Making markets for sustainable energy
Or how to produce customers for solar lamps in West Africa
"The most basic level of sustainable energy necessary for human well-being corresponds to the level of supply and the level of electricity services that a solar lamp can provide."
- UN Sustainable Energy for All Initiative (2013)
Hello folks! On the reading list for today:
“Capturing Crisis. Solar Power and Humanitarian Energy Markets in Africa.” By Jamie Cross. Published in The Cambridge Journal of Anthropology. (Open Access)
The Gist
In the age of digital and mobile revolutions, the contemporary solar lamp is a venerable old product. It predates the smartphone! But while the (smart) mobile phone took over the world, the solar lamp has been more of a ‘market by market’ success story. It started out in India in the 2000s, then made its way to East-Africa, actually piggy-backing off the ubiquity of mobile phones, because the latter offered a digital payment infrastructure. But every new market still needs to be conquered. How to fan out through the whole African continent?
This is where the equation of the solar lamp with the most basic level of energy access comes in. It has helped make the solar lamp into "a humanitarian imperative in contexts of emergency and crisis.” An imperative, as it turns out, that solar manufacturers were only too happy to fulfil.
A first viable business model for (starting) solar lamp manufacturers was to sell in bulk to humanitarian aid organizations or multilateral institutions like the UN, who would then pass on the solar lamps – for free – to people in urgent need (such as refugees from “natural disasters, forced displacement and disease epidemics”). But after a while, two developments undermined the viability of that business model. One came from the solar lamp sector itself: other manufacturers protested that these hand-outs were undercutting the direct-to-consumer market. The second developed occurred within the aid sector, and neatly dovetailed with the first objection: refugees were ‘normalized’ from people in acute crisis to people experiencing a lower-grade “chronic crisis”. This normalization opened up the door for refugees to become more like you and me again – that is: customers (on the philosophical principle of ‘I buy therefore I am’).
In an effort to find out what market there could be for solar-powered mobile devices, a consortium of NGOs, research institutions and solar lamp manufacturers took advantage of a captive audience in a refugee camp in northern Burkina Faso (a region embroiled in the separatist violence in Mali), to launch a research project.
Want to read more about the solar lamps and the ‘business model’ of selling to the ‘bottom of the pyramid’?
As a participant in this consortium, Jamie Cross was surprised how “thin” this glorified market research turned out to be. It included a tiny sample of mostly formal organizations, whose members were never even asked about how they actually used the products. The only thing the study really wound up doing was establish the minimum purchasing power for the solar lamp. Its conclusion: aid organizations should keep normalizing refugees into customers through unconditional cash transfers which would allow people to make purchases as they see fit.
In other words, the research consortium described the (potential) market – ‘willingness to pay’ – and then showed how to support it. This support would, incidentally, help companies achieve scale and move beyond the camps – which, by the end of the article, they did, joining forces with the Burkinabe government to host a solar technology “fair” in a nearby town.
The Why
It’s hard to not raise one’s eyebrows while reading this story. It seems cynical, using the refugee camp as the place to experiment with selling to the “last mile” or “hard to reach” energy markets, as transmission lines painfully run right past the camp, since the government is anxious not to encourage or legitimize their stay there. Such cold calculation seems to surface elsewhere too:
‘We have 26 per cent of the world's refugees living in sub-Saharan Africa’, a representative of the World Bank’s International Finance Corporation told his audience. ‘You don't have that many untapped market segments of 200 million people!’
However, Cross wants to caution us against making snap judgements. He argues (somewhat tentatively) that market ‘capture’ and care are not mutually exclusive or even opposed. The notion that hard cash is cold betrays an understanding of the market as merely instrumental exchange. However, we can still remain fully human and social as market participants. In addition, there is dignity in unconditional cash transfers – as hitherto welfare-phobic countries have discovered during this pandemic.
The Ramble
Last edition I wrote about a missed opportunity to create a locally embedded sustainable economy. Today, I want to continue talking about sustainable economies by picking up on Cross’ qualification of the cynical market. My rambling point will be different but similar: the attempt to capture the refugee market may look exceptional, but it is actually kind of ordinary. Similar processes need to happen to create any new market. Let’s take two examples:
Selling in bulk to be able to scale up. Solar panels and Tesla have famously succeeded because of massive state support – whether by guaranteeing access to consumers (e.g., through tax breaks) or by being an customer themselves (like Biden has vowed to do by rejuvenating the federal fleet with EVs).
Pilots are also about lessons learned and networks. For the past few years, I’ve been witness to the development of energy flexibility markets. It’s messy: the technology is still in beta, roles aren’t (clearly) defined, nor is it clear who the customers are and what value they might derive from flexibility. Real work need go into establishing the relations that will 'make the market'. Experimental settings create opportunities for new cooperative networks.
Making markets, regulating markets
A final word on policy. Sustainable, responsible entrepreneurship in and by itself cannot be the solution. Take the solar lamp. By itself, it’s but a “technological fix”, which is to say, a solution that deflects attention from structural approaches, as one senior UNHCR official in Burkina Faso wryly noted:
‘If you were a company trying to sell things, would you go to a refugee camp? It would be like talking to a man who is hungry and saying, “My watch is so nice!”’
New market players should therefore not dictate the nature of the solution, but help re-regulate unsustainable economic sectors. For that, we need opinionated governments that can go beyond the common sense of the last decades that 1) markets are the solution and that 2) markets are all about the transaction of cold hard cash. In the age of the tragedy of our climate commons, we have to rediscover the public good in our policy-making and business models.
In upcoming editions, I’ll be exploring sustainable markets and ethical entrepreneurship in the energy field in further detail!
Till then,
Marten
PS Human-powered sounds from Burkina Faso to cool down from this electric newsletter!