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| | *2010: First PAYGO approaches are tested in Eastern Africa.<ref name="François Lepicard et al., ‘REACHING SCALE IN ACCESS TO ENERGY: Lessons from Best Practitioners’ (Hystra, 2017), https://www.gogla.org/sites/default/files/recource_docs/hystra_energy_report.pdf.">François Lepicard et al., ‘REACHING SCALE IN ACCESS TO ENERGY: Lessons from Best Practitioners’ (Hystra, 2017), https://www.gogla.org/sites/default/files/recource_docs/hystra_energy_report.pdf.</ref><br/> | | *2010: First PAYGO approaches are tested in Eastern Africa.<ref name="François Lepicard et al., ‘REACHING SCALE IN ACCESS TO ENERGY: Lessons from Best Practitioners’ (Hystra, 2017), https://www.gogla.org/sites/default/files/recource_docs/hystra_energy_report.pdf.">François Lepicard et al., ‘REACHING SCALE IN ACCESS TO ENERGY: Lessons from Best Practitioners’ (Hystra, 2017), https://www.gogla.org/sites/default/files/recource_docs/hystra_energy_report.pdf.</ref><br/> |
| | *2015: around 30 companies operate in at least 32 countries.<ref name="Peter Michael Alstone, Connections beyond the Margins of the Power Grid Information Technology and the Evolution of Off-Grid Solar Electricity in the Developing World (University of California, Berkeley, 2015), https://rael.berkeley.edu/wp-content/uploads/2015/05/LG-2015-PAYG-Report-Alstone-etal.pdf.">Peter Michael Alstone, Connections beyond the Margins of the Power Grid Information Technology and the Evolution of Off-Grid Solar Electricity in the Developing World (University of California, Berkeley, 2015), https://rael.berkeley.edu/wp-content/uploads/2015/05/LG-2015-PAYG-Report-Alstone-etal.pdf.</ref><br/> | | *2015: around 30 companies operate in at least 32 countries.<ref name="Peter Michael Alstone, Connections beyond the Margins of the Power Grid Information Technology and the Evolution of Off-Grid Solar Electricity in the Developing World (University of California, Berkeley, 2015), https://rael.berkeley.edu/wp-content/uploads/2015/05/LG-2015-PAYG-Report-Alstone-etal.pdf.">Peter Michael Alstone, Connections beyond the Margins of the Power Grid Information Technology and the Evolution of Off-Grid Solar Electricity in the Developing World (University of California, Berkeley, 2015), https://rael.berkeley.edu/wp-content/uploads/2015/05/LG-2015-PAYG-Report-Alstone-etal.pdf.</ref><br/> |
| | + | *between 2013 to 2016: an estimated average annual growth rate of the Solar Home System (SHS) Paygo segment of 140%.<ref>Off-Grid Solar Market Trends Report (MTR) 2018 by Lighting Global and Dalberg Advisors in partnership with GOGLA</ref> |
| | | | |
| | Financing need– steady increase over time:<br/> | | Financing need– steady increase over time:<br/> |
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| | *Find an overview of players involved in 2015 in [https://rael.berkeley.edu/wp-content/uploads/2015/05/LG-2015-PAYG-Report-Alstone-etal.pdf Lighting Global 2015] (Peter Alstone).<br/> | | *Find an overview of players involved in 2015 in [https://rael.berkeley.edu/wp-content/uploads/2015/05/LG-2015-PAYG-Report-Alstone-etal.pdf Lighting Global 2015] (Peter Alstone).<br/> |
| | | | |
| − | = Market Outlook for PAYGO<br/> = | + | <br/> |
| | + | |
| | + | == Hampering Factors of PAYGO market development<br/> == |
| | + | |
| | + | === Lack of data<br/> === |
| | + | |
