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AfDB convenes an innovation workshop to accelerate energy access through an innovative pay-as-you-go model: PAYG 2.0
On December 9, 2016, The New Deal on Energy Task Force hosted an Innovation Workshop to explore pioneering business models to scale access to pay-as-you-go (PAYG) payment models for off-grid solar energy.
Africa is the birthplace of new, innovative, sustainable business models that are disrupting how low-income consumers can easily access clean, renewable energy. As a result of this innovation, over 700,000 households now have access to solar energy home systems of varying capacity. A recent Bloomberg report suggests that these models could push off-grid solar energy to reach 9 million households across Africa by 2020.
With the ambitious goal of reaching 100 million households by 2025, the AfDB’s New Deal on Energy believes that 9 million by 2020 is only a fraction of what is achievable, with this target representing only a small part of a highly lucrative market of 634 million people in Africa, mostly in rural areas without access to electricity. With this in mind, there is need for a disruptive business model to scale growth in this sector.
The innovation workshop organized by the New Deal on Energy, in partnership with CGAP (the Consultative Group to Assist the Poor) and Making Finance Work for Africa, brought together key public- and private-sector stakeholders to explore innovative solutions to accelerate market growth of the pay-as-you-go business model. GSMA (telecommunications association); USAID; Ecobank; PEG solar, Lumos solar and Microcred (solar equipment providers); and Cellulant (mobile payment provider) were present to address the challenges of the sector.
The stakeholders in attendance agreed to undertake some important initiatives to promote the objectives of the workshop.
The financing gap in PAYG is getting larger and constitutes a bottleneck to growth. Therefore, the New Deal on Energy for Africa will explore and promote PAYG business models that will accelerate access to off-grid solar equipment to low-income consumers at scale. For consumers, the features of this model are that they can directly access instant mobile money micro-loans to pay for energy solutions in an affordable and flexible manner. The model brings all major players of the ecosystem, including commercial banks and microfinance institutions, mobile network operators, merchants and energy providers into a PAYG platform.
The outcome of the workshop was a model that will be piloted in 2017 to demonstrate the value of an open ecosystem that has the potential to provide access to solar home systems to 15 million farmers, who are already registered in a mobile payment platform operated by Cellulant.
The New Deal on Energy is a transformative partnership that aims at universal energy access in Africa by 2025.