Working at the 'Coalface' of Clean Energy: BCtA forum gathers renewal power players
By Tatiana Bessarabova, Consultant, Business Call to Action (BCtA)
This post originally appeared on NextBillion.net, a website and blog bringing together the community of business leaders, social entrepreneurs, NGOs, policy makers and academics who want to explore the connection between development and enterprise.
Lack of access to clean, affordable and reliable energy for millions of low-income communities remains one of the world's fundamental development challenges. 'Energy poverty' is a major barrier to economic and social progress to advancing the Millennium Development Goals (MDGs).
In 2012, approximately 1.3 billion people were without access to electricity and 2.6 billion people relied on the traditional use of biomass for cooking, which causes harmful indoor air pollution. These communities are mainly in developing Asia or sub-Saharan Africa, and in rural areas. Lack of access to energy creates significant economic disadvantages that limit the ability to engage in income-generating activities. Similarly, energy deficiency hinders the delivery of effective social services, education and healthcare.
Business plays a critical role in addressing the problem of energy access. Companies can provide innovative products and efficient services; deliver new technologies, technical skills and investment. Business can also bring insights and knowledge essential for developing effective government policies that are critical to overcoming 'energy poverty.'
At the Business Call to Action (BCtA), we seek to challenge businesses to create innovative market-driven approaches to sustainable development challenges such as access to clean energy. BCtA is a global leadership platform of more than 70 companies that have made significant and measurable commitments to leverage core business for development impact. Over the lifetime of BCtA member initiatives with a focus on energy access, over 80 million people in low-income communities are projected to gain expanded access to energy, according to company estimates provided to BCta. Here are just a few of examples:
Barefoot Power plans to bring affordable renewable energy and efficient lighting to 5 million people by 2013 and 10 million people by 2015 across 20 countries in Africa, Asia, Latin America and the Caribbean.
Similarly, ToughStuff a solar-powered energy solution provider, seeks to address this challenge by providing over 33 million people in 11 countries in Africa, including South Sudan and 3 countries in Asia Pakistan, Bangladesh, and India gain access to the solar products, including solar panels, solar batteries, and solar lights.
SolarNow commitment to the Business Call to Action is to scale up access to the solar systems for more than 1.1 million people by 2015 across Uganda, Tanzania, Mali, Burkina Faso and Senegal.
As a result of the Nuru Energy initiative, up to nine million individuals in rural households in Kenya, Rwanda, Uganda, and Tanzania will gain access to portable, rechargeable light-emitting diode (LED) lights by 2016.
d.light has made a commitment to the Business Call to Action to expand the production and distribution of its solar lamps, providing access to clean, safe and affordable renewable light and energy to an additional 6 million households in more than 40 countries in Africa, Asia and Latin America and the Caribbean by 2015.
While many such technology solutions already exist to deliver access to energy, one of the key challenges is to build business models that deploy related technologies so they deliver clean, reliable and affordable energy solutions to customers in low-income or hard-to-reach communities, while ensuring commercial sustainability for business. Many businesses are now piloting and implementing commercial energy products, with variable successes and some common challenges. If these variable business models can succeed and scale, the potential development gains are enormous.
(Pictured right:Prolonged studying hours with solar power (Photo Credit: SolarNow)
In a recent virtual discussion on making energy accessible for low-income communities around the world, representatives from five companies working at the coalface of the issue SolarNow and Wood Industries Corporation shared their experiences. The webinar was a collaborative effort between BCtA, the Innovations Against Poverty, and resulted in a rich and thought-provoking discussion, summarized below in five key messages.
1. Marketing to the BoP
Marketing to the low-income, often hard-to-reach communities requires localized, tailored approaches that go beyond traditional TV, radio, and billboard campaigns. Below-the-line marketing, word-of-mouth and door-to-door sales seem to be the most effective marketing tools in rural areas. More importantly, successful marketing relies on the company's abilities to provide feasible financing mechanisms for the products, have a trained sales force, and build trust with the customer.
2. Lack of consumer awareness
Lack of consumer awareness about the product, its efficiency and safety is often a problem for energy companies. Building consumer awareness requires localized, innovative approaches to below and above-the-line marketing. Based on the local context, successful consumer awareness building activities range from village demonstrations, to creating radio advertising and public education campaigns about a product or technology.
3. Distribution challenge
Last mile distribution to reach the low-income, rural consumers is a challenge for inclusive businesses across many sectors. Although village-level entrepreneurship for product distribution is often praised as a sure way to scaling up, in practice, companies experiences show that the franchise distribution model needs a lot of investment and adjustments based on the product and local context in order for it to work effectively.
Above: Solar Panels in Malawi (Photo Credit: Eqnon).
4. Sales force churn and lack of capacity
The local sales force is critical to building product awareness, securing sales, reaching consumers, providing follow-up and sometimes in consumer-financing as well. Whether they are employed sales agents or entrepreneurs and franchisees, companies are encountering problems with performance, scaling, and particularly with high levels of sales force churn.
5. Financing challenge
Low or limited purchasing power of the BoP customers requires companies to offer valid financing models, which are key to getting the energy products and technologies into the hands of the poor. While some companies are developing partnerships with Microfinance Institutions both for financing the consumer and for financing the small scale distributors that can reach BoP customers, others are finding that in-house consumer financing is more efficient than going through MFIs. In many parts of Africa and India, MFIs are under scrutiny and new models for financing small businesses, consumers and distributors are emerging. Innovation within financing includes crowdsourcing and financing through credit cooperatives.
6. Innovative and reliable partnerships are essential
Innovative partnerships with reliable and relevant stakeholders from different sectors are critical to achieving success and scale in expanding access to energy solutions for the low-income consumers across marketing, distribution, and financing aspects of a business model.