Entrepreneurs soak up the sun in Pakistan


Entrepreneurs soak up the sun in Pakistan

Pakistan is a lucky country.

It’s a contrarian view but in the right light it is indeed lucky: rich in technophiles, a 190 million-strong population that dwarfs anything in the Middle East or Africa (excepting Nigeria), and a clutch of entrepreneurs on the cusp of realizing the potential of solar energy.

Seven companies have the residential market to themselves.

They service middle class urbanites who can afford a complete home solar system, the very poor who need basics such as lighting, and the teachers, taxi drivers and low-level government workers who can’t afford big city rents and settle in shanty towns unconnected to the national electricity grid.

The residents of the 'Paris' shanty town in Islamabad, have a fantastic view of the mountains on a clear day, but despite years of agitating they are still not connected to the state grid.  (Image via Rachel Williamson)

What Pakistanis want

Sarmad Faraz, founder of energy information website Loadshedding.pk, told Wamda their Complete Guide to Solar consistently had the highest reader engagement among articles on the site.

“I think that now solar technologies are becoming much cheaper compared to five to 10 years ago,” he said. “You now see much more operators in the market.”

Brighterlite, Eco Energy, SRE Solutions and Harness Energy all cater to the people who don’t have access to electricity. Nizam Solar, Pantera Energy and Pak Shine tend to direct their energies at the middle classes, the kind of people who can afford a $200 solar home system and might be interested in selling back to the grid.

Mohammad Omer points to the product that really sells solar
to Pakistanis. (Image via Rachel Williamson)

But they’re all still working out precisely what it is their customers want.

Brighterlite managing director Mohammad Omer told Wamda while lights were good, especially for the very poor, people wanted
something cool.

Lubna, who lives in the ‘Paris’ shanty town in Islamabad, said during the summer her three daughters and one son hadn't been able to focus at school, as it was impossible to sleep before temperatures cooled around 5am. 

Renting a solar panel-powered fan from Brighterlite changed that.

Omer said they also offered a radio or a television in some of their rental packages (which at their most basic consist of a solar panel and a light or fan) as an incentive for cricket-mad Pakistanis to keep paying over winter, rather than cancelling.

Eco Energy cofounder Jeremy Higgs said they’d discovered their products were underpowered for what customers actually wanted them for: a battery that could keep a fan going for eight hours was actually being used to run it for 12, causing faster product decay.

As a result, Eco Energy was pivoting into becoming an energy-as-a-service company, rather than just selling or renting one-off products.

Pakistan is made for solar startups

Between 50 million and 70 million Pakistanis don’t have access to electricity grid. Harness Energy founder Muhammad Shehryar says those with patchy access number around 70 million.

In this section of sourthern Pakistan, load shedding - when electricity is cut off because of supply shortages - is heavy. (Image via Jeremy Higgs)

Other obvious advantages include international organisations very keen to pitch in, zero import duties and sales taxes on solar-related equipment, and high rates of solar intensity.

The International Financial Corporation (IFC) has directly and indirectly supported many of the solar companies in the country, while organisation such as the GSM Association, National Geographic, and Clif Bar Family Foundation led a series of grants totaling $200,000 to Eco Energy last year.

Like Egypt, Pakistan receives a heavy load of regional solar radiation. (Image via Al Hasan)

It’s not all straightforward for Pakistani startups, of course.

Obstacles include a terrible reputation for insecurity and big problems sourcing investment from the young ecosystem. One particular issue, says Kalsoom Lakhani of Islamabad accelerator Invest 2 Innovate, is the need to keep two sets of books - one for the tax office’s endlessly complicated rules, and one for the business - which raises the cost of due diligence for investors (a turn off) and reduces transparency.

Rotten roots, new growth

Pakistan’s energy crisis has been years in the making, with shortages hitting 5,000 megawatts (MW) a day, or just under a third of the national generation capacity. While the government vaunts big plans, many are turning to private solutions for a fix. 

Solar energy alternatives at a residential level have been available for years, but weren’t enticing.

