Over the last few years it’s been good to see the increasing focus on the role the private sector could play in meeting the challenge of energy access in Africa and Asia. A recent addition to the growing number of studies on this topic comes from the International Finance Corporation. http://www1.ifc.org/wps/wcm/connect/topics_ext_content/ifc_external_corporate_site/ifc+sustainability/publications/publications_report_gap-opportunity/
The report looks at opportunities in consumer products such as improved stoves and solar lanterns, plus the potential in mini–grids and grid-extension. The analysis suggests there are significant opportunities in all these areas with the largest being in consumer products. Improved cookstoves has the largest share but lanterns, lighting kits and solar home systems could also see huge growth. The report estimates there is a $31 billion market for these products waiting to be realised.
The report includes a lot of helpful general comment on the challenges involved in developing these market opportunities. Lack of consumer finance is a major limiting factor currently. Distribution is another huge hurdle. Overall this is a sober and realistic assessment of the markets with useful suggestions on possible ways forward.
There are a number of important issues and trends which the report misses which are worth mentioning.
- There is an assumption in the document that all ‘improved stoves’ result in health benefits. This is not the case. Most stoves in the market currently do not reduce exposure to emmissions sufficiently to impact longterm health risks. In fact stoves can increase exposure.
- While phone charging receives a passing mention its significance in driving demand for electricity is not recognised. Lanterns and solar kits which offer phone charging are far more desirable products that those which only provide light. Households with phones may be spending $1.50 a week on charging which adds significantly to the economic benefits of owning a solar kit. The market for higher end products is under-estimated in this respect.
- Pay as you go business models also only get a passing reference. This is surprising given the evidence in the study of the importance of reducing upfront costs, especialy for lighting kits and solar home systems. Several products which are currently completing field trials have the potential to revolutionise the market. Eight19 offer their Indigo system for a down payment of $10 and a weekly payment of $1.50. www.eight19.com That brings a basic home lighting system within the reach of a much larger market and will have a huge impact. The potential to integrate such products with mobile payment systems is particularly exciting.
- There is a class of business which the study misses but which is potentially significant – these are service providers who charge batteries amnd/or phones. There are many micro-businesses in Africa profitably providing these services. At the more sophisticated end companies like EGG-energy egg-energy.com and Nuru Lights nurulight.com are mimicing these businesses but adding value through renting high spec batteries or lights.
While the potential is there understanding how best to provide aid dollars or invest equity remains a highly complex exercise.