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PAYG Solar in West Africa – PEG Ghana – Ep008

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The image above shows PEG Ghana staff at a local service centre.

This episode is part of a podcast series called “Entrepreneurs & Economic Development” talking to entrepreneurs using business and technology to solve problems at the Bottom of the Pyramid. Listen to the interview by clicking play above. 

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Today’s Guest

Nate Heller, the Chief Operating Officer (COO) of PEG Ghana a pay-as-you-go energy company based out of Ghana.

You will learn:

  • How Nate’s Peace Corp background affected his career
  • Shifting from Crowdfunding for Emerging Markets to PAYG Solar
  • Mobile Money penetration in West Africa
  • M-Kopa’s 1st distribution Partner
  • Last Mile Distribution & Rural Sales Networks
  • Upcycling – Shipping containers to Retail outlets
  • Nate’s Favourite West Africa food

Great Quotes

Solar #PAYG in #WestAfrica has the potential to take off right now! @NateHeller Click To Tweet 2 major impacts on #Africa over the last decade: #microfinance and cell phones Click To Tweet Shipping Containers to Stores: Cut it, Paint it, add shelves @NateHeller #EmergingMarkets Click To Tweet

 The PEG Ghana/M-Kopa Solar Kit

m-kopa

Mentioned :

Contact Nate or PEG Ghana:

Feel Free to Comment or Connect

If you have any questions for Ryan, Nate or recommendations for future interviews please place them in the comments section. 

Ep 001: Internet & Electricity to Off Grid Communities – BuffaloGrid

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Subscribe with iTunes for iPhone or Stitcher for Android.

iTunes      Stitcher

This interview is the first of a new podcast series called “Entrepreneurs & Economic Development” talking to entrepreneurs using business and technology to solve problems at the Bottom of the Pyramid. Listen to the interview by clicking play above or read the dialogue below. 

The following interview was conducted with Daniel Becerra, Managing Director with BuffaloGrid. BuffaloGrid is a UK based company bringing Internet access and electricity to off grid rural communities at the bottom of the pyramid. The company operates in multiple countries and recently released its Internet hotspot feature on new devices. Most companies in the BOP Solar industry are focusing on home systems or mini grids and BuffaloGrid’s approach is truly unique focusing at the shopkeeper level while incorporating Internet services.

You will learn:

  • The history of BuffaloGrid and how they entered the solar energy business.
  • Information about their product, which provides Internet and electricity to rural communities.
  • The difficulties of product development in the Bottom of the Pyramid solar industry.

Mentioned in this interview:

Where to find Daniel:

LinkedIn
Twitter: @BuffaloGrid

Feel Free to Comment or Connect

Start of the interview

 

Ryan: You can kind of start by explaining a little bit more about BuffaloGrid.

Daniel: Right, so Buffalo Grid brings electricity and internet connectivity as a service to the third world. Today’s BuffaloGrid is the result of 3 years of researching in Off-grid communities. I mean, we started the project with a bicycle generator addressing the need of charging mobile phones in rural villages.

One of the first insights we had from the bicycle generator, was that people need access to power and not ownership of inefficient, polluting, or expensive power solutions. When you look at the energy hungry problem you will find lots of companies trying to tackle it but most of them if not all of them, are trying to sell a product to a really low income and of course a price sensitive market. They are facing lots of challenges. To address those challenges: One, they compromise on the quality to make it more affordable, a direct consequence of that is a lack of faith that people have in solar panels so many years they have been buying solar panels that were just downgraded from their original operations and they just break within 6 months and nobody has faith in solar panels in these regions.

The other approach which is gaining more momentum is similar to ours where they buy these products in little instalments with their mobile phones. The locking mechanisms that they put in these products make them more expensive. So they end up paying say 40 dollars for a solar panel that would cost 10. We saw all those issues and we said “Lets just drop the cost barrier to zero, so what we do is provide our equipment for free and provide a service with small charges with mobile phones and lights.

