News & Insights
Solar Lights Have the Power to Illuminate Homes & Improve Lives (GreenTech Series, Part 1)
Over the next couple of weeks, we'll be providing an in-depth look at our emerging work in the GreenTech space. In part 1 of our 3-part series, we talk about why we decided to launch our GreenTech work with investments in solar lights.
Many basic technologies that enable everyday tasks still remain out-of-reach for millions of people in poverty. For example, an estimated 1.3 billion people live without access to electricity. About 3 billion people use dangerous and toxic open fires or poorly ventilated stoves to cook daily meals. Nearly 800 million people lack access to clean water. We believe that making those technologies accessible will empower families to lift themselves out of poverty. So, of all the available technologies, why did we decide to invest in social enterprises that can connect people in poverty with affordable solar lights?
Doing our homework
When we launched our Green Technology Fund in September 2012, we took a hard look at the existing technologies emerging in the developing world. In analyzing these products we primarily looked at two things: the value that the product provides for the poorest families; and the potential for scale to reach as many of those families as possible in a sustainable way. In order to determine scale potential we considered: ease of adoption of the technology (user training, maintenance, etc.); household demand for the product; and the existence of a large market for the technology.
The technologies we examined included, among others:
- cooking solutions that reduce or eliminate the burning of biomass and reduce indoor air pollution, such as efficient cook stoves;
- community and household level water filtration products that decrease the prevalence of waterborne illnesses;
- solar water heaters that provide hot water for bathing and household chores;
- biodigesters that produce fertilizer to increase crop yields and produce methane gas for cooking fuel; and
- solar technologies for illuminating homes and powering household appliances like cell phones and radios.
While all the products we examined have potential for positive social impact, many of them are currently too expensive or not in high-enough demand among poor households to be market-sustainable. This has resulted in distribution channels fraught with subsidies and donations, which hinder the long-term potential for sustainable solutions and scale. In just one example, a 2012 World Bank report stated that in Guatemala “most improved stove programs have subsidies of 80 percent or higher of the stove cost […] and it is unclear how these independent programs will affect national efforts at stove commercialization.”
The impact of solar lights
Solar lights, however, are compelling from an impact and scale perspective. We believe solar lighting products will soon replace kerosene lights and candles for the nearly 1.3 billion people without access to electricity grids. Eliminating these dangerous and costly lighting methods through solar light technologies improves family:
- health: because they no longer rely on antiquated kerosene lamps that emit harmful smoke, which has been equated to smoking two packs of cigarettes daily;
- productivity: because their days are extended so that they can work, manage household chores and study after sunset; and
- finances: because they no longer need to pay for costly kerosene fuel, which can account for 10-25 percent of household expenses for the poorest families.
Solar lighting technology is an obvious improvement for poor families. In most cases, a family’s only consideration is whether they can afford it. Fortunately, innovations in product design and financing mean that most solar products on the market today have fairly low switching costs, and actually cost less over time than kerosene or candles. Furthermore, according to the Lumina Project at the U.S. Department of Energy’s Lawrence Berkeley National Laboratory, “users of kerosene lighting pay [between 150 to 600-times] more per unit of useful energy services than do those in electrified homes.”
There is demand for solar lights in developing regions of the world. For example, to support one of our partners in Nicaragua, we funded market research to determine demand for solar products among the rural poor. The results showed that 93 percent of off-grid households surveyed* expressed an interested in purchasing a solar product.
In 2013, we invested in MiCredito, a microfinance institution (MFI) in Nicaragua that makes solar lights affordable and accessible for families living in remote areas. It does so by recruiting, training, and offering financing to microentrepreneurs to become resellers of solar lights. As a client of MiCredito, a solar light owner and a solar light microentrepreneur, Pablo Alejo knows firsthand the benefits of the products he sells. Pablo uses a Sun King Pro solar light on a daily basis, which allows him to:
- continue working around his farm throughout the evening;
- help his children study at night; and
- eliminate the need to buy kerosene, thus saving money.
As an added benefit, Pablo is able to supplement his household income by selling solar lights. He explains, “Solar lights are a good business [because] the products work well. I use mine every day.”
Looking ahead — potential for scale
Our research shows that we are at the beginning of an explosive growth in solar products aimed at the off-grid poor in developing countries. Several key global players and standardized rating systems are beginning to emerge, increasing product quality and variety, and reducing prices. Many believe the impact of solar lights is so compelling that “The Next Wireless Revolution” could be in off-grid electricity. Furthermore, the ability of some solar products to charge cellphones has actually turned out to be another key driver in solar product uptake.
With strong demand from BOP families and a rapidly developing global supply chain, solar lights are expanding opportunity for millions living in poverty worldwide. That’s our mission at GP, and it is the reason we have chosen to focus our investments on solar lighting at this time. We plan to continue monitoring the green technology space, and may expand our approach as other technologies develop. However, out of all the products available today, we feel that solar lights are in the best position to achieve massive scale and impact.
*397 households in rural Nicaragua were surveyed in the market research study we conducted with FDL.
In our next blog post in this series, we will go into various types of solar lighting products and applicable distribution channels that can address the last mile challenge. Read it here.