April 23, 2010

Quality Energy at a Lower Cost for the Bottom of the Pyramid

If I were asked to name the one thing that affects poverty most, I would say that it would easily be access to energy. The provision of energy can play a crucial role in the effort to reduce poverty.

Historically, the price of energy was decreasing. Modern economies, based on industry and ingenuity, have been catalysts for reducing energy prices. Not everybody is benefiting from that, however. The rapid price decline led to products that consume higher amounts of energy, such as air conditioners, heaters, refrigerators and manufacturing machinery. Now that energy demands are greater, energy is unaffordable to people at the bottom of the economic pyramid. And it’s not just about affordability –  developing communities are often off the grid or inadequately connected, so even delivering energy is a major challenge.

Energy = Wealth Creation

If we meet the energy demands of low-income communities, then we stand a greater chance to significantly reduce poverty. As an engineer, I used to think that the solution to energy poverty could be found in technology and design. Now, I believe that although technology has an important role to play, it takes much more to address this lack of energy access. There are constraints in the marketplace and throughout the whole supply chain that need to be tackled so that the poor are not trapped in a vicious circle of poverty, social instability and underdevelopment. These constraints range from affordability and marketing to distribution and maintenance.

Though there are different routes to meeting the energy demands of low-income households, I believe that market-based approaches, rather than dependence on charity and foreign aid, are the most promising possibilities.  Acumen Fund, a non-profit global venture capital fund, and D. Light Design, a for-profit LED solar lighting manufacturer and distributor, are experimenting with an entrepreneurial approach to solving energy problems. They have developed a results-oriented model that is changing the ways in which philanthropists, the private sector, and even policymakers are addressing some of society’s most intractable problems.

Solar LED: A market-based energy solution

Through the Acumen Fund Fellows Program, I have been able to work with D. Light Design for nine months this year, helping the company replace kerosene lanterns with clean, safe and bright solar LED lanterns throughout the Indian states of Uttar Pradesh, Bihar and Maharashtra. The work we do brings affordable clean energy into people’s homes, and eliminates the health problems caused by the long-term use of kerosene.  D. Light aims to improve the lives of approximately 1.6 billion people worldwide by providing them with an affordable source of light.

Quality without cost

My role at D. Light is to ensure that our products are guaranteed high quality throughout their life-cycle, both before and after they reach the customer. In order to achieve those quality standards, we’ve needed to improve our performance and to decrease our costs.  A quality control team has been established to identify products or services that do not meet our quality standards, and with our new procedures in place, one month’s work can be done in one or two weeks.

One might assume that because we’ve increased the quality of our product, which we’ve also seen an increase in our costs, but this is not the case. We’ve simplified D.Light’s systems.  We’ve been able to cut out waste and improve our performance, both of which have reduced costs. In that way, we’ve been able to achieve both higher standards and lower costs.

Our work has increased D.Light’s bottom line and improved the company’s chances of surviving on its own to carry out its work in underserved communities. Since the launch of operations in 2007, D.Light’s LED lights have reached over a million base-of-the-pyramid consumers, increasing household productivity and improving safety, sustainability, and income generation for families. Now the challenge is scaling up to meet the demand of the 1.6 billion people who remain without electricity as fast as we can.


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