As a consequence when we saw the success of this approach we said we might as well integrate some internet connectivity. One of the very good insight that we got as well was that smartphones are ready to immigrate to this market. But they haven’t done so because two main problems, One lack of power they are power hungry so you still need to charge them everyday and two no one in these markets has a 3G or 4G plan. Without internet and power those smartphones are just very inefficient 2G phones, but if you bring those two things power and connectivity you can enable all those smart phones that are sitting in drawers in the developed world ready to immigrate to these markets. And that’s why mobile phone in the beginning were so successful, in the developed world we have a culture of always getting a new phone, then a new phone, then a new phone. So all these phones end up in these markets and become very affordable.

Smartphones have so many generations now that there are many phones ready to migrate. So what we are really looking forward to is allowing the smartphones to reach these places. Mobile phones are already one of the greatest contributors to economic growth in these regions, the future phone imagine what smartphones will do. That’s what gets us excited it’s the new ecosystem that we can bring to this place.

Ryan: You guys are the first company that I’ve talked to that is incorporating internet into your platform for consumers. I know other companies are using smartphones to essentially sell credits to customers for their locked systems. How is that system set up, are you throwing up a hotspot near your device?

Daniel: Exactly, Exactly. It’s just a hotspot, here’s an easy way to imagine it, in our units there’s an iPhone when you turn the hotspot on. It’s as simple as that, of course it’s quite complex hardware around it, yet its the basic principle.

Within that there are limitations of Hotspotting, at the early stages it’s not about having dozens of users streaming YouTube next to a unit it’s more about enabling other services to reach these remote communities. For instance we are collaborating with a company doing remote medical diagnosis, an unqualified person can take a picture of the patient and then a specialist can see it and come back with a diagnosis. For that we provide the internet, so that the user can send an image to a specialist in a different part of the world or we are collaborating with a company doing remote interactive educational content so a remote school in Rwanda and use our connectivity to download the content that these people are generating. We are using out internet capability to enable other services at this stage but we hope that with more and more usage we can make it stronger and provide better services to the end user.

Ryan: That’s very interesting. So, I’m curious as to what hacks you’ve seen them do, I know a lot of villagers were sharing cell phones in the early mobile days. Are you seeing one merchant set up a smartphone with internet as a part of his business? What are you seeing in the early stages of the internet business in East Africa? 

Daniel: What we’ve seen, we are trying to evangelizing the smartphone, we provide our agent with a unit and a smartphone. That smart phone can connect into the hub and he or she can can show her peers what is possible with the internet. So the person that sees it the next day can go to the market and buy a smartphone and starts to engage. One of the things we want to do is start tracking the data so we are the provider so we can see what’s websites are being used. At the early stages we are putting on limitations on the internet itself, it’s now about steaming Youtube, it’s about enabling Wikipedia, enabling more useful types of services.

Ryan: So have you guys talked to …. they are the only other person or company that I know covering the off-grid internet space is BRCK out of Nairobi.

Daniel: Ya, They have a different approach. We actually met the guys from BRCK a while ago. These guys are entrepreneurs in the cities of Africa, that are working on their laptops with constant power cuts, they were losing the internet every time. With BRCK you bypass this problem and you have constant internet, but it’s a completely different market sector. We are trying to bring the internet to the Bottom of the Pyramid markets. We deploy units where there is no power, where our average end user is earning on average 1-2 dollars a day. Most of these people are just sustainable farmers, it’s a total different market. But we are really keen to enable the internet. The whole inspiration, we started with power as I was telling you and the bicycle and then we’ve entered the service model. I had the opportunity to present at the UN alongside the guys from Google. They were representing their initiative, all about bringing internet connectivity to the Bottom of the Pyramid markets. As the UN already identifies the mobile phone as the biggest contributor to economic growth. The bottom line of that conference is that with internet and power you can pretty much eradicate poverty in the next couple of decades, and that got us really excited and that’s what inspired us to look into how can we enable that internet connectivity.

Ryan: That’s fantastic, I’m curious if the hot spot is always on or if you’ve somehow managed to set it up as a service by buying a chunk of data.

