"Our ability to respond to people's demands has changed by an order of magnitude"

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"Our ability to respond to people's demands has changed by an order of magnitude"

This is an edited transcript of the closing session of the Global Off-Grid Solar Forum & Expo (22-24 January 2018) prepared by GOGLA staff members and should not be considered a full transcript.

 

 

Joshua Pierce: One of the key ideas put forward in the opening session is that today's competitors will be tomorrow’s partners. Why do you think there's been a shift in thinking here? 

Itotia Njagi: I believe the enormity of challenge is being better realized. There is still 82% of the market we have not yet covered. Partnerships are therefore going to be critical.

And we've already begun to see some of these interesting partnerships and market disaggregation. Companies are looking at their key strengths and specializing on what they do best, whether it is operations and distribution, or the financial service side. 

Working together has the potential to reach more consumers. It is key for business models, technology, and impact.

Joshua Pierce: Do you think biggest companies need to own the customer relationship, or should they look to work with others on distribution? 

Itotia Njagi: Customer retention is huge. And up-selling is big. But if your customer service is even slightly weak, then keeping that customer relationship becomes a problem rather than a benefit. If companies want to do everything themselves, they need to have both ends covered.

Laura Sundblad: PAYGOs also have a chance to share the value that they generate from customers with the customers themselves. For example, companies can use insights from the data that they collect from solar home systems to improve product performance, and thus provide a more reliable service for customers. Another example would be to share with customers their credit history and payment performance so they can use them to build a credit score. 

Itotia Njagi: A great example of that is in the agricultural sector where a smart water pumping system can be used to help farmers understand the impact of weather -- so they know whether or not to water their crops.

Joshua Pierce: How do we align the needs of the customer, commercial enterprises, governments, development partners and investors? What are the opportunities and challenges? 

Johanna Diecker: We are seeing increasing engagement by governments. They are willing to invest in the enabling environment but, of course, they want to see that investment turn into benefits for their constituents. And they are under a time pressure. 2030 is not a long way away. So, there is a sense of urgency. And government's needs might also be different. For example, they may have a focus on reaching more remote consumers -- so how can we help them do that? this is where public funding plays a critical role. Steven Hunt from DfID said in one session that donors were in the business of distorting markets. The goal being, to direct markets to harder to reach segments.  But how do you build the right tools to reach that market without hindering the private sector? We need to work proactively together so that we create sustainable solutions that both enhance market growth and help customers that are currently beyond reach for our members to access these products and services

Joshua Pierce: So, it's a great opportunity, but the most attractive markets for the private sector may not be the people that governments need us to reach. What gives you encouragement on this issue of working together to align objectives? 

Johanna Diecker: One interesting case is Togo. While it is a small market, the government is giving support to BBOXX -- in a way that does not cost them much -- but which enables BBOXX to enter the market. For example, the government is helps to open up partnerships and also facilitated local currency lending. Following the example of East Africa, Niger and Haiti, we are seeing that VAT / tariffs have been exempted, which is a great way to encourage private sector interest. And the KOSAP program in Kenya has also been created in close coordination with the private sector -- another great example of positive engagement. 

Joshua Pierce: We've also been talking about appliances and productive use and the ways the market is evolving. What new things have you seen over the last couple of days that show the innovation here? 

Arne Jacobsen: Not a new thing but one that is very important is the efficiency of lighting and appliances -- which has drastically reduced product prices. Efficiency comes up over and over again, across all scales and products. And while we've made a lot of progress over the last couple of years, there's even more potential going forward. Another exciting area is a shift of focus to productive applications, and the marriage of these with PAYGO. We still have a strong focus on household use, but productive use is emerging now in a really important and interesting way.

Joshua Pierce: On productive use, where do you think some of the innovations are and the challenges when it comes to affordability? And how should we approach the dynamic of desire vs affordability?

Arne Jacobsen: There is a lot of innovation in solar water pumps and solar agri technologies. But we need to learn more about 'what happens next' once a farmer has a solar water pump. I visited a farm in Tanzania where using a solar water pump had expanded crop yield by a factor of 15 -- but this also brought with it new challenges. To really make the most of the system, the farmer now needs more finance and agronomy support to capitalize on that opportunity. So, we also need to focus on the next set of constraints that will have to be addressed in order to realize the full potential of this technology.

