© The Financial Times Ltd 2016 FT and 'Financial Times' are trademarks of The Financial Times Ltd.
January 17, 2014 2:15 pm
In much of Africa, families without access to electricity rely on kerosene lamps. Expensive, unsafe and unhealthy, they also provide only a dim light. But while solar alternatives are far cleaner and cheaper, widespread use of this technology will rely on innovative forms of payment and distribution.
Solar itself offers many benefits. First, eliminating kerosene lamps removes a significant source of illness. Inhaling the fumes from just one kerosene lamp is equivalent to smoking 40 cigarettes a day, according to SolarAid, a charity that is a leading provider of solar power in Africa.
The cost in human life is high. In sub-Saharan Africa, indoor smoke causes some 400,000 deaths a year. “A lot of people don’t realise how dirty kerosene is, but everyone is inhaling this,” says Shuaib Siddiqui, portfolio director at Acumen Fund, a non-profit venture fund that has invested in d.light, a company that provides low-cost solar lanterns.
Bad health leads to medical bills that poor families find hard to afford. Moreover, traditional forms of lighting and power – kerosene lamps, candles and disposable batteries – represent a large chunk of family expenditure.
Steve Andrews, SolarAid’s chief executive, puts it into context. In the UK, total energy costs represent about 3 per cent of average household expenditure, he says, while in rural Africa, lighting alone eats up around 20 per cent.
Crucially, the falling cost of photovoltaic technology has made solar lamps more affordable. The World Bank is supporting the development of markets for improved off-grid lighting through the Lighting Africa project. “Now, it’s possible to build a distribution network in an emerging market for solar lighting,” says Rachel Kyte, group vice-president and special envoy for climate change.
Solar lights are affordable and are also cheap to run, thus saving families money on a continuous basis. Mr Andrews cites research showing that customers who stop using kerosene after purchasing a study light for $8 save on average $85 a year – a large sum for a poor householder.
The money saved tends to be spent on healthcare, education and better food. “The cost benefits are overwhelming,” he says. “That’s the reason we think solar lights are going to change Africa in ways people can hardly imagine.”
Solar lamps bring other developmental benefits. Having a cheap source of lighting means activities can be extended into the evening. Children can study at night, improving their academic performance.
“Micro-businesses can open for longer hours and work at more flexible times,” says Ms Kyte. “And that has an impact on women’s economic empowerment.”
However, getting the message across is not always easy, particularly when a solar lamp represents a significant investment for families who may be reluctant to risk buying an unfamiliar product.
“When your customers are the poorest people in the world, they can’t afford to buy something that breaks in two weeks, and there have been plenty of bad products put on the market in Africa,” says Mr Andrews.
The challenge, therefore, has been to build demand for the technology in poor communities.
To achieve rapid growth, SolarAid’s model has been to sell lamps at an affordable price through a company called SunnyMoney. While SolarAid’s funding is provided by philanthropic donations, SunnyMoney is run as a business, selling lights at full retail price.
“We need to encourage the private market for solar lights,” says Mr Andrews. “If we sold lights at a subsidised price or gave them away, that would undermine private enterprise trying to enter the market.”
Offering lamps that also charge mobile phones – used in Africa for everything from money transfers to agricultural support services – has been another way to increase demand for solar technology. “As soon as you had cell phone charging, you started to see real demand for the lamps,” says Ms Kyte.
However, solar systems for entire homes and lamps that also charge phones are unaffordable for some families. Here, one option is to combine solar sales with innovative payment mechanisms.
Mr Siddiqui cites the partnership between d.light and M-Kopa, a Kenyan mobile technology company, to provide affordable home solar systems. Using GSM chips, the devices can be controlled remotely. Customers pay a monthly fee via their mobile phone and, so long as they keep up the payments, they can use the system. If a payment is missed, it is turned off.
For M-Kopa, the “pay-as-you go” model eliminates the risk of arrears. It also gives families budgeting flexibility, since they can forgo lighting when funds are tight but use it again as soon as they can afford to. “What we’re seeing with M-Kopa is mobile platforms and solar technology converging,” says Mr Siddiqui.
Such innovations could eventually flow back into mature markets, particularly if it becomes cheaper and more efficient to power residences using rooftop solar panels. “Imagine building new homes in the US that don’t need to be connected to the grid,” says Mr Siddiqui. “You’d meet your energy needs and pay for it each month like a utility bill.”
Copyright The Financial Times Limited 2016. You may share using our article tools.
Please don't cut articles from FT.com and redistribute by email or post to the web.