Harnessing the Power of Business to Tackle Energy Poverty

 

Ghulam Abbas, an aged man in his 70s, stokes fire to get some relief from the cold, as his wife, Zehra, lies beside him coughing incessantly. Zehra has developed lung cancer from the smoke fumes she has been exposed to everyday while cooking for her family. Few kilometers away from Abbas’s house, Nuriya is making chapatis on the clay stove while her six months old son is cradled in her lap. There is no light in the room except from a lone candle burning in the corner.

These are a couple of stories from thousands of villages across Pakistan which lack access to piped gas and electricity and have to use traditional fuels for cooking, heating and lighting. According to government’s own estimates, 30% of the households in Pakistan are still not connected to the electric grid, and a much larger percentage (75%) have no access to piped gas.

The present government is focused on adding supply as eliminating energy shortage was on top of its agenda when it assumed power in 2013. Given that all the planned projects are commissioned on time, the country may experience a period of no power cuts. However, even then there will still be over 60 million people who will continue to live without electricity and modern energy supply. Given the economics of setting up energy distribution infrastructure in these villages, majority of these areas may never get electricity or piped gas network.

The residents of these areas have had to rely on burning kerosene and firewood for fulfilling their lighting, heating and cooking requirements. This poses not only health hazards for the residents but also environmental problems in the region.

Young children are often carried by mothers or kept in the kitchen area during cooking exposing them to high levels of smoke. Because women do most of the cooking and spend more time indoors, they are exposed more to pollutants. In general, rural women and children are malnourished and the impact of indoor air pollution on them is likely to be much stronger. According to Global Alliance for Clean Cook-stoves, more than 100,000 people die every year in Pakistan due to air pollution.

Lighting up Off-Grid Areas

Witnessing the negative impact of energy poverty first-hand, Muhammad Shehryar, a Fulbright alumnus, upon his return to Pakistan founded Harness Energy – a social enterprise focused on renewable energy. He saw a missed opportunity in the massive off-grid population whose energy needs were being ignored, despite their willingness to pay. “I was never a non-profit person, and I strongly believe in the power of business to tackle poverty. Today, Harness Energy views even the poorest of the poor as long-term customers with dignity, rather than desperate souls in need of charity,” says Shehryar.

Harness Energy currently offers two kinds of products – solar lights and a super-efficient solar fan. The starting price of their solar light is $9 while the fan retails for $30. “As all our solar products are Lighting Global-verified, their pricing is significantly higher than Chinese generics. But we offer a unique ‘no-questions-asked’ replacement warranty for up to 24 months after purchase, which signals about the solid quality of our products. Right now, the only alternatives available to people are super-cheap Chinese factory rejects that last only for a few weeks,” he says about the relatively higher price of the products his company offers compared to those available in the market.

Basic solar lanterns (Uno 50 and L1) are their big-sellers, comprising a majority of sales. They are also pilot-testing a couple of high-capacity solar home systems capable of running multiple lights and fans for 8-12 hours on a single charge. “If all goes well, we will be launching a high-quality SHS very soon. One thing is for sure: our system will give a much better backup time than the ones currently being offered by competitors, and at a significantly lower price,” he shares.

Harness Energy is active in four districts of Punjab: Lahore, Chakwal, Khushab, and Layyah. Their short term plan is to expand existing operations deeper into these four districts and by 2020 extend operations to Nankana Sahib, Bahawalnagar, and Muzaffargarh in Punjab, and in un-electrified talukas of Northern Sindh. “Our goal is to impact over 1 million lives by 2020, and become the leading provider of clean energy solutions in rural Pakistan by 2025,” says Shehryar.

Solar 1

A fruit vendor using Harness Energy’s solar lamp to light up his stall at night

Solution for Household Air Pollution

Other than solar energy solutions, Shehryar and his team are also working on providing improved cook-stoves. Harness Energy are the first Pakistani company to be awarded the D-prize. They won seed money to distribute 500 clean stoves in three months. They have sourced these cook-stoves from a local vendor to ensure timely delivery and affordability. The cook-stoves can be purchased at an average retail price of $17.

 

Improved Cooking Stoves for distribution in rural areas of Punjab

Pilot for the cook-stoves is being conducted primarily in Nankana Sahib, with some sales coming from retailers in Bahawalnagar and Chakwal. Harness are using kiryana (local grocery stores), material (cement and steel bars) stores, road shows, and micro finance partnerships as their distribution channels.

They have received positive response from their customers, especially from women who are increasingly adopting these improved cook-stoves owing to their numerous benefits. One such customer is Muneer Begum, from a small village called Dhok Jaba. Below is her testimonial.

“I have been married for 22 years now and have been cooking daily meals for my husband and family. I collected firewood from our vicinity and sometimes bought it from a trader, and used to cook on an open fire outside my house. My children used to play close by. I could see them coughing regularly but didn’t realize how dangerous the smoke was for them until I lost my 3 year old boy in 2013 to chronic asthma. I was dejected and angry as we could not afford LPG cylinders. A few months ago, my sister-in-law told me about a clean stove that completely eliminated smoke. We bought one on installments to test it out. This stove has changed our lives. It not only saves us Rs. 300 per month in firewood cost, it does not have any smoke. I will recommend it strongly to all women of our village if they want to ensure their kids live in a healthy smoke-free environment.”

Challenges

Their two primary challenges are customer’s price sensitivity and lack of options for consumer financing for such products.

“Since price is an important factor in the purchasing decision of customers, they are often hesitant in buying our products. So we have to work extensively on behavior change campaigns to convince people that in the medium and long-term, the financial and non-financial benefits of our products far outweigh the immediate advantage of getting a cheap but low-quality product,” comments Shehryar on the issue of price sensitivity.

One way of mitigating this trust factor is to offer them financing whereby the customers can pay the company in 3-6 installments. Each installment will be the same amount that they would have paid for the cheaper alternative. “But because we are not a financing company ourselves, we have to rely on local organizations and partnerships with micro-finance institutions and banks”.

One issue with Micro-finance banks is that they are constrained by SBP regulations and cannot do branchless lending (requiring off-grid customers to travel 50-100km to submit their loan documentation). Moreover, they do not have branch networks that reach into off-grid areas, making financing through them difficult in deep rural areas.

Another way they are building customer confidence is through community outreach. “We take existing customers to door-to-door visits with us as a way to gain prospective customers’ trust”, he explains.

Lastly, even though government has provided support for solar products by exempting taxes and duties, nothing has been done to facilitate the ICS sector. Unfortunately, household air pollution caused by traditional cooking stoves has not been afforded the same priority by the government, with no institution taking leadership role in addressing this issue.

 

 

An edited version of this article was published by MIT Technology Review on September 22, 2017 and can be accessed at http://www.technologyreview.pk/harnessing-power-business-tackle-energy-poverty/

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