PowerGen, improving energy access through micro-grids

Sankalp Africa interview series 2015
Sub-Saharan Africa
23. Aug 2015

More than 75% of East Africans do not have access to the electric grid. Grid expansion is slow and where the grid does exist, the connection fee of hundreds of US dollars is prohibitively expensive for most residents. PowerGen is addressing the problem of rural energy access by installing and operating alternating current (AC) solar micro-grids in off-grid communities in East Africa. PowerGen’s Elizabeth O’Grady tells us how micro-grids are significantly improving the lives of rural Africans.

What is the core value proposition of your business? 

PowerGen installs and operates alternating current solar micro-grids in off-grid communities. Nearby homes and businesses connect to the micro-grid and can use regular appliances just like they would on the national grid. Customers pre-pay for energy using mobile money and pay less than they previously were for kerosene or diesel generators. We see micro-grids as the optimal solution for energy poverty in remote areas because they provide affordable pay-as-you-go energy for the consumer in the form of a financeable, long-term asset. Micro-grids can be deployed quickly, offer a low connection fee for customers, have more functionality than solar lanterns (it is “real” AC power), and can be expanded to supply more energy as customer demand grows.

What stage of operation have you reached?

We have installed 20 AC solar micro-grids throughout Kenya and Tanzania. We’ve learned a lot about customer tendencies and preferences while optimising our operational processes. We currently have a team of over 20 employees, with a 5,000 sq ft workshop space where we fabricate our micro-grid systems. With both of these components in place, we are now in the process of scaling our operations to keep up with the growing demand for micro-grids.

How is your business different to others offering the same product?

PowerGen AC solar micro-grids are one of the first attempts at pay-as-you-go infrastructure. The main barriers to energy infrastructure expansion in Sub-Saharan Africa are the governments’ capacity and the consumers’ ability to pay connection fees to the national grid, often 400 to 800 USD. PowerGen charges customers an affordable connection fee and has the capacity to build micro-grids quickly by breaking down the task of “rural electrification” into manageable community-scale infrastructure projects. Solar home systems and lanterns proved that people are effectively willing to pay up to 10 USD per kWh for reliable electricity, as long as they can pay it over time. We are using this lesson on consumer behaviour to build actual energy infrastructure at an even lower price point for the consumers while providing more functionality and longevity. On the technology side, the scaling of these micro-grids is made possible by newly developed smart meters from a cadre of metering companies. Paired with mobile money, they allow the micro-grids to operate without employees onsite reading meters and collecting payments. This remote operational capacity allows us to manage thousands of grids across a wide geographic area for far less cost and time than previously possible.

How do you market and distribute your product/service to your target ‘beneficiaries’?

We conduct initial surveys to identify dense off-grid communities that would be viable for a micro-grid. Then, we explain our solar micro-grid to residents and ask about their energy use habits to design an appropriately sized system for the community. We charge a nominal connection fee, which encourages customers to connect to our micro-grids.

Tell us about your beneficiaries. Who are they, how do they use your product/service?

Our beneficiaries are off-grid home and business owners. Many use our electricity to improve their business offerings though staying open later with reliable lighting, to attracting more customers with TVs and music systems, to selling cold drinks and food with refrigerators. Our customers no longer operate their diesel generators or kerosene lanterns.

What feedback have you received from your ‘beneficiaries’?

Our customers are happy with our service and often call us to tell us about their friends and neighbours who would like to connect to our micro-grids. None of our customers have switched back to using kerosene or diesel generators, which speaks to the quality and affordability of the service we provide.

Tell us about the impact you are having in the communities where you operate.

We estimate each micro-grid customer reduces their energy spend by 30-50%, saving them 100 to 300 USD per year. For children, access to reliable lighting enables studying after dark. This especially benefits young girls who often have household chores that consume all their daylight hours. Business owners, often women, can expand their offerings to include electrical appliances like hair dryers and electric hair clippers, refrigerators for food and drink storage, and TVs and radios for attracting customers. Access to real AC electricity allows new businesses to develop— for example, computer and IT centres which in turn increase access to information. One kilowatt of solar displaces about 4,000 litres of either kerosene or diesel per year, offsetting 10 tons of CO2 annually. Our micro-grids range in size from 2 to 10 kW and serve 15 to 100 initial customers each. Therefore, the average 5 kW grid serving 50 customers offsets 50 tons of CO2 annually.

What would you say has been the most challenging aspect of starting and running your inclusive business?

Learning how to identify our personnel needs and then finding the right mixture of experience and attitude in candidates to join the PowerGen Team. The backbone of any company is its employees and we work very hard to recruit and train the best talent in East Africa.

What is the one factor that has most enabled your inclusive business to progress this far?

PWe’ve been growing our renewable energy business in Kenya for the past few years. During that time, we’ve built good relationships with suppliers, clients, and partners in the sector. Throughout the lifetime of PowerGen, we’ve kept a focus on quality and constantly improving our operations. This experience and refined operational processes has allowed us to transition into the micro-grid sector without significant issues.

You won a grant at the Tanzania REA and have now been chosen as a Sankalp finalist, how critical has this external support been to your business? How have you leveraged it to grow your business?

This support has been critical because micro-grids have a high up-front capital cost that requires financing. The grant from Tanzania REA helps us further demonstrate our model and attract investments. The recognition brings attention to micro-grids’ potential and PowerGen’s specific model.

Where do you see your business five years from now?

Now that we have 20 micro-grids installed and operating throughout Kenya, we’re looking to accelerate the pace of our installations. Five years from now, we plan to install a few hundred micro-grids per year while continuing to operate and maintain all those we’ve installed.

What is the one piece of advice you would give to entrepreneurs looking to start an inclusive business?

We would advise aspiring social entrepreneurs to learn as much as they can in related fields, from their customers, and from experts as they build their businesses.

Lighting up classrooms in Kenya