Podcast’s Essential Bites:
[4:55] KS: "Globally, there's [about] 750 million people [...] who don't have access to electricity. 600 million of those are based in Sub-Saharan Africa. And I think we see increasingly, that's going to be the concentration of where energy access is really an issue. By 2030 90% of people who don't have access to electricity will be living in Africa."
[5:51] KS: "[An] average US person uses [...] 12 megawatt hours per year, roughly. If we're looking at some of the markets in Africa, we focus a lot on Kenya, [which is] about 150 kilowatt hours per year. [...] If you're looking at places like Rwanda, it's more like 60 [kilowatt hours per year]. [...] That means the average person in the US is using 75 times more electricity per year. [...] If you're looking at developing Asia, [like Indonesia], it's kind of somewhere in the middle."
[6:33] KS: "Looking at [...] the total installed [electricity] capacity [per country], is where you get to see a really big difference. [...] China [has around] two terawatts, US [has] one terawatt roughly, [...] Kenya [has] three gigawatts. [...] So you have these two problems that you're trying to solve: How do you get electricity access to way more people and get them consuming at a level that's really going to improve quality of life and improve the household situation? And then how do you get these big megawatts [or] gigawatts online that are really going to drive the economy?"
[14:16] KS: "For off grid, the lower cost [energy] solution actually is solar. And the logistically easier solution is solar in almost all cases. [...] On the grid side, I think that's the more challenging one. [...] You want to have large scale baseload power. A lot of developing Asia or in Africa has large scale hydro, that's a great baseload solution. If you look at what you layer on top of that, there are a lot of gas resources [...] and really the question is: [...] does the world [...] let them grow their economies based on that? [...] That brings up the real ethical question, as far as these are countries that have not been traditionally high emitters. The entire continent of Africa produces two to 3% of global emissions."
[30:09] KS: "When you look at investing in large scale power in emerging markets, you have to look at the off taker and [...] in most cases, it's a government utility. [...] That's where you see a really high concentration of projects in certain countries attracting a lot of international investment, and other countries being really challenging because of that inability to guarantee that you're going to have an off taker."
[33:41] RS: "There's a technology that provides the electricity access level that works for a lot of households, there's a financing model that's really flexible, it's pay as you go where people kind of pay as they're using the system. And then if they can't make a payment, they basically just stop for a period of time, there's no penalty for it, so it creates a lot of flexibility for rural households. [...] Up to half the people in Africa could currently afford that solution, [...] no innovation needed on that. But we saw it wasn't scaling."
[34:16] RS: "We really saw that one of the challenges [...] was this inability to understand household credit risks. So if you're a distributor supplying the solar home systems, you know that you're giving flexibility, but you don't actually know how people are going to pay you back. [...] It's really hard to understand your cash flows, [...] but it's also really hard to turn around to investors and say, [...] trust us, these 10,000 rural households are going to continue to make payments. [...] And the other issue was just that there wasn't this large scale infrastructure for providing scalable financing."
[35:04] RS: "We developed this model for understanding household credit risk, being able to actually identify the characteristics that put you on those different payment paths. And then we [...] offer receivables backed financing, based on what we assess those cash flows we're going to look like. [...] We developed this model for understanding credit risk that we use ourselves, but we also provide it to other investors in the space, hoping that I'll unlock more capital for them too. And then we have a financing vehicle, [...] where we offer financing to companies in the space, and really try to help them scale."
Rating: ⭐⭐⭐⭐
