EGG-energy

One of the most frequent questions that we hear from EGG customers is if and when we will start offering a TV package.  Most of our customers go to local shops and movie houses to watch TV (see photos below).  A few have purchased or found old car batteries and inverters to power TVs at home, but this can be expensive, not to mention dangerous (old car batteries may leak, and they are often connected to TVs in a rudimentary and hazardous fashion).  The demand for affordable, reliable TVs that do not require a grid connection is high, and it has become even higher as we approach the June 11^th start of the first African World Cup.

Over the last week, the EGG team has begun testing a TV package with five current customers.  The package consists of devices to power a TV (a battery and an inverter).  The customers selected for the trial already own TVs but are either not using them or are powering them with a generator or hazardous car battery and inverter set-up.  EGG is supplying the customers with newer, safer devices free of charge for two months, provided that they keep detailed logs of their usage patterns and how long their TVs last after each battery charge.  The goal of the trial is to determine which devices are best-suited to power the TVs currently on the Tanzanian market and in people’s homes, and ultimately, what to include in our more permanent TV offering.

EGG’s trial TV package includes one of several sizes of 12-volt batteries.  These batteries are larger and higher capacity than our current batteries, which are intended for small appliances such as lights and radios.  As before, the customers in the trial will charge these batteries at our charging station in Chanika.  The package also includes an inverter to convert the battery’s DC power to AC, since most of our customers have standard (20-inch, color) AC TVs.  The exact battery and inverter combination that a customer receives depends on the number of watts consumed by his / her TV set.

At the end of the trial, we will decide if supplying devices to power TVs currently on the market is a viable business.  Another option we are considering is importing TVs that consume less power, such as LCDs.  These TVs would require cheaper, lower capacity batteries and inverters than the TVs currently on the market.  Until these decisions are made, we hope that this trial will show current and prospective customers that we are serious about developing a TV package that suits their needs.

A movie house near EGG's charging station in Chanika

Kids watching TV inside the movie house

Last week, Jamie, Laurent and I attended Lighting Africa 2010 in Nairobi, Kenya.  Lighting Africa is an annual conference and trade show on off-grid lighting in Africa.  It is attended by representatives from government, academia, multi-national organizations, non-profits, private companies and energy service providers.

The most notable (and unexpected) part of the conference was its focus on solar devices.  Though I expected the conference to cover a variety of off-grid lighting solutions (such as off-grid power plants, battery services and human-powered solutions), solar devices was the topic of a majority of the presentations that were made.  Indeed, during the opening speech of the conference, a representative from Tanzania’s Rural Energy Agency said that the purpose of the conference was “to figure out how to make solar devices more affordable to the poor.”  In addition, a majority of the companies with exhibition booths showed variations of solar-powered LED lanterns.

Despite this, there were several ideas presented during the conference that were interesting and relevant to EGG:

• Schneider’s Battery Distribution Model
• Using Micro-Finance to Help Entrepreneurs
• Providing Services beyond Lighting

Schneider Battery Distribution Model

Schneider Electric, a global electrical equipment company based in France, recently started distributing LED lights in rural India.  The lights are powered by batteries that can be charged by the grid or a solar panel.  Schneider sells a package consisting of batteries, a charger and a solar panel to rural entrepreneurs.  Customers who have purchased LED lights but cannot afford their own batteries and chargers subscribe to an entrepreneur’s battery rental service.  The entrepreneur rents batteries to customers and swaps them every day at customers’ homes.

There are several interesting aspects of this model.  First, all parts of the business (battery ownership, charging, transportation and distribution) are sold to entrepreneurs.  While EGG is currently considering franchising the transportation and distribution of our batteries (See entry below entitled “Can We Franchise EGG Services?”), we might also want to consider selling our batteries and the charging portion of our business to franchisees in the future.

Another interesting aspect of Schneider’s model is that its entrepreneurs swap customers’ batteries every day, regardless of how much they have been used.  The advantage of this is that it prevents customers from overusing batteries and reducing battery life.  This model might not work in areas less dense than India (such as Tanzania), as transportation costs would be too high.  We might want to consider other ways to prevent our batteries from being overused though, such as requiring customers to swap their batteries every three days or using battery indicators.

