Over five years ago, two simple ideas were slowly but surely taking hold around the world: mobile money (which allows people to transfer money using their mobile phones) and crowd-funding. Little did we know then that what we were building at Nuru Energy would ultimately rely on these two innovations to stand a chance of working. After all, what could mobile money and crowd-funding possibly have to do with providing the poorest of the poor with low-power electricity?
We started five years ago with a simple notion: that we could build a sustainable, scalable, pedal-powered way to displace once and for all the dirty kerosene that more than 2 billion people still burn to have light after dark. Study after study showed that the poorest people were spending upwards of 25% of their income on kerosene for light, amounting to US$ 17 billion a year in Africa alone. Many of these studies clearly and accurately describe the ongoing difficulties in changing the status quo, from high investment costs in alternatives such as solar power to a lack of credit or problems with maintenance and repairs.
That being said, there are finally some organizations that are serious about innovating to overcome these barriers. At Nuru, the starting point was to better understand the context in which our idea would be used. The poorest people have the same desire for reliable, affordable energy as everyone else in the world. Unfortunately, their options so far have been neither reliable nor affordable.
For a reliable and efficient energy source, we looked at human power, instead of solar: in particular, pedal power. As archaic as it may sound, it is one of the most efficient ways to create low-power electricity and is available virtually for free, anywhere and at any time.
To address the issue of affordability, we looked at two successful business models. The first was from the mobile telecom industry. Given the explosive growth of mobile subscribers in rural markets, mobile network operators have clearly tackled the issue of affordability. Their model is to build the towers and make money on talk-time, rather than on margins from selling handsets.
The second model we drew inspiration from was one that relied on collaborative consumption as a means to bring down the per-user cost for consumers. Examples here include Netflix and Zipcar – you don’t have to buy the car or the film, you just pay for using it when you need it.
So how about stand-alone pedal generators that are easy to use anytime and anywhere, located centrally, and owned and operated by entrepreneurs within villages who don’t take a margin on the portable LED lights that they sell to consumers but only make money on recharging those lights? Consumers don’t have to pay anything substantial upfront. They receive a simple yet high-quality and long-lasting bright light that combines an LED and a rechargeable battery. They then pay as and when they recharge the light. We knew we were on to something.
We have scaled up to over 1,200 schemes in villages across East Africa. However, we have had to evolve and adjust as we went along. For example, when we realized that we could not make any profit on the upfront sales of the rechargeable LED light, we decided to take what we called a “microfranchise fee” instead from our entrepreneurs. With 70 entrepreneurs, this was physically do-able. With 1,200, forget it! We looked again at other technologies that could help. Mobile money came to the rescue; what better way to conduct transactions simply with our remote and at times physically inaccessible network of entrepreneurs? Now all of our “POWERCycle” generators are “mobile-money enabled”.
To further increase market penetration, our entrepreneurs have started selling the lights at below cost as a loss leader, knowing that they can recoup the loss through recharge revenue. Crowd-funding has proven effective in helping here. Social lenders offer village-based entrepreneurs a loan to cover the full cost of the lights and wait to get their principal returned, which is paid over time from a portion of the recharge revenue (recouped via mobile money!).
Innovation builds on innovation. Five years ago our technology and business model could not have worked. Today, however, as we combine old and new technology, we have a fighting chance to alleviate energy poverty once and for all.
Sameer Hajee is a Schwab Foundation Social Entrepreneur who participated in the Annual Meeting of the New Champions in Dalian, China.
Image: A man scrolls through his mobile phone to carry out a money transaction in Nairobi. REUTERS/Noor Khamis