Overcoming Customers’ Budget Limitation

Many are predicting an exponential growth of the off grid solar market, making parallels with the telecommunication sector during the last twenty years. Turning that prediction into reality will require to overcome the barriers encountered by off grid solar consumers. Most of them have low income and live whether in rural communities having no access to electricity or within communities victim of unplanned and frequent power outages. Consumers in these underserved areas are in most of cases accustomed to purchasing energy in low increments: solar product are seemingly prohibitively expensive for them. The challenge for energy entrepreneurs dealing with them is to build sustainable revenue stream: how to charge low income consumers without pricing being a barrier for them, how to make a solar product offer without compromising on quality?

Energy entrepreneurs in low income off grid areas should focus on overcoming consumers' budget limitations. They should emphasize on small payments; energy should be sold in small increments fitting to consumers' budget. Drawing a parallel with telecommunication sector, the winning mobile phone pay as you go model has been adapted to off grid solar market:; as for mobile phones users, energy users also, in certain cases, can buy a set amount of power time and top up again once they have spent it. Pay as you go model has the advantage of allowing them to spend amounts of money strictly fitting to their budget.

We have seen the massive introduction of solar lanterns as substitution product for low income off grid areas, but there is still a need for comprehensive energy solutions as provided by solar home system. Revenue models such as end user financing, energy as a service and pay as you go tend to help customers accessing comprehensive systems they could not have afford through upfront payment of solar equipments.

Without the appropriate payment scheme, those of the consumers in low income off grid areas interested by solar home systems are attracted by cheap products, price only guiding their choice. As one can guess, cheap solar products are often low quality. They are quick to fail and subsequently, they contribute in developing consumers' skepticism about solar products. Accordingly, in low income off grid areas, it is crucial for energy entrepreneurs to offer quality products together with the payment scheme which will make the products fit to consumers' budget.

Off grid revenue model differ one from another by what end users are paying for and how they are paying for it. It is either:

• a prepaid energy usage fee allowing consumers to buy small increment of power time as developed by pay as you go model, ;

• a loan repayment fee when using end users financing model. Entrepreneur basing their revenue stream on this model sell solar products under the umbrella of micro finance institutions (MFI). The strategy for entrepreneurs here is to partner with a MFI and continuously run demand creation activities among the MFI's members. MFI are known as being the banks of the poor. In the case of end users financing, they are the economic buyer, granting loans to those of their members committed to acquire a solar system, helping them bearing the full cost.

• or it is a performance based subscription. Energy as a service being the model based on performance. Under this model, end users pay for services enabled by energy access rather than paying for energy access itself. Lighting and charging devices are the most widely services offered under energy as a service model.

The role of energy entrepreneurs operating in low income off grid areas is to find the right balance between products, consumers' needs and revenue model.