Eco Energy cofounder Jeremy Higgs said there were instances where systems had been installed but when they stopped working, people were left “high and dry” without any follow-up support, and products were often given away for free by NGOs.

Pantera Energy cofounder Farooq Saeed called Pakistan a “solar junkyard” for cheap parts from China. He said of 350 MW of products imported only 12 percent were from Tier 1 producers.

Lubna lives in Islamabad's 'Paris' shanty town and says
lights and a fan have helped her children study and sleep at
night. (Image via Rachel Williamson) 

And finally, Pakistani customers at the lower end of the income scale were price sensitive, putting the high quality, higher priced products of these startups in direct competition with an influx this year of very cheap Chinese products.

IFC energy access consultant Liam Grealish, who has worked closely with solar startups in Pakistan, said on average, off-grid households spent 14 percent of their monthly disposable income on lighting products.

“Currently energy poor households get their lighting from either kerosene, candles or battery powered torches which they purchase in small increments of $2-3 at a time. In comparison, solar products require you to make a larger upfront purchase,” he told Wamda.

Shehryar said convincing people of the long-term benefits of buying a $9 solar lantern rather than a $3-4 version had been a real challenge.

Solar works differently in Pakistan

East Africa is the model for solar in Pakistan. Pay-as-you-go (PAYG), a system that requires telco partnerships, and GSM technology to track both rental payments and loan payments were pioneered and proven in East African markets.

Grealish said distributors such as Brighterlite and Eco Energy, which rent solar panels that power different ranges of products, were lending off their own books to customers using PAYG and microfinance institutions were running pilots on financing for people who want to buy systems outright.

“PAYG is going to be important to the Pakistan market as it enables consumers to make a much smaller down payment on a product and pay it off in much small incremental payments like consumers do now via mobile money over a period of time” he said. “The microfinance sector in Pakistan is now serious about this asset class given the size of the opportunity,” he said.

GSM chips in products, be they Brighterlite’s prepayment meters in homes or Pak Shine’s buy-to-own models, mean the system can be remotely switched on or off depending on whether a customer is current with their rental or loan payments.

Partnerships with phone companies mean customers can pay through their mobile operator rather than the company having to set up an outlet or website payment gateway. Higgs said mobile data also allowed them to determine whether a potential customer was “bankable” or not.

Brighterlite call centre and sales manager Malik Ayaz with the GSM-operated box. Users enter prepaid codes into the box, bought with mobile credit, and this activates the system for a certain period of time. User who don't pay find their systems cut off and, after a period of time, taken away by the company to be redeployed elsewhere. (Image via Rachel Williamson)

Egypt’s Cleantech Arabia founder Ahmed Huzayyin told Wamda the cooperative model already existed there so the PAYG method could work.

"I think in Egypt it would work… but I think it has to be a little bit more clustered. I don't think it would work with very tiny systems that are distributed," he said.

Egypt’s high density living and low absolute poverty rates (under $1 a day) mean people would expect more from a solar system than just a fan and lights, but it could work via a mini-grid connecting 20 or more apartments or homes, so if one client didn’t pay as much others could compensate.

Eastern raiders

If the Pakistan experience can be made to work in MENA countries, local startups may be in for some trouble, especially given that expansion into India is politically impossible.

“The Middle East is the place to expand for Pakistan solar companies,” said Pantera Energy’s Saeed.

They have ambitions to launch a flanking manoeuvre, via a base in Dubai, into countries such as Jordan.

Grealish said the IFC had strong interest from its clients to work in Middle Eastern markets, particularly in places with significant levels of load shedding. Pak Shine CEO Jasim Sheikh told Wamda this is exactly what their expansion focus would be, as well as including African and Asian markets.

The business models Pakistani solar startups are adapting are well worth watching as are the insights they’re gleaning from the different market segments. Both could be applicable to similar markets around the developing world.

The sun, these entrepreneurs are eager to stress, has finally come out in Pakistan.

[Feature image via Global Giving]

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