One of the greatest rewards of impact investing is watching the effects of a single strategic investment ripple out through many communities.
In Entesopia, a small town southwest of Nairobi, entrepreneur Lazaro Kaisa sells fuel. When he has electricity to power his pump, Lazaro can decant the fuel into specially calibrated containers that limit evaporation. Without reliable electricity, he has to sell the fuel in simple jerrycans, and the fuel lost to evaporation makes it almost impossible for him to earn a profit.
When Paul G. Allen challenged his team at Vulcan, Inc. to create solutions to some of most intractable problems in Africa, we focused on the absence of and need for basic infrastructure. Our interest in rural electrification led to an investment with SteamaCo, a Kenyan off-grid energy monitoring solutions company. Together with SteamaCo, Vulcan built solar microgrids that provide rural communities with access to reliable, clean power. Payment from consumers occurs via a pay-as-you-go model, which allows for a payment schedule that matches the consumers’ needs and abilities.
With access to a solar microgrid, Lazaro now has power for his pump which allows him to make a profit and his customers can depend on him as a consistent, reliable fuel source. Lazaro’s story is one of many, making the benefits of impact investing visible and tangible to entire communities.
These microgrids are generating an unprecedented level of commercial and impact data. It is our hope that this data will help overcome one of the greatest hurdles to investment in rural African microgrid projects: project finance risk.
Real-time data, captured through SteamaCo’s remote monitoring platform, on-the-ground interviews and our resulting analysis will be openly shared with other potential funders. This information can be used to inform site selection, as well as design and operating models for future microgrid projects in Africa, increasing the productive benefit of the invested capital.
What we’ve learned so far has been eye-opening and humbling. For example, we’ve found that microgrid consumers are consuming energy in multiple forms, demonstrating that the market for microgrids is complementary to the solar lantern and solar home systems markets and may be greater than we had thought. We’ve also seen how critical a role the community plays in adopting the microgrid service model – and we have begun to tangibly define the key criteria of a thriving microgrid site. Sizing the microgrid appropriately to best meet the needs of the community has been a challenge, but doing so is essential in achieving positive returns.
In an information economy, it’s increasingly true that knowledge equals power, and we’re heartened to find that our initial impact investing strategies are generating both. SteamaCo is supplying entrepreneurs like Lazaro Kaisa with the power they need to build their businesses into profitable, sustainable enterprises that are culturally and economically transformative. And by gathering data on how, where and at what scale such investments work, Vulcan is learning how to build replicable business models that can increase community resiliency and improve economic livelihoods, and allow others to enter the market with less risk.
We’ve only just begun information gathering and data analysis, but we are building on these initial insights and are committed to sharing what we’ve learned with others. We hope to encourage more investors to join the space and to magnify the impact of investment in Africa’s future.