Making energy truly accessible

A creative way of selling solar energy is gaining traction in sub-Saharan Africa: customers can pay as they go.

Only one in six rural inhabitants in sub-Saharan Africa has access to electricity. For households living off the grid, kerosene lamps are the primary lighting source. The World Bank estimates that breathing kerosene fumes is the equivalent of smoking two packs of cigarettes a day, and two thirds of adult females with lung cancer in developing nations are nonsmokers.

Some observers rightly point out how the poorest people in the world are not just paying a bit more for their energy, they’re paying a disproportionate amount! Across the U.S. and U.K. electricity from a utility costs between 10 to 15 cents per kilowatt-hour (kWh). A villager in rural Kenya or Rwanda, however, pays an equivalent cost of $8 per kWh for kerosene lighting. Often 30 percent or more a family's income is spent on kerosene. Charging a mobile phone is even more expensive. That same villager would pay nearly 400 times more to charge a mobile phone in rural Kenya than in the U.S.

Solar-powered charger kits are a promising alternative, but many rural families cannot afford the up-front cost of these systems, which start at $50.

With a Pay-As-You-Go model (PAYG) for solar kits, on the other hand, customers can instead pay an up-front fee of around $10 for a solar charger kit that includes a two- to five-watt solar panel and a control unit that powers LED lights and charges devices like mobile phones. Then they pay for energy when they need it—frequently in advance each week—or when they can (say, after a successful harvest). In practice, kits are paid off after about 18 months and subsequent electricity is free to the new owner. PAYG customers are finding that instead of paying $2 to $3 a week for kerosene, they pay less than half that for solar energy.

A US company has integrated an analog modem into their solar charger that “talks” with the customer’s mobile phone to authenticate a transaction.  Companies report that the PAYG business model replicates well from country to country. They reach rural communities by working with local distribution partners within each country, who also make money from each solar kit sale.

Yet challenges remain. Many PAYG start-ups are running into limits of working capital; companies front the initial cost of these solar kits and are not fully reimbursed for 18 months. This leads to cash flow constraints that intensify when customers default. 

But for now, the advantages are more, in terms of energy accessibility and reducing pollution from burning kerosene and firewood!