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Increasing energy access: The rise of pay-as-you-go solar and innovative payment methods

Increasing energy access: The rise of pay-as-you-go solar and innovative payment methods

By Hanisa Weru, Strategic Alliances Leader in Africa for Sun King

As commodity prices soar and leaders around the world worry about energy shortages and prices of gasoline at the pump, millions of people in Africa still lack access to reliable electricity.  One-half of the people on the continent cannot turn on a fan when temperatures go up, keep food cool, or simply turn the lights on. Off-grid, decentralized renewable energy solutions serve as a viable alternative for millions of people, especially in countries with an underserved population and difficult terrain. Off-grid solar companies utilize innovative technology systems from pay-as-you-go (PAYG) technology to unconventional and revolutionary mobile applications to enable clean energy access to consumers. One advantage of these financing and payment models has been the increase in affordability of off-grid systems.

For example, according to the World Bank, West Africa has one of the lowest rates of electricity access in the world; about 42% of the total population, and 8% of rural residents, have access to electricity. There is a disparity between grid access and access to electricity. This means there has been some involvement of decentralized renewable energy systems to close that gap. The idea of a renewable decentralized system is now commonly and more consciously embraced in Africa.

The pay-as-you-go method for energy access

Decentralized renewable energy systems include mini-grids, microgrids, solar home systems, and many more. The growing adoption has allowed product manufacturers to develop affordable, sustainable clean energy products that meet rural consumers’ needs. Sun King has a range of products that are embedded with the pay-as-you-go (PAYG) technology allowing customers to make daily micropayments for their solar home energy system over a period of time, making them affordable. A huge upfront sum is not needed for continued energy, you can flexibly pay for it over time.

The confluence of mobile usage and energy access

There have been multiple touchpoints between the two industries, telecommunications and pay-as-you-go solar, that prove their relationship to be immensely symbiotic in nature.

Firstly, pay-as-you-go systems allow customers to charge their mobile phone, keeping them connected and allow them to maintain constant communication to the world, to their families that leads to increased use of mobile services, data and airtime. This also allows for users to do business from far off distances, sometimes, even across borders.

Secondly, pay-as-you-go (PAYG) solar has been enabled by mobile money and mobile connectivity that allows customers to pay by installments, and companies to remotely control and monitor the solar home systems (SHS). The PAYG solar industry has helped to drive the adoption and use of mobile money, by giving customers a regular and essential use case, ensuring they have a convenient and safe power source to charge their phones, fostering financial inclusion. In much of the world, people don’t live near banks or have bank accounts. Research suggests that the fast spread of these systems that give access to mobile money leads to significant economic growth in the areas affected. In parts of Africa, mobile money systems are ubiquitous. In Uganda, 43 percent of people have a mobile money account. 84% of internet users in Kenya and 60% in Nigeria regularly made payments with mobile phones in 2021. Transaction frequency with mobile money increases for transactions for products and services beyond energy.

Sun King collaborates with telecommunication operators through varied partnership models. The type of transactions: cash-in, cash-out, merchant payment, person-to-person payment, airtime purchase, all grew for the PAYG group. Increase in person-to-person transactions reinforces the point that PAYG adoption drives mobile money usage across transaction types, and that more value is circulating in the digital ecosystem.

Thirdly, there is an  increasing trend of telecoms starting to look beyond their revenue earning models and find innovative partnerships that can lead to sustainable increases in ARPU and customer retention. For example, increasing mobile internet usage is a high priority for mobile operators seeking to stimulate phone activities among their clients. Energy providers can, and want to, leverage their customer relationship to continue to offer services after a customer has completed the payment on their first solar home system.

Expanding into rural consumer segments with value-added services such as pay-as-you-go solar products for daily energy and infotainment is a really interesting spot where telecoms can deliver long-term value to their users. PAYG smartphones, associated with increased mobile usage, are a good example of this trend and are developing fast in related markets.

Creating an ecosystem through collaboration for energy access

The key to unlocking energy access requires a collaborative effort of industry and sector stakeholders working to serve the underserved population. For example, financing is very important for PAYG solar deployment. The industry needs financiers to get more involved and partner with manufacturers, distributors to provide energy to rural communities. They (manufacturers and distributors) need access to financing for onward lending to customers, allowing them to pay for their energy in installments in a flexible, affordable way.  With the pay-as-you-go option, manufacturers and/or distributors provide energy to the consumer with an option to pay overtime. So, who bears the huge capital cost or funds the working capital required for financing and distribution of the solar home systems, mini-grids, or macro grids?

Reiterated at the Mobile World Congress at Kigali, Rwanda, this year, the PAYG opportunity is enormous given the extent of pent up demand for affordable pathways to access essential goods and services. PAYG provider and mobile operator partnerships are central to meeting this need as each side brings unique value. While PAYG models have mobile services at their core, PAYG providers and mobile operators can develop a symbiotic relationship to reach the underserved communities with the services they need. Deepening these partnerships will ultimately reach end users with products and services they have traditionally been excluded from accessing.

This page was paid for by Sun King. The editorial staff of CNBC Africa had no role in the creation of this page.