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Member Spotlight – February 2017

SolarAid

By Jamie McCloskey, Programme Partnerships Manager, SolarAid

SolarAid turned 10 years old in 2016. We have reached over 10 million people with clean and affordable energy and played pivotal roles in the catalyzation of the solar lighting markets in Kenya and Tanzania. While a success story in this still very young sector, these successes have been far from easy and we are still faced with some of our greatest challenges.

Photo Credit: SolarAid/Patrick Bentley

SolarAid is an international NGO which fully owns the social enterprise SunnyMoney. We work in East Africa selling affordable solar lights through our unique distribution model, The SunnyMoney Way. This model was developed over a number of years to overcome the three key barriers to widespread energy access in rural Africa: Affordability, Availability, and Awareness.

When we founded SunnyMoney in 2009, there was little or no knowledge of small solar (pico-PV) in rural areas. Therefore, arriving to these communities and just offering solar lights was not a solution. We knew we had to educate and instill trust in solar technology. The eureka moment was on Mafia Island, Tanzania in 2010, where we realized we needed help.

This is when the first step of our two-step distribution model was born – School Campaigns. By working with local head teachers, who are seen as trusted community members, we were able to educate communities about the benefits of solar lights in comparison with traditional lighting sources such as kerosene. By gathering head teachers together, we were able to train these ‘agents of change’ at scale and have them each return to their communities to spread the word and sell.

Photo Credit: SolarAid/Patrick Bentley

It was largely due to these activities that the solar lighting markets in Kenya and Tanzania reached their tipping point. By establishing trust and creating initial demand in solar products, we created enabling environments for other companies to succeed. As Erica Mackey, co-founder and COO of fellow Practitioner Network member Off-Grid: Electric stated in 2014:

SolarAid’s SunnyMoney non-profit business model acts as a market primer for companies like ours. We have found it much easier to penetrate markets where customers have already had a positive experience with solar products. We spend much less time educating customers about the benefits of solar in areas where they have worked, as they have already built trust in solar technology and there are much higher levels of demand. SunnyMoney makes it easier for us to extend our operations into rural areas where they have a presence.

While positive, playing a pioneering role in this emerging sector has also had major drawbacks. When the solar lighting market took off in Tanzania in 2015, the fierce level of competition from other companies as well as the influx of generic, fake and poor quality products hit us hard. The drop-in sales and lack of working capital to compete led to our withdrawal from Tanzania and a tough organizational restructure.

Trying to retain a market share in Tanzania was our biggest mistake. As our funding model relies on a combination of philanthropy and reinvested sales revenue, trying to operate just the same when sales revenue suddenly drops had serious consequences. As we have learnt many times, failure is perhaps the most important experience – as long as you learn from it. Therefore, when the solar lighting market took off in Kenya in 2016, we had learnt our lessons. We made the decision to leave when the time was right, knowing that other organizations would continue to serve those we had introduced solar lighting to.

Photo Credit: SolarAid/Patrick Bentley

While our model encourages and welcomes other companies to sell solar lights, the majority of companies now emerging from the enormous investment boom this sector is experiencing are selling products which are unaffordable. Pay-As-You-Go solar home systems (PAYG SHS) are currently dominating conversations on the affordability of solar products; yet, there is not much evidence to prove they are widely affordable to lower income families. Upfront payments on even more affordable PAYG SHS often exceed what a family can afford.

While these higher-service products have received most of the $511 million (BNEF, 2016) which has been invested in the sector, pico-PV, the smallest most affordable option, has not. Sales for small portable solar lights are currently declining due to the working capital challenges faced by organizations such as SolarAid.

The contribution of small solar lights on market development and on people is currently unparalleled in Africa. SolarAid is now fighting for our customers to demand that pico-PV remains part of the conversation in energy access. Although the potential for profit is much less than PAYG SHS, the social impact is proven.

While the sector has been moving away from affordability, we have been moving towards it. In late 2016, we launched the SM100 – “the world’s most affordable solar light”. In Malawi, Uganda and Zambia, life is becoming increasingly tough and people have less to spend on energy. Therefore, we are responding with the SM100 to give people the best chance to place a first step on the all-important energy ladder.

Once on the energy ladder, people begin to climb to access higher levels of service, but there needs to be an entry point. For example, in Malawi, we are the only major distributor of solar lights. 99% of our current customers live below the $1.25 per person per day poverty line. We have the obligation to push and break this affordability barrier for the people of Malawi, and will continue to work towards this in the years to come.