Using Micro-Finance to Help Entrepreneurs

During a session entitled “End-User Finance for Off-Grid Lighting”, a few speakers made the point that the goal of companies at the conference should not be to reduce the quality of our products and services to make them affordable to the poor, but to partner with micro-finance institutions (MFIs) to make quality products and services more affordable.  There are two main issues with this idea.  First, most lighting products and services (including those presented at the conference and even EGG’s battery subscription service) fall below the lending range of typical MFIs.  Second, for better or worse, MFIs usually need to see that a loan they make to a customer has real potential to increase his / her income.  This might be harder to establish if the customer is using the loan to purchase a lighting product or service.  The speakers did mention using MFIs to help entrepreneurs (such as those used by Schneider) afford a large package or quantity of a product.   This idea would not meet with the two issues mentioned above.  If we decide to sell EGG’s batteries and chargers to franchisees in the future, we might consider using MFIs to make it more affordable.

Providing Services beyond Lighting

Finally, on the last day of the conference, a speaker from the Solar Energy Foundation argued that it is unreasonable to expect customers to be satisfied once their need for lighting is fulfilled.  He said that in many cases, it is other services (such as cell phone charging and radios) that attract customers and that lighting is simply an added bonus.  He encouraged conference participants to think beyond lighting and begin offering TVs, fans and other electricity-powered devices that customers demand.  From my experience in the field, I agree with this assessment, especially regarding the demand for TVs!  In fact, the EGG-team has started developing a battery-powered TV prototype, and this will be the topic of my next blog post.  The only question is: will we be on time for the June 11^th start of the first African World Cup?

A couple of weeks ago, I accompanied Micah, EGG’s field operations manager, and Yohana, our sales manager, on a sales run.  We started at our charging station in Chanika and drove north.  After about 20 minutes, we noticed a group huddled around a game of checkers and decided to stop to do a demonstration.  Yohana proudly exhibited EGG’s batteries and their ability to power lights, a phone charger and a radio.  The group had many questions.  They wanted to know where they could swap batteries, if our batteries could power TVs and the price of an installation.  Yohana answered their questions and explained EGG’s pricing scheme.  Afterwards, those who were interested put their names on a list for Yohana to contact later in the week.

While this account might not seem like anything special, it made me think about what it means to treat the poor as consumers and the advantages of such an approach.  Thirty years ago, well-meaning development organizations used a very different strategy – they decided what was best for the population they served and offered it to them for an artificially low price (and sometimes for free).  That day in the field, Yohana treated the group as other producers in their lives treat them – as consumers who are capable of making their own purchasing decisions.

I see two major advantages to operating this way.  First, it increases the likelihood that the service we sell will be used and valued by our customers.  Like any for-profit business, we allow potential customers to decide for themselves how they value our service, instead of deciding for them that it suits their needs best.  Those who elect to purchase our service believe it will benefit them and are thus more likely to use, take care of and potentially improve our service.

Second, operating this way allows us to provide a higher-quality, more sustainable service to our customers.  We price our service above our cost.  If we instead sold it at an artificially low price, our ability to serve current and future customers would depend on the (sometimes unpredictable) availability of outside funding to fill the gap.  In addition, because we pay attention to our profits, we invest in increasing the quality, convenience and cost-efficiency of our service in order to remain competitive.

All in all, it makes sense to experiment with using for-profit models to provide socially valuable goods, keeping in mind that the limited wealth of our customers poses an impressive challenge to our operations, one that other for-profit companies might not face.  The key, however, is to use this challenge to become radically more cost-effective than we would be if we operated as a non-profit.

The first time I visited EGG’s charging station in Chanika, I was amazed by the number of customers swapping their exhausted batteries for charged ones.  One customer came by motorcycle from Bwama, a village nearly two hours away.  In America, the only time that I think about my electricity usage is when I get my monthly bills.  I have never made a special trip to secure electricity access.  But as I learned more about the electricity options available in Tanzania, I began to understand why EGG’s service has attracted so many customers, even from long distances.  Some of EGG’s customers live in areas far from the grid, like Bwama.  But even when transmission lines are close by, getting connected can cost more than 1,000 USD – a prohibitive cost, given that household incomes in the villages near Dar es Salaam likely average 1,000 – 1,500 USD a year.

Nevertheless, asking customers to swap batteries in Chanika would eventually constrain EGG’s reach.  I have therefore been tasked with figuring out how to get EGG’s batteries closer to current and potential customers.  We considered the idea of opening EGG storefronts near places like Bwama but quickly decided that the capital and labor costs would be too high.  We are now looking into franchising the transport and swapping of EGG batteries.  Our franchisees will ideally be storeowners that have physical space near our customers (e.g. convenience stores, cell phone shops).  These storeowners will take care of transporting batteries to and from Chanika (and other charging stations as they open up) and will swap batteries at their storefronts for a fixed price.  The price will be set to allow storeowners to profit from each battery swapped (even after transportation costs).

I began conducting interviews with potential franchisees last week, and my initial impressions are positive.

