All over the world the poorest people in their own countries have no electricity, and in India, this lack of access to power affects 400 million citizens—45% of the population.
There are great technologies for cheap solar power, and these are improving all the time. But affordability is the issue, and people who earn $4 a day, or less, support the “cachet economy,” where their market purchases are very small portions—of shampoo, toothpaste, medicine, rice or beans or cloth.
But the concept of Economy of Scale has succeeded in making cell phones available to an ever-widening pool of consumers, and the economic benefits, to the companies that manufacture the phones, the companies that provide the cell service, and the buyers of these technologies, have begun to change the world.
In India, there are small-scale companies already selling solar panels and the wiring infrastructure that connects the power of sunlight to the DC battery, powering lights and fans and radios. With an initial investment of about $150, these households can expand their personal use, and enjoy the benefits of electrification.
But in the same way North Americans are challenged to pay the initial cost of solar-powering their homes, for about $20-$30,000, 45% of India cannot afford this $150 start-up investment.
Canadian Economist Paul Needham saw a way to overcome this barrier to affordability by using the cell phone financing model. His company, Simpa Energy Networks of India, has used the pricing-model innovation to create a finance and technology platform for making these small-scale solar-power systems affordable for the poorest people.
It works just like a cell phone plan: you buy the physical phone and then you pay for a plan that activates the service. However, the challenge with solar-power systems is that they are all bundled together.
With Simpa, the customer makes a small initial payment for the equipment, and it is installed in their home by the local solar installation company. These companies are already in the market, training installers, supplying solar panels, and integrating systems. Simpa is facilitating the growth of these local businesses. The solar panel goes on the house roof and the wires connect it to a small box panel with a key pad, which is mounted on an interior wall.
Simpa has designed a system of payment for energy credit that activates the device once it is installed. They sell energy credits the same way mobile phone companies sell air time. Several methods can be used, but the most popular one is the scratch card.
The customer buys a scratch card, turns it over, and scratches away a patch to reveal a code, sends that code to Simpa to validate their credit, and then Simpa sends back another code which the customer taps in to the key pad of their power box. This new code adds balance to their credits. This is the simple system: make a small initial payment for the equipment, and then pay-as-you-go for the energy service.
The genius in this network plan is that these payments for energy service add up towards the total price. Once the customer has completed the contract, the system unlocks permanently, and the household now has free energy, indefinitely.
Funding from grants and Angel investors helped the Simpa Network leap from prototype to commercial launch in 2012. The first customers were in Bangalore.
According to Needham, the ideal of clean solar power was not a motivating factor in this transition to electrify the countryside. “People here do not care that their energy comes from solar.” The repulsion to kerosene—its expense, and its danger—has been responsible for redirecting attention towards this technology. Every household has suffered from the effects of kerosene fumes and spills leading to fires. These quality of life costs have prevented children of impoverished families from having access to any of the opportunities that might lift them out of the cycle of poverty. Growing up in a home that has independent electric power changes that fate.
Demands for electricity scale, so a family who is first motivated to have light when they want it, will soon want a fan and a radio and a television. The demand for power is insatiable. The great boon of this particular technology is that it is clean, and infinite. Now, for the first time in the history of the largest democracy in the world, energy is affordable to everyone.
Mobile phones leapfrogged the landline. Solar power on a cell phone plan has now leapfrogged the old power grid.
Publisher’s Note: Judith Stapleton is a writer in the fields of science and medicine.