Market-based approach to catalyzing energy access: Lighting Africa

Pepukaye Bardouille 4th June 2012 / Manila

Over the next 20 years, Africa will rapidly surpass Asia to become the largest un-electrified market in the world
Un-electrified population, millions

21 5 698

809

2009 2030
34
589

561

13

Household lighting data – Rural HH in Kenya

Province

Electricity

Lantern

Tin Lamp

Solar

Total

KENYA

273,352

5.1% 1,847,613

34% 2,617,593 49% 118,412 2.2% 5,361,334

Number of households – Kenya 2009 census

African BOP households and small businesses spend over $10 billion on lighting p.a - growing to over $11bn
Total annual spend on lighting ($, billions)

•Average rural HH spends $10 – 12 per month and $ 120 – 140 per year

Significant, unexplored potential in low cost solar lanterns
Segmentation of potential market for solar lighting devices 4%

14%
26%

7%

49%

1-5W solar lanterns account for at least 50% of the potential off-grid solar system lighting market based on the expense of larger solar systems

Price range from $25 - $110
Source: GTZ, SEF, Newenhout surveys across Kenya, Tanzania, Rwanda, Ethiopia, and Uganda. (1) Average market segmentation projections based on purchasing ability and on-the-ground expert assessment.

Catalyzing market development
Business Model Development
Profitability

Proof of concept

Maturity

Breakeven

Technology/business model advancement

Advisory services
MARKET INTELLIGENCE

Investment
CONSUMER EDUCATION

QUALITY ASSURANCE

BUSINESS SUPPORT

Catalyzing venture financing

Catalyzing mainstream investment with Financial Institutions

Addressing regulatory constraints

8

Lighting Africa’s approach
The overall approach of the program is to accelerate the development of off-grid lighting markets by: 1. Demonstrating the viability of the market to companies and investors 2. Improving the enabling environment for the sector

3. Supporting the scale up and replication of successful businesses

Programmatic Response
B2B linkages Technical assistance

Firm

Sector

Market intelligence Training Mobilization of commercial and concessional financing Product quality standards Best practices and business models for serving the poor
Policy: undertaken by WB National consumer education and communication programs

Standards & Practices Policy & Awareness

10

Results to date:
2.5m
Energy Access Energy Access Growth rates Energy Access Quality products Replication • Number of people in Africa with access to better Lighting from using solar lanterns

502k
113% 14 14 1


• • • •

Number of solar lanterns sold by manufacturers that have passed LA min quality standards
July – Dec 2011 growth rates over Jan – June 2011 in Africa Number of countries in Africa that manufacturers have established importers/distributors Number of good quality products available in the market in Africa Replicated the program in India – launch 31st May 2012

Quality Assurance Highlights
5
test labs products tested products passed quality standards institution referencing test method
• • Nairobi, Kenya / California / Germany / New York/ Beijing Ever-expanding coverage of the market

94 29
1


• •

Allowed to use Standardized Specifications Sheets; differentiated from other products.
UNFCCC harmonized with Lighting Africa QTM for carbon finance (CDM) compliance Ethiopia requires products meet the standards and targets for import.

1
2 7 1

government using standards and targets
product awards competitions technical briefing notes Path to standardization


• •

2012 awards underway now, built on success of 2010
Part of the technical assistance to the market LA invited to sit in an IEC tech committee that is looking to institutionalize LA standards

Key challenges:
Lack of finance impeded market growth and expansion:
• Manufacturers (based in China/India) – Do not meet IFC investment criteria – Perceived as high risk and suited for impact/social PE – Too small/young for mature PE funds/mainstream FIs • Local distributors – Lack collateral to finance additional growth – Unwilling to invest upfront and tie funds for 90 – 120 days

Ghana – low uptake of solar lanterns
• High grid electrification/subsidised connections (low market attractiveness) • Other competing initiatives e,g WB – GEDAP & JICA

Key priorities going forward
1. Develop an A2F facility for the supply chain • Developing a $20m “inventory facility “ with FM (Global) • Working with BOA Kenya/FM to development a risk guarantee for local importers Develop a sustainability plan ; includes waste disposal/collection and Greening the products

2.

3.
4. 5. 6.

Expansion /replication of the Lighting Africa program in Africa and India
Pricing of all our AS provided at firm level (gradually phase out of subsidies) Institutionalization of LA standards with IEC Development of a replication/best practice tool kit for other Dev Inst, NGOs etc

www.lightingafrica.org