• The storeowners we spoke to are intelligent and business-savvy.  During our conversation, Salwa Sultan, who sells building materials in Msanga and recently became an EGG customer, quickly calculated what the swapping price at his storefront would have to be in order for him to profit from each swap.
• They have information about local distribution channels that is not immediately apparent to outsiders.  Phares Kweke, who owns several shops in the Mvuti area and has been an EGG customer for five months, surprised us by explaining that his goods travel from Mbgata to Chanika, instead of in the opposite direction as we had assumed.  Many of the storeowners we spoke to know who in their village travels for business, where they travel to and how often.
• Finally, they have some degree of accountability to the people in their villages.  All of the villages we visited have a central street or intersection where stores are located, and the villagers seem to know the storeowners in the area and vice versa.  We hope that these ties will prevent franchisees from taking advantage of customers, but we will also make sure to weave proper incentives and quality controls into our franchise offering.

Over the next few weeks, I will continue speaking with storeowners and will begin developing our franchise offering.  I am excited to be involved in making EGG’s service more accessible to current and future customers.

*****

A graduate from Rice University and a consultant at Booz & Company, Pareen Bathia will be assisting EGG-energy’s management team in Tanzania this summer.  If you are interested in applying for such a fellowship, please let us know at info-at-egg-energy.com.  Please note that all summer 2010 positions have been filled.

Crisis Mode in Clean Energy and Africa Investments: Ironic?

Isn’t it ironic that some of the most important areas for investments in sustainable, balanced and long-term development, namely Africa and clean energy, are so heavily impacted by the current economic downturn? It certainly makes sense for investors, companies and consumers to focus on their investment base, reduce their risks and consolidate to do better in the future.  At the same time, isn’t it the best time to support the potential products, ideas and startups that can make a difference in the global warming mitigation and sustainable growth race?

—

2009 was a tough year and the situation looked scary.  Stock markets were down – see the Dow Jones’ 50% drop in two years -, banks such as Lehman Brothers were going bankrupt and unemployment reached 20% in such places as Spain.  It therefore made sense for consumers, companies and investors to reduce their spending and appetite for risky investments.

One of the sectors which suffered the most was clean energy.  A look at the fluctuations of the Wilderhill New Energy Global Innovation Index highlighted in an article from the Economist (The Green Slump, http://www.economist.com/specialreports/displaystory.cfm?story_id=14994802) shows that clean energy was hit almost twice as hard as the S&P 500, losing 43% of its value between 2007 an 2009 when the S&P 500 was only losing 24%.  In 2009 alone, clean-tech companies saw a 50% drop in investments from the previous year, although fortunately the number of deals increased (U.S. clean-tech investment falls 45% in fourth quarter, http://latimesblogs.latimes.com/technology/2010/02/us-cleantech-investment-falls-45-in-fourth-quarter.html).

This is alarming as clean energy is one of the most critical areas for investments, not only for financial returns but also and above all as the fuel to the engine of global warming mitigation.

Why are clean energy investments suffering so much?  Some of the key reasons put forward in the Economist (The Green Slump, http://www.economist.com/specialreports/displaystory.cfm?story_id=14994802) include high up-front costs. This means debt finance funding and high debt-to-equity ratios, which explains why, when the financial crisis made money less available, the clean energy sector was among the first to suffer.  Others argue that the lack of support from consumers triggered fear from investors.  Lack of support from consumers?  Well yes, in critical times, consumers tend to flow towards whatever cost effective solutions they can find.  And the relative failure of the Copenhagen meeting in 2009 did not help incentivize consumers to favor more eco-friendly solutions.

It remains to be seen what impact this will have on global warming.  Clean energy investments must grow to reduce our environmental impact and limit temperature rises.  But by how much?  Different views have been voiced.  A study by New Energy Finance and the World Economic Forum shows, for instance that they should reach $600 billion yearly by 2030, from a little more than $100 billion in 2009 (Green Investing: Towards a Clean Energy Infrastructure, 2009, http://www.weforum.org/pdf/climate/Green.pdf).  This would imply a five-fold increase in 20 years, which will not be easy.  We were already late when signing the Kyoto protocol in 1997, we are still very much behind this target today.

At the same time, the financial crisis has also had a significant impact on Africa.  The BBC estimates from $49 to $280 billion the losses for 2009 alone (Crisis will cost Africa $49bn,  http://news.bbc.co.uk/go/pr/fr/-/2/hi/business/7945843.stm).  This is bad news for a continent that needs to catch up on development and accelerate its growth.  What’s more, the impact of a $ 280 billion drop in investments on poverty and development is likely much worse in Africa than on other continents.  Programmes for health, education, nutrition and infrastructure were reduced or stopped.  And some are wondering if Africa will ever meet its Millennium Development Goals.

