Public Eye: solar electricity for off-the-grid communities in Philippines

Jim Ayala, founder and CEO of Hybrid Social Solutions Inc. Photograph: Hybrid Solutions/PR

Jim Ayala, founder and CEO of Hybrid Social Solutions Inc. discusses his company’s bid to bring solar technology to off-the-grid communities

Jim Ayala is the founder and CEO of Hybrid Social Solutions Inc. and the Ernst & Young Social Entrepreneur of the Year in 2012 for the Philippines, as well as one of the Schwab Foundation’s 24 World Social Entrepreneurs of the Year for 2013. As a social entrepreneur, CEO and management consultant, Jim has worked on a variety of economic development issues in emerging markets.

Through Hybrid Social Solutions (HSSi), Jim and his team are working to reach off-the-grid communities in the Philippines with solar electricity and provide the required support to ensure that they can benefit from these products for many years.

This interview took place at the BoP World Convention and Expo in Singapore.

What has HSSi recently achieved?

Earlier this year, HSSi and its partners surpassed a threshold of impact, with over 100,000 villagers now benefiting from our solar energy products. At the same time, we have attained healthy profitability, which has given us the confidence to scale up our business models.

Every year, we have gone deeper within our communities to sell a wider variety of products, launching HSSi distribution partnerships in new villages. In the Philippines, where over 20% of the population has no access to energy, and many more suffer from poor energy quality and black outs, we see significant opportunities, and we are currently raising funds to drive further growth.

We have been doing impact assessments along the way, so I can say with some confidence that our growth also drives positive social impact. For instance, we know that the children who check out lights through our solar library programme for schools without electricity study 45% more at night than they did previously. 

We have also documented that families using solar rather than kerosene for lighting cough less, feel more confident, and save money over time. On average, users save US$10 (£6.15) per month by reducing their use of kerosene, and they earn an additional US$30 (£18.45) per month through productivity gains. So we are seeing our customers earn an additional US$40 (£24.60) per month by using our products, which is a significant boost for households that earn only US$150 (£92.30) per month.

Why is solar a good solution to this problem in the Philippines? What is unique about HSSi’s approach that ensures the success of solar energy, whereas in other countries it has not yet gained traction?

The reason solar energy must be subsidised in developed countries is because the alternative is cheap electricity from the grid. Without factoring in externalities, solar is more expensive than coal or nuclear in these countries, so subsidies are required to incentivise use.

The Philippines is a unique market for electricity. With over 2,000 inhabited islands, it has been extremely difficult to extend an electrical grid to communities in remote areas. For my customers, the alternative to solar is kerosene or batteries. To run a radio, a poor person pays 4,000 times more for energy from batteries than a person with access to the electrical grid. That is a real penalty for people in poverty, so solar makes sense in this context.

Even those who have electricity in the Philippines are poorly connected. Many communities, particularly in outlying areas, suffer daily outages due to power shortages. And with more than a dozen typhoons knocking down power lines every year, millions suffer power outages on a regular basis, many lasting weeks at a time.

The nice thing about solar is that you have your own independent electrical system, and the energy is free. The capital expenditure for a solar system can be repaid over time, which makes it affordable. We are beginning to see interest in our home solar systems, even from people who are already on the electrical grid.

You coordinate several different organisations to deliver solar electrical products to rural poor people. Can you tell us a bit about how these organisations interact?

We are building an ecosystem to support standalone solar energy devices, which we believe is essential to ensure the sustainability and future growth of the initiative.

HSSi specialises in distribution: we are the master distributor that builds the network through which solar products are delivered to poor communities across the Philippines. We source most of our products from Sun Transfer, a German company that builds and sources our lamps, home systems, and specialised installations. For supplier financing, we partner with a German cooperative bank.

Our network includes the Solar Energy Foundation, a separate entity that raises funds for community organisations that cannot afford our products, but would greatly benefit from them – such as schools, clinics and birthing centres. It is part of the Stiftung Solarenergie International Network of Rural Development.

HSSi’s team of hybrid area managers and our community distribution partners are key to our success. We put a lot of effort into identifying local partners in each community that we enter. We most often work through member organisations like cooperatives, NGOs and microfinance organisations. We also recruit entrepreneurs to sell our products directly, but this is less common.

The hard work by our team is in building the capacity of our distributors so they can sell the solar products in their communities and benefit financially from the effort. When we enter a new community, we conduct a four-to-six month training programme with the local distributor, which covers product marketing, integrating sales into their systems, managing inventories, dealing with warranty claims, etc.

We help them to select the product line that will be most attractive to community members, and to establish consumer financing options. We also show them how to train consumers in the correct use of the products to ensure that they do not accidentally break them. We basically train our partners in all the basics of sales, marketing, inventory management, and maintenance. It takes a lot of time, but it is essential to our success. Only when the distribution system is working in the first branch do we replicate across other branches with our distribution partners.

What would you say are the most important factors in the success of your work?

First and foremost: for this to work, all the players across the value chain must see the value. Everyone from the product innovator, social distributor, maintenance partner, community partner and end-customer need to see financial benefits. Our job is to connect the pieces and ensure value.

Also, the product line must be robust and tailored to the needs of consumers. For instance, we sell a home lighting system that particularly appeals to fishermen. When they fish at night, they use the light to attract fish to their boats instead of traditional kerosene lamps. By reducing the amount of kerosene they use, the pay-back period for the solar light system is only a month and a half. Since they are used outdoors, Sun Transfer’s products are water proof and shock proof, and they come with a two-year warranty that offers free repairs or replacements. The typical loan that customers obtain to purchase a product lasts from three months to one year, so the length of the warranty gives them confidence that they will benefit from the product for an extended period of time.

For us, the cost of a broken product is very high – it is not just the cost of fixing or replacing the product, rather it’s the impact it has on our customer. For example, we had proudly fixed a customer’s light within one week, our target for repair turnaround. While appreciative, she reminded us that because she relied on the lamp for her livelihood, she was unable to feed her children for three days while the light was being fixed.

Poorly made solar lights cause damage to a reputation that is not easily undone. Also, because many of our customers take loans from our distributors to afford their product, it is imperative that the product works throughout the life of the loan. If customers stop paying their loans, our partners have problems and soon lose interest in our solar program. Therefore, we ensure that our products are as robust as possible, train our customers in their proper use, and set up maintenance procedures.

Finally, we are where we are because of the commitment of our team members to ensuring that our customers and partners are able to get access to our products and enjoy their benefits over time. Our culture marries the compassion of Mother Teresa with the teamwork and performance of the Marines, and this combination has enabled us to earn the trust of our partners and customers.

What do you envision as HSSi’s next avenues for growth?

Solar lanterns are just the beginning. With a strong distribution system in place, we can offer increasingly high-end products to remote communities. Eventually, we want to be able to offer more aspirational products: solar systems large enough to run electrical fans, televisions, refrigerators, water pumps and to charge computers and tablets. However, these products need a stronger technical team, more customisation, and new financing schemes. We are now in the process of expanding the branches where HSSi technicians can be deployed to homes for equipment installation and regular maintenance visits. This is where we are headed.

Content on this page is provided by Business Call to Action, and originally appeared on the The Guardian Business and the Sustainable Development Goals Hub