Bill McKibben writes this month in The New Yorker about the burgeoning small scale solar business in Africa.
In this century’s version of neo-colonialsim, sub-Saharna Africa is being overrun by young Americans and outside VC – inevitable, given the roll back in multinational aid. For better or worse, these folks are fueling a rapid expansion of distributed solar power in rural Africa.
The secret to success is, wait for it, selling something people really want.
Small grids to support a few lights and phone charging. These compete with kerosene lamps (kerosene is expensive) and traveling to next village to recharge a phone. Larger systems support a TV and the next step up can handle a refrigerator. The latter is just the thing for local clinic, for sure.
The result can be disruptive, but it isn’t really a technology-driven disruption.
The main challenges don’t seem to be technical—we can deliver solar power at small scales from a single home to a village mini-grid. Rather, as usual, the challenges are social and political, and the solutions are anything but revolutionary.
How to install and fix the system. How customers pay for the system. How to get people to sign up.
The solutions involve attractive purchasing schemes, with payment through existing mobile phones. This means that the power company is a finance company, too. Just as the retail industry and automobile companies pioneered consumer credit in the twentieth century, electricity companies are finding a way.
McKibben recounts that the products are sold through completely conventional direct sales, but really succeed through good service and reasonable pricing. He notes that most of the customers don’t know or care that the power comes from the sun or is environmentally friendly. They want the light, phone charging, and, most of all TV.
In short, while I’ve been excited by the technical promise of distributed solar power for nigh on 50 years now, I have to say that this really is just like any other business now.
Cool technology is not really the key to solving the problem. In this instance, the main technological advance is getting the cost down. Nothing that is being sold today is technically new, but it is finally cheap enough to be real. (This trend was understood and predicted from the beginning.)
The tough problems involve quality and trust, and working out financial sustainability.
The most important factor leading to success in these businesses is actually going to Africa and talking to people. Know your customers! What a concept!
I note that this story contrasts sharply with some of the enthusiastic hopes for cyprotcurrency technology to revolutionize payment systems. The mobile payment systems vary from place to place, and generally just barely work. There is surely opportunity for improvement. But however good the technology (and cryptocurrency isn’t that great for this use case), the key is the user experience, and no one has really cracked that problem. My advice would be to go to Africa, and see what people really want.
Funding this development through offshore VC is potentially a problem, though it’s not clear yet how big of a problem. If too much of the money is skimmed off by foreign and off shore investors, that’s going to be a problem for the customers and local societies. Worse, if the off shore people distort the businesses, forcing rapid and exploitative development, it could kill the businesses altogether.
I have to worry a bit about the rapid expansion in recent years: McKibben reports that there has been a huge expansion in the last 18 months. Everyone is excited and companies are promising to be profitable in three years. Is this enthusiasm rational? I’m not sure.
The huge growth is from a base of zero. Success over 18 months hasn’t even got to the end of the first wave of three year contracts. Is this sustainable? Will these companies really break even (especially with off-shore VC demanding payback)? No one knows, and it is surely too early to declare success, and there could easily be a big crash coming.
The short-term insurance against disaster would seem to be maintaining very strong local presence, lots of local workers, and making sure there is a decent regulatory structure to protect customers from abusive businesses. (For instance, I’d hate to see predatory lending attach itself to distributed solar.)
Long term, the businesses simply must be owned and managed locally.
Personally, I would love to see some of these companies work to develop local coops to fund and staff the local operations. But it’s really up to the African’s how they might want to organize things.
- Bill McKibben, “Power Brokers: Africa’s solar boom is changing life beyond the grid”. The New Yorker.June 26 2017, Conde Nast: pp. 46-55. http://www.newyorker.com/magazine/2017/06/26/the-race-to-solar-power-africa