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The team behind EGG-energy has a statistic they cite often: In Tanzania 80 percent of the population lives within 5 kilometers of a transmission line but only 10 percent has access to electricity. To help solve that “last mile” problem, the team, which hails from MIT and Harvard, decided to create a business model that closes that gap, not by building out electrical distribution lines, but by “using feet, motorbikes and buses,” or a bottom-up grid explained EGG-energy CEO Jamie Yang in an interview with us. The result is a subscription-based battery service — a Netflix of batteries — where customers can pick up a fully-charged battery on the way to work or while shopping for groceries, and a few days later swap out the empty battery for another charged one.
The idea is not unlike the battery swapping concept that electric vehicle infrastructure startup Better Place has been working to build in various countries, and the EGG-energy team told me that they did think about Better Place’s business model in the planning stages. But while Better Place looks to couple its batteries with electric vehicles, EGG-energy’s customers are using the lead-acid batteries to power much more basic devices: lights, radios and cell phone chargers.
Here’s how it works: EGG-energy signs up a customer that is willing to pay $27 for the first year’s subscription service, and 40 cents per swap of a depleted battery for a charged one. EGG-energy outfits the customer’s home with wiring for lights, cell phones and radios, and the customer can immediately get the first fully-charged battery.
The company has built its first distribution center in rural Tanzania and placed the location close to local bus and commuting routes. The batteries are much smaller than a car battery, making them relatively easy to transport to and from the distribution center. Customers are used to carrying food and water over the same routes, so adding on a battery isn’t too much of a stretch, explained Yang.
The most surprising benefit (to me) was that the EGG-energy system can save its customers money on energy costs. The company explains in its executive summary that its target customer spends $5 per month on kerosene and $3 per month on AA batteries, with an average total of $96 per year for lighting and the use of a radio. But with eight swaps per month, the annual cost of the service in total is $65. “Switching to EGG-energy therefore saves a typical household $30.60 a year on its lighting and radio needs,” says the company.
The financial savings might be what initially attracts the customer, but the other benefits are more game-changing. The kerosene lamps that many households in the developing world burn at night — to study, cook, socialize, read — are both dirty and dangerous, and EGG-energy-powered lighting in homes can reduce carbon emissions. The defacto connection to the electric grid also gives households more reliable connections to communications like cell phones and radios.
So far EGG-energy has built its first distribution center in November 2009, signed up its first 60 customers and completed feasibility studies that have proven the business model and demand on a small scale. But Yang, who is based in Tanzania, says that 2010 is a huge year for the startup, as it looks to expand rapidly, and test the model in more urban environments.
Success, and beating competition who could easily copy the business model, “relies on rapid expansion,” explained board member Alla Jezmir. Some ways that the company is looking to scale include: working with local entrepreneurs to franchise the distribution centers, working with local NGOs on promotion and resources, and even working with larger corporations like telcos in the area that would have an incentive to see more stable cell phone use.
It’s an intriguing idea, though one that faces a lot of hurdles. Yang says the biggest difficulty has been figuring out how to do businesses in the developing world as an outsider — learning who to partner with and who carries influence in the village. And Jezmir is right, the plan could be easily replicated, particularly by a really well-funded firm willing to invest and move fast.
Which brings us to the other piece that EGG-energy is looking to achieve this year: more funding. The company has won several business competitions (I learned about them through the Ignite Clean Energy competition) that has provided them some funds, as well as financing from an angel investor. But EGG-energy is looking for hundreds of thousands of dollars more for growth in 2010 and 2011.
Ultimately, Yang says, EGG-energy is looking to help bring better access to electricity and clean power to the developing world, and the battery subscription service is just currently the best way. Follow the company’s progress, and find fascinating reports and articles on their Facebook page.
Image courtesy of EGG-energy.