Written and Researched by EarthAction Intern Larry O'Connor
The Economist magazine recently published an article about a company that has developed an interesting way to profit from providing electricity to poor, sunny regions around the world. The company is based out of London and called Eight19, which refers how long it takes sunlight to reach the earth - 8 minutes and 19 seconds.
The Economist article focuses on Eight19’s “Pay as you go” solar program, where a family will be able to pay an upfront deposit of $10 US to purchase a solar cell and battery that have the ability to light two small rooms for 7 hours per day while charging one cell phone. The users then must purchase "scratch cards" using their cell phones to receive a reference number that will activate the devices. The "scratch cards" and reference numbers are sent via text message. Users can purchase any amount that they can pay for: a day, a week, or a month. These small purchases work toward paying off the cost of the device. After purchasing approximately eighty dollars’ worth of scratch cards, the customer will have paid off the entire cost of the battery and will have complete ownership of the unit.
Customers can then use their $80 US investment on a down payment to move up the "Indigo Energy Escalator" to obtain a larger solar battery unit, or they can just keep their solar unit and not spend any money on electricity. This energy escalator has four different levels, ranging from 3 to 80 watt capacity. The 80 watt solar cell generates light for a phone, four rooms, a radio, a TV, and a sewing machine.
This process was recently tested on a few hundred Kenyan families. Over the next two months Eight19 plans to release 4,000 solar kits in Kenya, Malawi, and Zambia. Many people in this region already have light and some electricity fueled by paraffin - a harmful waxy substance that comes from hydrocarbons used for lighting candles (pictured aboved). The most important aspect in this process is that these incremental payments are similar to what potential customers currently pay for paraffin to light lamps and the cost of charging a cell phone at a store.
Potential Implications of “Pay as you go solar”
In a market where people have very little money to spend, making a profit is an obvious hurdle for businesses who wish to enter. With “Pay as you go”, however, it appears as though company profit and the economic wellbeing of many in poor (and sunny) regions of the world are actually aligned for once.
The primary issue with renewable energy is that there are large capital costs, so before you get free, renewable energy, you must pay a hefty price upfront. Eight19 has taken this obstacle out of the equation. If this ends up working out the way Eight19 claims it will, why would someone choose to pay a similar price and continue to burn paraffin when given the opportunity to pay off their own renewable solar cell that will eventually bring free energy?
This is a business model that will help to spur economic growth. After a customer has paid off their solar cell, they no longer have to pay for electricity and will be free to spend that money on other areas of need. Through savings acquired from owning a solar unit, Eight19 will be putting more money into the pockets of all of its customers while gaining for itself.
During the next few months, when Eight19 plans to sell over four thousand solar cells throughout Kenya, Malawi, and Zambia, it should become clear how effective “Pay as you go solar” will be. If it proves to be successful, could it possibly provide a blueprint example for how renewable energy can be made affordable to all? If a business can make profit off of selling renewable energy to countries with an average per capita annual income of $703 US, why can’t companies profit in a similar way in a country like the United States that has an average per capita income of $44, 372 US? Of course, people in the United States demand more energy, but there is also much greater wealth and a growing desire to be energy independent.
Effective renewable energy policies have been difficult to come by in the United States and much of the developed world, but an effective business model wouldn’t need legislation and could end up accomplishing even more. Is this the business model the world needs to move towards renewable energy and save the earth? The world energy system is extremely complex and there is no silver bullet, but the success of Eight19 in Kenya, Malawi, and Zambia would be a huge step in the right direction.
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