Pay-as-you-go (PAYG) solar home system companies are seeking to provide an on-grid experience in off-grid settings. To fight off competition from lower cost, lower quality systems, PAYG companies need to deliver a premium experience at a competitive price.
At the vanguard of an emerging industry bringing light to millions of rural households, companies executing a pay-as-you-go (PAYG) model for solar home systems received $223 million in investment in 2016, a 40% increase from 2015. This support from investors signals that the PAYG model is emerging as a commercial opportunity for providing energy access.
The PAYG model removes the high up-front cost of a solar home system and allows customers to pay for the cost at a pace that works for their lives. Day laborers can pay daily; whereas, some farmers choose to pay larger amounts twice a year during the harvest period. The model has gained the most traction in east Africa but is also gaining momentum in west Africa and India.
In 2015, there were around 25 million households using off-grid solar products such as pico-solar lights, usually less than 10 W in size, and solar home systems, generally between 10 and 300 W. Only 1.3 million of these 25 million households were served through a PAYG model, although analysis from Bloomberg New Energy Finance suggests that there is potential for this to increase to over 45 million households by 2020.
In order to realize this ambitious growth, PAYG companies need to compete against lower cost, generic solar home systems purchased on a cash basis by partnering with existing business networks to lower their cost of operation. To beat out the generic products, PAYG companies need to solidify their premium brand by offering customers seamless after-sales service at an affordable price.
Customers that have bought generic solar home systems and subsequently encountered problems recognize the value of paying for the service offered by PAYG companies. To keep these customers and attract their neighbors to their service, PAYG companies need to deliver superior service throughout the contract period at a cost not far above the cash-sale alternatives. Laurent Van Houcke, the COO of Bboxx, says that “providing affordable maintenance services in rural Africa is a logistical challenge, and technology is the only way to keep the cost low while providing on-grid experience in an off-grid setting.”
Off-grid O&M logistics
Given the long travel times between rural villages, properly executing preventive maintenance practices reduces the need and urgency for a technician to service the system. For many PAYG companies, remote monitoring through a GSM card is already, or will soon become, part of their systems. The GSM device communicates the power output of the solar panel, battery charge levels, and other system characteristics, which allows companies to understand the system performance over time. Given the insight remote monitoring provides, it is an essential starting point to reduce service costs and foster a strong relationship with the customer.
As an example, remote monitoring can be used to address a common impediment to optimal system performance – dusty solar panels. During the dry season, everything skirting the roads in rural villages is blanketed in dust, including a home’s solar panel. During installation, the customer is instructed to regularly clean the panels, though customers often forget to do so. While companies are aware of the need to remind customers, many have not implemented proactive measures to ensure customers are performing routine maintenance, such as cleaning the panels.
Remote monitoring can easily track the output degradation from accumulated dust, and send a standard text message to notify customers of the decreased output. Since PAYG companies sell days of system operation instead of kilowatt-hours of energy, the customer suffers from decreased output due to dusty panels. Sending a text message explaining how their system output would increase shows the customer that they have a partner in maximizing their access to energy. These interactions help customers get the most out of their systems, show customers that PAYG companies are invested in their system’s performance, and deliver on the promise of a superior product experience.
In most PAYG companies today, customers need to call a hotline to report an issue when their system isn’t working or is under-delivering on promised performance. Incorporating remote monitoring systems allows PAYG companies to leverage system analytics that enables them to proactively identify and fix issues. This removes the burden of reporting issues from customers. If a customer loses the repair hotline number, or if an issue limits system performance in a way not visible to the customer, the customer could spend several days, months, or years with a limited or disabled system. Instead, PAYG companies can detect and remedy early warning signs of issues to allow customers to get the most out of their systems.
In addition to routine maintenance and proactive issue detection, remote monitoring helps in addressing the impact of customer usage on battery life. Van Houcke of Bboxx expressed that “batteries represent 90% of the maintenance cost of solar home systems and are impacted by customer usage and weather parameters such as the amount of sunlight or the temperature of the room in which the battery is stored.” Companies are utilizing the troves of data collected over their system’s lifetime to develop their own charging and discharging algorithms that can maximize battery performance and longevity.
Tim Kasperidus, COO of Mobisol Tanzania, provided further insight into how customer usage patterns impact battery lifetime. “A battery unable to reach full charge for several days will have a significantly limited lifetime.” During the rainy season, sunlight is at an annual minimum, reducing the energy output of the solar panel, yet many customers continue to use similar amounts of energy as in the dry season. Kasperidus mentions how in certain cases Mobisol has contacted customers to ask them to reduce non-lighting loads, such as television so that the battery can be fully charged. Only in extreme cases has Mobisol manually reduced power output to non-lighting loads. As Kasperidus articulates, “Customer experience is most important to us. We would never cut off a customer’s lights at night as we see lighting as an essential part of our customers’ lives.”