Daniel: I mean, to be honest, we are totally in development. The first units with this internet capability were deployed in India a week ago, we are still doing trial and error kind of approach. At the moment they are always on, but they are communicating with us the performance of the units, we haven’t yet enabled any of the services which we have planned to enable … yet.

Ryan: I did some work in Bihar with Orb Energy a few years ago, I found that there were internet connections in quite a lot of Indian villages. Why did you pick to deploy first in India versus East Africa?

Daniel: Well in India because we got the support of the government. The government invited us, and facilitated a lot of things, and as well the government is our client. Our business model relies on the amount of units we can deploy. So, we will be a very successful company if we are able to deploy 2000 units. And the government said we need you to deploy 5000 units. So all of a sudden, the government has enabled us to scale much quicker. So that’s why India, as well one of the things that we’ve discovered in our process is that setting up things are challenging. When you set up the payment integration system, setting your revenue channels, if you are making a profit in Rwanda getting it to the UK. All those little bits and pieces are challenging.

When you see the off grid market, you see that in essence half of the market is in Sub-Saharan in Africa, and the other half is in India. So you can tackle half of the market in one country with one set up rather than 20 different countries, with 20 different set ups in Sub Saharan Africa. So it was a logistics approach in the early stages, simplifying all the logistics issues.

Ryan: That makes total sense, so has your team pulled out of your Ugandan and Rwandan operations?

Daniel: No, No we are still going and we have really exciting projects in Ethiopia and Malawi that we want to start in Q1/Q2 of next year. And then at the beginning of this year we were in Brazil exploring the Amazon regions, what we believe is that we have a global solution. One of our approaches is that to deploy in many different contexts and environments as possible and prove that our approach is a universal answer to the power needs of the small villages. The basic power needs.

Ryan: Understandable, I’ve seen a lot of companies working with Mobile Carriers. Have you worked with any carriers? You mentioned the government being a main partner. 

Daniel : Ya, it’s always been one of our main goals to engage with a Mobile network, our services would be very beneficial for them. It would increase their revenue potential in these markets but we haven’t managed to engage with any of them yet. Traditionally they are slower movers so they require much more traction than we currently have. As I mentioned before we are still in development, so we don’t have the thousands and thousands of users that other companies have. Until we get some scale we are probably just too small for them to pay much attention. Having said that we are getting so much traction now we have really interesting conversations going with VodaPhone in India and SafariCom in Sub-Saharan Africa.

Ryan: One of the questions I had, When I was working with Off.Grid one of the founders came from a charitable background prior to doing an MBA. That’s how they knew the pain point of the industry. How did your team decide on entering the solar off-grid market?

Daniel: I mean the whole project started with Phil, Phil is a coffee trader. So rather than having an energy approach, it was more of a village approach in Sub-Saharan Africa. He’s the head of a company that has been trading coffee in more than 13 nations across Africa for 150 years. So they have built a massive network of coffee co-operatives who they buy coffee from, and he first hand witnessed the struggles of the farmers to charge their mobile phones. So the initial thought was like “lets build a solution, so we started with a bicycle”. That’s how the project started. At that stage he hired me, my background is in design and engineering. So when I took the bicycles I realized that the need was certainly there but build wasn’t quite right. And we’ve been following the design process for the last 3 years, towards getting the product we have today.

Ryan: So how is the design process unique when operating in markets. You can’t exactly walk out into your backyard and test in the conditions that would replicate say rural Rwanda and talk to customers because you’ll need a translator. It’s all very distant from where you manufacture your prototypes most likely, how do you find you’ve adapted? To that manufacturing cycle. 

Daniel: Well, you need to be in the field, the first time that we had those bicycles we went to Uganda and tested them and identified all the possible problems. Then you go back to the whiteboard and address all the issues that you found, create a new prototype and go back. We’ve been doing that back and forth for the last 3 years. I guess, that’s why it’s been slow. If you were targeting the market that you live in you can iterate much faster. But for us you need to test things in the field.