| | + | Because the PAYGO sector is relatively new, information on market size, effective policy incentives, business model dynamics or financial and operational performance of PAYGO companies is limited.<ref name="Lighting Global, ‘Overview: PAYG KPI Framework | Lighting Global’, accessed 21 July 2017, https://www.lightingglobal.org/payg-kpi/.">Lighting Global, ‘Overview: PAYG KPI Framework | Lighting Global’, accessed 21 July 2017, https://www.lightingglobal.org/payg-kpi/.</ref> The lack of this industry data is keeping investors from entering the sector that is growing and therefore in need of higher commercial investments.<ref name="GOGLA, ‘Announcing the First-Ever Key Performance Indicator Framework for the Off Grid Solar Pay-As-You-Go Sector | GOGLA’, 31 May 2017, https://www.gogla.org/news/announcing-the-first-ever-key-performance-indicator-framework-for-the-off-grid-solar-pay-as-you.">GOGLA, ‘Announcing the First-Ever Key Performance Indicator Framework for the Off Grid Solar Pay-As-You-Go Sector | GOGLA’, 31 May 2017, https://www.gogla.org/news/announcing-the-first-ever-key-performance-indicator-framework-for-the-off-grid-solar-pay-as-you.</ref> |
| | + | |
| | + | === Lack of Reporting Standards<br/> === |
| | + | |
| | + | Without proper data collection and reporting on major facts of the PAYGO sector, investors have no chance to get a transparent picture to calculate their risks. They probably perceive the risks to invest in PAYGO companies as higher; or do not invest at all. Investors need standardized process and information with relevant market data. According to GOGLA, companies are willing to provide the data.<ref name="GOGLA, ‘Announcing the First-Ever Key Performance Indicator Framework for the Off Grid Solar Pay-As-You-Go Sector | GOGLA’, 31 May 2017, https://www.gogla.org/news/announcing-the-first-ever-key-performance-indicator-framework-for-the-off-grid-solar-pay-as-you.">GOGLA, ‘Announcing the First-Ever Key Performance Indicator Framework for the Off Grid Solar Pay-As-You-Go Sector | GOGLA’, 31 May 2017, https://www.gogla.org/news/announcing-the-first-ever-key-performance-indicator-framework-for-the-off-grid-solar-pay-as-you.</ref> Lighting Global suggests a KPI framework to standardise the data reporting and trainings to enhance capacity to collect the data.<ref name="Lighting Global, ‘Overview: PAYG KPI Framework | Lighting Global’, accessed 21 July 2017, https://www.lightingglobal.org/payg-kpi/.">Lighting Global, ‘Overview: PAYG KPI Framework | Lighting Global’, accessed 21 July 2017, https://www.lightingglobal.org/payg-kpi/.</ref><br/> |
| | + | |
| | + | *Find here the [https://www.lightingglobal.org/resource/technical-guide-for-the-kpi-framework/ Technical Guide for the KPI Framework]<br/> |
| | + | |
| | + | === Limitations in attracting adequate investment capital by energy access companies<br/> === |
| | + | |
| | + | *often displayed as one of the the primary bottleneck for most distributors as it is a strong limiting factor to reach the scale required for operations break-even.<ref>19.09.2018. Thibaut Lesueur, Co-Founder and Chief Marketing Officer at Solaris Offgrid: On the path to profitable solar Paygo distribution? https://www.sun-connect-news.org/articles/business/details/on-the-path-to-profitable-solar-paygo-distribution/</ref> |
| | + | |
| | + | === Trouble with building strong net customer traction<br/> === |
| | + | |
| | + | *generating the greatest customer traction out of each unit of resources involved (sales agent network, marketing expenses) while keeping its customer churn rate at the lowest can often become an alienating issue.<ref>19.09.2018. Thibaut Lesueur, Co-Founder and Chief Marketing Officer at Solaris Offgrid: On the path to profitable solar Paygo distribution? https://www.sun-connect-news.org/articles/business/details/on-the-path-to-profitable-solar-paygo-distribution/</ref> |
| | + | |
| | + | === Difficulties related to HR training and retention<br/> === |
| | + | |
| | + | *Insuring capacity building and retention among a network of sales and after-sales agents can be challenging and strongly impactful on profitability, as is arbitrage between payroll and commission-based staff.<ref>19.09.2018. Thibaut Lesueur, Co-Founder and Chief Marketing Officer at Solaris Offgrid: On the path to profitable solar Paygo distribution? https://www.sun-connect-news.org/articles/business/details/on-the-path-to-profitable-solar-paygo-distribution/</ref> |
| | + | |
| | + | <br/> |
