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These Five Market Innovations are Revolutionizing Solar Energy in the Developing World

Solar energy investment and development can be especially impactful in the developing world, where a billion people live with unreliable electrical grid service, and another 1.3 billion live without the grid entirely. Traditional energy solutions are unavailable to these largely rural and decentralized populations, but renewable energy sources like solar are an ever-present resource that many organizations are beginning to pursue as a sustainable and affordable alternative.

Much of this market activity constitutes manufacturing and selling another solar lantern or cell phone charger, but there are also innovative models which are fundamentally changing the delivery of solar energy to developing populations. Here are five such innovations that are increasing access to affordable clean energy and creating economic opportunity in the developing world.

Pay-as-you-go financing

Clearly, one of the major barriers to solar adoption in the developing world is the cost of grid access or system installation in the first place. American residential solar systems can run into the thousands of US dollars, but even simple systems that power a cell phone and a couple lights can cost a developing houshold more than they can afford. To push adoption and remove purchasing barriers, Simpa Networks is pioneering a pay-as-you-go financing model in India, wherein the solar installation costs are dramatically reduced and are then capitalized over the next few years as the user prepays on a per-kW basis for the energy that they consume. Once it is paid off completely, the system is permanently unlocked to allow the energy to flow freely, thereby allowing users to avoid prohibitively high setup costs while still being able to buy solar energy systems without credit.

Mobile payment tools and plans

People living in the developing world similarly have poor or no access to traditional banking and money management services, making regular payments from a remote location another key challenge. Fortunately, the Information Age has made mobile phones ubiquitous even in developing areas, and organizations like Angaza Design are utilizing them as a primary means of payment for energy access. Angaza sells solar lanterns, but they specialize in a software platform that transmits data over cell phone voice channels (similar to how dial-up modems work) enabling reliable data transfer and energy payments using only a mobile phone and a voice plan, not Internet access. This also streamlines the business side of things, allowing energy producing organizations to efficiently sell to customers who previously would have provided too little revenue and been too widely dispersed to serve profitably.

One-for-one product subsidizing models

Discounted and subsidized prices can also increase the adoption of solar energy in poorer markets. Taking a cue from TOMS, WakaWaka sells solar lanterns and charging units to developed and developing markets, using the revenues from the developed markets to cover some or all of the cost of developing market products. Market share is the name of the game, because in this case, growth in market share directly increases growth in positive impact.

Self-sustaining, bottom-up distribution networks

The physical remoteness of developing populations’ living conditions poses additional constraints on traditional supply chains. In 2000, Hindustan Unilever Ltd. launched Project Shakti, which sells basic consumer goods like soap, and equipped and empowered local women to become entrepreneurs. The result is increased sales and market reach while also creating livelihoods and a resilient, bottom-up direct sales network. African nonprofit Solar Sister is employing an analogous strategy to bring various solar products and sustainable employment to over 400 entrepreneurs and their communities.

Greater product efficiency

Finally, gains are being made in the value of the products themselves. Companies are using and less costly and more efficient components, and streamlining the manufacturing price to create more capable and more affordable products at the outset. For example, Haitian company D&E Enterprises manufactures simple and smartly designed cook stoves made from cheap local materials that use 50 percent less biofuel than traditional competitors, saving customers money on fuel and health care costs, since less biofuel used means less cookfire smoke inhaled. Similarly, the cost of solar energy is continuing to fall as solar equipment and product efficiencies continue to rise.

Given the enormous potential for solar expansion in the developing world, it is great to see these market innovations leading the way. What do you think are the next steps to getting clean energy around the world?

Steve Tomey recently graduated from James Madison University with a management degree and has a strong interest in social entrepreneurship and how it can be an engine for sustainable development and empowerment at the individual and community levels. He was previously a Net Impact chapter president and consulted through the Social Innovation Program at George Mason University. In his free time, he stays current on all things #socent and #socinn, and enjoys camping and outdoor living.

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