Ryan: So how have you been getting feedback on your products remotely? Do you use a local team to do focus groups or customer interaction, or do you simply scrape data from your devices to see the usage patterns?

Daniel: Yes, we scrape data from our units and we speak to our local team, so for instance we see a peak in charges. Okay, we charged 50 phones a day in this village… what happened? It was a consequence of a power cut. When a power cut commons along you have too many charges. Then we found another village where we only had 10 charges a day. So what’s happening here, it’s a village that has a population of around 100 families. While in the other villages we have three times the charges because we have three times the size of the village. So we are starting to create our recipe for deployment. It’s a balance of the data we can scape from the unit and the data we can extract from our agents.

For instance, the agents weren’t totally straightforward with us, they were thinking that …telling us …  it was funny because what they thought was better for us… we are doing lots of charges but saw that the data wasn’t quite right. We questioned their input and then you get more accurate responses. It’s a mater of making things more accountable and transparent with your local team and us.

Ryan: That’s interesting. Do you have any stories about your best experience with solar? Is there one moment that stands out in the last three years that you can say “This is why I like to work in this industry”.

Daniel: Well ya, when it comes to that type of anecdote. One of the early insights that helped us develop what we have today is the locking mechanism. And the locking mechanism when you see it now, it’s a response to the lack of trust that you have with the agent but it’s totally the other way around. When we had the bicycles one of the problems we saw was that the bicyles were given to a local entrepreneur and the community is all his friends and family. So when the aunt came along and wanted a mobile phone charge well he knew that she didn’t have much money so he didn’t charge her then her friend wanted one and it’s his friend so he wouldn’t charge her much … So he ended up giving away half the charges for free because they were friends and family and that wasn’t obviously giving him enough money to make a business out of it. So our response is that if you lock those ports and only enable them with a text message, no matter how good intention you are you can’t give away power for free.

Ryan: A lot of businesses are either doing individual units or micro-grids. You guys are in the middle with a unit that services the community. Is there any special needs for that kind of business model?

Daniel: Well, yes, you need networks of trust. You are giving the unit away for free and you want to deploy it in a place where it’s going to be used by the community. Thanks to the coffee connection we are deploying them within coffee cooperatives for instance. Where there’s a captive audience, they know each other and it’s a more close environment. A community.

Ryan: The coffee plantations have a density that’s high enough for deployment. But will that mean you’ll have to expand into more countries, rather than hit saturation in small areas. You’ll need to enter more areas because you aren’t deploying a thousand units in a village, you are deploying maybe 50. 

Daniel: Yes, exactly. There are 20,000 villages that we have access to through our coffee network but those are in 13 countries. So instead of doing 20,000 villages in 1 country, we had to go into 13 countries to deploy this amount of units.

Ryan : My last question is around what do you think are barriers to entry for individuals in the solar business, is it a fairly inclusive community and helpful or is capital limiting, what is the limiting factor to growth?

Daniel: It’s a difficult question, one of the things we’ve discovered in  our experience in the field is that the micro levels. The micro socio economic levels, we found there are so many markets. So I mean we found that the solar industry for rural communities is a very big community of companies. It’s a very collaborative industry, there are one billion people without access to power so there are enough clients for everybody. You will find that they are all targeting a different market. Within the poor people in the bottom billion you will find a socio economical sector where they can afford a 50 dollar micro generator for their houses, and there are companies tackling that market. There’s another micro socio economic level above that, that will be able to afford, a bigger solar panel, that will enable tools/refrigerator and that kind of stuff. There are so many types of markets, that could be addressed and we are addressing the very bottom of the pyramid. Its one that has been neglected because there is not much money to extract from it. We see an opportunity to create an ecosystem, and actually rather than taking the money out of these communities you make profitable by bringing services to these communities. Rather than charging the internet to the local farmer, you charge the internet to the NGO or the company that wants to bring a service to these communities.

Ryan: That makes complete sense. That’s about all the questions I have…

 End of Interview

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If you have any questions for Daniel, BuffaloGrid or for future interviews please place them in the comments section.