| | + | |
| | + | = Market Outlook for PAYGO = |
| | | | |
| | == Scenario 2030: Outlook<br/> == | | == Scenario 2030: Outlook<br/> == |
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| | PAYGO companies can perform a similar, critical role as public players used to in the past. For example, the government owned company Infrastructure Development Company Limited (IDCOL) in Bangladesh: with their one-stop-shop role, they managed successfully to channel financing for SHS.<ref name="Sanyal, Sanjoy, Ariel C. Pinchot, Jeffrey Prins, and Feli Visco. ‘Stimulating Pay-As-You-Go Energy Access in Kenya and Tanzania: The Role of Development Finance’. World Resources Institute, 2016. http://www.wri.org/sites/default/files/Stimulating_Pay-As-You-Go_Energy_Access_in_Kenya_and_Tanzania_The_Role_of_Development_Finance.pdf.">Sanyal, Sanjoy, Ariel C. Pinchot, Jeffrey Prins, and Feli Visco. ‘Stimulating Pay-As-You-Go Energy Access in Kenya and Tanzania: The Role of Development Finance’. World Resources Institute, 2016. http://www.wri.org/sites/default/files/Stimulating_Pay-As-You-Go_Energy_Access_in_Kenya_and_Tanzania_The_Role_of_Development_Finance.pdf.</ref> As PAYGO companies are able to occupy this one-stop-shop role, they might be able to increase the financing for SHS even further. If more private PAYGO companies take over such roles, the efficiency and effectiveness of the funding process will increase.<br/> | | PAYGO companies can perform a similar, critical role as public players used to in the past. For example, the government owned company Infrastructure Development Company Limited (IDCOL) in Bangladesh: with their one-stop-shop role, they managed successfully to channel financing for SHS.<ref name="Sanyal, Sanjoy, Ariel C. Pinchot, Jeffrey Prins, and Feli Visco. ‘Stimulating Pay-As-You-Go Energy Access in Kenya and Tanzania: The Role of Development Finance’. World Resources Institute, 2016. http://www.wri.org/sites/default/files/Stimulating_Pay-As-You-Go_Energy_Access_in_Kenya_and_Tanzania_The_Role_of_Development_Finance.pdf.">Sanyal, Sanjoy, Ariel C. Pinchot, Jeffrey Prins, and Feli Visco. ‘Stimulating Pay-As-You-Go Energy Access in Kenya and Tanzania: The Role of Development Finance’. World Resources Institute, 2016. http://www.wri.org/sites/default/files/Stimulating_Pay-As-You-Go_Energy_Access_in_Kenya_and_Tanzania_The_Role_of_Development_Finance.pdf.</ref> As PAYGO companies are able to occupy this one-stop-shop role, they might be able to increase the financing for SHS even further. If more private PAYGO companies take over such roles, the efficiency and effectiveness of the funding process will increase.<br/> |
| | | | |
| − | == Hampering Factors of PAYGO market development<br/> ==
| + | *[[Role of Supporting Environment in Fostering Pay-as-you-go Approaches (PAYGO)|Role of Supporting Environment in Fostering Pay-as-you-go Approaches (PAYGO)]] |
| | | | |
| − | === Lack of data<br/> ===
| + | <br/> |
| − | | + | |
| − | Because the PAYGO sector is relatively new, information on market size, effective policy incentives, business model dynamics or financial and operational performance of PAYGO companies is limited.<ref name="Lighting Global, ‘Overview: PAYG KPI Framework | Lighting Global’, accessed 21 July 2017, https://www.lightingglobal.org/payg-kpi/.">Lighting Global, ‘Overview: PAYG KPI Framework | Lighting Global’, accessed 21 July 2017, https://www.lightingglobal.org/payg-kpi/.</ref> The lack of this industry data is keeping investors from entering the sector that is growing and therefore in need of higher commercial investments.<ref name="GOGLA, ‘Announcing the First-Ever Key Performance Indicator Framework for the Off Grid Solar Pay-As-You-Go Sector | GOGLA’, 31 May 2017, https://www.gogla.org/news/announcing-the-first-ever-key-performance-indicator-framework-for-the-off-grid-solar-pay-as-you.">GOGLA, ‘Announcing the First-Ever Key Performance Indicator Framework for the Off Grid Solar Pay-As-You-Go Sector | GOGLA’, 31 May 2017, https://www.gogla.org/news/announcing-the-first-ever-key-performance-indicator-framework-for-the-off-grid-solar-pay-as-you.</ref>
