Energy storage got a lot of attention at InterSolar last month. If developed countries such as the United States and Germany are seriously looking at batteries to integrate more renewable energy to fight climate change, another fight is going on elsewhere: bring light to the 1 billion people who do not have access to electricity. And I am not talking about charity here. A new kind of social enterprises is choosing a for-profit business model to fuel growth and have a bigger social impact.
Meet Michelle Lacourciere of Sirona Cares Foundation (picture left) and meet Peter Glenn of Fenix International (picture right) with two interns from top business schools. Michelle’s path crossed the one of Pastor Honore who runs an orphanage in Haiti. Their relationship changed from charitable dependency to self-reliance thanks to a solar station. Peter decided to join Fenix International, a start-up in San Francisco, after spending 4 years in East Africa, to provide power for all whether one lives in Kansas or in Kenya. These are their stories.
“My heart broke when I first visited Haiti. Like so many people I immediately thought ‘I could do this’ or ‘I could do that’…” Michelle recounts as we meet in a park near San Francisco. After a first bio-fuel project that was transferred to a local community, Michelle learned that it is important to design a solution WITH and not FOR the people that you are trying to help. As a result, her customers in Haiti made the product their own, and named it “Ti Soley”. It means “small sun” in Creole.
The portable kit (picture below on the left) powers two LED lamps and can recharge two phones at the same time. Each family brings the unit at the main charging station in the village typically located at a school or another. IEEE and their Community Solutions Initiative developed the 1.5 kW SunBlazer charging station (picture below on the right – courtesy of IEEE) in partnership with Sirona.
Each station is connected to a deep cycle battery that supports 80 homes and affects the lives of 7,200 people for an average number of 6 persons per household. Sirona deployed 15 stations so far. They are scattered around Haiti. Michelle hopes to reach 1 million people by 2016 by deploying another 800 stations.
Sirona Haiti, S.A. was set up as a for-profit entity because the non-profit status in Haiti does not allow the client to pay the organization for any service, so in that country it was the only structure available. All the profits are rolled back into the program to deploy new stations. Michelle is the CEO of the for-profit entity in Haiti, and she remains as a Director of Sirona Cares Foundation in the US. Sirona Haiti has not broken even and is tuning the number of households per station to achieve financial independence from organizations like the United Nations, which helped sponsored the first six installations in Haiti.
For social enterprises based in the US, the choice of for-profit vs. non-for-profit is a major one. Peter Glenn, Global Business Development Manager at Fenix International, has worked in both worlds. “What I observed is that the traditional non-profit approach to socio-economic development is somewhat unsustainable. In traditional development, the priorities are often set more by the donors than the needs on the ground. Many programs create dependency on donor funds rather than creating self-reliance.”
This does not mean that some non-profits are not making a tremendous impact and delivering sustainable solutions. Peter just “fell in love with enterprise and entrepreneurship as a solution for economic development because it focuses on clients as customers who need to want our product and vote for it with their purchases”. Before joining Fenix, Peter worked in East Africa as a volunteer, making a film about AIDS, and helping run a non-profit.
And he is not the only one seeing a viable business in helping people: students in top-tier MBA programs are making the choice too. One intern from the Stanford Graduate Business School, Mariana Gonzalez, and one intern from the Presidio Graduate School, Thomas Graham, picked Fenix for their summer program. Although we expect to see top-tier MBA students to choose Investment Banking on Wall Street, more and more graduates are choosing to work with social enterprises. Mariana and Thomas are working with Peter to implement a major marketing campaign: “buy one and fund one” (picture below).
Fenix realized that there was also a need in the US when friends and family asked for a kit. They did a kickstarter campaign that raised more than $100,000 in thirty days, which helps fund the development of the company. It is a much clearer commitment to social impact compared to VC backed companies like D-Light that sells 400,000 lamps a month and use only 10% of their US sales to subsidize lights for children to read at night in rural Africa.
A non-profit that we already covered in a previous article, Unite to Light, offers a similar buy-one-give-one deal but for a personal reading light at $20. There are also crowd-funding platforms for non-profits but the numbers are typically smaller. Unite-to-Light raised $12,000 on Indigogo for the next education project: a solar powered light that can also charge a Kindle loaded with a full curriculum. This is equivalent to a portable library.
