32 Replies Latest reply: Sep 29, 2013 3:46 PM by rema RSS

    E-Discussion #5 - Exploring the Franchise Approach for Off-Grid Electrification

    1231309 C4D Extraordinaire

      Sustainable energy powers opportunity. As noted by the SE4All initiative, 1.3 billion people—one in five globally—lack electricity to light their homes or conduct business. Engaging the private sector to define and implement financially sustainable business models could play a pivotal role in accelerating off-grid rural electrification. The IEA estimates that more than $50 billion annual investment is needed to achieve universal energy access by 2030, much of which will be mobilized from and directed toward the private sector. Yet notable barriers remain for unlocking private sector participation in energy access. As you are aware, we continue to implement a multi-year initiative to explore and support commercially viable business models for private sector engagement in providing energy services to rural, off grid customers. Reaching millions of customers is not a new challenge for the private sector. Around the world, even in rural areas with no access to electricity, industries such as telecom, consumer goods, appliances and automotive are reaching their customers using a network of retailers, distributors, local partners and agents. Despite some obvious and major differences between the energy sector and others, there is room for inspiration and there is a rural customer to be served. A confluence of factors including, recent advancements in renewable energy based generation and storage technologies, development of mobile-phone enabled metering, payment and customer management solutions, availability of high-efficiency household appliances and reduction in costs of these technologies, is creating a unique opportunity for the private sector.


      What can we learn from other sectors to help design these business models for the energy sector? How can entrepreneurs who have created unique business solutions and are successfully running their companies in a few villages, scale-up or replicate? How can we engage small private enterprises that exist in most rural areas in becoming local energy service providers? Reinventing the wheel, village-by-village and country-by-country is not necessary. Can we learn and adapt the well-established practice of franchising? Can we help the development of the business method and relationships that could accelerate the pace of off-grid electrification? These are few of the questions for which we seek answers during this E-Discussion.

       

      Focus areas:  Is the Franchise approach relevant for A-B-C business models? What are the different types of franchise approaches and their respective modalities? What kind of capacities are required from potential franchisees? What are the benefits of franchise approach in terms of scaling up? What specificities should a franchise model address in order to be relevant for A-B-C business models? What are the key start-up barriers for franchisees and franchisors? How to match-make rural entrepreneurs with franchisors?


      Expert Contributors:

       

      anil.JPG

      Anil Raj, CEO and Co-Founder of OMC Power. OMC is an established micropower company in India that builds small-scale power plants with renewable sources where there is no reliable power grid. Anil is a veteran of the telecom industry with roots tracing back to the earliest days of mobile telecom. Anil was the start-up CEO of Hutchison in India and launched the country’s very first mobile network. He started his career at Ericsson where he held a number of senior management positions in Sweden and in Asia Pacific. As Head of Ericsson’s Smartphone Business Unit, he was responsible for launching the world’s first smartphone and first Bluetooth product. He also headed Ericsson’s companies in India and Indonesia establishing the company as the market leader. While at Ericsson, he also spearhead the merger of Ericsson’s and Sony’s handset businesses into Sony Ericsson and went on to forge the Symbian initiative where he also served as Chairman.

      dan.jpgDan Berelowitz is co-founder of the International Centre for Social Franchising, a not-for-profit that replicates proven social ventures to scale. He previously worked as first Director of Tzedek, a worldwide poverty alleviation organisation engaged in projects in Ghana and India, which more than quadrupled in size during his four years of leadership. Dan founded ICSF partly out of a sense of frustration at seeing community transforming projects reinventing the wheel and failing to scale up and replicate. At ICSF, Dan has worked on a range of projects and clients from Oxfam, GlaxoSmithKlien, Big Society Capital and Big Lottery to small charities with huge potential to replicate such as Street League and FoodCycle. Dan is a Clore Social Leadership Fellow, has a BSc in Management from Nottingham University, and is a Rothschild Fellow at the Cambridge Judge Business School.
      Manoj.jpg

      Manoj Kumar Singh,Vice President Green Energy, Regulatory Affairs & CSR, Indus Towers Limited. Manoj Kumar Singh, is a seasoned energy professional having 22+ year experience in energy and project management. He is heading Green Energy, Regulatory Affairs & CSR for Indus Towers Ltd., India as Vice President. He is also the Chairman of industry association TAIPA’s Energy Committee. He is a coveted speaker on Green Energy in Indian Telecom space, and has represented Indus at various international forums.

      In past he has successfully installed multiple projects of Thermal, Solar , Wind, Hydro, Natural Gas, Bio Gas and Bio mass. He has very successful instinct with Modis, Kanorias, Shri Ram Group & Jaipuria. He conceptualized the so called innovative energy model – FCM, which brought paradigm shift to energy management within the industry. He initiated i-CAP – Indus Carbon Abatement Program and is also leading the RESCO project in the industry on behalf of TAIPA. Manoj is actively engaged within the industry and the government while passionately driving the drafting of Green Telecom Policy.