People, here is a gap to fill.  To catch up, we need to find solutions that are innovative, affordable and efficient.  This is what we have been trying to develop at EGG-energy: an innovative supply chain, an affordable project for investment and an efficient idea using existing products, channels and means to reach consumers and reduce their kerosene/carbon footprint as quickly as possible.  Luckily enough, EGG-energy is only one of many ideas that are out there to help the world be a better place: good luck to them all!

Emmanuel Cassimatis

Okay, I admit it. As a kid, I was afraid of the dark. When I had to go back to my pitch-black room to retrieve something I had forgotten, I would have to be very strategic about it. I would sneak around the corner until I could just barely peek out from behind it, then BAM, I would make a frenzied dash to the light switch and throw on the lights, scanning the room quickly to be sure there did not happen to be a monster on my bed, waiting to get me.

The fact that the light switch was there, and that flipping it would illuminate the room, had always been blindingly obvious to me. What does one do when the sun begins to set and it becomes too dark to continue reading? What does one do when entering an unfamiliar area, perhaps the basement, or the garage? “Well, duh,” my smart-aleck younger self might had replied. “You figure out where the light switch is!”

However, for almost a quarter of the Earth’s population, that light switch doesn’t exist. According to a WHO/UNDP report released November 2009, there are one and a half billion people in the world today who lack access to electricity. The problem is worst in Sub-Saharan Africa, EGG-energy’s home turf. In Sub-Saharan Africa, 74% of people don’t have access to electricity, and in Tanzania, the figure comes in at a shocking 89%. As we can see from Map 1, over 80% of those without electricity worldwide reside in Sub-Saharan Africa or in South Asia.

But the problem doesn’t stop there. Research shows that households without access to modern energy sources (such as electricity) often turn to solid fuels (coal or traditional biomass, such as wood, dung, or charcoal). Indoor air pollution caused by the smoke from solid fuel use has been linked to almost two million deaths per year worldwide from child pneumonia, chronic obstructive pulmonary disease (COPD), and lung cancer. A remarkable 99% of these deaths are occurring in developing countries, suggesting that these deaths are highly preventable.

Important an issue as energy is here in the developed nations, regularly bandied about in the halls of our capitals, how much more important must it be in the developing nations that don’t enjoy our indulgent level of access! The fact of the matter is, energy is a challenge for all of us, because it touches upon so many inescapable aspects of our well-being, from quality of education to quality of medical care, from economic impact to ecological impact.

Developing countries, especially, cannot hope to achieve the national energy access targets they have set (and in particular, those Millennium Development Goals set for six years from now) without a significant increase in efforts to make modern energy sources available to their citizens, efforts that EGG-energy is very much a part of. Working together, we can and we will start switching on the lights for those 1.5 billion people still living in the dark, and help them begin to vanquish the monsters that they face in their own lives every day.

-Mark

Access to affordable energy is one of the greatest challenges that countries face today in creating sustainable growth. This point was highlighted by two of the latest visitors to MIT’s campus. The first was William Kamkwamba (whom Ben previously blogged about), who built a windmill from junkyard parts at age 14 with no formal engineering training. The second was President Barack Obama, who came to campus to talk on the topic of “American leadership in clean energy.”

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Yesterday afternoon, I was listening with Clélia to the “Bedtime Stories” CD that her father bought in London. I’m not sure that my two and a half month old daughter fully appreciated the narrative that led the donkey, the dog, the cat and the cockerel on their way to be musicians in Bremen to chase thieves out of a hidden cottage, but the seven children of the farmer’s wife whose big pancake ends up being eaten by a pig reminded me of how special the number 7 is.

1987, 1997 and 2007 were all remarkable years for green, cleantech, carbon cap and trade, global climate change and Kyoto to become respectable household words.
1987: birth of sustainable development as a concept (Brundtland Commission‘s Report)
1997: commitment by industrialized nations (minus the USA) to lower their greenhouse gas emissions (Kyoto Protocol)
2007: formal acknowledgment by the international community that anthropogenic emissions of greenhouse gases cause climate change (IPCC’s 4th assessment report).

It took more than 30 years to make the case for businesses to plan their long term growth in a carbon-constrained economy so clear that the oldest consulting firm in the world, Arthur D. Little, recently cautioned against not doing so. Yet, “carbon” (and all the environmental externalities that it has come to represent – remember acid rains, mercury contamination, dead rivers and chemical dumps?) is only one of the three sustainable development stool’s legs. The economic crisis that unfolded in 2008 brought the “economic leg” on the front scene, but what shall we do about the “social” one?
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