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Published 03 February 2011 05:03, Updated 10 February 2011 05:15
Switching on a light is an automatic response to the onset of nightfall but for about 1.5 billion people across the globe with no access to electricity, such a simple tool for life improvement is absent.
For the past five years Barefoot Power has been struggling to bring its solar-powered light emitting diode (LED) kits to developing nations to replace the $US10 billion a year spent on kerosene for lamps.
Initially the two founders of the company, Australians Stewart Craine and Harry Andrews, started a pilot program in Papua New Guinea in 2006 with an aim to bring their specialist lighting products to the Asia-Pacific region.
Despite proving the sustainability of the products, the pair was unable to gain financial support in Australia from wealthy individuals, institutions or government grants and the business faced a bleak future.
But in early 2007, an award in Europe for the company’s business plan attracted the attention of some wealthy Europeans who agreed to provide financing if the business took its product to Africa.
Within a couple of years the company was selling about $1 million worth of product in Kenya and Uganda.
In the year just ended, revenue had grown to $1.5 million and this year is expected to expand to as much as $5 million.
The vision of the two renewable energy specialists is to reverse the typical energy development programs of developing nations whereby centralised power generation is spread across a country from larger cities to rural areas in a process that often takes decades.
The reverse process is to take the savings from energy replacement, such as LED lights for kerosene and create small localised electricity grids in villages through the development of micro-power plants that eventually can be expanded outwards into a rural network before joining up to the main grid.
That vision is still to be realised but the initial step of replacing kerosene lamps with renewable energy is taking shape.
From a two-man organisation, the social enterprise now employs about 40 people in Africa and another 15 contractors across Africa, India, China the United States and Europe.
For a small enterprise, Barefoot Power has a surprisingly large footprint and to run such a business is, in the words of Craine, “a nightmare”.
“It’s difficult to manage a group with limited conversation but Skype [the internet-based phone and video provider] has made it possible,” he says.
“As a group we meet in person perhaps only once a year instead of perhaps once a week, which is what you would do if you were a local single-state-based operation. But it’s one of the barriers to entry you have to overcome to drive the process forward.”
It also means working long hours to stay in touch with the different parts of the organisation.
Craine lives in Sydney and works about an 80-hour week. Andrews is based in Kenya and is equally driven.
Another barrier to entry that the pair has constantly worked to overcome is financing.
While the initial funding from several wealthy European individuals helped kick-start the business, the day-to-day operations have required innovation, such as short-term micro-financing supplied by an individual or foundation to pay for the delivery of a container of product.
In fact, the company has won awards for its micro-financing innovation and that brought it to the attention of the world’s largest micro-finance specialist, Netherlands-based Oikocredit, an organisation focused on financing projects that help the world’s poor become self-sufficient.
Not surprisingly, Craine is a fan of awards. In each case they have brought a degree of commercial benefit to the business and he aims to get on BRW’s Fast Starters list.
Last year, in the World Bank Quality Awards, against 21 competing suppliers, the company came first in three of the four categories and second in the fourth.
And while the Australian government has knocked back three product- development grant applications by the group, a European Union grant of €1 million ($1.4 million) was recently awarded, which together with a $5 million capital raising now under way, will be used to pump some research and development funds into the key products to make them more effective and directed towards the end user.
Its two main products are the Firefly – a solar-powered LED lamp – and the PowaPack – which can power multiple lights and other operations such as charging a mobile phone.
Craine says that in rural regions, the average family spends about $1 a week on kerosene for lighting and another 50¢ charging mobile phones.
At a cost of $25 for the PowaPack, the payback period is a little over a month – and there are also greenhouse gas benefits.
Last year the company shipped 150,000 Firefly lighting kits to Uruguay and Kenya, replacing about 1500 tonnes a year of greenhouse gases from kerosene burning. Globally, millions of barrels of kerosene are burned each year to provide light.
Now that Barefoot is reaching some scale, Craine and Andrews are in the process of gaining global accreditation for greenhouse gas abatement, which can then be sold to corporations and add another revenue stream to the group.
But its success has not come without compromise.
Originally the company was 100 per cent Australian owned but the continued financial support from offshore means it is now only 20 per cent locally owned, which will fall to 10 per cent if the current capital raising is all provided from offshore.
One local organisation that has supported the company is the Melbourne-based Grace Foundation which invests in social enterprise-based solutions to poverty and its executive director, John Altman, is on Barefoot Power’s board.
Oikocredit also has an equity investment manager on the board and the chairman is David Hind, the chairman of Skills Tasmania and a former managing director of the global gas group BOC’s South Pacific operations.
Craine says he hopes to have the new capital injection completed by April, one year after the process began. It’s a sign of the maturing of the company as the first capital raising the group embarked on took four years to complete.
The quicker time frame is a reflection of the group’s move from an incubation enterprise to a profitable organisation of scale but it is still early days for the five- year-old company.
Apart from improving existing product, the funds will also go towards developing larger scale lighting solutions and the next step up from providing light is to move to AC (alternating current) wiring for villages to allow expansion of product from lighting to other essential appliances.
That is phase two of the four-phase long-term goal to create mini-grids within villages and create self-sustaining communities that have the benefit of electricity.
Barefoot Power is not the only organisation operating in the developing world lighting space.
Light up the World is probably the best known, with its global programs to bring renewable energy systems and high efficiency lighting to communities.
Electronics giant Philips and the Dutch government are also in partnership to provide solar-powered solutions to sub-Saharan Africa.