GAROWE, PUNTLAND: Lack of national grid high fuel costs and the detrimental effects that bio-fuels have on health and the environment are limiting the Somali private sector from reaching its full potential while also perpetuating poverty and insecurity at a household and community level. Extending the grid is an integral part of providing those populations with energy access. However, extending the grid involves significant capital outlay and long lead times for the construction of new infrastructure.
Renewable energy and hybridized systems offer a sustainable solution to these energy challenges. Off-grid solar mini-grids provide an affordable option for bridging the energy gaps in peri-urban settings, as well as for rural electrification in remote areas. These communities represent big populations with different needs for power and other renewable energy systems. Improving access to affordable and reliable energy is an important step to promoting growth and reliability.
However, making the upfront investments necessary to set up distributed renewable energy systems to satisfy electricity demand and improve supply reliability remains a difficult undertaking in many areas, particularly in these rural communities which in most cases have potential for economic growth. SECCCO whose core business involves sales, distribution, installation and maintenance of renewable energy solutions as well as consulting services on clean, low cost and sustainable renewable energy solutions in Somalia is bridging the gap through their PAYG business model which has been instrumental in improving energy access for these under–served consumers.
“We are seeking to increase the share of renewable energy sources in the power sector and improve the access of end consumers to power supply through technology-enabled payment systems. This works in a way that SECCCO through other partners for example banks bring on-board their micro-lending experience into the PAYG model and assist in effective credit management as well as provide lending services andbusiness mentor-ships to the rural households and businesses that might have low repayment ability. Once we have partnerships with funding agencies we install systems for farmers who while using the system say solar water pump for farming will benefit from the farm proceeds sales adequately to be able to pay for the same over an agreed period of time” says Said Mohamoud SECCCO Business Development Manager
SECCCO team preparing a solar water pump system installation for crop irrigation in Garowe Puntland
The PAYG business model is an innovation that emerged to address the energy access challenge and to provide electricity generated from renewable energy sources at affordable prices.
Other benefits of the model include:
➜ Improved energy access in off-grid areas
➜ Defer network expansion investments
➜ Enable other innovative business models, such as peer-to-peer trading or community ownership
DEPLOYMENT AND ROLLOUT OF PAYG MODEL
The objective of the model is to enable rural poor households and small businesses in Somalia have access to clean and affordable renewable energy sources by enabling beneficiaries acquire the otherwise expensive solar equipment without the need for full upfront payment. By rolling out the model SECCCO is banking on the untapped demand for the PAYG systems; as the repayment model is convenient and affordable to the low-income earners.
“We piloted PAYG solar systems model since 2016 and it has proved quite attractive to rural customers and as a result we received two grants from World Bank’s Somalia Business Catalytic Fund (SBCF) and EU funded Somali Energy Transformation (SET) Program. added Mohamoud . Consumer awareness and access to finance for renewable energy service providers of PAYG models is key to its rollout. With support from United Nations Development Programme (UNDP), SECCCO has also recently trained a total of 550 youths in Mogadishu, Baidoa and Kismayo. The trainees consisted of 200 male, 200 female and 150 IDPs (disaggregated per gender).The youths were trained on solar kits installation, maintenance and in scaling up solar systems PAYG model across Somalia.
Students display certificates issued after undergoing training on PAYG model and solar installation
IMPLEMETATION AND BUSINESS ASPECT OF THE PAYG MODEL
Improving energy access with distributed solar PV systems is the key contribution of the PAYG business model to power sector transformation in that the model improves the energy access of communities in areas with limited or no access to power that either rely on fossil fuels like diesel for their energy needs or have limited (or no) access to energy at all.
Although the solution will be offered on a Pay-As-You-Go financing format where the provider will retain product ownership until customers offset all payments the user have a practical solution in choosing to pay according to how they see fit either weekly or monthly this allows affordability to most rural folks since they have locally designed monitoring platform that doubles up as PAYG platform.
“For all PAYG systems/equipment, SECCCO has provided adedicated helpline through which clients can register their complaints about the PAYG systems and obtain assistance through the phone. The services delivered through phone normally include configuration guidance, simple setups, or navigation” concludes Mr. Mohamoud
Energy experts say that with increased funding of such model like PAYG in Somalia will improve access to reliable energy leading to increase in per capita energy consumption from the current 29KW hours to at least 32KW hours, hence spurring economic growth
“Somalis digital literacy coupled with a very strong mobile money platform is a key driver for the growth of PAYG business models it has enabled increase in awareness among consumers as well as generate sales, the trick is to invest in an active on- ground teams that provide last-mile connectivity to reach consumers, use local governance structure and engage communities in their energy choices”. Says Samatar
i) Access to finance
The PAYG business model requires upfront funding to build the solar PV systems and to deliver them to consumers. The need for rollout capital increase significantly with a growing consumer base, as the number of outstanding loans continues to increase because customers only pay a small upfront payment.
ii) Different sources of funding are required to invest in the business planning process and for financing further scale up.
iii) The cost of raising capital is a critical factor and can decide the competitiveness of a company’s PAYG model. Financing from governments or development financing institutions is required in the early stage of business model, the ideal case would be that the income generation becomes high enough to finance the system. Once this equilibrium is reached, the scheme practically scales by itself.