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Developing the market for Solar Home Systems to Bring Affordable Clean Energy to Rural Households in Myanmar Learnings from Greenlight Planet and Brighterlite Challenge Fund Investments

What you will find in this case study:

  • To maintain demand, solar companies must take steps to understand customers’ preferences and adapt their products accordingly.
  • When piloting pay-as-you-go (PAYGO) systems, account for costs of physical payment collections or ensure partnerships with telecom providers to leverage mobile platforms.
  • To promote clean energy access, coordination between public and private sectors is necessary to discuss goals and market impacts of policy decisions.
  • Private firms should consider wider market implications when concluding the operations of their business and exit the market responsibly.

Universal access to clean energy solutions is critical for progress towards a range of development outcomes such as climate change mitigation, poverty alleviation, health, education and gender equality, and contributes towards all the Sustainable Development Goals (SDGs). However, clean energy solutions traditionally have a prohibitive initial investment burden that excludes the poor. Energy inclusion therefore needs to be accompanied by financial inclusion, so that people have access to a range of financial services to finance their basic energy needs. Businesses in clean energy have straddled across two value chains, manufacturing and financing, to present a viable business model for underserved communities. Examples of business models include PAYGO via mobile payments and loan financing through a partnering microfinance institution.

The relationship between energy inclusion and financial inclusion is bidirectional – while financial inclusion contributes towards energy inclusion, energy inclusion can also bring households into the formal financial system. For example, the PAYGO system that provides energy to its customers can also be their gateway to using formal financial services (i.e. regular payments in installments), or even digital financial services if payments are made via digital platforms.

Regional Challenge Fund Window Launched

In September 2015, the United Nations Capital Development Fund (UNCDF) Shaping Inclusive Finance Transformations (SHIFT) in ASEAN and CleanStart programs jointly launched the 'Energy Access' Challenge, with support from the Australian Government (DFAT). The challenge, put forth by SHIFT ASEAN to companies, was to lower the affordability barrier for low-income consumers who want to pay for modern clean energy. A total of 113 Expressions of Interest were submitted by companies globally; 18 companies were shortlisted, out of which five companies were awarded performance-based financing to launch new business lines in Cambodia and Myanmar.

SHIFT ASEAN focused on monitoring the implementation and progress of the five winning projects in Cambodia and Myanmar:

  • Biolite (Myanmar) manufactured and distributed low-cost, electricity-generating and clean biomass stoves. This was implemented with accessible payment and financing solutions to consumers in rural areas.
  • Brighterlite (Myanmar) leased out high-quality solar home systems (SHS) using a fee-for-service business model to off-grid, low-and-middle-income households.
  • Greenlight Planet (Myanmar) designs and manufactures safe, affordable and durable solar-powered lamps to help replace kerosene lanterns with a clean energy source through a rent-to-own financing model.
  • Hydrologic (Cambodia) manufactured and distributed charcoal cookstoves with low carbon dioxide emissions and efficient combustion for the Cambodian market.
  • Kamworks (Cambodia) developed a rent-to-own model, via a financial leasing scheme, of SHS through sales by solar entrepreneurs who were mostly women in rural Cambodia. This approach incorporated mobile PAYGO payment services.

This case study aims to illustrate how two of the winning projects, namely Greenlight Planet and Brighterlite, aimed to bring affordable solar home systems to rural Myanmar through their PAYGO models.

Both case studies illustrate the need for coordination between public and private sectors to discuss goals and market impacts of policy decisions. To directly go to Britherlite’s case study please click here or continue for more information about how Greenlight Planet established itself as a leader in the solar home systems off-grid market in Myanmar.

Overview of Solar Home Systems Market

According to 2018 figures by the World Bank, 66 percent of Myanmar’s population had access to electricity. This marks a progress in Myanmar’s efforts towards universal electrification, where it rose from 52 percent in 2014, the year before the regional challenge fund was launched. An even smaller proportion was connected to the power grid then (i.e. one-third of the population) and only 16 percent of rural households were grid-connected. This meant that more than 45,000 villages and almost 40 million were left without a connection and had to pay high electricity rates to local private operators using unsustainable diesel generators.