Off-Grid Electric has hard-wired limits on battery discharge into their systems. When battery levels go below a certain threshold, the lights dim to a lower level and the power to non-essential appliances is shut off until the battery is charged above the threshold again. This allows customers to benefit from extended run times late at night when lighting levels are less crucial for productive activities.
Balancing battery longevity with customer demand for power is challenging, though in many cases the best approach is to educate customers on the long-term consequences of their behavior and use alerts, limits, and notifications to help them develop usage patterns that maximize the lifetime of their system. Since the battery is often the most expensive part of the solar home system, it is in the customer’s interest for the battery to last as long as possible.
Outside of customer behavior, there are other issues that can prove even more important to the long-term performance of a solar home system. “When delivering a high quality, low-cost solar solution, the long-term system performance tends to be more affected by the lesser known challenges,” Joshua Pierce, CTO of Off-Grid Electric, explains. “Humidity and dust can accelerate corrosion in power electronics. Something as small as oversizing an electronic component so that it does not heat up under load can have a meaningful impact on limiting system degradation over time.” Other examples include improving cable insulation for LED lights, which are susceptible to rodents chewing on them.
As PAYG companies deploy systems, they can utilize remote monitoring to identify the weakest links and improve on their design. This insight into the system’s weak points allows PAYG companies to design superior components that are more likely to operate throughout the systems’ lifetimes without the need to be serviced.
Pierce emphasizes how Off-Grid Electric’s “next generation systems leverage greater data science to do predictive battery aging analysis, dirty solar panel alerts, and other maintenance and customer education elements that will drive down the cost of maintenance and improve customer experience.” The companies pv magazine spoke with are all pushing ahead with these improvements. Each of the measures will provide an enhanced customer experience, and strengthen the company’s brand.
The variety of preventive maintenance and design improvements discussed thus far will further differentiate PAYG solar home systems as premium products above generic alternatives. Eventually, though, some systems will break down requiring the system to be serviced.
Some companies offer a warranty on their systems but require customers to return the systems to a retail shop whenever there are issues. Others offer a service model, where a company technician installs the system and will return to the home to service the system if necessary.
For PAYG companies offering only a warranty, the geographical reach of their retail shops limits their service. When an issue arises, the customer needs to take the system back to the retail shop, and if it takes more than one hour to travel to the shop, the product is not delivering a premium experience to the customer.
Under the current model, the PAYG companies that offer a service guarantee are each building out their own network of technicians. Having a network of technical support differentiates PAYG companies with a service model from their competitors, though the cost of these service networks can undermine this advantage. As multiple PAYG companies build out their own network of technicians, their efforts are being duplicated at a greater cost. A more efficient approach would be to use an independent network of locally developed skill that multiple companies can utilize to reduce the cost of providing services to remote villages.
Many of the technicians performing services for PAYG companies are contract workers already, so there is scope for these contractors to service systems from multiple companies. This would allow service workers to combine field visits from different companies and reduce costs through economies of scale.
An even more efficient model would utilize local electricians based in the villages to perform service repairs. These local technicians would need to be certified by each PAYG company to perform repairs within the company’s service agreement. Presently, the rural villages where many of these solar home systems are being deployed lack the skills to repair the systems. This means that, for now, a trained technician based in a regional town will need to drive to the villages to perform repairs. Given that transportation to these villages is the main cost of servicing, the long-term strategy for servicing should be to build the technical capacity to service these systems within the villages.
Pierce, CTO of Off-Grid Electric, reiterated the difficulty of servicing systems in rural villages, “an underlying challenge in operation and maintenance for small solar home system companies is the high cost of a field service visit and the challenge of what to do with refurbished products. For a system that might sell for $250, it can cost $50 or more to remove a product (like a battery box), repair it, and then replace it.”
The idea of combining the network of technicians that each company has created may at first seem unpalatable to many PAYG companies since other PAYG companies are their competitors. However, the main competitors of these companies are not other PAYG companies, but rather the lower cost, generic products that offer no promise of service. The primary battle is not between companies, but between business models – pay-as-you-go versus the cash sale of generic systems.
To achieve the potential of reaching a total of 45 million households by 2020, PAYG companies must create a different model for servicing that includes utilizing existing networks or pooling resources to beat off competition from generic products. Pierce emphasizes that “we must continue to deliver significantly better value than low-cost, low-quality copycat products, or we risk the industry engaging in a race to the bottom, where customers lose and ultimately won’t trust solar as a long-term asset in their lives.”
If solar home systems become disposable products, customers will suffer from higher replacement costs and large amounts of electrical waste from the discarded systems.