AfricaFocus (Washington, DC)

18 August 2014

Africa - From Kerosene to Solar

The largest marketer of solar lamps in Africa, which recently passed the one million mark in lamps sold, has set an ambitious target for the industry.

"Our mission is to eradicate the kerosene lamp from Africa by the end of this decade," proclaims Solar Aid. Although achieving this goal would require the pico-solar market to emulate mobile phone industry's exponential growth path, it may not be as utopian as it sounds. According to market research company Navigant Research, "Off-grid solar lighting for base of the pyramid (BOP) markets, the leading solar PV consumer product segment, is transitioning from a humanitarian aspiration to big business."

Although Solar Aid's business affiliate Sunny Money now only operates in four countries, other companies are entering the market. Continuing drops in cost point to rapidly expanding growth in both solar lamps and somewhat larger home solar systems. In India, newly elected Prime Minister Narendra Modi has made a similar pledge to have at least one solar light in every home by 2019 (http://tinyurl.com/lbzvnp9).

In developed countries as well, rapidly expanding mobile solar technology is gaining increased investor interest, with a recently announced purchase of start-up Goal Zero by NRG Energy, a leading U.S. independent power producers (http://tinyurl.com/m775l75).

This AfricaFocus Bulletin contains an article by Justin Guay of the Sierra Club on off-grid energy priorities, written just before the U.S.-Africa Leaders Summit in Washington, as well as two press releases from the new Kenyan solar power marketing site M-KOPA, which provides mobile credit for paying off a small home system in less than a year.

For a previous AfricaFocus Bulletin on this topic, see http://www.africafocus.org/docs14/ces1406.php

For talking points and links to earlier AfricaFocus Bulletins on climate change and the environment, visit http://www.africafocus.org/intro-env.php

Other useful background resources can be found at the following links:

Impact Report on Switching to Solar http://www.solar-aid.org/impact/

Largest marketer of solar lights in Africa http://www.sunnymoney.org/ "Our mission is to eradicate the kerosene lamp from Africa by the end of this decade."

Solar for Africa Blog http://johnkeane1.wordpress.com/

M-KOPA Solar (includes list of dealers in Kenya) http://www.m-kopa.com/

Review of M-KOPA in Wired magazine http://www.wired.com/2013/10/mkopa-solar-charging/

"Solar powered lighting market is expanding rapidly, report finds" Navigant Research, May 27, 2014 http://tinyurl.com/pwq5q4k

Notably, the trend towards dropping prices and increased competitiveness for solar power continues in the United States as well, as noted in a recent article and in the recently updated "National Solar Jobs Census."

Emily Schwartz Greco and William A. Collins"Solar Power Gets Hot, Hot, Hot," Alternet, August 13, 2014 http://www.alternet.org / direct URL: http://tinyurl.com/mgerg92

National Solar Jobs Census http://www.thesolarfoundation.org

On another topic, but timely and sober analysis:

Adam Levine, Five Myths on Ebola Debunked, August 13, 2014 http://tinyurl.com/lt3fnfw

-- Editor's Note

Four Things The U.S.-Africa Leaders Summit Can Do For Beyond the Grid Solar

by Justin Guay, Sierra Club

August 1, 2014

Huffington Post

http://huff.to/1s9WgcH

All eyes will be on the U.S.-Africa Leaders Summit in Washington next week with one question in mind -- will those gathered take steps to move investment beyond the grid?

Just this week, Politico reported that former New York City Mayor Michael Bloomberg and former President Clinton are set to attend. With a long list of U.S. Government dignitaries also expected, the event will send an important signal for the future of President Obama's Power Africa Initiative. Now's the time for that signal to be loud and clear - Power Africa is doubling down on investment in solar markets beyond the grid.

Earlier this summer, Energy Secretary Ernest Moniz announced at an event in Addis Ababa Ethiopia, a groundbreaking new $1 billion initiative as a part of Power Africa dubbed "Beyond the Grid." The initiative builds on more than 25 small-scale energy projects already in the Power Africa pipeline to catalyze a distributed clean energy deployment. To build the initiative and drum up investment, the Administration pulled together 27 founding partners - including impact investors, venture philanthropists, clean-energy enterprises, and practitioners - who have committed to invest over $1 billion over the next five years to seed and scale distributed energy solutions for millions of African homes, businesses, schools, and other public facilities.

That announcement was a big deal. By shifting policy focus and investment towards the cheapest, fastest, most effective energy access solutions - distributed off-grid solar - the Obama administration is poised to unlock between a $12 billion and $50 billion clean energy opportunity.

