The Problem of Energy Access
Worldwide, approximately 1.6 billion people have no access to electricity and another 1 billion have extremely unreliable access. Without ready access to electricity, the poor depend on kerosene lanterns and battery-powered flashlights for light. They can’t break the cycle of poverty because they can’t take advantage of the myriad productive uses of energy. Access to energy is essential for a family’s economic livelihood, health, safety, educational achievement, and quality of life.
It’s Expensive to be Poor
Kerosene lanterns are dangerous, dirty, and dim. Worse, they are very expensive to operate. And yet, in most markets, kerosene lanterns are the preferred lighting system. For a person with little or no savings, no access to formal credit, and low and uncertain income, the selection of kerosene lighting is eminently rational. Kerosene lighting has a low initial purchase price and offers a flexible pattern of expenditures over time. The consumer can choose how often and how bright to burn the lantern, and often chooses to forego light entirely for periods when income is unavailable. The kerosene light – with its high operating costs, its many dangers to health and home, its poor quality light and noxious fumes – has been the best choice available.
Individual consumers in many emerging markets are making less than $10/day, with the poorest spending up to 30% of their income on inefficient and expensive means of providing light and accessing electricity. Worldwide, low income consumers spend about $38 Billion per year on kerosene for light, another $10 Billion on cell phone charging. There is likely a $100B global opportunity for small scale distributed energy solutions, with no clear market leader.
Modern energy systems that meet these lighting and basic electrification needs are on the market for $200-$400 retail. These systems typically include a solar panel, battery, charge controller, at least 3-4 lighting points, a mobile phone charging port and power for charging or powering small DC devices. These solar home systems have proven to be very desirable to consumers who immediately recognize the health, educational, and income generating benefits. Yet households cannot afford the high upfront cost of a quality solar energy system and thus remain locked into expensive fuel-based lighting and battery charging fees. Over the 10 year useful life of a quality SHS, households will spend $1500-$2000 on kerosene, candles, batteries and phone charging. They are paying more than they need to, because they are poor and because their incomes are low and unpredictable.
Underscore this fact: In our launch market, India, as in most developing country markets, the low income consumer can actually afford a small solar home system if only they could pay for such a system over time, in small, irregular, and user-defined increments. That is, if the pricing model matched the pricing model they are already using for kerosene, candles, batteries, and phone charging.