| + | |
| − | | + | |
| − | === Lack of Reporting Standards<br/> ===
| + | |
| − | | + | |
| − | Without proper data collection and reporting on major facts of the PAYGO sector, investors have no chance to get a transparent picture to calculate their risks. They probably perceive the risks to invest in PAYGO companies as higher; or do not invest at all. Investors need standardized process and information with relevant market data. According to GOGLA, companies are willing to provide the data.<ref name="GOGLA, ‘Announcing the First-Ever Key Performance Indicator Framework for the Off Grid Solar Pay-As-You-Go Sector | GOGLA’, 31 May 2017, https://www.gogla.org/news/announcing-the-first-ever-key-performance-indicator-framework-for-the-off-grid-solar-pay-as-you.">GOGLA, ‘Announcing the First-Ever Key Performance Indicator Framework for the Off Grid Solar Pay-As-You-Go Sector | GOGLA’, 31 May 2017, https://www.gogla.org/news/announcing-the-first-ever-key-performance-indicator-framework-for-the-off-grid-solar-pay-as-you.</ref> Lighting Global suggests a KPI framework to standardise the data reporting and trainings to enhance capacity to collect the data.<ref name="Lighting Global, ‘Overview: PAYG KPI Framework | Lighting Global’, accessed 21 July 2017, https://www.lightingglobal.org/payg-kpi/.">Lighting Global, ‘Overview: PAYG KPI Framework | Lighting Global’, accessed 21 July 2017, https://www.lightingglobal.org/payg-kpi/.</ref><br/>
| + | |
| − | | + | |
| − | *Find here the [https://www.lightingglobal.org/resource/technical-guide-for-the-kpi-framework/ Technical Guide for the KPI Framework]
| + | |
| | | | |
| | = Conclusion = | | = Conclusion = |
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| | This article depicts the market overview with quickly summarising the history and the current market stage of PAYGO. The Market Outlook section looks at the future of PAYGO. The predictions of scenarios for 2030 do not take PAYGO separately into account. Nonetheless, market size is likely to grow. Entry barriers will fall. The PAYGO value chain is in the process of being disaggregated: vertically integrated PAYGO companies get competition by partnerships of companies that each stick to their competence (including microfinance institutions). Hampering factors for PAYGO are the lack of data and the lack of reporting standards. | | This article depicts the market overview with quickly summarising the history and the current market stage of PAYGO. The Market Outlook section looks at the future of PAYGO. The predictions of scenarios for 2030 do not take PAYGO separately into account. Nonetheless, market size is likely to grow. Entry barriers will fall. The PAYGO value chain is in the process of being disaggregated: vertically integrated PAYGO companies get competition by partnerships of companies that each stick to their competence (including microfinance institutions). Hampering factors for PAYGO are the lack of data and the lack of reporting standards. |
| | | | |
| | + | <br/> |
| | | | |
| | + | <br/> |
| | | | |
| | = Further Information<br/> = | | = Further Information<br/> = |
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| | *[[Advantages and Disadvantages of PAYGO Approaches|Advantages and Disadvantages of PAYGO Approaches]]<br/> | | *[[Advantages and Disadvantages of PAYGO Approaches|Advantages and Disadvantages of PAYGO Approaches]]<br/> |
| | *[[PAYGO Approaches: Overhyped or Justified|PAYGO Approaches: Overhyped or Justified]]<br/> | | *[[PAYGO Approaches: Overhyped or Justified|PAYGO Approaches: Overhyped or Justified]]<br/> |
| − | * | + | *[[Role of Supporting Environment in Fostering Pay-as-you-go Approaches (PAYGO)|Role of Supporting Environment in Fostering Pay-as-you-go Approaches (PAYGO)]] |
