EGG-energy

and 5000 cumulated revenues. GOOOOO EGGGGGGG!

Recently some smart cool college students came up with the SOccket – a soccer ball that stores the kinetic energy created by being kicked around and makes it available as electricity.

SOccket has attracted plenty of media attention, which is a bit of a mixed bag. On the one hand, anything that gets people thinking about the lack of power in the developing world is good. On the other, anything that gets people thinking that the solution is going to be something as telegenic as an electric soccer ball is bad.

Most people who have spent time in the trenches of development know that the real problems are crushingly un-catchy. In terms of difficulty, of trying to do something we just aren’t quite sure how to do, spurring development is up there with reforming healthcare, regulating the stock market, and coping with global climate change. It shares with those problems a combination of complexity and inscrutability.

A problem is complicated when it’s, well, complicated. Sending a man to the moon is complicated. A problem is inscrutable when it’s hard to tell what a “solution” would look like, or if one even exists. Living a good life is an inscrutable problem.

Complicated problems with clear end posts can be thrilling. No matter how difficult the path, the goal is always visible. That’s why, for example, tasks which might otherwise be considered drudgework become appealing when inserted into the highly structured, goal-oriented worlds for videogames.

Inscrutable problems devoid of technical complicatedity can be rewarding subjects for artworks or daydreams. Tolstoy for example threads a theory as to the proper interpretation of history through War and Peace, and of course Proust’s In Search of Lost Time is largely involved with an examination of how and whether personal identity persists.

It is when complexity and inscrutability collide, however, that truly mind-numbingly boring and hellacious problems are created. This is why you will never see a (successful) video game based around reforming the health care system, or a novel whose central conceit is an exploration of the melancholy truths revealed by the depressive effect of mark-to-market accounting standards on corporate balance sheets.

The question of how to spur development is surely both complicated and inscrutable (how does one even define the word development in this context?). As such the greatest strides forward are apt to be found in the least sexy of places.

When you bring electricity to a Tanzanian village for the first time ever, every person in the village will know about your project within a few days. This doesn’t, however, automatically translate into customer subscriptions: people will not understand the value proposition, pricing or service levels. To get the customer count growing we wanted to build a sales presence that is more typical of a tech start up than a traditional development venture.

EGG-energy sales team ready to go

EGG-energy’s approach is all about getting our sales people out of the office and where the potential customers are. We made several initiatives to support sales. First, to motivate the sales reps, each new, installed customer that he approached outside the station brings the rep a sizable bonus. Second, we built demo kits to demonstrate what the lights, switches and battery would look like inside the customer’s house.

Hussein and Jukka explaining the concept at the market

Finally, we did sales training, increased the amount of marketing materials handed out and are currently improving the link between closing a sale and having an installation scheduled. As the household decision maker is seldom home during daytime and closing the sale at site is difficult, we now collect phone numbers from prospects, and do follow up calls after they have had a chance to discuss the purchase with the right people.

Micah and Hussein demoing the product

Demand for electricity is driven by appliances and at the moment chargers for mobile phones drive many of the purchase decisions. High on our task list is sourcing new products for which our batteries provide enough power and which we can find at prices that suit our target group. A TV bundle by the world cup is a must!

The very first experiences from increased sales efforts are promising. First, the monetary incentive (up to some 50% of the monthly salary with good sales performance) seems to be an efficient motivator: sales people spend a lot of time doing house calls. Second, we have been winning over a very high percentage of our potential customers and have increased the traffic at the charging station significantly. Next few weeks will show how good we are at converting the increased demand to paying customers.

Jukka

One of my all time favorite books is the Alchemist, a fable about following your dreams, by Paolo Coehlo. “There is only one way to learn- it’s through action,” writes Coehlo. “Everything you need to know you have learned through your journey.” Among the fable’s many lessons to the protagonist is to pay attention to clues, omens and symbols along this journey.

Two recent announcements about new sources of funding specifically targeting access to clean energy sources have made me think of Coehlo’s charming novel and its teachings on heeding signs and embracing opportunities. Just last week, US Energy Secretary Steven Chu announced the launch of a new Renewables and Efficiency Deployment Initiative—Climate REDI—which aims accelerate the transfer of clean and renewable energy technologies to developing countries. In an effort to reduce greenhouse gas (GHG) emissions, fight energy poverty, and improve public health, the United States and other major economies, including Italy, Australia, UK, Norway, the Netherlands and Switzerland, have pledged $350 million to the program. Climate REDI will emphasize deployment of solar lantern and light-emitting diode (LED) technology, super-efficient equipment and appliances, sharing information, and scaling up renewable energy sources such as solar and wind systems.

