EWB E-conference 2011

Energy: Marketing and Enterprise

Welcome to the energy platform.

Here we are hosting the energy papers. These raise some very interesting and key issues faced by the energy sector and follows on from points raised yesterday about the need for a holistic approach to technology integration.

Chris White highlights some of the key challenges faced by the energy sector currently with the need to not only consider technical limitations but to look at effective marketing strategies, distribution networks and the need for low production costs.

For those interested this Boiling Point article may also be of interest: http://www.hedon.info/MarketingAndBusinessModelsForRapidDevelopmentOff-gridLightingMarketsAfrica

One point I would ask would be related to the enterprise establishment, how do you foresee manufacture of the improved solar lantern? I am aware that solar lanterns which are currently manufactured are put together in country, though they tend to import the actual PV parts. Do you plan to have local manufactures of the lamp or do you think low cost production in for example China would be more effective at keeping costs low and importing the entire product? How do you see this affecting local economies?
Marketing of new products need to appeal to peoples interest and comfort improvement so they are prepared to pay for it. While in some villages we find people with each several mobile telephones costing several Euro's per month, they may not be interested to purchase improved cookers or biogas installations saving large amounts of firewood, time, reduce health hazards and hospital bills; even not if these equipments are financing themselves over some time.

Villagers are hardly interested in CO2 reductions, global warming or improving the environment, but will go for improved comfort or status. This element of human behaviour is largely under-estimated at marketing of energy efficient products.
The promotors looking for CO2 reduction or health improvement need to follow the double track system (include also comfort in order to sell) to achieve their objectives. Only then the intermediary sales persons can make a living and the marketing of the iimproved products may become sustainable.
Your question about the manufacture of a new Solar Lantern design is a good one, and not an easy one to answer. It is interesting to look at the current and past approach to manufacture for this market which sees both local and foreign manufacture used. The Glowstar lantern that was a key pioneer of this market was initially designed with the intention of manufacturing in countries close to the main target market (e.g. Kenya, Ghana) and design effort was put in to make this possible. However when it entered production this was off-shore (presumably in the far east). The current generation of lanterns also seem to be primarily produced in the far east (often China), this helps to produce a high quality product while keeping the price low which helps achieve their aims of spreading improved lighting as wide as possible

A significant part of the reason for not manufacturing in country is due to the availability of parts, manufacturing capability and appropriate skills. These can be overcome but not without significant investment in time and money to establish a production base as there is little in the way of a hi-tech manufacturing eco-system in countries such as Kenya. There are undoubtedly benefits to local manufacture, not least the stimulus to the local economy and workforce as well as sound business benefits stemming from a local knowledge base for servicing, repair and sales however the costs are almost certainly going to be higher both in the short and medium term.

For an organisation with strong social and developmental motivation the choice of in country versus off-shore manufacture comes down partly to a trade-off of priorities, is it to service the greatest number of people with improved lighting at the lowest possible cost or is it to stimulate local manufacturing at the expense of higher unit costs. In a market that is very price sensitive and not without significant other challenges to access and persuade of the benefits the unit price is inevitably important.

There is perhaps a balance that can be struck with manufacture of components undertaken, at least initially, in countries where the infrastructure exists to produce good quality, high tech products, with assembly and the addition of commodity and locally available parts taking place in country. Although of course this runs the risk of offering the worst of both worlds, or perhaps benefits across multiple social objectives.

To conclude, manufacture is an important and difficult issue, balancing conflicting social aims and hampered by manufacturing capability in many countries throughout Africa. Initially, the development of a design that is suitable for manufacture in country is a good starting point and allows for a longer term aim of migrating increasing proportions of manufacture locally, while initially keeping the costs down through off-shore mass production.
A post from Edward Matos:

I'm no expert in policy-making for industry growth, but here are a few relevant observations on the Tanzanian industrial sector and government policy, that might be of interest to the discussion:

I know of more than one entrepreneur in Tanzania that truly seem to believe the Tanzanian manufacturing industry is no more than 3-5 years away from being able to compete price-wise with China. Looking at recent movements in the manufacturing sector certainly suggests this is fairly plausible. The Tanzanian government provide incentives for companies that export their product in the form of tax exemptions - indeed if you export more than 50% of your product then you get 0% corporate tax for your entire company. These incentives have kicked off a few motorcycle assembly plants, where parts are shipped in from China, assembled in Tanzania, and the assembled product is then exported all over the world. A sign of future promise for the Tanzanian economy? Or an unsustainable bubble based only on potentially short-lived tax breaks?

As for the Tanzanian local market, when you import anything here you have to pay about 50% of its value to the government (30% import duty + 20% VAT). Locally produced items naturally don't pay import duty, and any product that is sold to the end-user through a small business or street vendor doesn't pay VAT either - people aren't very good at demanding receipts! Add to this the rising cost of shipping fuel (I'm assuming shipping fuel follows the same trends as oil) and it seems like investment in local manufacturing firms will start to look attractive again.

Unfortunately (for the economy) the exception to this are items such as solar lamps and LPG stoves. This is an interesting example where the government has clearly weighed up the pros and cons, and decided that these items are needed urgently enough to forfeit any long-term benefit that a local manufacturer could bring to the economy. In my opinion I reckon they've got these two particular examples right, but that's just my 2p!

Edward Matos
edward.matos at shambatechnologies.com
A post from Daniel Roggema:

I very much agree with Mr. Nienhuys' statements. What has been almost continually disappointing with improved stove projects, is that there has been the assumption that a stove with increased efficiency/reduced emissions would in itself present enough incentive for people to adopt the technology. -There needs to be real, additional and tangible benefits for the end user.
I recently sent an email to a number of people/organizations who in different ways have a vested interest/involvement in the issue of household energy in high altitude/ cold regions. The email includes a presentation of a prototype stove design with some rather unique end-user benefit potentials. The email is also a call for collaboration to get the system properly tested with instrumentation. I am not an engineer, and as such, I lack certain skills/knowledge to get it done. I apologize if I am being opportunistic of the forum, but I would gladly send a copy to anyone interested in the issue. Any guidance from EWB community would be highly appreciated.
Daniel Roggema
With regards to CO2 emissions, I agree with both Mr Nienhuys and Mr Roggema, a rural villager probably does not have this high on their interest list. Indoor air pollution however also has detrimental health effects to the user. These do need to be addressed - the shell foundations marketing strategy in India is an interesting example here where the old and young Ama and the house with the improved cookstove are healthy, the older Ama has an old stove and odes not look healthy. They found just like the West everyone wants to look young and healthy and will buy into it even if that is not the underlying reason for marketing these devices. but the question still needs addressing and there is still huge scope for discussion, ideas and improvement in design and marketability of devices.
  • A practitioner's journal on household energy, stoves and poverty reduction.

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