Pay-as-you-go: from mobiles to energy

Sensemaking / Pay-as-you-go: from mobiles to energy

A new business model for off-grid solar power could revolutionise India’s energy sector, transforming lives in the process. 

20 Mar 2012

A new business model for off-grid solar power could revolutionise India’s energy sector, transforming lives in the process.

People with unreliable access to electricity at best, and none at worst, will soon be able to pay for off-grid solar energy ‘as they go’ – if trials of an innovative microcredit scheme in India meet with success. The ‘Progressive Purchase’ model enables customers to make a low-cost down payment for a solar photovoltaic system, which is then topped up in installments using a mobile phone and locally purchased scratchcards.

It works much like putting a coin in the meter – or its modern equivalent: top-up mobile phone tariffs. Users can determine each payment according to their means, and each goes towards the total purchase price of the solar home system, transforming energy expenditure into an asset purchase over time.

In many emerging markets, the poorest are spending up to 30% of their income on inefficient energy sources, particularly kerosene for lighting. Kerosene is not only expensive relative to standard on-grid electricity but it’s a smoky health hazard with a disproportionately high environmental impact. Pay-as-you-go (PAYG) solar addresses both these concerns.

“It breaks down the barriers of asking very low-income communities to pay large upfront costs”, says Caroline Howe, who has worked extensively in India with UNICEF and the Climate Solutions Project.

Mobile phone money systems are becoming the payment method of choice in several emerging markets. Not only is PAYG a system many are already comfortable with, but it’s relatively cheap to implement, and mobile ownership is widespread. It is estimated that almost 500 million people have mobile phones, but no access to a grid.

The potential for PAYG to revolutionise the off-grid energy sector is clear. Simpa Networks, a venture-backed technology company based in Bangalore, is working to develop the incremental energy payment plan in low-income countries – and vying to lead the market: “There is likely a $100 billion global opportunity for small-scale distributed energy solutions, with no clear market leader.”

The Indian Government has set a target for solar capacity of 20,000MW by 2020, but audit group KPMG believes that breakthrough technologies could help it to exceed this by more than three times, reaching 67,000MW by 2022. In a country with a huge electricity gap and continuing population growth, the demand for reliable, inexpensive energy has never been greater. – Tess Riley 

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