Case Study 5: PEG Ghana – Licensing Solar-as-a-Service in a New Market
In 2013, we launched the M4D Utilities Innovation Fund (formerly MECS) to test and scale the use of mobile to improve or increase access to energy and water services. With the support of the UK Government, GBP 2.4 million in Seed and Market Validation grants was awarded to 13 organisations in 11 countries across Africa and Asia.
Today we continue our Case Study series on lessons learned from these 13 projects. A core output of the Innovation Fund are the lessons and evidence base developed throughout the grant timeline that can inform ecosystem players on topics such as commercial benefits to mobile operators, and social and economic impacts for the underserved. By making these lessons public, we intend to accelerate scaling and sector growth. Since the inception of these grants, we have already seen significant expansion and innovation to mobile-enabled products and services for water and energy delivery, as well as sanitation and the business models that support them.
The fifth Case Study in our series focuses on PEG Ghana, which provides pay-as-you-go (PAYG) energy services in Ghana’s off-grid market. Through licensing their technology from other service providers, they have learned about the opportunities and challenges in licensing technology and replicating business models.
In December 2013, the GSMA awarded PEG a GBP 180,416 Market Validation grant to replicate two Solar-as-a-Service business models and technologies from Tanzania to Ghana: OGE’s solar home systems (SHS) and Devergy’s smart micro-grids. The micro-grids had GSM-based machine-to-machine (M2M) communication gateways to remotely turn household connections on and off with ZigBee-enabled smart meters at each house. Conversely, the SHS were turned on by manual entry of a code sent via SMS after payment. For both technologies, PEG set out to leverage mobile money for customers to make pre-payments on a continual usage basis (rather than rent-to-own). Due to variable network coverage in rural Ghana, PEG worked with several Mobile Network Operators (MNOs).
The main objective of the grant was for PEG to test licensing technologies and business models for replication into a new market.
Other key objectives were to:
• Demonstrate the benefits of mobile money on a remote energy business for mobile operators and customers; and
• Gain market insights and attract follow-on investment.
Some of the most valuable findings from the grant are outlined below and are explained in more depth in the Case Study.
Licensing new technologies and business models requires significant investment of time and resources from both parties through a robust agreement and partnership.
It was largely assumed that replication would require simply importing the energy hardware and software and mirroring general business operations. However, given the contextual differences between countries and companies (i.e. mobile money maturity, technical capability, etc.), and evolving technologies and systems, replication requires a hands-on approach from the licensor to transfer knowledge and technical support and to build local business operations. PEG’s original licensing agreements were limited in some aspects, which, in tandem with the unique challenges faced on the ground, resulted in ad-hoc improvements and under-developed business operations. These factors, in addition to changing supplier priorities, ultimately led PEG to develop a new licensing agreement.
Benefits to mobile operators and energy providers from mobile payments require strong partnerships and commitment.
Initially, PEG did not invest in the level of partnership and time required to leverage mobile money through backend system integration, customer registration and adequate agent coverage. Nor did their contracts include sufficient support in this area. This may have been particularly important in Ghana where the mobile money ecosystem is less mature than in Tanzania from where the models where licensed. Ultimately, customers were not utilising mobile money as a way to pre-pay for their service; cash was given to PEG agents who then made bulk transfers, thereby putting revenue collection at risk and by-passing intended benefits for mobile operators through increased mobile money usage.
Sales responsibilities should be separated from repayment collections
PEG sales agents were responsible for finding new customers and collecting weekly pre-payments from existing customers. As mentioned above, PEG customers did not use mobile money themselves and were dependent on agents’ availability to purchase electricity. At the same time, agents were more heavily incentivised to find new customers rather than collecting payments from existing customers. As a result, PEG’s services were not considered to be more convenient and reliable than alternatives, and usage – and therefore payments – were below expectations.
As a result of the experiences gained through this grant, PEG developed a licensing partnership with a new solar home system provider, M-KOPA, whereby both M-KOPA and PEG have allocated significant resources to build strong operations from the start. PEG has gone on to refine their business model and has obtained USD 3.2 million in investment – one of the key impacts that this innovation fund seeks to achieve. Through their new licensing partner, PEG anticipates reaching 500,000 households (2.5 million people) by 2018.
In the coming weeks and months we will publish more Case Studies to share insights from the other Phase 1 grantees. Follow the series on our blog and please share your views on any of these findings by contacting us at firstname.lastname@example.org.