Cracking the power supply in Tanzania
Energy in sub-Saharan Africa is an interesting subject, and one that a small group of Engineering PhDs and MBAs from MIT and Harvard wanted to explore more. They looked at what kind of businesses would be useful in a place like Tanzania, where only a small percentage of the rural population have access to electricity.
EGG-energy is a ‘for profit’ business, with a social mission — they believe in the potential for private enterprise to empower its customers, but they have a commitment to the social goal of cheap, clean power for the developing world. In Tanzania, government funds aren’t available for the extension of the power grid to villages and homes; individual customers would have to pay the upfront cost (in the region of several thousands of dollars) to extend the grid, meaning that at the moment, the cost is just too high. So here was an alternative approach.
The young team developed a business model and pricing scheme that allows profit sharing between the end user (35% annual savings on their energy expenditures), local entrepreneurs (6-year average profit of 24%) and EGG-energy (internal rate of return of 27% over six years).
EGG-energy took a year to work on the business plan and raise funds, and one of their biggest lessons was that they couldn’t rely on word of mouth to spread the message about their service. After three months, they noticed that customer recruitment was still slow, so they developed a sales strategy, including a local sales force to visit communities with kits to explain the value and the savings of the service.
We spoke to Jamie Yang, CEO of EGG-energy, who told us “We noticed there were a lot of people who were living close to a power source, especially the grid, and yet had no access to energy from the grid and little hope of that happening. We saw that the last mile of delivery of energy was broken and there seemed to be an easy way to fix it. Or at least to create a temporary solution that would allow people to improve what they were doing and save money in the meantime.”
The idea is very simple — take power at its source (a grid connection or a renewable electricity generation plant) and package it in small, transportable, rechargeable batteries. EGG-energy uses a 12V 12Ah deep-cycle sealed lead acid battery that can power lights, a radio, and mobile phones for a household for about five nights in a typical household. The batteries are owned and maintained by EGG-energy, and rented to customers for a subscription fee. Customers can change their depleted batteries for a fully charged one at any time at a number of charging stations. At the end of their useful life, batteries are removed from circulation and recycled.
The main component in EGG-energy’s ‘portable grid’ is the battery — they realised that they needed to be small and light, easy to transport and rugged so that they don’t break or spill during transportation. EGG-energy uses battery technology invented for use in airplanes, so that they are light and tough, and can be carried in a single hand. EGG-energy take their service right into the home; when a customer subscribes, a trained technician will install the necessary wiring to make sure the batteries are easy to use and effective, as well as safe.
The intention has been to replace other temporary sources of energy, like kerosene and AA batteries. The light from a kerosene lamp is less than 5% of an incandescent bulb and these lamps are a major contributor to indoor air pollution and respiratory problems, especially among women and girls. The batteries are much more efficient in providing light and power, and a lot kinder to the environment. The local feedback is that a large proportion of EGG-energy’s customers don’t use kerosene any more.
The effect on everyday life for EGG- energy users has been life changing, and Jamie Yang told us “Our lights have been important in helping kids to study at night. It is a story that people really like to hear. But the lights have been important in other ways too, like social gatherings, allowing people to gather after sunset around the house and be able to see each other’s faces. Being able to get around the house, providing extra security, things like that are a major improvement to people’s lives.”
In a wider sense, EGG-energy is investing in the local economy, recruiting local people, and intending to develop and train their employees. Only three of the staff are expats, the rest are Tanzanian. It’s an important part of EGG-energy’s development to listen to their employees, and to understand where they’re coming from. This is what gives EGG-energy a better understanding of how business transactions are done, and how people understand and use their services. They rely on their staff to keep them up to date with local information and intelligence.
In taking on local people, Jamie says “We look to hire more for attitude and are willing to invest in the development and training of people. We look for an entre- preneurial attitude. We’re trying to structure the stations in ways that the leader of that station feels a sense of ownership and treats it like their own business.”
Most of the training and development for technicians starts with the simple household battery systems and technical training, but EGG-energy are working on developing sales and managerial training and capabilities for their teams. The question of infrastructure is a big one in the setup and development of EGG-energy. It’s important that there is a robust supply chain, and the business understood the importance of local entrepreneurs and businesses in this chain. They partner with local dukas (the Tanzanian version of convenience stores) and delivery businesses for pick-up and drop-off services for the batteries. Piggy-backing on what is already there, using local resources and supporting local businesses are key to their success and development.
What is clear, at the core of the business, is a strong commitment to valuing what matters:
“We’re looking for ways to improve our customers’ lives and if our activities are doing something other than that then it doesn’t really fall within what the mission of the company is.”
As for the future, the plan is “to get everyone on a modern electricity grid. This is a good solution for now and it allows us to start building some infrastructure towards what could eventually be a very smart distributed electricity grid”.
In Tanzania, EGG-energy is improving quality of life, providing accessible, affordable and sustainable sources of power — perhaps they have cracked it after all.