Pay-As-You-Go (PAYG) Solar for Commercial Use: Opportunities for MSMEs

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1 Pay-As-You-Go (PAYG) Solar for Commercial Use: Opportunities for MSMEs Segun Adaju CEO, BlueOcean Nigeria June 30, 2015

2 MICRO, SMALL AND MEDIUM SIZED ENTERPRISES IN NIGERIA 300 Employees N500m Turnover

3 MICRO, SMALL AND MEDIUM SIZED ENTERPRISES IN NIGERIA At 96% More than 9 out of 10 Nigerian Businesses are MSMEs MSMEs make up 90% of Manufacturing and Industrial Sectors MSMEs make up 46% of National GDP 98% of MSMEs are Micro

MSMEs make up 90% of Manufacturing and Industrial

4 Source: Oyelarin-Oyeyinka, 2010

5 ENERGY ACCESS IN NIGERIA Electricity from Renewable Sources (Billion KWh- 2012) Total Electricity Generation (Billion KWh- 2012) % of Total Electricity from Renewable Sources (2012) Electricity Access GDP/Capita (to nearest $1000) Nigeria % 55% $3,000 Indonesia % 65% $3,000 Morocco % 97% $3,000 Ghana % 60% $2,000 Kenya % 16% $1,000 Nigeria s Energy Performance in Comparison with other countries on the basis of GDP per Capita (IRENA, 2011, 2012; EIA, 2012; 2013; World Bank, 2015)

266 21% 55% $3,000 Indonesia 22.266 185.333 12% 65% $3,000 Morocco 2.343 25.35 9% 97% $3,000 Ghana 7.99 11.706 68% 60% $2,000 Kenya 6.

6 ENERGY ACCESS AND MSMEs Percentage of MSMEs Utilising Alternative Sources of Power in the form of diesel and petrol electricity generators (NBS & SMEDAN, 2010: Survey Report on MSMEs in Nigeria)

7 ENERGY ACCESS AND MSMEs I beta pass my neighbour a necessary evil N796.4b spent on fuelling generators annually as of 2012 As of 2014 that figure could be as high as N3.5trillion Courtesy of: Oluwatobi Bolashodun

8 Financial constraints and cost of the technology remain top barriers to Renewable Energy Uptake (Solar included) USE OF RENEWABLES IN NIGERIA Barriers to Off-Grid Renewable Energy Uptake Globally (IRENA, 2014)

10 - Ernesto Macias (President, Alliance for Rural Electrification)

11 The Solution: PAYG Solar Distributed Renewable Energy (DRE) approach Energy access via digital finance PAYG pricing holds the potential to disrupt the energy sector same ways it helped to fuel the growth of mobile communication in developing world Currently over 25 companies actively deploying PAYG solar solution across Africa, Asia and Latin America 3 million PAYG solar systems projected to be sold globally in 5 years

mobile communication in developing world Currently over 25 companies actively deploying PAYG solar

12 PAYG Solar Business Model Mobile Money M-KOPA Solar and Mobisol Energy Credits Azuri (scratch cards), Simpa Networks (recharge without scratch cards) Microfinance Grameen Shakti, SELCO India On-network reliable cellular coverage in off-grid areas Off-network little or unreliable cellular coverage Hybrid Angaza Design Software Back-End collecting data, remote monitoring, product performance tracking,

On-network reliable cellular coverage in off-grid areas Off-network little or unreliable cellular

13 Business Model Segmentation Asset Ownership rent-to-own Energy-as-a-service pay per kilowatt hour used Time-based pricing Usage-based pricing End-user financing terms down payment, tenor, comparison with alternatives etc Risk management risk assessment, credit evaluation, guarantee etc

Usage-based pricing End-user financing terms down payment, tenor,

14 Renewable energy development in Nigeria is still largely government-led, with burgeoning interest from financiers such as Ecobank, Bank of Industry, StanbicIBTC etc Kenya with a third of Nigeria s GDP per capita has a thriving Solar industry - 14% use solar as their primary lighting and charging source LESSONS FROM KENYA Market-led, with government creating an enabling environment: Subsidies on solar technology Relevant training and capacity development Innovative access to finance

14% use solar as their primary lighting and charging source LESSONS FROM KENYA Market-led, with government creating an

15 The Association has currently transmuted into a national body and commencement of state chapters. There is scope to extend the program to other parts of the country if successfully piloted in Lagos. CASE STUDY 1 SOLAR BARBER SHOP/SALON Work with Lagos State Barbers, Cosmetologists and Hairdressers Association (LABCHA) to launch a pilot with 1 or 2 of their members running the salon on solar as an alternative to petrol or diesel generator sets. LABCHA has been in existence for over 15 years with approximately 25,000 members in the Lagos area.

