In February, Grantham PhD student Oliver Schmidt, who is part of the Science and Solutions for a Changing Planet DTP, joined an impact investing trip through Rwanda. He visited two start-ups from Imperial College London that are trying to make the case for low-carbon ‘cleantech’ business in Africa, and compared them to a third operating across the continent.
I did have my doubts when booking flights to Rwanda. The country is infamous for the genocide in 1994. Eastern Congo, just across the border, still sees frequent rebel insurgences and kidnappings.
However, minutes after landing in Kigali, the country’s booming capital, I realized that the trip’s organiser was not joking when calling Rwanda the ‘Switzerland of Africa’. That’s not because Rwanda is also known as the ‘land of thousand hills’, but because the country is comparatively clean[1], safe and non-corrupt[2], the perfect investment climate for cleantech start-ups, particularly as 75% of the population still has no access to electricity.
Throughout the impact investing trip, we visited customers of three different cleantech start-ups. The aim of the start-ups is to deliver electricity to the 1.2 billion people globally that live without it[3], and they went to Rwanda to make the case.
Meshpower is a start-up founded at Imperial College London which builds micro-grids[4] in off-grid villages. Once at least a third of households sign up to the service, Meshpower installs a solar panel and lead-acid battery in the community and connects paying households through a micro-grid. Starting from around US$2 per month, each household receives light bulbs for bright and night light and a phone charger. These appliances will work unlimited (night light, charger) or at least 3 hours per day (bright light).
Meshpower can track the usage of each device live and thereby charge customers for their actual usage on a daily basis. From the garage-like headquarter in Kigali, CEO and founder Lukas Lukoschek showed us live data of the 60 villages with more than 2,000 Meshpower customers already connected, showcasing the direct and immediate impact a cleantech start-up can have on people’s lives.
A slightly different business model is being tested by Bboxx, another Imperial start-up (in fact from the same student society as Meshpower and founded a year earlier). Bboxx sells solar home systems – including battery – directly to households in a pay-as-you-go scheme. Depending on the plan (between US$3 to US$10 per month), customers also receive lights, chargers, radio and TV. Pay-as-you-go means that customers don’t own the system, but installation and servicing in case of system failure is covered by Bboxx. The company already has around 12,000 customers in Rwanda.
The third start-up is Off-grid Electric with their Rwandan brand ‘Zola’. While relatively new in Rwanda, the company is one of the biggest players in East Africa with more than 20,000 customers in Kenya, Tanzania and Uganda. For up to US$14 per month for a solar panel, Lithium-ion battery, lights, radio and TV, the company has the highest cost offering, trialling a lease-to-own scheme where customers own the whole system after paying for three years. This appeals to the Rwandan culture and shifts the risk of system failure to the customer. But it also limits the depth of customer relationship that can be built compared to perpetual lease schemes.
A key criterion for these start-ups to succeed is the appeal of their offering to customers and how many customers they can reach. A frequent theme of discussion is the population wealth pyramid. While Meshpower claims to be able to reach the vast majority of the rural off-grid population with their low-cost offering, Bboxx and Zola argue that a large percentage of Rwandans actually are able to afford more than US$5 per month for electricity. In addition, Bboxx and Zola also target small businesses and households that are connected to the national grid. Here, the ability to avoid grid outages and the appliances included in the companies’ offerings appeal to customers. While this focus on high-end customers is likely the reason for rapid customer growth in recent years, the answer of whether the majority of the off-grid population can afford these offerings still remains to be seen.
Regardless of which idea flies highest, the future of electrifying more than a billion people’s homes and businesses by 2030, formulated as the 7th UN Sustainable Development Goal, looks bright. Off-grid Electric is already active in all of East Africa, now expanding to West Africa. Bboxx aims to scale by franchising their business model and technology, and Meshpower showcases how entire villages can be electrified at once. This is how making the case for cleantech business in Rwanda could trigger the transformation of people’s energy access not only in Africa, but across the entire developing world.
More details on the impact investing trip through Rwanda and its objectives pursued by the organising Center for Sustainable Finance and Private Wealth can be found here.
[1]Since 2008 the country enforces a ban on non-biodegradable polythene (plastic) bags https://www.theguardian.com/commentisfree/2014/feb/15/rwanda-banned-plastic-bags-so-can-we
[2]Rwanda takes #50 / 176 in Transparency International’s corruption index, 10 ranks ahead of Italy http://www.transparency.org/news/feature/corruption_perceptions_index_2016
[3]https://about.bnef.com/blog/off-grid-solar-market-trends-report-2016/
[4]See Grantham Briefing paper on Electrical Energy Storage 2016 https://www.imperial.ac.uk/media/imperial-college/grantham-institute/public/publications/briefing-papers/2526_Energy-storage_BP-20_24p_lores_4.pdf
