Access to energy: When business issues meet social impacts

Presented by: Total

Total's access to energy goals spur it to partner with others and offer technological solutions that meet local demand and specific requirements, especially in Africa. Although this is a permanent, replicable, profitable activity, the ripple effects go beyond those of conventional businesses.

Providing access to reliable, affordable energy to the nearly 1.5 billion people currently without it is critical to human development in fast-growing economies. It also happens to be the United Nations' Sustainable Development Goal 7. The solutions for doing this are as myriad as the stakeholders who champion them, from governments and local institutions, NGOs and foundations to microfinance institutions, international corporations and start-ups. Each is in search for a solution or solutions that will be lasting and provide a viable business model for all concerned. The key success factors will be integrating these diverse stakeholders, establishing and maintaining dialogue, pursuing innovation and always taking into account the specific cultural, geographic and economic environment.

Meeting local communities' power needs by offering appropriate, profitable financial and technical solutions is the whole reason for the partnership initiated in 2010 between Total and d.light in Kenya.

Total's "access to energy" activities have recently become even more of a core business. Since September 2016, the organization chart for Gas, Renewables & Power has given equal priority to all GRP energies. Philippe Cabus, Managing Director Total Access to Energy within the Innovation & Energy Efficiency Division, points out that: "It's a core business like any other, with clear development, profitability and impact goals."

Energy needs are growing for hundreds of millions of the world's people1, mainly in Africa. No energy operator can reasonably continue to ignore this demand from what is often described — perhaps wrongly — as the bottom of the pyramid.

The three building blocks of access to energy

"Our local footprint is our strong suit," is the first thing Cabus says. "Our affiliates, 4,000-plus service stations in Africa and our longtime presence are all assets for working with local stakeholders and building the trust needed to create sustainable relationships."

The first energy-access building block Total put in place in Africa was the Awango by Total project in 2010. The individual solar solutions sold in its service stations and through distributor networks offered far higher quality and service than the products available in the market at that time. "After five or six years, we'd reached more than nine million people and break-even," says Cabus. "Providing that kind of initial access to energy saves money, since people no longer need to buy kerosene or candles. It also supports education, because children can study in the evening. And it promotes safety, local business and also health, by eliminating smoke in homes for example." The list is not exhaustive, but it does underscore what a big factor any kind of access to power, no matter how simple, is to human development.

The second building block, rolled out in early 2016, dovetails with growing consumer expectations. After getting lighting and cell phone charging, customers wanted a way to install several light sources, plug in a radio or television or run a fan. The solar kit went from being an individual to a household solution. Solar Home Systems (SHS) were developed and marketed. But there was one big stumbling block: their cost. While you could buy a solar lamp for only $30, these systems ranged in price from $150 to $600. Cash sales were replaced by an innovative pay-as-you-go financing system, a type of leasing that lets customers earn credits via cell phone for using the SHS and pay it off until they own it six months to three years later. Cabus sees this as "innovative in two ways. First, technologically, battery performance has soared, the lamps are brighter and the photovoltaic panels are more efficient. This has cut costs and allowed us to offer a viable product. Plus, a pay-as-you-go system — which cell phone users were becoming increasingly familiar with — represented a real innovation in energy use. It's growing at a fast pace."

The ultimate goal is to design more efficient SHSs that can power several home appliances for six to eight hours. Households could use the money no longer spent on other sources of energy, mainly fossil fuels, to install a second, also pay-as-you-go SHS, plug in new appliances and sharply enhance user convenience and comfort. They could also add new products yet to be defined, which might in turn make other services necessary. "We'll gauge the product's success by several criteria," says Cabus. "The number of people who benefit, of course, and the profitability of the model so that it is worthwhile for all players, including our resellers and us. But also by the ripple effect on their expenses, job creation, customer loyalty and a few others, such as carbon emission reduction." There is lots of work ahead.

