Enabling Local Entrepreneurs to Offer Energy Access
While the work of companies led by experts may be crucial to prove new solutions, we believe that in order to provide access to basic services at scale, the world needs viable business models that encourage local and national entrepreneurs to meet the needs of their neighbors. Lumeter Networks’ mission is to overcome the barriers that often stand between energy businesses and the 1.3 billion still lacking access to electricity.
Since around half those individuals live in areas where extending the main utility-grid is uneconomical, the solutions will have to come from distributed generation like mini-grids and stand-alone solar solutions (aka “pico-solar”).
While the solar lantern market is growing significantly, we think that most people who buy a solar lantern really want a higher level of energy service. More importantly, they can afford to pay for better service if the larger cost can be spread over a reasonable time period.
Solving the difficult challenge of getting people to pay for electricity over time is where Lumeter comes in. We’ve developed electronics to control power flow, web- and SMS-based accounting to track payments, and we are even starting to work on the financing in collaboration with investment partners.
We realized right at the start of Lumeter that there are multiple solutions to providing power depending on the resources available (solar, wind, hydro, biomass), the density of homes (mini-grid vs. stand-alone), and the amount that customers are willing and able to pay for energy services.
Whatever the appropriate solution, Lumeter's technology allows customers to pay as they go using prepaid activation tokens – this also ensures that electricity supply is turned off when customers haven’t paid. This dramatically reduces the cost of payment collection, which would otherwise eat up most of the average $2/week that a household has available for basic energy services such as lighting and phone charging.
Lumeter started by developing meters for mini-grids, (where energy sources are shared across multiple consumers) and now have solutions for both DC and AC options. These incorporate sophisticated power-management, for example setting different power limits to different customers, or providing a daily amount of energy on a subscription basis.
Mini-grids are often the most affordable solution in areas with densely packed houses and low power requirements; however, they’ve faced formidable barriers, both from governments that want to regulate and tax them like normal utilities, and from cultural-specific factors, for example villagers who are unwilling to buy power from a grid controlled by a different sub-community of the village.
For these reasons, stand-alone Solar Home Systems (SHS) are taking a larger share of the market than mini-grids. It’s a highly competitive market, with a number of well-known branded solutions and an even higher number of white-label manufacturers. We’ve developed a solution that can be retrofitted into most of the box-type SHS or added to the component style systems (where batteries, panel, charge control, and optional inverter are bought separately and integrated by the supplier). Several manufacturers are in the process of incorporating our technology and are just starting to take orders from distributors across Africa and Asia, at incredibly low price points around $100.
Whether the electricity comes from a shared solar array, or a single solar panel on the customer’s roof, the payment models are similar. In all cases, the challenge is to collect and track small payments from customers to the provider. Mobile Money is really only pervasive in a few countries, and even where it is used, most customers do not (yet) keep balances in their accounts so alternatives are needed. In Zambia we set up a local shopkeeper as an agent, who used SMS to purchase tokens, maintaining a small virtual balance by depositing money with the provider. In Peru, we tied into an existing network of mobile airtime vendors through their back-end servers.
Our latest project is to incorporate finance into the chain. Most new energy entrepreneurs entering the PAYG field need about $5,000-$20,000, which is more money than a local bank will lend, but far too little to interest impact investors. Scalable Energy Access Loans (SEAL) will tackle this problem with loans to energy entrepreneurs that start small and scale as their operations grow. We’re also working to leverage philanthropy, thereby allowing entrepreneurs to prove their model before accessing commercial finance.
One of our premises is that there won’t be one single solution to poverty, instead, there will be an ecosystem of related solutions. The challenge we’ve had to face with that premise is the necessity of flexibility to take advantage of whatever infrastructure is present, without depending on its robustness or stability. For example we’ll build on mobile infrastructure – GSM service, Mobile Money – wherever it exists, but we can operate without it.
Our challenges to the reader …
• How can we think of solutions in terms of an ecosystem of related businesses rather than a single vertically integrated, expat driven solution? For example when we ask what a business’ impact is, we are implicitly assuming that the business is handling the full chain.
• What sources of investment could be attracted by a model of small, easily disbursed loans to entrepreneurs?
• What other technologies could a Pay-As-You-Go model help scale a solution?
We’d love to hear from you. Please comment below or email [email protected]