| − | [[Role_of_Supporting_Environment_in_Fostering_Pay-as-you-go_Approaches_(PAYGO)|Role of Supporting Environment in Fostering Pay-as-you-go Approaches (PAYGO)]] | + | |
| − | | + | |
| | *A list of relevant PAYGO companies and an in-depth explanation about PAYGO approaches: Bennu Solar Ltd. ‘PAYG Solar. Information on PAYG Enabled Solar Solutions |Bennu Solar’, 2017. [http://bennu-solar.com/pay-as-you-go-enabled-solar-solutions/#.WYGhmFFLfIV Link]. | | *A list of relevant PAYGO companies and an in-depth explanation about PAYGO approaches: Bennu Solar Ltd. ‘PAYG Solar. Information on PAYG Enabled Solar Solutions |Bennu Solar’, 2017. [http://bennu-solar.com/pay-as-you-go-enabled-solar-solutions/#.WYGhmFFLfIV Link]. |
| | *Lepicard, François, et Al. ‘REACHING SCALE IN ACCESS TO ENERGY: Lessons from Best Practitioners’. Hystra, '''2017'''. [https://www.gogla.org/sites/default/files/recource_docs/hystra_energy_report.pdf https://www.gogla.org/sites/default/files/recource_docs/hystra_energy_report.pdf]. | | *Lepicard, François, et Al. ‘REACHING SCALE IN ACCESS TO ENERGY: Lessons from Best Practitioners’. Hystra, '''2017'''. [https://www.gogla.org/sites/default/files/recource_docs/hystra_energy_report.pdf https://www.gogla.org/sites/default/files/recource_docs/hystra_energy_report.pdf]. |
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| | *Lighting Global ('''2015'''): Alstone, Peter Michael. ''Connections beyond the Margins of the Power Grid Information Technology and the Evolution of Off-Grid Solar Electricity in the Developing World''. University of California, Berkeley, 2015. [http://search.proquest.com/openview/0a39e3cd025b0300cc030729278ccf1d/1?pq-origsite=gscholar&cbl=18750&diss=y Link]. | | *Lighting Global ('''2015'''): Alstone, Peter Michael. ''Connections beyond the Margins of the Power Grid Information Technology and the Evolution of Off-Grid Solar Electricity in the Developing World''. University of California, Berkeley, 2015. [http://search.proquest.com/openview/0a39e3cd025b0300cc030729278ccf1d/1?pq-origsite=gscholar&cbl=18750&diss=y Link]. |
| | *Winiecki, Jacob, and Kabir Kumar. ‘Access to Energy via Digital Finance: Overview of Models and Prospects for Innovation’. ''Consultative Group to Assist the Poor (CGAP), Washington, DC, USA'', '''2014'''. [http://www.fgda.org/dati/ContentManager/files/Documenti_microfinanza/Access-to-Energy-via-Digital-Finance.pdf Link]. | | *Winiecki, Jacob, and Kabir Kumar. ‘Access to Energy via Digital Finance: Overview of Models and Prospects for Innovation’. ''Consultative Group to Assist the Poor (CGAP), Washington, DC, USA'', '''2014'''. [http://www.fgda.org/dati/ContentManager/files/Documenti_microfinanza/Access-to-Energy-via-Digital-Finance.pdf Link]. |
| | + | *2018 [https://sun-connect-news.org/fileadmin/DATEIEN/Dateien/New/2018_Off_Grid_Solar_Market_Trends_Report_Full.pdf Off-Grid Solar Market Trends Report (GOGLA)] |
| | + | *12.09.2018. Harald Schützeichel: [https://www.sun-connect-news.org/articles/business/details/why-africas-payg-bubble-heated-up-by-investors-will-burst/ Why Africa's PAYG bubble, heated up by investors, will burst] |
| | + | *19.09.2018. Thibaut Lesueur, Co-Founder and Chief Marketing Officer at Solaris Offgrid: [https://www.sun-connect-news.org/articles/business/details/on-the-path-to-profitable-solar-paygo-distribution/ On the path to profitable solar Paygo distribution?] |
| | | | |
| | + | <br/> |
| | | | |
| | = References = | | = References = |
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| | | | |
| | [[Category:Financing_and_Funding]] | | [[Category:Financing_and_Funding]] |
| | + | [[Category:PAY-GO]] |
| | [[Category:Financing_Solar]] | | [[Category:Financing_Solar]] |
| | [[Category:Africa]] | | [[Category:Africa]] |
In recent years, many PAYGO companies appeared in many countries. Find an overview of relevant companies and their approaches here.