Thus, many households did not rely significantly on electricity – a household energy consumption survey in 11 regions across Myanmar showed that firewood was mainly used for cooking (73 percent) and candles and torches for lighting (65 percent), followed by electricity for cooking (13 percent) and battery for lighting (17 percent). For lighting, the majority of households rely on one fuel source while a small proportion of around 15 percent practised fuel stacking, tapping on two or more sources. The MercyCorps Energy Poverty Survey found that rural villagers spent on average 233 hours a year (about 20 hours a month) collecting fuelwood; this lowers household productivity and contributes to deforestation. Furthermore, collecting firewood is associated with additional risks for women as they can be exposing themselves to crime and violence.

A key innovation in off-grid solar for expanding access is PAYGO financing. This financing model allows low-income households to pay for energy in smaller increments, as well as finance the initial investment for the units, through agents or via mobile payments. With an 80 percent smartphone penetration rate in Myanmar, the potential for PAYGO technology and financing is high, although unequal between rural and urban areas. Nevertheless, for rural households, this technology presents an opportunity for significant monthly savings as they spend approximately US$ 15 per month on candles and to recharge batteries for light. Furthermore, this technology can facilitate financial inclusion amongst the unbanked, as only 48 percent of the population in Myanmar are formally served by financial services (i.e. have/use commercial bank products and/or other formal nonbank products) and only 12 percent of adults have a savings account (FinScope dashboard 2018).

Learnings from Greenlight Planet Challenge Fund Investment: Investing in clean energy access in rural Myanmar

Thuzar runs a snack shop selling fritters and fruits in Aye Thar Yar (Shan State).

I first learnt about Sun King through a radio advertisement and decided to buy it through the EasyBuy scheme.

The EasyBuy scheme gives Thuzar the flexibility to pay in installments and she finds it convenient when the Energy Officers drop by to collect payments. She uses her solar home system to power electrical appliances like lamps, a television and fan.

Thanks to Sun King, I can cook and open my shop later into the evening, and I don’t have to run over to my parents’ home to charge my electrical lamp!

For her business, switching to solar products has allowed her to cook into the evening, thus increasing her sales. At home, switching away from candles has saved her energy costs and the inconvenience of charging the electrical lamp.

In rural Myanmar, many households lack connection to the national grid, and rely on candles, chargeable batteries and firewood as sources of energy. However, as experienced by Thuzar, the reliance on such sources brings about several inconveniences and safety considerations, and also hinders the operations of small businesses as soon as night falls. Greenlight Planet therefore provides affordable Sun King SHS and lamps with a flexible payment solution to off-grid households. Their unique EasyBuy technology gives customers the ability to pay for products in small regular instalments over time, allowing low income families to own and use solar products in line with their typical cash flow. Founded in 2009, the Chicago-based company has lighted nearly 13 million homes across 40 countries including India and Kenya, becoming a leader in the entry-level, off-grid solar lighting industry.

Greenlight Planet applied for a matching grant from UNCDF under the ‘Energy Access’ Challenge Fund Window in September 2015. After a competitive selection process, the project was approved by SHIFT ASEAN's Investment Committee and initiated in December 2015 with a committed investment of US$ 564,262 from Greenlight Planet matched with a US$ 150,000 grant from UNCDF.

With SHIFT ASEAN's support, Greenlight Planet was able to launch its PAYGO solar home systems in Myanmar, but has faced challenges in trying to convert clients from cash-based to mobile-based payments.

Overview of Greenlight Planet’s PAYGO Solar Lighting Systems

Greenlight Planet aimed to reach off-grid homes in Myanmar with an innovative financial solution to make good quality solar lighting truly affordable to its most important demographic: families that live in rural Myanmar with little or no electricity access. With the help of SHIFT ASEAN's Challenge Fund, it introduced PAYGO EasyBuy payment plans for solar lamps and home systems in Myanmar, allowing poor households to access quality lighting system with low up-front costs and to save energy costs each month even before the system is fully owned.