Earlier this month, E+Co, an investment firm that provides business support services and investment capital to clean energy enterprises in Africa, Asia and Latin America, received two significant capital infusions: $7.5 million from the Norwegian Investment Fund for Development and $6.65 million from FMO, the entrepreneurial development bank of the Netherlands. E+Co’s current investment portfolio includes over 150 small and growing businesses from micro-hydro developers in Nepal and solar retailers in Nicaragua to efficient cook stove manufacturers in Ghana. E+Co. The organization anticipates that approximately 60% of the new capital will be invested in Sub-Saharan Africa.

These monetary commitments underscore the timeliness of EGG-energy’s recent pilot launch and the importance of the company’s mission to provide clean, adequate, affordable power to underserved communities in sub-Saharan Africa. Now, more than ever before, power companies committed to providing access to modern energy services have an unprecedented opportunity to help drive sustainable development in the poorest countries. I’m reminded every day of the catalytic effect that EGG-energy and our peer firms like D.light and dissignio can have on generating economic opportunity for our customers.

As the year comes to a close, a few other signs stand out, giving every reason for optimism.  The team is closing on pilot financing from an angel investor. Jukka is heading to Tanzania for January as an MIT Public Service Center fellow to bolster our sales and marketing strategy and to scope out new sites for EGG-energy’s charging stations. Another competition victory brought in an additional $25,000 in capital that will enable EGG-energy to jump start on expansion. We continue to push ahead and as we head into 2010, we remain consistently alert and eager to pick up on clues and cues, largely from the amazing network of EGG-supporters and allies.

Happy holidays everyone!

Alla

One of the risks we get most asked about and spend time finding mitigation strategies for is the exchange rate risk. I wanted to provide a short intro to how we think about it.

In general, hedging currency risk in Tanzania’s poorly developed capital markets is challenging. First of all, there are no publicly traded options for the Tanzanian Shilling. Buying options directly from banks is expensive as the currency is fairly volatile and as there isn’t significant competition among the existing issuers. We would also have to bear the counterparty risk which outside of the few global banks that operate there (like Citi) may be substantial. Moreover, the Tanzanian exchange market is both small and inefficient (monthly USD sales volumes are at $100m+) and consequently the interest rate parity doesn’t hold. This makes money market hedges and forward contracts resemble private bets more than anything else.

Our business faces two types of currency risks. First, as our inputs come from China, Europe and the U.S. and as our revenues are realized in Tanzania, the Shilling’s depreciation hurts our margins. Second, as we fund our operations from the U.S., a depreciating Shilling makes it difficult to repatriate earnings or to pay back loans.

To mitigate the first risk, we seek battery and charging equipment manufacturers within Tanzania and in neighboring countries (the correlation between East African currencies is surprisingly high), so that both inputs and outputs are in the same currency. Luckily, the price of our main competitor, kerosene, follows oil price, which, in turn, is dollar based. Thus, as the Shilling depreciates, both the cost of kerosene and that of our inputs increase. As a result, the prices of all the products in the market increase, and we may be able to have the end-customer share some of the increased costs.

The most efficient way to mitigate currency risk associated with the repatriation of money is to expand internationally. Instead of being dependent on the Shilling-US dollar relationship, we will then have a portfolio of currencies to work with. Although our position is, in this case, hurt by the correlation between currencies, rapid international expansion remains the best way to go.

What is the magnitude of EGG-energy’s currency risk? A depreciating event that with current volatility happens once in 20 years would eat 40% of our full-scale profits. Luckily there is no indication that the Shilling is grossly mispriced at the moment and no extensive correction is expected.

Shilling volatility: Five year trend – TZs vs. USD

Jukka

The world needs more alternative energies and less polluting ones.  Here is a statement that more and more people agree to.  Some might ponder on ways to pollute less. Some might fight for the alternative energy cause.  And some might even act to alleviate their environmental footprint, by driving their car less, using energy-saving services or changing their light-bulbs.  To all these people I say: congratulations.  Congratulations for caring about our planet.  Congratulations for acting towards the common good.  Congratulations for inspiring other people.

