Exponential Distribution

One of the big questions we get at Colibrí is “if the base of the pyramid is such an opportunity, why is it still overlooked?” With every passing year, solar is more efficient and more affordable. The kilowatt hour cost of solar is 1/10th today what it was at the start of the millennium. In the developed world, this has meant an explosion in home installations hooked up to the grid, and ever bigger industrial solar farms. But solar is just beginning to blossom where it stands to make the greatest societal impact: the base of the pyramid.

To personify the base of the pyramid, I’ll introduce Usnavy. Usnavy lives in the departamento of Matagalpa on a coffee farm about an hour and a half bus ride from the nearest paved road. All year long, he works with the animals on the farm — but he doesn’t own the farm or even the land he lives on. The owner of the farm has around thirty people living there. It is about a hundred acres in size, thirty of which are coffee producing. During the coffee harvest, Usnavy’s wife and three kids pick coffee on the farm. Each of them makes about seven dollars a day in the peak harvest. This is good money, especially considering how low their cost of living is. They pay no rent and have an unlimited supply of fruit for free from the farm (bananas are used to shade the coffee plants, and there are more than they could possibly eat). What they don’t have is access to a diversity of goods. They buy most of their needs from the farmer including rice, beans, oil, soap, and candles. Many have cellphones and when they take the bus into the city they pay $0.50-$1 to charge them. Cellphone credit is readily available at a small store a few miles away from the farm. The bus comes twice a week, but when it rains, it frequently can’t make the trip. When this happens and Usnavy is on the farm, he might be without a charged phone for a couple months; on the other hand, it’s extremely costly when he gets stuck in the city.

Usnavy and his family are among the 2.5 billion worldwide people lacking access to reliable electricity. Over a third of the world’s population face similar problems. Electricity would dramatically change their lives and so the potential for microgrids and individual solar installations is massive. For every one of the 300 million people in the United States, there are more than eight people like Usnavy who lack reliable electricity.

The social impact of solar powered electric light is obvious. Electric light saves money in the long run for families using candles or kerosene to light their homes. For a product with a five year lifetime, this means up to $900 saved for a family living on $2 a day. Further, switching a family from kerosene to solar cuts carbon-dioxide emissions by 200kg a year. With electric light, Usnavy doesn’t need to worry about being stuck without a way to communicate to the outside world because he can charge his cellphone with the system. His children have increased their study time by 75% because their day doesn’t end with the 6pm sunset.

“But while the engineering problems have been solved in Silicon Valley and the manufacturing costs have dropped in Shenzhen, the store down the road still only sells single serving shampoo packets, Coca Cola, and bananas.

Usnavy loves the idea of solar products and knows how they can change his life. But while the engineering problems have been solved in Silicon Valley and the manufacturing costs have dropped in Shenzhen, the store down the road still only sells single serving shampoo packets, Coca Cola, and bananas. Single serving products are especially attractive for Usnavy because of their low cost in the instant. A large bottle of shampoo would be cheaper per serving, but is out of his price range. Similarly, an investment in solar which pays for itself in a couple months requires a notable change in behavior. Despite affordable solar goods, accessible solar goods require a special focus on distribution and financing.

This should not be a surprise. Because solar technology is moving so fast, the distribution and financing gaps are especially apparent. Solar technology has been forging ahead, making top of the market products more affordable with every generation. The advances in manufacturing aren’t just useful for home installations in California and Berlin as improvements in affordability spill down to all solar applications. How important are financing and distribution? SolarCity, one of the most recognizable household names in the solar industry has spent nearly their entire business career in these two sectors and have only started manufacturing recently.

Existing solar providers are missing a huge opportunity. The Tesla narrative, for example, is a compelling explanation of engineering iterations. First, build a top end car for aficionados, next a high end sedan for the passionate, and third, focus on the mass market. We’re currently in the second phase now with the Model S. Many are waiting with bated breath for the next generation — for the accessible and affordable luxury of an electric vehicle. Solar has already passed that point, but distributors haven’t adapted. A $35-$40 product is the sensible investment for low income households around the world and with 1.35 billion people lacking access to electric light, they can’t afford to not switch to solar.

Financing and distribution might sound trivial, but poor distribution is the reason that grid electricity has failed Usnavy and the other 2.5 billion like him. However, unlike grid electricity, individual, decentralized electricity sources enable decentralized distribution. With a personal solar powered light Usnavy doesn’t have to wait for the electric company or government to lay new cables to reach him. He doesn’t have to wait for the river to fall to travel to town to charge his phone. He doesn’t have to wait. The reason we track Usnavy so closely is because understanding how people and goods move to and from the last mile helps us understand the best distribution networks for providing electricity. By developing agile sales networks, nontraditional partnerships with teachers, religious leaders, and coffee plantations, and offering software assisted payment plans that match kerosene expenditures, we’re proud to offer a new frontier in energy access.

We’ll see you at the last mile,

- James Downer, Co-Founder at Colibrí

Originally published on Colibrí’s blog, The Last Mile. To learn more about Colibrí’s work in Nicaragua, follow us on Twitter @Colibri_Global.

One clap, two clap, three clap, forty?

By clapping more or less, you can signal to us which stories really stand out.