Make no mistake, Fenix wants to make money so they can have a bigger social impact. The founders of Fenix Internatonal recently secured a strategic investment from Schneider Electric, and were selected to participate to Orange accelerator. Fenix International was started by Mike Lin and Brian Warshawsky to address the need of the 600 million people who have a cell phone but do not have access to the grid. They first worked in Uganda in collaboration with MTN, a major cell phone carrier in Africa.
Because of the fast penetration of mobile phones in Africa, many local entrepreneurs improvised charging kits with solar panels and second-hand lead-acid batteries. The kits did not last long, and many users continued to struggle to recharge their phones. Fenix designed an intelligent kit to address that need. It is called the “ReadySet”. It protects the lifetime of the battery and does not require to change a fuse when someone causes a short circuit. The smart battery kit comes with a solar panel. It can power up to ten phones at the same time with two USB connectors, and provide power to light bulbs at night with 12V car connectors.
It is not easy to engage large corporations on a social problem with business arguments. But Fenix succeeded on getting another deal with Vodafone in Tanzania in April 2013 after launching their commercial partnership with MTN in January 2012. Fenix and Vodafone have a mutually exclusive distribution agreement in Tanzania. Contrary to the US, phones are not locked to one operator with a service contract. Cell phone users buy SIMS cards and recharge minutes in small increments at local markets. Yet, mobile carriers maintain a distribution network with franchized vendors in those markets. They can benefit from solar kits such the ReadySet (picture below - courtesy of Fenix International).
“We first started to talk to the CSR part of Vodafone but quickly engaged the business leadership”. Why would a mobile carrier care about electricity? According to a GSMA report, up to 30% of the monthly budget for phones is used for charging fees. A phone charge typically costs 20 cents equivalent in the local currency. For a typical phone battery of 10 Wh, that is an outstanding $20 per kWh, more than 100 times more expensive than the price of electricity in California.
By distributing solar charging kits, Vodacom has seen an increase of 15% in revenuesin Tanzania according to Peter. More than 3,500 ReadySet kits have been sold through MTN retail channels in Uganda, and Fenix is working with another carrier to launch in Kenya. The mobile carriers take care of the import. It is a lot easier for them because they are established players. It is a win-win partnership.
“What is the benefit for the end-users?” I ask Peter as we are taking at Fenix's office in San Francisco. “They don’t have to take a ride to the city to get a phone charge. A local entrepreneur provides the service down the street and more shops have power at night with the ReadySet kit.” Still, the fee priced by the entrepreneur remains 20 cents per charge, whether the phone is fully discharged or not. “Price will come down as competition increases” notes Peter who does not believe in a non-profit model to scale.
Competition can take other forms in emerging countries. “Just a month ago we lost a unit in a local skirmish. Our village was invaded by a neighboring village, sixty four homes burned, four people killed and our unit was burned and destroyed because of its value to the village.” Michelle tells me in a follow-up email. This a rare event. Most of the time there is no vandalism because Sirona works with the right social partner. Sirona works with a major community hub like a school rather than the "rich guy in the village" who could upfront the investment but exacerbate social tensions.
Yet, this gives a sense of the rough reality that social entrepreneurs have to deal with on the ground. “If someone were to steal solar panels, the community would know who it is and it would be resolved with machetes” adds Michelle without kidding. That is where the passion comes in. Peter is not afraid of working extreme hours in Tanzania with Vodacom to get the solar kit in remote areas because he is passionate about the social mission.
The case of Pastor Honore is Michelle’s favorite story because it shows that Sirona’s program in partnership with IEEE and local social partners can do a lot more than providing basic energy. Michelle first met him when she was purchasing a part of the food for the orphanage of 54 children via the Haitian Health Foundation (HHF). She selected his orphanage as a location for one of the first six SunBlazer stations in Haiti. Kids do not want to go to bed because they have light now.
“This moved him from asking his community for donations to providing a service to homes that they desperately needed” summarizes Michelle Lacourciere. Pastor Honore has made continuous payments since the unit at his school was first deployed in 2011. “At the current level he is able to offset the cost of food for his children, by increasing his income he is hoping to start a school at his site. Now we are in the process of doubling the number of kits at his unit to assist him in generating more revenue.”
With distribution, financing is the biggest challenge to scale for social enterprises according to Peter Glenn. Customers are in line for Fenix International and Sirona Haiti, repayments rate have been close to 100%, but the up-front investment remains a barrier in those parts of the world although the pay-back time would make the deal a no-brainer in western countries. That is where the for-profit model might become the most useful: attract project financing on business merits to install more kits, make sustainable margins, and improve many more lives.