Underneath those numbers lies an even more exciting idea -- that energy access can develop just like communications have. All across the developing world -- but especially in Africa -- mobile phone technology has leapfrogged land line telephones entirely. In fact, three out of every four new mobile phone subscribers are now in the developing world. The same cannot be said of energy access.

Research from Group Speciale Mobile Association (GSMA) shows how both energy and water access lag far behind the penetration of cell phones in Africa. In total, 411 million people worldwide, the vast majority in sub-Saharan Africa, have a mobile phone but no way to charge it. It's this convergence of un-electrified populations and mobile phones that is creating a tremendous new opportunity for solar power.

All across Africa, solar entrepreneurs are working with communities who live beyond the grid to put power directly into their hands. Thanks to the explosion of cell phones, these communities are now able to take advantage of mobile money platforms like M-Pesa in Kenya to pay for solar energy from companies like M-Kopa. This is unlocking a solar revolution for energy poverty that could fundamentally alter the evolution of energy infrastructure across the continent.

But while this market is growing rapidly -- 77 percent in 2014 according to the Global Off Grid Lighting Association -- it's cashstarved and needs support. That's why the industry has been demanding a new $500 million fund from the World Bank (join them and sign our petition at http://tinyurl.com/lv3ky3r). Here are a few steps the summit can take to further back this vital industry:

Announce a goal to phase out kerosene based lighting by replacing it with clean solar power;

Leverage investments in solar that help achieve that goal by using loan guarantee authority at USAID or OPIC;

Work to reduce and eliminate harmful VAT taxes on solar products for the off-grid rural populations; and

Set a baseline and measure progress in increasing public investment in beyond the grid solar markets.

The President's new Power Africa Initiative and the Energize Africa Act in Congress both touch on these important goals. That's why they now represent historic opportunities to shift resources and investment beyond a failing business-as-usual approach towards 21st century solutions. As the world's biggest leaders come to town for the U.S.-Africa Leaders Summit, the innovative companies and investors building a future we all want to see will be waiting to hear one message: It's time to move investment Beyond the Grid.

M-KOPA in the News - Press Releases

http://www.m-kopa.com/media/latest-news/

April 7th 2014

M-KOPA Solar Scoops Bloomberg New Energy Finance Award

Kenyan company is one of ten companies globally being recognized in 2014 as a game-changer in clean energy technology and innovation

Nairobi, Kenya - M-KOPA Solar has been recognized as a new energy pioneer at the Bloomberg New Energy Finance Summit, held in New York on Monday 7th April 2014. This award recognizes companies that have innovative technologies, robust business models, momentum in their activities and the potential for global scale.

M-KOPA Solar brings together asset financing, mobile technology and solar innovation to connect off grid, low-income homes to energy. Customers buy a solar home system on a mobile payment plan, with an initial US$35 (Ksh 2,999) deposit, followed by 360 daily payments of US$0.58 (Ksh 50).

Mr. Jesse Moore, Co-Founder and Managing Director, M-KOPA Solar says, "We're delighted to be recognized as a new energy pioneer. We dedicate this to our 60,000 pioneering customers in Kenya and Uganda. By connecting to M-KOPA Solar they are investing in a better, healthier, brighter future for their family. This award is made possible by the hard work of the M-KOPA Solar staff and agents, as well as our fantastic partners and investors."

M-KOPA Solar systems are sold in partnership with Kenya's leading mobile operator, Safaricom and the customer payment plan is offered through Safaricom's mobile money platform, M-PESA.

Mr. Bob Collymore, CEO, Safaricom Limited says, "M-KOPA Solar is an innovative and relevant solution that is solving a real problem for thousands of rural homes. The majority of Kenyan homes are off grid - and are spending US$200 (Ksh 17,000) on dirty and dangerous kerosene each year. M-KOPA Solar offers a cleaner, better alternative for the same daily expenditure. At Safaricom, we are proud that M-PESA is the medium used to access and pay for these transformative devices."

"We are aiming to power up one million homes across Kenya by 2018. And together we're going to focus our innovation on products and services such as M-KOPA Solar, which positively impact on current and future generations." adds Mr. Collymore.

The proprietary, patented technology platform that supports the company's daily operations is called M-KOPAnet. It connects the embedded SIM card, engineered in each solar system, with the mobile money platform. And it manages each system's performance, disabling it if payments are missed and reactivating it when customers catch up.

Mr. Moore says, "The technology behind M-KOPAnet is groundbreaking and enables low-income households to use mobile money and mobile technology to access services that were previously inaccessible to them, whether that was due to geography or finances. We're proud to be a Kenyan company that is producing award-winning technology that can be used on a global scale."

