Digital payments are helping make off-grid power sources like solar and wind more economically viable
DAR ES SALAAM, Sept 7 (Thomson Reuters Foundation) – When Asteria Lymo saw her prepaid electricity meter was short of units, she grabbed her smartphone and bought some using Tigo Pesa, a local application that allows customers to pay their utility bills on their mobile phones.
“I simply transferred the money from my bank account into my phone to buy electricity,” said the 35-year-old mother of three. “It’s fast, easy to use, efficient and saves a lot of time and money.”
With 10,000 Tanzanian shillings (about $4.50), Lymo bought 28 kilowatt-hours (kWh) of energy – enough to power her home for one week. Previously, that would have meant standing in a queue for an hour to buy electricity coupons at a vending kiosk.
Lymo, who lives in the Kimara neighbourhood of Dar es Salaam, Tanzania’s largest city, is among the many customers of state power supplier TANESCO who now use digital platforms to pay their bills.
A new study suggests that digital payment – whereby users shift to smart, prepaid metering systems and purchase a set amount of power electronically – not only helps customers but benefits utility companies and mini-grid providers too by reducing the costs of metering and credit operations.
As a result, digital payments are helping make off-grid power sources like solar and wind more economically viable.
The study, published in July by the Better Than Cash Alliance, a partnership of governments and international organisations, also suggests that digital payments can create new business opportunities, increase transparency, and improve cash flow for utilities and off-grid operators.
While most African countries are embracing modern technologies like mobile money transfers, utility bill payments across the continent are still overwhelmingly made in cash, according to the report.
And it points out that traditional electricity meters, which have to be read manually, can easily be tampered with. Of 76,000 households audited by TANESCO in 2012, 5 percent were found to be stealing energy.
TANESCO spokesperson Leila Muhaji said most of its domestic customers now use prepaid plans.
Honest Prosper Ngowi, an economics professor at Mzumbe University in Dar es Salaam, said the shift from cash to digital payments has helped utility firms boost revenues significantly and cut transaction costs, while delivering “social benefits” to their customers, such as eliminating time spent in queues.
Globally, 1.1 billion people lack access to electricity, most of them in sub-Saharan Africa. Digital payments can help by enabling mini-grid operators to expand their customer base in areas that are not connected to the national grid, experts say.
In East Africa alone, pay-as-you-go solar operators have financed the sale of over 800,000 units of solar home systems, according to a 2016 report from Bloomberg New Energy Finance.
Electricity cables in Dar es Salaam, Tanzania, July 25, 2017. Thomson Reuters Foundation/Kizito Makoye
The research organisation estimated that digital payment-enabled solar units will bring renewable electricity to 15 million households and 75 million people by 2020.
In rural Uganda, customers of Fenix International can access lighting and phone-charging through a solar system that costs just 380 shillings ($0.11) a day, but only if they can pay digitally, the report says.
In Kenya’s western Kakamega region, Edna Joroge has recently installed an M-Kopa solar system in her new three-bedroom home.
The farmer had been waiting for a connection to the grid, but because her house is far from the nearest transformer, she decided to go solar.
“I paid $217 in one year and got a solar panel, lithium battery, three lightbulbs, a mobile phone charger, a torch and a radio,” she told the Thomson Reuters Foundation. “This cost is much less than what I had been incurring buying kerosene.”
With an ambitious target of achieving universal access to electricity by 2030, Kenya, Rwanda, Tanzania and Uganda are now exploring mini-grids to power rural communities away from the main grid.
In Kenya, U.S.-based technology venture Powerhive operates a micro-grid network for rural homes and businesses, using smart meters linked to a cloud-based server.
This integrated system enables customers to pre-pay for electricity using M-Pesa, a widely used mobile phone-based money transfer service, while allowing Powerhive to remotely monitor performance, consumption and cash flows.
CHEAPER, FASTER, HEALTHIER?
Shashank Verma of Energy 4 Impact, a non-profit group working with local businesses to broaden energy access across Africa, said digital payments give customers the flexibility to pay in small instalments from as little as 50 Kenyan shillings (about $0.50) per day.
As most customers for pay-as-you-go solar live in off-grid rural places, they also save time and money, Verma said.
“Digital payments avoid all the transactions costs of cash collection and customers can easily be reached and served,” he added.
Ray Naluyaga, managing director of the Eleanor Foundation, a Tanzanian charity promoting clean energy technologies, said digital payments help prevent deaths from respiratory diseases by allowing rural people to access the financing they need for alternatives to smoky fuels like kerosene and wood.
The foundation provides solar home systems on loan and accepts mobile payments in weekly instalments over a minimum 20-week period. This eliminates the need for a downpayment of around $100, which most villagers cannot afford, said Naluyaga.