Off-grid solar (OGS) companies are playing a valuable role in the progress toward Sustainable Development Goal 7: Ensuring access to affordable, reliable, sustainable, and modern energy for all. To date, the OGS industry has provided lighting and other services to more than 420 million users worldwide.1 In doing so, it has created critical last-mile financing and distribution infrastructure that can be leveraged to provide access to other household needs, including modern energy for cooking.

While several OGS companies are already selling improved cookstoves, some are exploring how to integrate modern solutions – such as liquified petroleum gas (LPG) and electric cooking appliances – often with pay-as-you-go (PAYGO) technology – into their product lines and retailing them through increasingly expansive last-mile networks.

 

Potential for PAYGO LPG
LPG is an aspirational cooking fuel that typically requires less behaviour change from consumers than some other fuels. The possibility of leveraging metering technology and PAYGO credit schemes into LPG distribution aligns well with existing OGS business models, infrastructure, and asset-financing expertise. PAYGO integration can involve low-tech solutions such as bundling LPG gas with solar home systems (SHS), with the SHS functioning as collateral for non-payment of the LPG. It can also involve higher-tech solutions such as GSM-enabled smart meters, as is being scaled up by Circle Gas in Kenya under the brand name M-Gas. Various other companies are also developing a range of high- and low-tech solutions that aim to address affordability barriers with attractive unit economics to ensure scalability.

Over the last few years, a range of clean cooking fuel-focused companies – such as Circle Gas and KOKO Networks, who have developed innovative ethanol fuel-based distribution technology – have shown robust growth and are emerging as leaders in the new generation of scalable clean cooking business models. As such, it is reasonable to expect that existing OGS companies have advantages upon which they can capitalize, as well. This is due to their existing last-mile distribution networks, established partnerships with telecom companies and experience leveraging mobile money payments, and the ability to invest in product research and development given more robust balance sheets and better access to finance.

One of the OGS sector’s early pilots was conducted by Fenix International’s (Fenix) Fumba initiative which distributed LPG cylinders with integrated smart meters to 750 customers in Kampala, Uganda, throughout 2018 and 2019. While customer feedback was positive, two challenges emerged. First, due to the fact that LPG was perceived as expensive, customers saved rather than used their fuel despite having access to a subsidized or even free supply, resulting in Fenix being stranded with immobilized assets for a considerable period of time. Second, there was little overlap between the company’s existing SHS customers and potential LPG customers.

PAYGO is deployed by utility companies and leverages smart meter infrastructure. This allows utility subscribers to enroll without large deposits or established credit – and ‘pay as they go' for their utility usage.

“We saw great market traction for our product, and customers largely appreciated being able to access LPG at an affordable cost,” said Vincent Kienzler, Managing Director of Fenix Fumba at the time. “However, a majority of our customers in Kampala only used LPG to quickly cook small meals, which resulted in little gas consumption and long repayment periods. Increasing gas consumption was our next challenge.”

Fortunately, new LPG pilots that aim to overcome such challenges are under development. Bboxx, a next-generation utility and leading OGS company, has been developing its strategy for LPG distribution, with pilots underway in the Democratic Republic of Congo (DRC), where there is significant overlap between LPG and SHS customers. Bboxx also recently announced a new partnership with USAID to scale up PAYGO clean cooking access in the DRC. The pilots will test two offerings: bundling LPG with SHS by leveraging the PAYGO capabilities of the SHS and a (soon-to-be-launched) stand-alone smart meter solution. These solutions will allow upfront equipment financing in order to increase affordability among target customers. These pilots explore synergies associated with merging solar and clean cooking solutions, including the reduction of overheads and investment needs for expansion.

“LPG is the best cooking solution match for our current operations as it allows us to leverage our physical and digital infrastructure as well as our PAYGO capabilities and extensive customer knowledge,” said Paul Büttner, Product Manager at Bboxx.  

M-KOPA Labs, the dedicated R&D arm of M-KOPA, is assessing the expansion of its product line with a pilot to explore LPG demand and willingness to pay among its customer base in Uganda. Aside from business model innovation, M-KOPA Labs is exploring the design of a low-cost technology alternative to smart meters that will fulfill user needs while unlocking greater efficiencies in rural and urban LPG distribution.

 

E-cooking Solutions for Off-Grid Customers  
While cooking with electricity (e-cooking) currently remains a relatively expensive method, further technological innovation and the development of alternative consumer financing approaches could allow e-cooking to present a compelling value proposition for households. For instance, the development of highly efficient and inexpensive Electric Pressure Cookers has caught the attention of many in the market as they increasingly show potential to compete on price-per-cooked-meal. Battery-supported direct current devices can enable cooking on weak grids, mini-grids, and stand-alone systems.Further research and development are required to bring e-cooking solutions off-grid, and some OGS companies are getting involved.

M-KOPA Labs, with support from the UK Foreign, Commonwealth & Development Office-funded Modern Energy Cooking Services (MECS) Challenge Fund, is exploring the appropriate design and suitability of e-cookers for its Kenyan and Ugandan customers. “Charcoal use in rural and urban East Africa is pervasive and represents a costly expense for the household budget,” said Katherine Owens, Head of M-KOPA Labs. “Much like M-KOPA Labs enabled customers to replace kerosene for solar lighting, we are now looking to displace charcoal fuel for cooking. But the solution must be developed with a clear understanding of customers’ desires, behaviors, and feelings.”

A Holistic View of Energy Access
OGS companies can play a significant role by enabling a shift away from wood and charcoal to cleaner cooking solutions. The integration of PAYGO in LPG and e-cooking appliances are just two examples of the natural integration with OGS business models. Other companies are integrating PAYGO solutions into biomass stoves, biogas systems, and ethanol distribution – all of which could be additional opportunities for OGS players in the years to come. Ongoing pilots promise to illustrate the right combination of technology feasibility, consumer value proposition, and economic viability.

There is a large and growing opportunity for increased collaboration between companies in the private sector, as well as among sector alliances and industry associations such as the Clean Cooking Alliance, GOGLA, the Africa Minigrid Developers Association, the Alliance for Rural Electrification, and others. The clean cooking sector should consciously, collectively, and collaboratively work to support better integration of household energy offerings to customers throughout the developing world.


1 2020 Off-Grid Solar Market Trends Report, World Bank and GOGLA, 2020, https://www.lightingglobal.org/news/press-release-2020-solar-off-grid-market-trends-report/

2 Cooking with Electricity – A Cost Perspective, 2020, MECS & World Bank, http://documents1.worldbank.org/curated/en/121371601050459132/pdf/Report-Summary.pdf