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Thursday, May 20, 2010

Looking for Killer Apps at Lighting Africa 2010

By Nathan Wyeth

Solar for light and phone charging

At the World Bank/IFC Lighting Africa Conference in Nairobi, some numbers are looking good for a change.  There are still 1.6 billion people without access to electricity, but decreasing costs of solar panels and LED lighting have put individual solar-powered lamps at a price that is affordable for much of the base of the pyramid.   Solar lantern distribution is projected to grow at 25-40% rates over the next 5 years in Africa.  

Does this mean the path to modern energy for rural Africa is in clear view?  I'm not sure it is, which is why when I'm meeting people at this conference sponsored by the IFC's Lighting Africa program, I'm saying that I'm still looking for killer apps.  Engineering better, cheaper products is often a process of putting one foot in front of the other, but distributing them will require side-stepping the barriers that solar energy has continually run up against at every price point.  

And even if the goal is defined as lighting for Africa, lighting products themselves may not be the best starting point or a standalone approach, as opposed to more comprehensive platforms for energy access - laying the groundwork to go from portable pico-power retail products to household and community scale energy distribution, in terms of both business infrastructure and customer readiness/ability. 

Even at these huge projected growth rates that are probably as much as any single product distribution company can handle, Gaurav Gupta of Dalberg Development Advisors is quick to point out that over 5 years, that will take solar lighting market penetration in Africa from an estimated 1.3% to an estimated 2.3%.   So I am on the lookout for approaches that will also open up whole new horizontal growth and distribution in this sector.  

I'm not sure I've found the killer apps here just yet, but there are promising new ideas floating around, some embodied in new start-ups operating in Africa.  Here are a few things that I'm looking for:

- Defining and increasing the value of solar by linking to income and tangible payback.  There is generalized information available on what people currently pay for kerosene lighting, but very fuzzy understanding of actual willingness to pay for new energy products - and this may reflect unclear marketing and product positioning as much as lack of data collection.  

Anecdote-based discussion is unfolding at this conference about whether end-user financing is necessary for solar lighting products that cost anywhere from $10-50, illuminating the fact that while product designers have been focused on a combination of lighting price and quality, there's no clearly established understanding of what people will pay for modern lighting at what income levels. 

What is clear is that payback and specific utility matters more than price.  For example, Barefoot Power is having great success with its Firefly 12 product - not the least expensive in its line - because this can charge mobile phones.  If solar is linked to specific utility, or payback for lighting is clearly defined, customers will be able to tell retailers what they will pay for it and the supply chain will be able to adjust accordingly.  

- Building customer relationships.  What makes solar attractive as an energy source makes it more difficult as a retail product - if you do a good job with your lamp product you won't see your customers again for a few years and they won't need to buy a single thing from you until they're ready for a second lantern.  But as a new technology, solar product companies need to develop intense technology loyalty and evangelism and probably need to be focused as much on reselling to existing customers and finding new ones.  How to stay connected to customers who hopefully won't have to talk to you more than once ever few years?   

Companies that offer energy as a service might begin by suppling rechargeable battery stations that can power a home's electricity need, but could then build on this by installing distributed power generation with the same customers at a much lower cost of acquisition and much greater readiness to install and value a household solar system.  

- Building distribution and maintenance platforms.   As alluded to above, electricity is a unique product.  It's only useful in tandem with other products, and some certainty of supply is needed before those products become worth it.

Distribution platforms offer the opportunity to meet energy needs beyond lighting - both in terms of energy supply and the appliances that can be linked specifically to distributed energy generation.  For example, an energy efficient fan is valuable when it can be linked to a reliable energy supply, and solar panels gain in value when they can power an energy efficient fan.  I would love to find an energy company that could sell both to a household in tandem.  

In places with even more constrained ability to pay for energy services, a village energy vendor who recharges phones or LED lamps from a solar array can become a future distributor of products and the village expert in repairing solar panels.

These ideas are peeking through the cracks here at Lighting Africa, but perhaps by default, disruptive ideas are not an easy fit for this kind of forum, focused specifically on delivering lighting.   Development banks operate on a programmatic basis, with certain starting points, end points, and program strategies in between.  A focus on lighting markets - rather than energy markets - is one such construct that I'm not sure is helping here.  Within this, the IFC is focusing on product quality.  I can't disagree with supporting high quality lighting products, but this presupposes that retail solar lantern distribution is actually the first step that you want for electrifying Africa.  Disruptive approaches may pop up here but will go against the grain.   

Battery re-charge subscription services, income-generating village energy vending opportunities, and technology-agnostic energy retail chains are among the disruptive and promising approaches that I'm seeing here.  Mobile communications and payments can and will be wrapped into effective approaches - they may become killer apps in themselves.  And as one persuasive participant said towards the end of the conference, when solar companies get as smart at marketing at Safaricom has in Kenya, these products will find their way into customers' hands. This sector is moving fast but the clear winners have yet to emerge.  

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