How do you get electricity to the millions of people who still don’t have it? One answer is to build an electricity grid. Another is to do what Tanzania is now doing: Give people a small solar panel and battery kit, so they have their own power.
As developing nations look to bring electrification to the masses, they face a choice: pursuing the course taken by the developed world, which is expensive though bountiful power-wise, or a cheaper, simpler-to-implement option that gives people some of what they want, but not everything.
Tanzania is choosing the latter with its One Million Solar Homes initiative. Delivered by an American company called Off Grid Electric, the program looks to deliver cheap “solar as a service” much like a mobile phone package. In return for a $10 starting fee, Tanzanians get a kit that generates enough power for lighting, mobile phone charging, and running a TV.
“One in five people is not served today by grid power,” says Xavier Helgesen, Off Grid Electric’s CEO. “It’s a huge difference to their lives and it’s absolutely commercial with support from the development community.”
Off Grid Electric, which is based in Tanzania, has a contract with the government and, vitally, it thinks it can make a profit. Venture capital groups think so too. The company has received more than $30 million from Vulcan Capital, Omidyar Ventures, Zouk Capital, and SolarCity, the largest U.S. solar installer. It’s got additional support from the Overseas Private Investment Corporation, USAID Development Innovation Ventures Program, SNV Netherlands Development Organization and SunFunder.
“We provide an interesting option where we’ll take your unprofitable customers with a completely different business model because they’re profitable to us. That’s why the government is so excited about it, because we’re not asking for a handout for each home we light up,” Helgesen says.
Eight million households in Tanzania lack access to electricity, so there’s plenty of scope. Off Grid Electric, which calls itself M-Power in Tanzania, leases its unit through a mobile phone. People pre-pay to get a code that they enter on the device. Then they choose to pay the balance as if they were pre-paying for phone credit. It’s up to them how quickly they go, with minimum daily payments of about 25 cents. It costs Off Grid Electric about $100 to install a system, all told.
Helgesen says it’s unprofitable for developing countries to develop traditional grids for everyone. While high-users like factories need grid-sized power, a lot of retail consumers are happy with the 10-50 watts from a solar kit. It’s cleaner and cheaper than using kerosene lamps for lighting and walking miles to charge mobile phones, he says.
The question for Off Grid Electric is how to manage leases with millions of people who don’t have credit histories. Helgesen says the company has a big data system that’s able to predict default rates, though time will tell if its algorithms are accurate. On top of that, it also needs to maintain all the kits and offer after-sales care.
Helgesen reckons we’ll see countries like Tanzania build “hybrid grids” with full power for big electricity users and low-power renewables for millions of others.
“Our business is based around targeting places where power is non-existent, expensive or unreliable–all the places where the grid doesn’t work every well,” he says. “All we need to do is make sure we have the political support and infrastructure to deliver this service, bring in the investment and then repay that at a profit.”
It sounds possible, though not straightforward.