Why am I mentioning this?  I recently stumbled upon a very interesting June 2008 article from the Economist, one of my favorite sources. (It is available to registered users at: http://www.economist.com/opinion/displaystory.cfm?STORY_ID=11580723&source=login_payBarrier.)

What is the article about?  Looking at our energy needs, the writer describes the need for a transformation of our energy infrastructure in order to face global warming.   The need for energy is real and current energy sources, such as oil or gas, cannot last forever.  Many bet on technology developments to replace them: solar, wind power, biofuels, electric cars.  Over time, their costs go down and economies of scale develop.  With the support of a carbon tax, these solutions could well replace one day fossil fuels and allow the world to cool down.

That might be true.  But why wait for this hypothetical wave of alternative energy cost reductions, economies of scale and worldwide availability, with their subsequent bottlenecks in materials, to address climate change?  Why not try to focus more on the quick fixes that are already available?

Faced with daunting challenges, we commonly think of radical solutions instead of focusing on the smaller yet more workable solutions.  However, these can take a worthy first stab at significant parts of the problem.  What can these quick fixes be?  We are surrounded by opportunities.  I am for instance amazed at the number of airports that run shuttles between their terminals.  They usually run on oil, 24 hours a day, at low speeds, with frequent stops.  Here’s a quick fix that could have a big impact: replace them with electrical shuttles, or natural gas ones if you really can’t put those wires together.  A small step in the grand scheme of things, but if every airport adopted eco-shuttles, local and global pollution could be seriously reduced. Likewise, if every one of us identified one small fix per year, and communicated it to others, there’s little doubt that a great deal of carbon emissions could be avoided.

Are all quick fixes good though?  No, they are not always as efficient as we would like them to, and careful prior analysis is needed.  For more on that topic, see “Business Owners Beware: Quick Fixes Can Cost More Than Smart Energy Savings Strategies”, http://www.greenerbuildings.com/news/2009/11/04/business-owners-beware-quick-fixes-can-cost-more-smart-energy-savings-strategies.

Where am I going with this?  To the solution we have developed at EGG-Energy of course, which is a quick fix!  How is it a quick fix?  Well, first the energy source and power delivery technology, batteries, are neither new nor revolutionary: we don’t need to wait for huge worldwide demand or economies of scale to develop and operate our service Second, we do not need to amortize it over such long periods as are required by wind or solar farms.  Rather, the novelty lies in a smart concept: making available electricity by packaging it into batteries and transporting it from power lines to energy-less areas through a clever supply-chain.  Here’s a quick fix.  And a quick fix that could have a great impact on the world

- Emmanuel

EGG-energy’s hard work has paid off once again! The US team has been working on multiple submission deadlines for the Pace Pitch Contest (www.pace.edu/pitch ) since early October, and Mark Yen and Rhonda Jordan have been rigorously training for the pitch for a couple weeks now. Bruce Bachenheimer, Pace Pitch Contest Director, welcomed the two in New York City on December 3rd along with nine other finalist teams. The keynote speaker was Iqbal Z. Quadir, Founder and Director of the MIT Legatum Center for Development and Entrepreneurship (http://legatum.mit.edu/) – so the finalists had a tough act to follow. All of the finalists gave well-organized pitches to the panel of judges, but EGG-energy stood out.

Mark Yen delivered a compelling pitch and COO, Rhonda Jordan, answered the judges’ questions. The two were able to demonstrate what makes EGG-energy unique: the company (1) addresses a very pressing need experienced by over a billion people in the world today (a lack of access to electricity) (2) offers a solution that is much safer and reduces carbon emissions by over 130,000 tons over the next 10 years (3) offers a solution that is more than 30% cheaper than alternatives (4) offers local employment opportunities  and (5) is profitable.

Congratulations to the EGG-energy team!

Rhonda Jordan (left center) and Mark Yen (right center) along with Pace Pitch Contest Director, Bruce Bachenheimer (far left) and Coordinator (far right).

