When it comes
to the off-grid solar market, the South Asian countries
you normally hear about are India and Bangladesh.
One is home to the largest potential market in
the world, the other is home to the world's most
successful and booming market to date.
But the elephant in the room, the potential off-grid solar leader you never hear
about, is Pakistan. We've heard rumblings of off-grid
solar companies eyeing this market for some time,
so we sat down to talk with Jeremy Higgs of EcoEnergyFinance
to find out the latest on this pivotal country's
off-grid solar prospects.
Before we delve
into the market, it's important to understand the
context in which these companies operate. That
energy situation can be summed up in one word:
crisis.
As Carl Pope pointed
out, Pakistan really has two energy problems: 1)
most of the rural population still has no access
to the grid, and 2) the population that does have
access to the grid is struggling with power cuts
and supply shortages caused by climate disruption-induced
drought. This ultimately affects the use of hydropower
while the skyrocketing prices of oil further reduce
the affordability of the existing supply.
In fact, 36 percent
of Pakistan's electricity comes from oil, an outdated
and incredibly costly form of electricity production.
This means that throughout Pakistan, nearly 40
percent of the population -- an estimated 65 million
people -- lack access to any energy, which means
that there's an enormous potential market for off-grid
solar services.
The problem, of
course, is that the Pakistani government's response
to the country's energy crisis has been painfully
familiar, with a focus on large-scale supply and
grid extension.
And while grid
supply and grid shortages need to be addressed,
what makes no sense is for Pakistan to start building
new coal-burning power plants to supply their energy.
Any new plants that are built will be designed
to be powered with imported coal, which Pakistan
can't afford. In fact, the government of Pakistan
just released a new tariff schedule for coal-burning
electricity -- which is evidently the "most expensive coal tariff in the world." That's why some experts predict that a coal bubble is brewing.
It's in the midst
of this energy crisis, and in the face of the confused
response from the Pakistani government, that EcoEnergyFinance
is seeking a different path. The firm is trying
a progressive new approach: putting solar power
directly in the hands of the people. And the lessons
they've learned have implications far beyond Pakistan's
borders.
Lesson #1: Giving
away solar leads to market spoilage
EcoEnergyFinance
is one of only a handful of off-grid energy companies
in a market dominated by large non-governmental
organizations (NGOs) and foundations. The company
started operations in response to the Sindh Province
floods of 2010. Like many other organizations,
EcoEnergyFinance initially began as an NGO, giving
away solar lanterns for free. And like many before,
the company received a lot of negative feedback
about the quality of its products and heard concerns
about long-term sustainability. In response, EcoEnergyFinance
quickly pivoted into a hybrid social enterprise
by aiming to use a market approach -- which is
a reflection of the general transition this market
has seen over the past decade.
The products that
EcoEnergyFinance sells now are not the same low-quality
products that were given away for free. Today,
EcoEnergyFinance sells high-quality portable solar
powered lights -- like those from d.light -- and
they are continuing to experiment with different
business models to find the best organizational
structure.
Lesson #2: Pay-as-you-go
finance is the future
After trying free
distribution, EcoEnergyFinance started selling
products through retailers, but they quickly realized
that their products were too expensive and that
they would need to restructure payments to match
customer cash flow and expenditure on lighting
products. This naturally led to the extension of
consumer financing, which unlocked affordability
for their target market.
Customers now
pay a monthly fee to EcoEnergyFinance in order
to pay off their lantern over time. This essentially
functions as a "manual" version of popular pay-as-you-go solutions in which similar solar devices with
circuitry enable customers to make discrete payments.
In addition to its "manual" approach, EcoEnergyFinance is also starting to experiment with similar payment-enabled
devices through support from the GSM Association
MECS Fund.
Lesson #3: Word-of-mouth
marketing is key
Then came the
real game-changer: instead of just focusing on
retailers, EcoEnergyFinance started using its own
existing customers as brand ambassadors to spread
the word about its product. As the graph below
shows, this led to skyrocketing sales. The sharp
drop after the peak is a result of several factors,
including the fact that residents of farming communities
in Pakistan tend to have less disposable income
at certain times of the year -- February, March,
and April -- and the fact that EcoEnergyFinance
faced challenges with payment collection in one
district. The company has since recuperated by
focusing on payment collection, not sales, in that
particular district, which has lowered the overall
sales rates.
Lesson #4: Market information is scarce
Despite these initial successes, challenges still exist. The customers EcoEnergyFinance
works with tend to have unpredictable, seasonal
income and are not always able to reliably make
payment deadlines. Field staff have to balance
sales and payment collection, and they aren't always
able to effectively do so.
To continue addressing
these challenges, EcoEnergyFinance is gathering
information about marketing, effective sales tactics,
demographic information, and statistics on kerosene,
torch, and solar use. Additionally, the company
is looking at a range of products, including Greenlight
Planet lights with Angaza-designed technology and
BBOX systems with their new “SMART” technology,
as well as working to partner with microfinance
institutions for alternative means of financing.
In sum, EcoEnergyFinance
reflects a number of hard-learned lessons for this
nascent market -- lessons that are no doubt being
learned by companies and organizations the world
over. But if EcoEnergyFinance is able to build
and grow a company in such a challenging setting,
it says a lot about the robust future that off-grid
solar companies have in in store.
***
Justin Guay leads
the Sierra Club's international program. Vrinda
Manglik is an associate campaign representative
for Sierra Club's energy access program.