Play the Game of Life
Ryan Petersen's Blog

By Ryan Petersen

At the start of the semester, the Earth Institute asked an International Development Club team to investigate the value chain for rechargeable lighting appliances to help reduce energy expenditures rural Africa. In areas without direct access to the electricity grid, people light their homes with kerosene, an expensive, poor quality source of light that also generates indoor air pollution. For example, in the village of Sauri, Kenya, ninety percent of the population earn less than $1 per day, with kerosene representing the second largest monthly expense (behind charcoal). The switch to energy efficient LED lighting, powered by rechargeable or disposable batteries, could save these people a lot of money.

Our four-person IDC team has spent the semester speaking with the key players in the Kenyan market to learn what types of interventions could accelerate the transition to more efficient lighting technologies. In March we traveled to Kenya for a series of interviews to help us understand the forces driving supply and demand for the products.

The team of first year MBA students was assembled for our diverse and complimentary backgrounds: Nathaniel Choge, a Kenyan whose father is an entrepreneur in the solar industry, has degrees in electrical engineering and business from MIT; Richard Wang is an electrical engineer who owns a company producing power controllers for solar panels in Tianjin, China; Ryan Petersen, an American, spent the last two years working in China as a sourcing agent and supply chain manager for an international trading firm; and Daniel Madden is a former strategy consultant from the UK who lived in Kenya for seven years,

During our time in Nairobi we met with a broad range of stakeholders in the markets for rural electrical appliances.. We spoke with executives from dozens of stakeholders, including the leaders of Kenya’s two largest battery producers, its largest grocery chain, and a credit cooperative. We also met with retailers, importers, logistics companies, solar product outlets, energy entrepreneurs, non-profit organizations and battery charging stations. In addition, Dan Madden conducted focus groups to learn which lighting products most appeal to people without grid access

The Earth Institute has been working under the assumption that despite cost savings over their lifetimes, the up-front costs of LED appliances are too expensive for Africa’s rural poor. Yet in Kenya as elsewhere, the prices for LEDs powered have fallen to levels that the poor can finally afford. Indeed, in both Nairobi and in towns nearer to Sauri—the village selected for the institute’s pilot project—we found LEDs to be widely available, with some selling for as little as $1.40.

Given their superior lighting qualities and reduced kerosene expenditures, LEDs represent a sound investment for residents of Sauri. Not surprisingly, the Chief Operating Officer of the credit cooperative Faulu, Kenya, wants his lending officers to begin promoting these cost-saving devices to a network of 75,000 borrowers.

We have found evidence of a huge market potential for LEDs and other energy-saving products to consumers in off-grid areas of rural Africa. To help spark interest of market players, the Earth Institute will soon launch a pilot project in Sauri. They will source the lights and batteries from the low-cost suppliers we found in our investigations. We have recommended that they conduct rigorous product quality testing to overcome negative perceptions of LED dependability. We have also suggested that they carry out frequent focus groups and demonstrations of the lights to raise awareness in the village. To succeed, we believe the Earth Institute must enlist Sauri’s merchants and kiosk operators as partners in reaching this untapped market.

Labels: Columbia Business School, Energy, International Development, Kenya