EGG-energy is for-profit, and proud of it. In fact these days making money in the developing world is often seen as a point of pride. The idea is that if you are giving something away – whether it’s bed-nets or condoms or even drugs – there is always the worry that your organization might be simply flooding the countryside with goods that are either useless or not valued by their intended beneficiaries (and thus not used properly – witness the free textbooks that were distributed to children in a town I once lived near in a very poor area of Africa. Soon after being given out they began showing up for sale in the market, pawned by the children’s parents). The feedback loop between company and customer that is the backbone of capitalism is lacking. Whereas if you sell something for fair market price, and manage to make a profit doing it, then obviously you are providing your customers with something they need and value. They wouldn’t pay for, say, mobile phones if the phones weren’t giving them more bang for their buck than any previous alternative. Thus, if you sell something to a poor person, you are doing good. QED.

Right? Well, no. Here are four ways in which for-profit development can go wrong. We at EGG-energy hope to give them as wide a berth as possible, but these are tough, non-obvious questions that any social enterprise is going to have to struggle with at some point, and sometimes struggle hard:

1) Externalities. Both companies and people tend not to attach enough value to the damage (or sometimes good!) their decisions do to people outside the loop of buyer and seller. This can complicate, for example, the sale of antibiotics to farmers who might benefit from their use, while at the same time potentially speeding the development of resistant bacteria. The reverse problem occurs with mosquito-repellant-treated bed-nets: they not only reduce incidence of malaria in their users, but in the entire area in which they are used. But how can you charge someone for a benefit to their neighbor?

2) Discounting. People discount things – good things and bad things – that will happen in the future. They discount them a LOT. That’s why smoking exists. For many products, the present benefit is clear – but you have to ask whether there is going to be a future harm, and if so, whether consumers are taking that future harm properly into account when they buy the product. Are companies that sell cigarettes to the citizens of the developing world doing a good thing? A much more controversial version of this question can be posed to microfinance institutions. Are their customers properly discounting the pain involved in paying back their loans? And if not, can we be sure that the service provided is beneficial?

3) Human frailty. We are starting to understand a little bit about what makes people happy. One finding: people have no idea what makes themselves happy. It turns out that we are about as good at choosing courses of action that guarantee future happiness as would be a random spin of the action wheel. In a sense this is a problem for capitalism as a whole, and thus the answer might be “it might not work so great, but it’s better than the alternatives”. But if you are starting an enterprise whose goal is not only to make profits, but to make your customers better off, what do you make of the idea that your customers might have no idea whether or not buying your products actually does make them better off?

4) Agency issues. Often in life the person who makes the money doesn’t spend the money. This is particularly true in strongly patriarchal cultures in which the male head of the household might control an income derived from several wives and children. This patriarch might be great at choosing to buy products that benefit him, while not so great at buying products that benefit his family.

As these issues hopefully show, being for-profit is not a magical bullet that guarantees that an organization will necessarily accomplish the positive change it is dedicated to. Of course, they don’t show that it’s impossible either. It’s just that, like so many things in the realm of development are… it’s hard. We hope to do our best.

- Ben

This week I took a picture of one of EGG-energy’s first battery deliveries by bike. Hussein is bringing a battery to Mama Kanoga’s guest house, where we installed our 8th test system.

The battery is strapped in place by rubber straps cut from tire tubes. I’ve seen these straps used to make sandals whose soles were made from worn tires.

We aim to take advantage of supply chains that already exist in Tanzania, to use techniques that are tried and true by local delivery providers. Bikes are used extensively in rural Tanzania, and can handle an amazing range of cargo. Here’s someone transporting concrete blocks (note how flat the back tire is).

And here’s a picture of charcoal transport by bicycle. Often the bicycle is used as a cart to be pushed up hills, but I’ve seen people pedal with loads as impressive as this one.

Of particular interest to EGG-energy is the transport of fragile eggs. Along Nyerere Road in the morning, you can see bicycles carrying hundreds of eggs into the city center. I haven’t been able to get a good picture of this, but found one on this blog:

http://blogs.dfid.gov.uk/2008/10/cycling-proficiency/

Though we (by we I mean us folks from “western” countries doing “development work”) tend to think of ourselves as bringing technology and knowledge to Africa, I expect many of EGG-energy’s solutions will be home-grown.

–Jamie

This article from www.good.is is about William Kamkwamba, a young man who as a 14-year old built a working windmill in his rural village in order to provide electricity for his family. It’s a great story with a happy ending, and an example of the awe-inspiring ingenuity that you often come across in places where things taken for granted in the US (turning on a light with the flick of a switch) are still precious and desperately longed-for.

- Ben