More than one in five people in the world, mostly in South Asia and Sub-Saharan Africa, lack access to electricity. There are high hopes that solar energy can leapfrog the electric grid in these areas similar to how cell phones have surpassed the landline system around the world.
There is great reason to believe that this will happen — and it all starts with the economics of solar energy. In off-grid communities around the world solar energy is now economically viable with no subsidies and often with very short financing terms. In terms of affordability, off-grid is the low hanging fruit of the solar energy industry. The opportunity is a big one. A recent McKinsey study projects 40-50 GW of potential solar projects in the off-grid and isolated grid markets.
When you hear about people living without electricity, it’s easy to think it’s all about poor lighting and darkness. Well over a billion people use kerosene lamps and candles for lighting. Kerosene is just a bad deal all around — it’s very expensive ($1+/kWh equivalent), low quality, causes serious indoor air pollution, and is a leading cause of fires and burns. Solar powered lights solve this problem, and are changing lives around the world with higher quality, safer and less costly lighting.
Lighting, however is just part of the off-grid energy story. Increasingly, the story is about how cell phones and the need for power are linked. Cell phones are significantly increasing both the demand for and the viability of solar energy in off-grid communities. Below are five reasons why the solar energy opportunity in off-grid markets will be driven by cell phones.
1). Hundreds of millions of people have no good way to charge their phone:
There are now over 6 billion cell phone subscriptions in the world and cell phone penetration in developing countries is over 80 percent. There are more cell phones out there in the world than there are toothbrushes!
However, there are 600 million people with cell phones that have no access to electricity. To charge cell phones, people often have to walk hours to charging stations where they can plug their phone into a car battery. While kerosene may be a very poor lighting source, it is a source of light. For cell phone charging, there is often no local option.
Simply put, charging cell phones is emerging as the the number one reason people with no electricity want solar energy.
A new trend in the off-grid solar market is solar powered products designed specifically with cell phone charging in mind. Small-scale entrepreneurs are buying these solar cell phone charging units and creating businesses around charging other people’s cell phones.
Fenix International’s ReadySet technology is a great example. They sell their solar charging units to entrepreneurs who are essentially running micro solar-powered cell phone charging utilities. Entrepreneurs who purchase these units typically break-even on their investment in just a few months, and then benefit for years from a significant new source of earnings and energy savings! In this video, you’ll see a story of an entrepreneur in Uganda who charges 6-8 phones per day, earning $40/month, while also saving $6/month from one solar-powered light.
3). New financing payment methods:
For years solar businesses in off-grid communities have sought consumer financing solutions to help make solar energy more affordable for their customers. Solar businesses have tried to implement direct financing programs through micro-loans, leases and consignment, but one of the biggest challenges has always been how to get repaid by people living in remote unelectrified areas.
Now, due to the recent growth of mobile money systems, particularly in East Africa, new direct financing approaches, such as “Pay As You Go” (PAYG) are emerging that allow people to pay their solar energy payments with their cell phones.
Angaza Design is one of the pioneers of PAYG solar. They have developed a solar lighting and cell phone charging technology that uses existing local mobile money systems in East Africa to allow their customers to buy “energy credit” using SMS. Once the payment is received, Angaza activates the solar unit (via the cellular network) for a proportional amount of energy use.
Once this amount of energy is used up, the system locks until the customer buys more energy credit. After a customer buys a certain amount of energy credit (typically in less than one year), the system unlocks permanently and the customer owns the system. Watch this video on how Angaza’s technology works.
4). New approaches for operations and maintenance:
Providing operations and maintenance services to remote projects has long been another challenge for off-grid solar providers. Cell phone technology is also starting to change that.
Solar businesses in off-grid markets are now using basic SMS technology to track technology issues that require maintenance. One Degree Solar, which sells solar lighting and cell phone charging units in Kenya, receives alerts via SMS when a customer has a technical issue.
This is happening in a pretty basic way right now, but some exciting innovations are happening around cell phone technology and solar operations and maintenance. Soon, solar service providers will be able to use cell phone technology to monitor system output and efficiency. Imagine this: A person living in rural Africa who has a solar light will receive a text message saying: “Your solar panel appears to be dirty – please wipe it clean to get increased solar energy production!”
5). Cell phone towers:
You may be wondering, how do 600 million living in off-grid communities have cell phones. It’s because all over the world, even where there is no electricity grid, you’ll find cell phone towers. Often, these towers are powered by 100 percent diesel generators or hybrid diesel-battery systems. With solar energy costs decreasing rapidly, there’s a big opportunity here for hybrid solar-battery systems to replace the diesel systems that currently power these cell phone towers.
According to a new report from GSMA and IFC, in Kenya, Tanzania and Uganda, solar energy would be economically viable for over 4,000 cell phone towers in off-grid and highly unreliable grid areas. GSMA projects that by 2015, a $150 million annual market for third party PPA-financed green power for cell towers will exist in these three countries alone.
The opportunities for off-grid solar are just kicking off, and there will continue to be synergies between the proliferation of cell phones and the mobile, decentralized type of clean power that off-grid solar provides.
Ryan Levinson is the Founder of SunFunder, a new crowdfunding platform connecting investors to high-impact solar projects in off-grid communities around the world. Prior to SunFunder, Ryan was VP of Environmental Finance at Wells Fargo, where he focused on building the bank’s solar energy project investment business.
Images courtesy of Fenix, Simpa Networks.