May 30, 2017 Sector News
Photo: PayGo Energy
A handful of innovative companies may soon transform how low-income consumers purchase and pay for cooking fuel. By providing energy services on a pay-as-you-go (PAYG) basis, enterprises are leveraging technology-focused business models to overcome the affordability barrier previously faced by consumers unable to afford the upfront cost of household energy products.
Traditionally, one of the biggest challenges in switching from solid fuels to cleaner-burning fuels such as liquified petroleum gas (LPG) or ethanol is the initial cost of the stove and the inaccessibility of small quantities of fuel. A series of recently-announced innovations – including smart fuel canisters and mobile money payment systems – aim to enable both stove financing and sale of clean fuel in more affordable quantities.
In Nairobi, KOKO Networks is using technology to lower distribution costs by launching a network of cloud-connected “KOKOpoint” e-commerce kiosks in small neighborhood shops. Consumers are able to buy a modern 2-burner stove with cash or by using a layaway model. Accompanying smart canisters are refilled with ethanol fuel purchased through a digital billing system in bundles as low as $0.30, without the “poverty penalty” often charged to low-income consumers who buy fuel in small units. The mobile money-enabled kiosks are similar in appearance to ATMs, and integrate interactive touch screens that allow for cross-selling of other products and services.
Also in Nairobi, PayGo Energy is developing a pay-per-use service that makes LPG available for households through a smart metering solution. Users pay a reduced fee for the initial installation of a stove, cylinder and smart meter, after which they spend as little as $0.50 per day for their cooking needs. In the past year, PayGo has launched a first version of their smart meter that measures and communicates gas usage and has been supplying an uninterrupted supply of gas to its customers, through a logistics system adapted to informal settlements.
KopaGas is a social impact start-up based in Tanzania that has also launched a PAYG model for LPG. KopaGas has developed and stress-tested a proprietary Smart LPG Meter that integrates local mobile money providers with support from the GSMA Mobile for Development Utilities Programme and Oryx Energies. Customers make payments at price points competitive to charcoal and pay off gas and cooking appliances over time. KopaGas also leverages a traditional LPG distribution business serving 15K monthly users using digital payments.
Finally, Envirofit, one of the original manufacturers of efficient biomass cookstoves, is also making a foray into this space with its “SmartGas” LPG pilots in East and West Africa. In these pilots, Envirofit will leverags its distribution network to provide LPG on a “pay-as-you-cook” basis using mobile money and a GPS-enabled “SmartGas Valve.” Consumers prepay for gas, activating the OnDemand Valve to supply the purchased amount, and notifying customers before the valve is turned off. KopaGas and Envirofit have joined forces to commercialize and scale this technology.
These models have the potential to generate meaningful data around customer usage and pricing dynamics; and in turn improve the product/service offering. Making cleaner fuels accessible and affordable for low-income energy consumers has proven a massive challenge on the road to universal energy access, but by building on the innovation already beginning to occur and taking cues from other sectors, these businesses and others may be on the leading edge of a revolution to make clean cooking fuel accessible and affordable for all.
(Source: from website of the Global Alliance of Clean Cookstoves)