Lastly, the third energy-access building block is moving to a higher level using mini-grids or micro-grids. These small PV power plants can also be paired with a biomass source and generate enough power to supply villages of two to three hundred households not — or not yet — hooked up to the national grid. The pay-as-you-go principle applies here too. "Recent changes have been significant," notes Cabus. "Technology has made big strides, manufacturing costs have fallen and regulations have changed significantly. Since access to power poses major challenges in Africa in particular, the single-grid solution will in the short to medium term become unviable. Some government stakeholders wanted to provide solutions for each market segment, creating opportunities for new players. Especially since, technologically, grid and mini-grid solutions are mutually compatible."

Invaluable partnerships

Total's goal is to move to the large-scale deployment of SHS solutions in 10 or so African countries within two or three years. Cabus is "convinced that it will work, but we still need to find the right business model; in other words, not put all our eggs in one basket right away. Our strong presence in Africa allows us to keep our finger on the pulse of the fast-paced market. Customer requirements change and product lines have to keep up. We must offer the most efficient models at the right price and without lowering quality standards, because we're committing the brand. Total has long enjoyed a reputation for reliability, quality and safety; that's why customers come to us. Our power solutions must follow the same principles."

But the pay-as-you-go distribution model is more complex than retailing individual solar solutions. It requires specific know-how, dedicated personnel and sales engineers on the front line who can fulfill customer requests. You also need a call center to manage customer relationships and a digital platform, the key to most new business models for distributed energy."

So partnerships are critical to this approach to the market. As Cabus explains: "Total identifies a certain number of countries, mainly in Africa, based on their demographic and economic profile, plus major partners in the sector that can help us pinpoint the right way to take action — joint venture, capital investment or other. The one that will work for all sides and fits the local environment. We look at every option; nothing is off the table. Our only goals are simplicity, efficiency, balance, profitability and impact," comments Cabus. "A strong relationship is taking shape. It lets us get to know customers and their needs better and improves communication with them."

Partnerships can take other forms. Humanitarian non-governmental organizations appreciate the reliability of Total's solutions and have initiated talks. There are also microfinance institutions (MFI), which help households finance purchases. Another possibility is a future operator that develops a major innovation. "I'd like a start-up to bring me an electric oven solution compatible with our SHS," says an enthusiastic Cabus.

Total the power provider is already here

Total has been remaking itself for the last several years, especially by including the climate in its growth model. When you add in the finite fossil fuel issue, population growth and more distributed, less predictable, more renewables-based models, Total's milestones in Africa seem to map out an energy future very different from the usual models.

The Group's goal is to have low-carbon businesses account for 20 percent of its energy mix in 2035. Philippe Cabus points out that: "Once the micro- and mini-grid programs are economically viable and replicable, it will be feasible to deploy a thousand in a country. That means a jump from 200 to 300 households per project to around one-and-a-half million people. Ultimately with SHSs, mini-grids and the business innovations that are expected to emerge year after year, access to energy solutions will come into their own as part of Total's integrated low-carbon businesses."

Retail affiliates that used to sell mainly fuel and lubricants are now offering cell phone chargers, Wi-Fi access, secure payment and even fast food in addition to the usual products. "Tomorrow they could potentially function as general energy-access outlets, selling and doing maintenance on SHSs and solar lamps, and providing a place to sit down with a sales engineer for pay-as-you-go and other solutions we don't know about yet," says Philippe Cabus.

In conclusion: "Depending on the region and specific market needs, we'll have to put together an interlocking network made up of our affiliates, partners and solutions for our customers that are tailored to different environments. And each piece of the puzzle will have its place!"

1 According to the World Bank, nearly 1.1 billion people across the globe (or roughly the equivalent of India's population) still lack access to electricity. Most of them are in Africa and Asia. What's more, 2.9 billion people depend on wood or other biomass fuels to cook and stay warm, causing indoor and outdoor air pollution that is responsible for 4.3 million deaths a year.

This page was paid for by Total. The editorial staff of CNBC had no role in the creation of this page.