A handful of innovative companies may soon transform how low-income consumers purchase and pay for cooking fuel. By providing energy services on a pay-as-you-go (PAYG) basis, enterprises are leveraging technology-focused business models to overcome the affordability barrier previously faced by consumers unable to afford the upfront cost of household energy products.
Traditionally, one of the biggest challenges in switching from solid fuels to cleaner-burning fuels such as liquified petroleum gas (LPG) or ethanol is the initial cost of the stove and the inaccessibility of small quantities of fuel. A series of recently-announced innovations – including smart fuel canisters and mobile money payment systems – aim to enable both stove financing and sale of clean fuel in more affordable quantities.
In Nairobi, KOKO Networks is using technology to lower distribution costs by launching a network of cloud-connected “KOKOpoint” e-commerce kiosks in small neighborhood shops. Consumers are able to buy a modern 2-burner stove with cash or by using a layaway model. Accompanying smart canisters are refilled with ethanol fuel purchased through a digital billing system in bundles as low as $0.30, without the “poverty penalty” often charged to low-income consumers who buy fuel in small units. The mobile money-enabled kiosks are similar in appearance to ATMs, and integrate interactive touch screens that allow for cross-selling of other products and services.
Also in Nairobi, PayGo Energy is developing a pay-per-use service that makes LPG available for households through a smart metering solution. Users pay a reduced fee for the initial installation of a stove, cylinder and smart meter, after which they spend as little as $0.50 per day for their cooking needs. In the past year, PayGo has launched a first version of their smart meter that measures and communicates gas usage and has been supplying an uninterrupted supply of gas to its customers, through a logistics system adapted to informal settlements.
In Tanzania, KopaGas has launched a pay-per-use LPG model with support from the GSMA Mobile for Development Utilities Programme and Oryx Energies. KopaGas’ Smart LPG Meter allows customers to use mobile money make payments at price points competitive to charcoal and pay off gas and cooking appliances over time. KopaGas also leverages a traditional LPG distribution business serving 15K monthly users using digital payments. KopaGas and Envirofit have joined forces to commercialize and scale this technology.
Envirofit recently launched a new SmartGas program and has begun a series of pilots in East and West Africa leveraging its distribution network. Using a Pay-As-You-Cook Model this program allows customers to pay for LPG with mobile money through a GPS-enabled SmartGas Valve. Consumers prepay for gas, activating the valve to supply the purchased amount, and notifying customers before the valve is turned off. The valve also alerts Envirofit’s 360 Customer Care Center to automatically schedule the next delivery before the customer runs out of gas.
These models have the potential to generate meaningful data around customer usage and pricing dynamics; and in turn improve the product/service offering. Making cleaner fuels accessible and affordable for low-income energy consumers has proven a massive challenge on the road to universal energy access, but by building on the innovation already beginning to occur and taking cues from other sectors, these businesses and others may be on the leading edge of a revolution to make clean cooking fuel accessible and affordable for all.
This article is also the kick off to a series Alliance-hosted webinars, articles and discussions that will highlight Tools, Resources, Innovations and Lessons specifically focused on the cooking fuel value chain. Topics will range from fuel resource assessment methodologies to fuel enterprise optimization tools to white papers on specific clean fuels. Please continue to visit the Alliance website for updates on this series.