PAYGO companies started operations less than 5 years ago. What started as trial-and-error, turned out to evolve into different, rapid growing business models. However, even market leaders are still testing the core of their business models. So far, the PAYGO industry has only a limited track record.[1]
Only the largest companies are able to raise significant amounts of investment, with many smaller players continuing to struggle.
The table shows that most of the products sold in 2016 were still very small solar products. The PAYGO companies differ in size and sales volume. The largest company in terms of scale is M-KOPA, which reached 500,000 SHS in April 2017. Find detailed case studies in the Hystra report.[1]
Source: Lepicard et al. 2017
This is, however, only a small glance in time. The market changes dynamically: new players emerge, others disappear, and others change their approaches.[8]
Because the PAYGO sector is relatively new, information on market size, effective policy incentives, business model dynamics or financial and operational performance of PAYGO companies is limited.[10] The lack of this industry data is keeping investors from entering the sector that is growing and therefore in need of higher commercial investments.[11]
Without proper data collection and reporting on major facts of the PAYGO sector, investors have no chance to get a transparent picture to calculate their risks. They probably perceive the risks to invest in PAYGO companies as higher; or do not invest at all. Investors need standardized process and information with relevant market data. According to GOGLA, companies are willing to provide the data.[11] Lighting Global suggests a KPI framework to standardise the data reporting and trainings to enhance capacity to collect the data.[10]
A simple model by Scott/Miller, 2016, predicts that total sales in sub-Saharan Africa of quality-certified SHS could grow from the 3.3 million sold in 2014 to 17 million in 2030. “The total value of the sales under these scenarios would rise from around $ 111 million in 2015 to $ 943 million by 2030 under Business as Usual, and $ 1.5 billion in 2030 under Sustainable Energy for All scenario. Under the Power for All scenario annual sales of about $ 1.9 billion would be reached by 2026.”[8] They make, however, no assumption how large the share of sales with PAYGO will be, which currently is quite small –even in Kenya.
PAYGO has the potential to unlock demand on an unprecedented scale. Of all the unbankable households in Senegal, that are not able to pay the upfront costs of a micro credit, and were not served by MFI therefore, around half could be addressed with PAYGO solutions.[1]
Technological barriers to the PAYGO business are falling, and the sector is likely to see the entry of a larger number of PAYGO companies. Hopefully, also creating local employment among more locally managed companies. Entry barriers are likely to fall because of three outsourcing developments in the PAYGO sector:[4]
PAYGO companies offer (often for the first time) credits for solar products to households. After those are paid off, customers may be interested in other products. PAYGO companies may start to sell upgrades, appliances, devices, and services to those who successfully complete their payment cycles; or selling the collected customer data and payment history to other financial institutions to identify credit ratings of potential customers.[1]
For years, PAYGO companies used to be vertical integrated, excluding financial intermediaries. This changes now, with synergistic partnerships that disaggregate the value chain (e.g. Companies like Angaza provide PAYGO hardware and portfolio management software to potential financiers). So far, MFI mostly stayed out of PAYGO. However, they are better equipped to finance PAYGO business models: they have more local currency and less foreign exchange risk. They also have an existing customer base and loan distribution network that they could use to sell PAYGO products (and other financial products). Specialisation might bring down costs along the value chain.[15]
PAYGO companies can perform a similar, critical role as public players used to in the past. For example, the government owned company Infrastructure Development Company Limited (IDCOL) in Bangladesh: with their one-stop-shop role, they managed successfully to channel financing for SHS.[4] As PAYGO companies are able to occupy this one-stop-shop role, they might be able to increase the financing for SHS even further. If more private PAYGO companies take over such roles, the efficiency and effectiveness of the funding process will increase.
This article depicts the market overview with quickly summarising the history and the current market stage of PAYGO. The Market Outlook section looks at the future of PAYGO. The predictions of scenarios for 2030 do not take PAYGO separately into account. Nonetheless, market size is likely to grow. Entry barriers will fall. The PAYGO value chain is in the process of being disaggregated: vertically integrated PAYGO companies get competition by partnerships of companies that each stick to their competence (including microfinance institutions). Hampering factors for PAYGO are the lack of data and the lack of reporting standards.