Joshua Pierce: It’s a constant challenge for the technical staff in companies as there is always something more we need to learn about new appliances – for example, now it is possible for off-grid solar to power a fridge, I have to become an expert on compressors and insulation. Though it's a great problem to have! It raises a thought though, regarding many companies being competitors, but with the same 3-5 manufacturers making all of the products we sell. 

Should we also be thinking about how we can leverage our combined purchasing power in a way that – rather than reducing our USPs – provides combined competitive advantage? If we perhaps come together on appliances, there could be some incredible outcomes. It’s perhaps a utopian idea -- but one I'd throw out as my controversial notion of the day.

Another part of the interesting dialogue from this conference is that, while the industry is still very anchored on PAYG, we’ve heard more about alternatives. Laura: where will be in 5 years when we're looking at the topic of finance? 

Laura: In much the same way as there is diversity amongst our customers, businesses and investors are also diverse – with different challenges and needs. Many businesses remain customer-facing, and customers continue to need different kinds of affordability mechanisms.  Those mechanisms can be provided by a range of different actors, and in different ways. The question of what PAYG is therefore becomes a more and more existential one – as traditional financial institutions start adopting the technological solutions deployed by PAYG businesses. But whether banks and MFIs are going to come in, or if companies will continue servicing PAYG, is not the most important question, the important thing is to get the right financing to meet the needs of customers. 

Apart from customer-facing businesses, the increasing specialization in the sector means that more companies in the sector are B2B-businesses. This means that we also have to think about  how the ecosystem companies finance themselves. We may need a new wave of equity investors looking at this new opportunity -- and those investment needs will also be different.

And crucially, while we will need multiple types of financing, we always need to match sector growth with quality. We need to focus on where investors can place their capital so that they accelerate access to electricity, whilst continuing to provide high quality service to customers. 

Questions from the Audience

Michael Gatari, University of Nairobi: One thing I am still pushing for is for more focus on the training aspect of off-grid solar. The World Bank has strong links with governments in Africa. There are youth funds, and perhaps training could be linked to those. How do we make sure that the industry impacts the lives of our young people? 

Johanna Diecker: Great question, it’s critical to think about how we best channel public funding to help create impact. Perhaps we can piggy back on initiatives from the social sector and link with cross cutting sectors, such as youth employment, agriculture but also primary education, to maximize the benefit of these schemes. 

Itotia Njagi: We also need to look at the issue of youth training holistically. Companies will need to build a plan so that youth can continue to benefit from the training they receive. And we should work with governments who are looking at this to drive that impact together. 

Joshua Pierce: Ongoing training a huge importance for Off Grid Electric, so thanks for the question. 

Declan Murray, University of Edinburgh: What is new? We've been talking about productive applications for off-grid solar, and potential of MFIs for a long time now – Arne, you did you PhD on this area -- so why is it interesting now? 

Arne Jacobsen: The issues and themes are the same as in the early 2000s, but a lot of things have changed: technology, pricing, PAYG -- we can do things we just couldn't do before. So, while the needs are the same, our ability has changed dramatically. By an order of magnitude. The change has been driven by tech innovation and business innovation -- and the merging of those 2 things. 

Joshua Pierce: When we started Off Grid Electric the average panel we could give to our customers to power a TV was 35 watts, now its 8 Watts -- solar over $2 per watt, it's now 30c per watt – there’s been huge change.

Laura Sundblad: On the bank and MFI participation in the sector we are also seeing the blurring of lines now between financial institutions and PAYG. Baobab+  and Mobisol working together, for example, has brought new advantages and an ability to use data to create an understanding of previously unbanked people that was just not possible before. 

Koen Peters:  It is wonderful when you get a last question from a PhD student of today, to one from a previous generation, asking whether things have changed. And being able to respond that, while the demand is still there, our ability to respond to that demand has changed by an order of magnitude. 

So, the challenge is on to this generation -- let's see if you can do the same! 

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