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After a three-hour drive from Nairobi partly over unpaved roads I am finally standing on the banks of the Thiba river in Embu County. Embu lies about 50 kilometres south-east of the mighty Mount Kenya. It gets more than double the rainfall of London, albeit unevenly spread with only two short rainy seasons and the rest of the time remaining largely dry. It is mid-October but the soil under my feet feels parched as the rains are late this year. The land belongs to a demo farm which is run by SowPrecise, a GOGLA member and pioneer in the productive use of renewable energy.
“I have 10 acres of land, but I am only using a small portion of it, around 10 to 20 percent” says a local farmer, named Steve, standing next to me looking at the solar pump which is extracting water from the river. Before I can ask, he adds: “I need to irrigate my sunflower fields yet running a diesel pump is expensive. Fuel prices have increased a lot lately. I am now paying 2,500 shillings, which is about 20 dollars, for 10 litres of diesel. This allows me to irrigate one acre of my land once a week.” “And why are you not using a solar water pump?” I inquire pointing at the equipment in front of us.
This is when Linda, the CEO of SowPrecise, interjects with some more numbers. “A solar-powered irrigation system such as our innovative SunRider has a high upfront cost of around 4,000 dollars. This puts it out of reach for Steve and most other smallholder farmers in Kenya who typically earn between two to five dollars in a day. A surface pump with a flow rate of 20,000 litres an hour only comes with a price tag of 500 dollars, but we must also factor in the six 330-watt solar panels which are 200 dollars each, the four lead acid batteries at 350 dollars each and a five kilo-volt amps hybrid inverter costing 700 dollars. The water delivery from the pump to the sprinkler setup that consists of rain hoses is through two-inch high-density polyethylene pipes adding another five dollars per meter to the cost of the system” she goes on explaining. “And since SunRider is a mobile solution that can be carried across different farms for irrigation, we also had a customised electric transport vehicle developed which can handle up to half a ton of equipment.”
“I see – but tell me how you are making SunRider affordable then, what is the business model behind the technology?” is my follow-on question. “Well, that’s the thing” says Linda smiling “the CAPEX is high but the OPEX for the farmers using our system is lower than for a comparable diesel pump. We only charge them 1,500 shillings to irrigate one acre of land. This is less than 30 cents per 100 square metres.” “And the water…” I start my next question “…is not a free good” Pius, the COO at SowPrecise, completes the sentence. “We have to pay for our operational permit and farmers are charged for using the water from the river, although in practice this is not enforced” he admits.
The innovative business model which SowPrecise is showcasing in the agricultural heartland of Kenya is called “Irrigation-as-a-Service (IaaS)” or more generally “EaaS” which can mean both “Energy-as-a-Service” and “Equipment-as-a-Service.” It is different from the “Pay-As-You-Go” (PAYGo) model typically used by off-grid solar companies to finance solar home systems for residential customers in rural areas. The main difference between the two models is that with EaaS there is no transfer of ownership of the asset (in this case the irrigation system). The farmer (Steve) just pays a fee for the service (irrigation) which requires the provision of a certain level of renewable energy by the service provider (SowPrecise).
Some companies are taking the model to the next level by offering value-added services besides equipment and energy. For a farmer growing sunflowers, this can include threshing and pressing of the sunflower seeds, nets to protect the plants from birds preying on the seeds and contracts with off takers who commit to purchase an agreed quantity of sunflower oil at a fixed price. These market linkages, in particular, are very important to smallholder farmers who do not only lack the capital for the mechanization of their agricultural activities (milling, grinding and cooling are other examples) but also the negotiating power which is based on aggregating supply. Because off takers have a vested interest in the agreed upon quantities being reached, they will often give training or even inputs (fertilizer, pesticides) to their farmers. Once the sunflower oil has been delivered, the off taker pays the service provider who retains the service fees and distributes the rest of the proceeds in proportion to the contribution by each farmer.
While this model seems straightforward, as always, the devil is in the detail. Since market prices fluctuate based on supply and demand there is an incentive for farmers to bypass the off taker if the market price is higher than the price fixed in the contract. This will be the case if the harvest has been bad resulting in a limited market supply. Conversely, in good years when supply outstrips demand, farmers who are not part of the arrangement with the off taker will want to join to take advantage of the contractual price guarantee. The bad practice of bypassing can be prevented by appointing a “lead farmer” from the community who applies social pressure on his peers to enforce the contract with the off taker.
The sun is starting to set on the sunflower fields and the time has come to return to Nairobi. But there is one last burning question on my mind: “Where do you ultimately want to take your business model?” Linda’s reply is as clear as it is ambitious: “We are working on the ‘Uber-isation’ of solar water pumps. In the future we aspire to no longer own the hardware ourselves but to be the software platform which connect farmers who have a solar water pump to those who need irrigation services.”
On the long drive back to the city I have ample time to reflect on these words. Ownership of productive use equipment makes sense because it promotes responsible behaviour in operating and maintaining the asset. On the other hand, big ticket items such as solar water pumps only become affordable to the majority of smallholder farmers if shared. And even if a farmer eventually comes to own a pump under the PAYGo model, “sweating the asset” by renting it out to others will boost their income and improve their livelihood. Adapting business models of the sharing economy holds great promise of a brighter future for millions of people in rural Africa.
This article is part of a the #puttingsolartowork series, which highlights GOGLA member companies working in productive uses such as cooling, irrigating or milling.
The IKEA Foundation is supporting GOGLA to strengthen and develop the global industry around Productive Use of Renewable Energy (PURE).
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