The unit gets switched on by the Sun King Energy Officer (i.e. sales agent) as soon as the customer makes the initial down payment of approximately 15-20 percent of the total cost. The PAYGO mechanism is embedded within the SHS, whereby the lamp is switched off and system remotely deactivated if the customer does not pay. After the required number of instalments, the solar products are permanently enabled and owned by the customer. A wide range of products were offered to meet the customers’ needs – from small lamps, mid-level solar home systems with multiple lights and phone charging capabilities, to larger-scale systems capable of powering a small entertainment system for the entire family. More recently, Greenlight Planet introduced bundled products like a television with their solar home systems, which has since become their most popular product. All solar products are accompanied by a two-year warranty.

Greenlight Planet started its operations near Yangon before scaling up to different regions including Bago and Ayeyarwady. The company designs and manufactures the Sun King systems and sells them directly through their Energy Officers or indirectly through partnering distributors. Energy Officers are based at the local level and are remunerated on a commission basis. Besides selling the solar products, Energy Officers are also in-charge of collecting payments from their clients. While the initial project idea was to have clients pay digitally through mobile money, Greenlight Planet eventually engaged its Energy Officers to collect cash payments due to the low uptake of digital financial services. The Energy Officers then use the Wave Money app (i.e. mobile money app) to deposit the cash and transfer it to Greenlight Planet. Alternatively, customers with a Wave Money account can make payments through Wave Money agents in the vicinity.

Stories from the Field

Shwe Yee has been using Sun King products to power her home and business for the past four months. She sells produce such as pork, chicken meat and potatoes at her shop, and lives in that same compound with her husband.

With the Sun King products, I can now open my shop safely until nine pm, and watch the news on my television!

She was previously relying on candles for lighting, but has since switched to clean energy upon purchasing the solar home system through Greenlight Planet’s EasyBuy scheme. She pays a monthly installment of MMK 22,500 (US$ 16) to the Energy Officer who visits her, or to a Wave Money agent in the vicinity. Operating her business for three additional hours has boosted her sales and income, and she enjoys staying up to date with the latest news and weather reports through her television.

Stories from the Field

Thae Su has been living in Mon Zu with her daughter, sister and mother since her husband passed away. Her shop selling clothes and beauty products has been powered by Sun King for the past three months.

I find it easy to pay the Wave Money agent each time.

Previously, she relied on a gasoline generator to light up her home. She has now converted to a cleaner and more affordable source of energy, which she also uses to charge her mobile phone and light up the road outside her home, thus sharing the benefits with her neighborhood.

Stories from the Field

Unlike the other interviewed customers, Naung Ye paid upfront in full for the Sun King products. He resells metal scraps for a living, and lives with his wife in the Bago region. In the past, he used batteries to power his home. Ever since his purchase in August 2019, he and his wife have enjoyed the convenience of having their own renewable energy source.

I love how we can charge our phones or switch on our lights whenever we want to.

By 2019, Greenlight Planet’s solar home units had reached over 9,000 households in Myanmar. Large growth in sales were particularly recorded in August 2018, which Greenlight Planet attributed to the change in PAYGO loan terms. Extending the repayment period helped to make the Sun King products more affordable and accessible for low-income households. This also helped to stabilize the credit risk of the company and sustain the viability of the business.

Greenlight Planet Implementation Learnings

Through their EasyBuy solar home systems, Greenlight Planet was able to lower the barrier to energy access for rural, off-grid communities. They have become a market leader for PAYGO off-grid solar products in Myanmar, offering a wide range of high-quality products to meet the needs of different customers. Greenlight Planet was also cognizant of customers’ preferences and adapted accordingly. For example, in response to increased demand for mobile charging facilities and higher-value solar systems for homes and small businesses, they introduced the higher-value “Solar Home System 400” product bundled with a television, and extended the payment plans to repayment periods of up to 540 days. Customers also had the flexibility to choose between a daily, weekly or biweekly payment schedule. These helped to ensure that the Sun King products remained affordable to the customers and competitive in the market.

