The Energy Ladder Myth in Africa
The only thing that is true about the energy ladder is that there is no energy ladder.
There are currently over a billion people living without access to electricity around the world and for those working on energy access solutions the concept of the “energy ladder” will be familiar. For those that aren’t familiar, the theory goes something like this:
If you don’t have the grid then you’ll use a dirty source of energy, such as firewood or kerosene, until you earn some more money and move up “the ladder”. The first rung is a solar lantern, the second a solar panel and so on and so forth until you connect to a mini-grid or to the grid if available. As income levels rise you climb up the ladder.
Snakes and Ladders
Sounds pretty logical, but after having worked over the past few years to power some of the most rural communities in Tanzania, where the majority of our customers earn less than $2 a day, I’m here to tell you that there is no step-by-step path to energy freedom. Not only do low-income customers move up and down the ladder, but they will also stand on two or three rungs.
It’s much more helpful to think of an energy “tool box” where off-grid homes dig into the chest to find the right tool for the job.
Show Me the Money
Anyone who has lived pay cheque to pay cheque knows that unexpected expenses can be crippling. The ability to plan your expenses is critical and you will pass over the new and novel, even if it’s affordable in favour of what you know.
Nigeria’s energy situation offers a perfect example of this reality. With an unreliable grid, Nigerians spend over $14B a year on fuel for generators, and that’s not because solar energy alternatives are too expensive. There is a web of informal services designed to maintain generator use in Nigeria. In short, if your generator breaks there is someone up the road that can fix it. If your solar battery dies you’re out of luck.
The cost of this web of consistency is not zero, and any player that treats it as an externality will be punished. Commercial pay-as-you-go solar players have had to cover the costs of aftermarket care given the proprietary nature of their offerings and up to 25% of the costs of goods sold can be attributed to after sales service.
Consistency > Free
This highlights an important lesson: If the alternative is cheap or even free, but unreliable then it’s not an alternative.
In emerging markets if you can afford to take the risk and try something new it doesn’t always mean it’s going to work out. New products and services are often half-baked, with start-ups and development agencies often operating under the assumption that people have nothing and that anything will do. This creates a negative feedback loop where poor solutions = low trust = jaded market = limited innovation = poor solutions.
To break the cycle, consistency is key.
We learned this at Jaza when after a rapid period of customer growth we found ourselves with limited batteries to serve our customers. While focus grouping new pricing a customer spoke up and said listen, we don’t want you to make this cheaper, we just want you guys to get more batteries.
Thinking Outside of the Tool Box
The idea that people move up a ladder of solutions is not solely based on money, but depends on the consistency of the service and how it relates to what an individual’s or household’s energy needs are on any given day.
At Jaza, 29% of our customers report having a solar home system prior to joining our service and 6% are already connected to the grid. When people find a new solution that meets their needs they don’t toss away their old solution but instead add it to the tool box. It’s not uncommon to go to a customer’s home and see a solar home system with a spent battery being used to power a stereo during the day, a solar lantern used for late night bathroom visits and a Jaza battery used for powering a TV and lights.
We have customers that have the grid but use a Jaza battery pack to power phones because they say it charges faster. For the majority of our customers we provide their first energy solution after Kerosene, offering our customers their first taste of in-home electricity, but this is not the only way the world works. When we started Jaza, we too believed in the energy ladder — I never thought I’d see customers use our service once they had their own solar panel system, but that’s exactly what happened.
If you need power you find the most reliable service available and add it to your repertoire. When you need power you head to the tool box and pull out the tool for the job at hand.
Energy for Hire
Customers rent a product or a service for a job, and the job of the entrepreneur is to become a tool of choice. For off-grid households electricity doesn’t just come from a switch on the wall, and as a result each energy service is literally connected to the number of lights powered, appliances used and services rendered. Energy is a service, and we shouldn’t seek to reduce the complexity of reality into a simple framework. That said, I am a strong believer in simple solutions, and at Jaza we are just trying to power what people want to power. Our mission is to power what people want, when they want at a price they can afford.
About Jaza:
There are hundreds of millions of people living in Sub-Saharan Africa without electricity and Jaza believes that a decentralized clean energy utility can solve this problem.
With key operations in Tanzania, Jaza serves low-income households in rural communities — those earning less than $2 a day — with affordable energy through a battery swap/rental model. The company builds Hubs, solar-powered shops located in rural community centres. Hubs are operated by local women and act as a point-of-service to rent battery packs, which customers use and swap at the Hubs for fully charged units.
Learn more at www.jazaenergy.com and our road to product-market fit here.