The Bloomberg awards program, now in its fifth year, selects ten New Energy Pioneers each year. This year the independent panel of industry experts selected the winners from numerous applicants from around the world, assessing them against three criteria: innovation, demonstrated momentum and potential global scale.

Michael Wilshire, Selection Committee Chair and Head of Analysis of Bloomberg New Energy Finance, said: "We were impressed by the strength and breadth of innovation in this year's New Energy Pioneer candidates and their potential to accelerate the next wave of industry growth."

February 6th 2014

M-KOPA Update

M-KOPA Solar Brightens Off Grid Solar Market

Reaches 50,000 customers within 15 months of launch

Closes US$ 20 million in funding to reach one million homes

Nairobi, Kenya - M-KOPA Solar is today announcing that it has closed its most recent round of funding, raising US$ 20 million (Ksh 1.72 Bn) to fund expansion of their customer base from 50,000 homes to one million homes by 2018. M-KOPA Solar is an innovative asset financing company that sells solar home systems to off grid households, on an affordable 12-month mobile money payment plan.

The funding includes a US$ 10 million (Ksh 860 million) commercialgrade syndicated debt facility fronted by a leading East African bank, Commercial Bank of Africa (CBA). The system is sold in partnership with the Safaricom dealer network, and the consumer payment plan is offered through Safaricom's mobile money platform, M- PESA.

Mr. Jesse Moore, Co-Founder and Managing Director, M-KOPA Solar says, "The M-KOPA Solar model makes world class solar systems affordable for low income consumers - most of whom live below the poverty line. It's a model that is also proving attractive to investors. At the heart of our business is our patented technology platform that combines embedded GSM with mobile payments to revolutionise asset financing.

"We know Kenyans spend over US$ 1 billion (Ksh 86 billion) a year on kerosene. We also know Kenyans would prefer brighter, healthier and safer alternatives. We've developed our technology and business model precisely to meet that consumer need."

The collateral for the CBA-led loan is M-KOPA Solar's future cash flows from its customer payment plans. This innovative lending structure involves the securitisation of a loan book composed of lowincome consumers, sometimes without bank accounts or fixed abode, paid entirely through the Safaricom M-PESA system. This is different to most collateral packages that are backed up by assets - like land.

Mr. Jeremy Ngunze, CEO at CBA says, "As a group, we understand the aspirations and realities of African economies and this investment in M-KOPA Solar makes sound business sense for us.

"There is very little formal credit or financial information on how off grid households consume and pay for energy. We're very impressed with M-KOPA Solar's technology platform, which allows them to extend credit to customers who are otherwise lacking formal collateral or credit histories. And it is clear that there is an enormous, creditable market that wants to be empowered by cutting-edge energy, telecommunications and financial solutions."

Other lenders in M-KOPA Solar's debt facility are Bill & Melinda Gates Foundation, LGT Venture Philanthropy, Imprint Capital, and Netri Foundation. The US$ 20 million in funding includes grants from DFID UK, Bill & Melinda Gates Foundation and the Shell Foundation. And there is re-investment by lead equity investors Gray Ghost Ventures. Funds are being used to scale up sales and operations in East Africa, expansion into other markets, R&D and business intelligence.

Mr. Bob Collymore, CEO, Safaricom Limited says, "We're incredibly proud to have been an anchor partner for M-KOPA Solar and to see this Kenyan success story starting to go global. Our technology, fantastic customers and dealer network have provided a unique environment to scale up the M-KOPA Solar model."

"Every day there are people coming into our shops looking to revolutionise their access to energy by acquiring M-KOPA Solar. And each day we're seeing more and more people successfully complete their M-PESA payment programmes. By providing this service, we are not just lighting homes, but we are also enabling children to do their homework at night as well as providing convenient unlimited mobile charging at home."

M-KOPA Solar currently offers customers a high quality d.light D20G solar system with three lights, phone charging and a solar powered radio - which is all backed by a two-year warranty. The system is available for a deposit of Ksh 2999 (US$ 35) followed by 360 daily payments of Ksh 50 (US$ 0.58, inclusive of VAT).

Repayment rates on the M-KOPA Solar payment package are at 95 per cent even though most households have per capita incomes below US$ 2 per day. A recent independent survey, by TNS Research International Kenya, reported that 97 per cent of households with M-KOPA Solar were saving money compared to their previous daily spend on kerosene. Mr. Moore says, "Our investors and customers appreciate that M-KOPA Solar can do well as a business and change lives at the same time."

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