Mitra Ardron is CEO of Lumeter Networks, which is developing a variety of pre-paid electricity meters and cloud accounting services for renewable energy companies to build micro-grids and solar home systems (SHS) and extend service to the Base of the Pyramid. Renewable energy companies currently have trouble servicing this market because of the difficulty of managing small payments and the high degree of theft. Mitra spoke to Arc about how Lumeter has solved this through an ultra-low cost meter, which incorporates innovative tamper protection across micro-grids and facilitates pre-paid capacity for SHS as well.
Arc Finance: Let’s begin with an explanation of Lumeter, the background to the company, and the business model. What is the need you identified?
MA: A few years ago I was running a non-profit supporting innovation for developing country problems. People in the energy space used to keep coming looking for solutions to problems that weren’t core to their business. The problem that kept coming up was: “We have technology, but what we don’t know is how to deal with the monetization of of that.”
The more specific problem was that while people had tackled Pay-As-You-Go in providing energy solutions to the energy poor, it wasn’t really what you could call an accessible technology. Other companies such as Angaza Design, or SIMPA have the business model of integrating PAYG technology into the provision of the energy technology – like solar home systems. But there was nothing “off the shelf” to meet a broader range of clients’ needs which could then be integrated into existing products.
So, Lumeter came about by seeking to provide a meter (or family of meters) that can be integrated into a whole range of energy products, and a software package in the cloud that supports this family of meters.
Arc Finance: So what differentiates your product from your competitors’?
MA: Besides the off-the-shelf integration, I would emphasize what our cloud software allows. For one thing, our software allows a lot of power management built-in; for example, there was a minigrid provider which wanted to deliver 60Wh per day per customer, and then for it to shut off. The provider came to us because our software is bespoke enough to allow this need to be met. So while it wasn’t an off-the-shelf requirement, it was something we could do. In short, the software adapts to the needs of the client.
Pre-paid meter integration with renewable energy systems is not capital intensive; hence the cost to enter rural electrification markets is low. The entry strategy further benefits from leveraging partners’ renewable energy systems operations, marketing, sales, installation and maintenance infrastructure and know-how.
Arc Finance: Can you tell us a bit about who the end-users are? Do you collect end-user impact data?
MA: It’s not clear to us what the business case is for collecting BoP customer data. But I can say that we’re seeing a number of different enquiries. A number are from rural villages – completely off grid. We also have enquiries from those doing backups to existing, but low quality, grids.
Arc Finance: Let’s talk a bit more about the technology and payment options. How do end users pre-pay for their energy?
MA: At the technical level, our product consists of an affordable meter at each house, integrated into a solar home system (SHS) or as part of a mini-grid. The meters monitor and control consumption and look for tampering, and are controlled via codes obtained from our cloud-based accounting software.
At the business level, it consists of a web of relationships facilitated by Lumeter, which include: the renewable energy providers who install systems; hardware manufacturers who incorporate our technology; payments providers including mobile minute networks; village entrepreneurs; and financing providers and the customers. For each participant, we help de-risk the transactions and open up new markets.
And at the impact level, our solution has health, environmental, and livelihood development aspects; the current solutions (kerosene, and candles) are dirty and expensive, while electricity enables, for example, kids to study at night. We directly contribute to livelihoods through village electricity entrepreneurs and mobile minute sales, and indirectly since being able to charge mobile phones is a key enabler of many other enterprises.
Arc Finance: But a one-size-fits-all meter cannot work for an SHS and a minigrid… so what is the ‘family’ of meters you referred to?
MA: We have two broad categories of meter: one that measures power and time (predominantly for minigrids); the other only time (for SHS). What makes our meters unique is their ability to shut off after a certain period of time, and to limit the current drawn. We can set maximum power levels, or time limits: these are unique selling points of our technologies.
Arc Finance: And payments – do you see growth in scratchcards and mobile payment options?
MA: We don’t see a real need for scratchcards. Asia, for example, has largely shifted away from that. We are currently integrated with one of the mobile top-up providers in Peru, and we believe that m-money networks typically work, so that we can use an agent who transfers the payment to us. However – and this is a considerable caveat – we do not assume mobile coverage at all homes, which is why we don’t integrate GSM chips into our meters. We assume there is mobile coverage in most villages that enable m-money, but we don’t assume that every customer has an account.
Arc Finance: What do you see as the main drivers of scale in PAYG energy?
MA: The B2B platform solution serves stakeholders in a variety of market segments and can be applied in any relevant location. As the technology facilitates transactions between rural electricity suppliers and consumers, its promise and advantages to drive scale lie in adaptability to any potential partner’s technological and business requirements. And the need for pre-pay, non-grid electricity is immense, and will continue. B2B solutions that can address this can leverage access and scale.
Arc Finance: As of now, how much reach into this market do you have?
MA: Our numbers are still really small; each client is running trial, but we have taken our first double-digit order. We’re currently in three countries on three continents, and are in conversations with people across the developing world: all strictly B2B.
Arc Finance: What and where are your plans for expansion, and where do you see growth in the medium term?
MA: Our target markets are ones where regulation is softer. It’s not about the meter itself, but the way governments think about this sector. Some regulators might want to treat a metering solution as a utility, and we cannot – and don’t wish to deal with – over-regulation. I won’t go into specifics of which markets are unsupportive in this respect, but I will say that Zambia is an example of a market which is very conducive. Uncertainty always pushes up the cost of money, and hopefully governments will realize that by imposing barriers to off-grid meters, they are shooting themselves in the foot. What others and we are doing in this space is filling the gap that governments cannot or will not fill.
Our objective is to extend the platform to multiple geographic markets simultaneously by reaching out to existing energy suppliers. We want to use the resulting experience and established connections globally to partner with large rural electrification initiatives to quickly reach profitability and scaled impact. And we want to grow our market share as a dominant pre-paid electricity market player in various locations globally.
Arc Finance: Finally, any lessons learned you’d like to share?
MA: There have been lots of surprises, of course: we had technical surprises – battery quality control at one point was very low. We needed to push back on some ideas too; some customers have either more or less sophistication than you think they do, and judging that can take time. Also, customers are used to being cheated, so they work from the assumption that they are not to treat you as a savior, but as someone to watch. This can take some work to overcome.