There has been huge growth in the use of local energy systems to provide energy to off grid locations. These systems take the many forms, from solar lamps to household scale systems and mini-grids, offering a range of quality of service. A number of different factors have influenced this uptake, including falling PV and battery costs, increased attention and funding given to energy access initiatives and enabling technologies and business models such as Pay As You Go (PAYG) energy and mobile payments via phone handsets.
The E4D team has recently reviewed the status, barriers and opportunities for PAYG in Malawi.
The report focuses on PAYG energy, defined in this context as: Any system or business model where consumers to not pay up front the entire cost of an off grid energy system. This can include models where consumers have no ownership of the system pay only for energy consumed, micro finance loans used to buy systems that are repaid over time or rent to own agreements.
Innovative business motels and technical approached enabled by remote payment and monitoring of systems present compelling benefits over more conventional off grid energy solutions, particularly for more remote and rural locations, reducing the cost of bill collection, enabling preventative maintenance and a host of other benefits explored in more detail in the this work.
This study has used expert interviews to ascertain the perception of the key barrier to the Malawi off grid PAYG sector from both a technology and business model perspective. Testimony was taken from a wide range of relevant stakeholder within the Malawi off grid energy sector and is summarised along with background information on PAYG energy and mobile payment technology and two case studies, showing the cutting edge of PAYG off grid solar in Malawi and Rwanda.
The barriers are divided into two distinct but related categories:
Technical Barriers: Mobile signal strength, coverage and reliability; high cost of metering and payment technology and platforms; maturity of mobile money infrastructure in Malawi and mobile money transaction costs
Business Barriers: Access to working capital; risk of non-payment from customers and customer ability to pay; unpredictable payback times; previous reputational damage from poor quality solar products; cost of bill collection; risk of theft by collection agents; lack of experience with relevant business models and lack of technical knowledge and experience within communities
These barriers become more apparent when contrasted with the relatively mature market in other countries, such as Kenya, Rwanda and Bangladesh. This is not an exhaustive list, but represents the key concerns and perceptions of a range of stakeholders. The report also offers recommendations to business, academia and government to address the barriers presented above and help the industry reach its potential within Malawi, including:
Business and finance training for off grid energy operators; reduced tax for off grid energy technology; collective action from the Malawi energy industry to lobby for reduced transaction fees for mobile money payments for energy and a greater focus on learning from international best practice.
Understanding and addressing these barriers is key to the timely, sustainable and cost effective electrification of millions of people in Malawi.