Fifteen

Issue date: 12/8/09 Section: News

ECG-energy doing market research in July 2009

The village gathers to see the first customer installations

An MIT-Harvard team is set to change the lives of the 500 million Africans who currently lack access to electricity. The start up, EGG-energy, connects low-income Tanzanians to power and hopes to make its owners rich in the process. EGG-energy is part of the wave of for-profit companies that are reaching for the thus far elusive goals of development with market based solutions.

EGG-energy's business addresses the missing last mile of electricity distribution. While only 10% of the population in Tanzania has access to electricity, a great majority of them lives within a few miles of the grid line. The grid is there but hardly anyone is connected, this is a problem that has existed for years and will continue to exist. EGG-energy is attempting to bridge that missing last mile by using inexpensive, rechargeable and portable batteries to distribute the electricity to the households.

A customer pays a subscription fee and receives a battery that powers two lights, a mobile phone and a radio for three nights. Once the battery is exhausted, it is swapped for a new one at an EGG-energy swapping station. It's like how milk delivery worked in the 60s. It's like Netflix for batteries. With the movie being the same one every time.

The current market leader in lighting solutions is burning kerosene in tin cans. Its quality is like burning candles for lighting except that kerosene lanterns ruin the indoor air and start thousands of fires every year when the lanterns are knocked over. EGG's solution replaces this with LED lights and cuts the cost almost in half. What is more, the company doesn't introduce any new technology; everything is off-the-shelf products.

EGG-energy was founded on the principle that a for-profit business is the most effective and sustainable way to facilitate development. The for-profit model is so powerful because the market ultimately judges whether EGG-energy's service is the right solution. Like any start up, it has to win over every customer every single day. Having to worry about operating cash flows makes a development project surprisingly attentive to what is really needed in its target market.

The average household in Tanzania makes roughly $1,000 a year which doesn't seem like a lot. But they currently spend 10% of it on kerosene and AA batteries and the cost of serving these customers with the battery swap model is very competitive. Scale that against the 35 million people without electricity and it becomes serious money. Total spending on kerosene for lighting is $17bn in sub-Saharan Africa of which some $4bn is spent in Tanzania and its direct neighbors, in our direct target segments. The addressable market is huge and the alternatives have severe shortcomings. This is a fortune at the bottom of the pyramid business.
The company was initially funded by winnings from business plan competitions and grants and fellowships from institutions like the MIT Legatum Center and the MIT Public Service Center. EGG-energy is currently backed by an angel funder and is preparing for a rapid expansion in Tanzania.

Two local employees will soon be dozens of employees and dozens of customers will soon be thousands of customers. As a result, more Tanzanian businesses will be able to keep their doors open after sunset and more children will be able to read at night. There are easier ways for MBA's to make money but the social rewards are unmatched.

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