CASE STUDY 1 SOLAR BARBER SHOP/SALON Work with Lagos State Barbers, Cosmetologists and Hairdressers Association (LABCHA) to launch a

16 Financial Impact Improved access to affordable energy and inherent productive uses CASE STUDY 1 SOLAR BARBER SHOP/SALON Cost savings on running generators (87% Savings in Barber shop Case) Social Impact Health benefits associated with reduced noise and air pollution Increased awareness about renewable technologies Potential Gender Impact Targeting Hairdressers and Cosmetologists which are predominantly female owned Environmental Impact Reduction in GHG emissions including CO2 (at 0.6kg of CO2/KWh*) *Source: EIA CO2 emissions data Courtesy of: PowerGen Renewable Energy Estimated Energy Demand (Based on Current Usage) Hairdressers Salon: 5KW to power 4 hairdryers, fans, lighting (from 5KVA petrol generator) Barbers Shop: 1KW to power 3 clippers, TV, and stereo (previously from 0.8KVA petrol generator; currently from 1KW solar installation of 4 X 55W solar PV panels)

predominantly female owned Environmental Impact Reduction in GHG emissions including CO2 (at 0.

17 Spend on Fuel for Generator (Based on Current Usage) Hairdressers Salon: Appx N17,000/ per month Barbers Shop: Appx N12,000/ per month (prior to solar tech) Appx N1,500/per month (after solar tech) CASE STUDY 1 SOLAR BARBER SHOP/SALON Recommended Technology Cost of Installation Financial Framework Solar PV Panels Hairdressers Salon: N1.25million Barbers Shop: N257,000 (N21,000 monthly repayment) Rent-to-Own: 10%-15% of cost of installation down payment Balance spread over 12months to 18 months Partnership with a financial institution and working through LABCHA to support repayment Specific cost of installation varies Costing Energy Requirement 1kva 1.5kva 3.5kva 5kva Solar PV (250W) 1 unit 3 units 6 units 9 units Inverter 1kva 1.5kva 3.5kva 5kva Charge Controllers 20Amps 30Amps 60 Amps 60Amps Batteries (200Ah) 1 unit 2 units 4 units 4 units Batteries Rack I unit 1 unit I unit 1 unit Cable and switches Roll Roll Roll Roll Estimated cost N279k N319k N450k N518k N855k N1.1m N1.2m 1.46m

25million Barbers Shop: N257,000 (N21,000 monthly repayment) Rent-to-Own: 10%-15% of cost of installation down payment Balance spread over 12months to 18 months Partnership with a financial

18 CASE STUDY 2 SOLAR PHONE CHARGING STATION

19 Targeting strip malls in order to utilise roof space for solar installation Strip mall format popular mode of commercial development in Lagos CASE STUDY 3 SOLAR POWERED STRIP MALLS Commercial clusters housing a variety of businesses (grocers, boutiques, eateries, electronic stores, pharmacies etc.) Shop owners often rent the space from the developers or building owners Larger malls provide central diesel generators to supply units; individual business owners run small petrol generators to supply their stores individually in smaller malls

20 Financial Impact Improved access to affordable energy and inherent productive uses Cost savings on running generators Courtesy of: PowerLutions.com Social Impact Health benefits associated with reduced noise and air pollution Increased awareness about renewable technologies Environmental Impact Reduction in GHG emissions including CO2 (238,478.92kg of CO2/KWh* annually ) *Assumptions based on PVSYST Software Simulation Courtesy of: Livinglekki.com

com Social Impact Health benefits associated with reduced noise and air pollution Increased awareness about

21 CASE STUDY 3 SOLAR POWERED STRIP MALLS Target Beneficiaries Assumptions Recommended Technology Energy Produced Cost of Installation Cost of produced energy Financial Framework Mall Developers and Shop Owners Based on PVSYST Software simulation of a 2000 sq. meter roof (building approximately the size of Lagos City Mall) Solar PV Panels 440 MWh /year N130million N57 /kwh Rent-to-Own/ Pay as You Go: The equipment is leased from the financier Ownership remains with the financier until payback is completed Owners may recoup costs from tenants (through rent rates or communal contributions which would ordinarily have gone towards maintaining and fuelling central service generators.

22 Who Will Make It Happen? Government Regulation, PPP, incentives, Guarantees, Standards, Concessions Energy Entrepreneurs Investors Impact, Angel, Debt etc Financial Institutions Commercial, Development, Microfinance etc Development Partners building capacity, creating awareness, etc Technology Providers Mobile Money, MNOs etc Customers

23 THANK YOU

24 Contact BlueOcean Nigeria Plot 2 Block 14, Adetayo Akintayo Street Magodo Phase 1, Isheri Lagos, Nigeria Segun Adaju segun@blueocean-nigeria.com