With a 32% energy access rate, the government of Tanzania has made expanding access to energy a national priority.
In recent years the solar home system market has grown rapidly and there are now more than 100 minigrids operating in the country, according to Power Africa.
However, most rural communities still lack access to reliable electricity and many people living in villages with minigrid or national access cannot afford the connection fees. This means large parts of the country remain in the dark when the sun sets.
Addressing this issue, clean energy financier EEP Africa have released a case study into an innovative business model that brings electricity to bottom-of-the pyramid customers through rechargeable battery packs.
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Canadian last mile energy company Jaza Energy is developing a network of solar energy hubs across Tanzania that offer rental battery packs for lighting and other energy needs. Most batteries are used for household energy but 16% of Jaza customers use them to support small businesses and entrepreneurial activities. To date, the company has deployed 78 hubs across Tanzania, providing power to 39,000 people.
Changing the business model to bottom up to address last mile access in Tanzania
In 2020, using EEP Africa financing, Jaza launched a new battery and refined its pricing model to specifically target low-income customers. Initially they had charged a substantial down payment for each battery, but they realised this deterred customers and limited growth.
Shifting to a nominal registration fee backed by a guarantor made their batteries more affordable upfront and tapped into existing social capital in the community.
The company developed a battery with a smaller capacity of 60Wh, lasting one to three days. Now each swap is priced lower than kerosene. The one-time sign-up fee is $1, with a $0.22 daily fee for rental. This means a smaller battery makes energy access affordable for households with daily incomes as low as $0.75 a day.
As a result, the acquisition rate per hub rose from 10 to 140 new customers a month, and Jaza battery swaps increased by more than 440%.
Jeff Schnurr, Jaza CEO, commented: “There is an assumption when it comes to energy access that ‘anything is better than nothing’, but this is not true. The product should solve the customer’s pain point. And, the big lesson in this market is that quality of service matter because those with the lowest incomes have such a high pressure on their purchasing decisions.”
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Employment for women
The Jaza business model is also unique in that all their energy hub are operated exclusively by women. Jaza has so far created employment for 150 women from rural communities, most of them under 25 years old. 97% of them report this is their first job. All of the ‘Jaza Stars’ are provided with technical and financial training, as well as on-going peer support, which has created a strong sense of empowerment among the young women.
EEP Africa portfolio coordinator Faith Chege is impressed by the way Jaza is creating employment opportunities for young women in rural Tanzania: “Some of the Jaza Stars I met on my site visit had just finished high school. The job has equipped them with skills to manage the hub and their confidence has increased significantly after seeing what they have capacity to achieve. The job has also increased their income, enabling them to support their families and improve their livelihoods.”
Read more about Jaza’s business model in EEP Africa’s latest case study Putting Stars on the Map.