A key challenge faced by Greenlight Planet was in getting customers to use digital payment channels. They initially incorporated mobile payments into their EasyBuy model. However, scheduled expansions in mobile coverage to their target communities did not occur as planned. While customers with mobile money accounts (i.e. Wave Money) could tap on Wave Money’s agent network to make their payments, customers without an account did not regard paying for their SHS a strong enough reason to start using digital financial services. Greenlight Planet therefore relied predominantly on physical cash payment collections which increased costs of operation and reduced the productivity of Energy Officers.

As a private company, Greenlight Planet was encouraged to see that public actors had the same goal of electrifying off-grid regions through subsidy programs. The company had the opportunity to work with the Myanmar Government’s Department of Rural Development to promote electrification, and collaborated with International Finance Corporation (IFC) under its “Lighting Myanmar” program. By working alongside public sector partners, Greenlight Planet was able to fill the gaps in the existing SHS market and sustain the business. Unlike Brighterlite (more below), Greenlight Planet was able to position itself as a complementary private sector partner within the larger ecosystem.

Key learnings from this case study:

  • To maintain demand, solar companies must take steps to understand customers’ preferences and adapt their products accordingly.
  • When piloting PAYGO systems, account for costs of physical payment collections or ensure partnerships with telecom providers to leverage mobile platforms.

Learnings from Brighterlite Challenge Fund Investment: Impacts of Public Sector Initiative on the Private Sector

Founded in 2011, Brighterlite leased out high-quality solar home systems using a fee-for-service business model to off-grid, low-and-middle-income households, and had operations across Myanmar, Pakistan and Kenya. Brighterlite applied for a matching grant from UNCDF under the ‘Energy Access’ Challenge Fund Window in September 2015 to launch its Myanmar operations. After a competitive selection process, the project was approved by SHIFT ASEAN's Investment Committee and initiated in December 2015 with an investment of US$ 1.3 million from Brighterlite matched with a US$ 233,708 grant from UNCDF.

This case study provides several learnings on the impact that subsidy schemes have on the market. In the case of Brighterlite’s operations in Myanmar, the introduction of a public sector initiative to increase electricity access, including through off-grid solar home systems, had an adverse effect on the private sector ecosystem.

Overview of Brighterlite’s PAYGO Solar Home Systems

Brighterlite operated as a remote utility, using a lease-for-life model for its solar home systems in Myanmar. Customers paid a small upfront cost and then an amount for their energy service each month through a PAYGO financing model. Customers did not own the solar home system, thus placing the liability on the company rather than the client. In return, Brighterlite benefited from greater access to a market of several million households, ensuring a long-term regular income stream. Data collected from customers then provided the company with information on energy use, while future customer upgrades of products generated additional revenue.

Three packaged products were offered:

  1. the L4 package that roughly powered two led lamps and a mobile phone;
  2. the L9 package that included three lamps (all approximately 200 lumens), a radio with a USB port and two mobile chargers; and
  3. the L16 package that contained the same appliances but with larger solar panels that could power televisions.

Brighterlite partnered with Telenor Myanmar to incorporate mobile phone-based payments into their business model. This partnership gave them access to Telenor’s vast network of over 12 million subscribers, distributors and retailers. To expand its sales network, Brighterlite explored opportunities to conduct sales with other organizations such as non-governmental organizations (NGOs) and microfinance institutions (MFIs). A pilot with a women’s group NGO was launched at the end of 2016. Brighterlite also negotiated distribution partnerships with microfinance providers, satellite TV providers, and other providers of goods targeting rural areas to provide microfinance to customers to help them overcome the upfront cash barrier and avoid attracting customers that may default later.

