange in Cote d’Ivoire and Senegal.
Mobisol has expanded vastly since being awarded with the GSMA grant in late 2013. Today the company has installed 75,000 large solar home and business systems in Rwanda and Tanzania and has expanded to Kenya, reaching 375,000 beneficiaries. Mobisol focuses on large solar home systems that are able to deliver 100 per cent of the electricity needs of customers, illuminating entire households, and powering large household devices. In addition, approximately one third of customers make use of Mobisol’s solar power commercially, running charging businesses, barber salons or operating village cinemas. Approximately 25,000 businesses in East Africa generate additional household income, and Mobisol power has created over 1,000 permanent jobs.
Easypaisa was awarded a grant to trial a mobile operator-led solar service. The grant was designed to trial the sale of 125 solar home systems and by December 2016 Easypaisa’s two vendors Roshan and Brighterlite each exceeded sales of 2,000 SHSs. Easypaisa is now planning a nationwide roll-out of its lease-to-own solar home system model. The grant demonstrated clear value for mobile operators in partnering with PAYG companies, seeing growth in adoption and use of their mobile money services, and extending the credit scoring algorithm developed for the PAYG solar systems to other uses.
Kamworks was awarded a seed grant to roll out PAYG technology in Cambodia, and today continues to work to prove the model’s viability and refine its preventive maintenance capability. Kamworks now wants to roll out its PAYG technology internationally, and is currently looking for an equity investor.
The commercial promise of mobile-enabled energy models has been recognised by private sector investors
Today, the proof of concept for mobile-enabled energy has been demonstrated, as past and current energy grantees have raised over $174 million in follow on commercial investment.
In 2015 Lumos announced it raised $90 million from private equity investors and development banks to deploy pay-as-you-go solar power systems in Nigeria. This marked the biggest fundraising round to date for the off-grid market according to Bloomberg. Lumos received a GSMA grant to trial the use of airtime as payment for PAYG solar energy, and of GSM-based machine-to-machine (M2M) connectivity to remotely monitor usage, billing and performance. Having proven the viability of this model, Lumos has announced the nationwide roll-out mobile electricity across Nigeria.
Since completing its seed grant testing PAYG solar products, EcoEnergy has shifted its focus to the sale and service of PAYG solar systems. Having raised a $500,000 seed round and securing a consumer financing partnership with a microfinance bank, the team aims to reach 2,400 new customers in 2017.
Positive repayment rates allow energy providers to offer customers additional products, and provide them with positive credit scores.
Through the Mobile for Development Utilities grant, M-KOPA was able to roll out a solar TV system, enabling customers who successfully repaid their solar home system to move up the energy ladder and upgrade to a larger product. Today, as 500,000 households are connected to solar energy across Africa, 50,000 of them own solar TV systems sold. 150,000 customers upgraded for further products and services including water tanks and energy-efficient cook stoves. CEO Jesse Moore says, “Our customers don’t just need a panel and a battery. They are looking to M-KOPA to provide products and services that help them be more connected, productive and financially secure”.
Mobisol and MTN have partnered to offer customers the option to purchase smartphones through small instalment payments via mobile money. This initiative is aiming to drive digital inclusion in Rwanda, improving the affordability of more advanced mobile handsets. Mobisol also pilots a number additional products such as other loan, insurance, agricultural products and more.
Another important aspect of the PAYG model has been the opportunity to create positive credit scores for previously unbanked individuals. Several PAYG solar companies, including Fenix and M-KOPA are using data from the positive repayment of loans to provide their customers with credit scores. The credit score allows customers to access additional financial services, such as school fee loans and increased loans to purchase additional products energy and household products.
Additional services, such as health insurance, are being bundled-in with energy
PEG, was awarded a grant to license and replicate PAYG solar home systems and microgrid solations from Tanzania in Ghana, ultimately becoming a licensee of M-KOPA, Today they have launched in Cote d’Ivoire. To reward its solar customers, PEG has developed a programme delivering free health insurance. A primary reason why customers cease repaying their loans on their rent-to-own solar systems is the occurrence of health emergencies, which drain family savings. Partnering with BIMA and Prudential Lifeligible, PEG now offers free hospitalisation insurance cover to customers, to overcome this challenge and reward customer loyalty. The project has been piloted with over 2000 families and is being scaled across PEGs markets.
Finally, the impact of energy grantees has been impressive:
Access to a personal electricity source has an enormously positive socio-economic impact on lower-income households. The Mobile for Development Utilities fund counts over 2.5 million direct beneficiaries, who have received improved access to clean energy for both lighting and productive use. Environmental and health benefits of these grants have also been impressive, reducing the use of kerosene, which releases noxious fumes, and saving large amounts of CO2 emissions.
This initiative is currently funded by the UK Department for International Development (DFID), and supported by the GSMA and its members.