After decades of effort, rural electrification proceeds agonizingly slowly: What secrets must be revealed to accelerate a solution?
I took the picture above while on a research expedition in Kenya. The wires on the power poles have been cut and stolen; leaving the remainder to dangle impotently. The work crew seen here is digging a miles-long ditch to bury the power lines to protect them from theft. The time and money lost due to this theft are but two reasons that rural electrification is a slow problem to solve.
The scale of the problem is almost incomprehensibly big. The International Energy Agency estimates that 1.2 billion people, approximately 20% of the world’s population, live without access to reliable electricity. 400M of those people reside in India alone. Companies that can deliver light and power without connecting to a grid stand to make a significant social and financial impact.
One such company, d.light design, is a US-based, for-profit company that designs and sells solar powered lanterns. Eschewing a connection to an unreliable grid their products span a range of cost and functionality. Each product is focused on a different segment of the family. The S10 lantern is designed to replace a kerosene lantern to light a kitchen or living area (available on Amazon for $USD 15.95). The high brightness S250 lantern focuses on customers who need light to work by while also charging a mobile phone (Amazon $USD 39.95).
According to d.light, they are shipping approximately 200,000 lights per month with more than two million units in the field as of November 2012. d.light’s projections for 2013 forecast a 100% increase in shipped units over 2012.
Accelerating sales indicate that d.light is getting more than just the product design right. President Ned Tozun relocated to China to work with suppliers and manufactures to establish production and assembly costs. “We went item by item; we know the costs for every resistor in the product. We had to do that work very carefully to meet our cost objectives.” d.light has also paid very close attention to developing distribution and marketing partners in each country they enter.
These factors and their for-profit model are three of the reasons that Mr. Tozun cites for d.light’s sales successes. Mr. Tozun feels that there is significant room to continue this accelerating trend in that solar solutions have only penetrated 2% of the market thus far.
For companies engaged in this space here are some near and long term questions to consider:
- Near Term
- Do you know exactly what the necessary price point is for your product to be affordable by BoP (Base of Economic Pyramid) customers in your target countries?
- Can you trace the cost and margin for every component in your product?
- Does your distribution model allow for shipping hundreds of thousands of units without breaking your cost assumptions?
- Long Term
- What can be learned from the telecommunications industry?
- What are the technical and economic tipping points where solutions gather their own momentum?
- What is the right scale for the solution? d.light provides power to one family at a time. Is that strategy more efficient than trying to provide power to one village as in a micro-hydro installation?
- Distributed power generation is gaining momentum throughout the developed world. How can this momentum be leveraged for application in the developing world?
The Unitus Seed Fund is seeking investment opportunities in companies that have demonstrated that they can meet BOP consumers’ needs in energy and other basic necessities with scalable and efficient solutions. Done right, distributed energy solutions can provide both cost effective value for low-income consumers, jobs in the local community and significant financial returns for all involved.
Chad W. Jennings is an intern with USF. He blogs on using the power of capitalism to defeat poverty.