By the end of project implementation, Brighterlite had reached 685 households with their products. While sales were increasing gradually, Brighterlite anticipated that growth could not be sustained in view of the new government subsidy launched. Thus, they made the strategic decision to shut down their operations in Myanmar.

Brighterlite Implementation Learnings

While Brighterlite achieved good progress in the beginning, and had secured two additional grants from the Norwegian Government to expand its business in Myanmar, it eventually decided to cease its Myanmar operations in April 2017. This decision was made largely due the effects of a government scheme subsiding solar products in several of Brighterlite’s key sales regions resulting in a sharp decline in demand for their products. The subsidy was intended to make solar use more affordable and accessible, but also had the unintended consequence of lowering customer expectations of the price of solar products and thereby affecting the sustainability of the private sector market in the longer term.

Furthermore, the scheme had removed 30 percent of the off-grid market by electrifying villages and provided solar systems for free or greatly reduced rates, which is in itself a step towards achieving the SDGs. The first phases of this program had particularly targeted the most rural states, which were the market regions most likely to purchase the standalone solar systems sold by Brighterlite.

The news of the subsidy schemes affected consumers’ price perceptions of and their willingness to purchase solar home systems. As Myanmar’s government conducted information-gathering missions to these off-grid areas, villagers were under the impression that electrification in their villages would commence shortly, even though the government had not made any promises about future grid electrification or handouts of subsidized solar home systems. This challenge was compounded by the slow expansion of Telenor’s mobile services into Brighterlite’s target regions. This reduced the number of people who could access Brighterlite’s mobile payment system, thus making their products less attractive to the consumer. Finally, after carefully assessing different options, the company decided its Myanmar operations were not commercially viable.

During Brighterlite’s exit from Myanmar the company assessed carefully different effects this could have on the overall SHS market. In order to prevent negative perceptions of companies offering lease to own solar products, Brighterlite decided to offer their customers to pay 5 months lease upfront to take over ownership of their product as the company exited. The remaining solar home system units were auctioned off in a transparent manner. This ensured that customers could continue to use and benefit from the products and that all units ended up in households needing them. SHIFT learnt further from its monitoring studies that the project was able to achieve a positive impact on the solar market in Myanmar, as Brighterlite’s products were of such high quality that they increased overall demand for solar products in the target communities and helped to create a positive image of solar products in Myanmar.

After Brighterlite’s exit the company has continued to offer advise in developing the solar home systems market in Myanmar including commenting multiple rounds on the development of the current results-based financing for solar home systems program offered by the Myanmar Government’s Department of Rural Development.

The case studies on Brighterlite and Greenlight Planet show the different impact that government policies can have on different private sector actors, thus providing important learnings for other solar companies to consider.

Key learnings from this case study:

  • To promote clean energy access, coordination between public and private sectors is necessary to discuss goals and market impacts of policy decisions.
  • Private firms should consider wider market implications when concluding the operations of their business and exit the market responsibly.

About the United Nations Capital Development Fund

The UN Capital Development Fund makes public and private finance work for the poor in the world’s 47 least developed countries (LDCs).

UNCDF offers “last mile” finance models that unlock public and private resources, especially at the domestic level, to reduce poverty and support local economic development.

UNCDF’s financing models work through three channels: (1) inclusive digital economies, which connects individuals, households, and small businesses with financial eco-systems that catalyze participation in the local economy, and provide tools to climb out of poverty and manage financial lives; (2) local development finance, which capacitates localities through fiscal decentralization, innovative municipal finance, and structured project finance to drive local economic expansion and sustainable development; and (3) investment finance, which provides catalytic financial structuring, de-risking, and capital deployment to drive SDG impact and domestic resource mobilization.

UNCDF’s Shaping Inclusive Finance Transformations (SHIFT) in ASEAN programme is supported by the Australian Government.

Disclaimer

The views expressed in this publication are those of the author(s) and do not necessarily represent the views of UNCDF, the United Nations or any of its affiliated organizations or its Member States.