      Mary Roach.jpegMary Roach, Programme Operations Manager for the MECS Programme, GSMA, is responsible for the overall management of the MECS Innovation Fund and leads the team delivering advisory services to mobile operators and support to the MECS ecosystem of organisations. Prior to joining the GSMA in 2011, she spent two years working on rural energy solutions in sub-Saharan Africa, including an early trial of pay-as-you-go access to energy using mobile money. Mary’s interest in the role that energy can play in development emerged from the combined experiences of her 5 years working with GE Power Generation in project and operations management and decade of involvement with Engineers without Borders Canada at home and abroad . She holds a MBA from Oxford University and a Bachelors in Chemical Engineering from McGill University.
      400x238_jim_walker.jpgJim Walker, Co-Founder of The Climate Group, serves as the organization's Director of International Programs & Strategy, based out of the New York office. He is a member of the Executive Management Team and of The Climate Group’s Australia, Hong Kong and China boards of directors. He has worked for 16 years on green strategy and policy, formerly at Environmental Resources Management and URS Corporation in London. He has spoken at events including Climate Week NYC, the Climate Leaders Summit and TED Global and is currently focused on The Climate Group’s electric vehicles, LED lighting and smart technology programmes. He was a co-author of The Climate Group’s review of China’s 12th Five Year Plan commissioned by HSBC and spent 18 months living in Beijing in 2010-2012. He has served as a member of the final jury for the Netherlands Postcode Lottery Green Challenge since 2008, awarding US$1m to green entrepreneurs each year. He is an advisory board member at Chinese NGO Thirst4Water and a member of the UK Government's Catalyst UK business leaders' network. Jim holds a Masters degree in Environmental Technology from Imperial College London, and competed in rowing at the 1992 and 1996 Olympic Games.
      mohua copy.jpgMohua Mukherjee, Senior Energy Specialist at the World Bank is a development professional with over two decades of experience at the World Bank in Washington DC. She currently works on energy projects in South Asia and Africa, both on-grid and off-grid. Her specialty is the development of off-grid business models through commercially viable public private partnerships. During her career, Mohua has managed diverse economic development projects in a variety of sectors, including water and sanitation, education, health, macroeconomics, private sector development, microenterprise and rural livelihoods, as well as energy. She has a strong background in private sector/SME development and renewable energy, and is partnering in the development of an innovative, private sector led business model in Nepal at the moment, with a grant that the Nepal government has received from the Scaling Up Renewable Energy Program (SREP). Mohua has managed development projects for the World Bank in thirty countries. She also has five years of experience in the financial sector, having served as Vice President and Head of Corporate Finance at Citibank and ABN AMRO Bank in Nairobi, Kenya, in the late-1990s. Mohua has lived on four different continents, speaks a number of languages.
      scott-weaven.jpgScott Weaven is an Associate Professor in the Department of Marketing, Griffith University and is Deputy Director of the Asia-Pacific Centre for Franchising Excellence. He has a PhD in franchising and has co-authored the Franchising Australia surveys since 2002. Prof Weaven is a member of the International Society of Franchising and has published his research in international academic refereed journals including the European Journal of Marketing, Academy of Marketing Science Review, International Small Business Journal, Asia Pacific Journal of Marketing and Logistics and the Journal of Business Ethics. Currently, Prof. Weaven is working on an Australian Research Council grant (with the Australian Competition and Consumer Commission) to develop strategies to manage conflict within franchise systems. In addition, he is investigating consumer perceptions towards brand extensions in franchising and the role of personality in franchisee recruitment and selection. Prof Weaven teaches marketing and entrepreneurship in the Griffith Business School.




        • Re: Exploring the Franchise Approach for Off-Grid Electrification
          C4D Explorer

          South Asia accounts for approximately 31% of the global population without access to electricity. Of this population, approximately 400 million people are in India - a population that could eventually be connected to renewable energy sources. Clean energy technology, including solar, biomass and wind generation along with efficient LED lighting, could revitalize India’s failing energy system.


          The Climate Group’s Access to Rural Energy in India project (principally funded by the Nationale Postcode Loterij of the Netherlands) aims to enhance the lives of rural inhabitants in India by deploying renewable energy technologies and improving infrastructure quality whilst reducing greenhouse gas emissions. One of the key barriers for private sector participation in energy access is the gap in identifying a commercially viable business model. To address this, we will be piloting a range of different rural electrification business models with a view to identifying one or more sustainable model/s that can be scaled up thereafter.

          • Re: E-Discussion #5: Exploring the Franchise Approach for Off-Grid Electrification
            C4D Explorer

            Franchising is a popular and pervasive phenomenon in many developed and developing economies. On the face of it, franchising represents an efficient method of replicating proven business concepts with ongoing success reliant upon the ongoing collaboration between interdependent parties. While we most often think of franchising in terms of retailing (e.g. accounting for 53% in Australia), there are a number of distribution arrangements and it is growing rapidly in other sectors (e.g. construction, services, telecommunications).  So its application in energy appears sound.

             

            Typically, business owners (franchisors) utilise franchisee investments to rapidly expand their geographic reach (often in remote areas) and build their brand image. Franchisees gain access to the 'proven business concept' , established brand, clientele and (initial) and ongoing training and support in return for paying ongoing royalties and other contributions (e.g. to the advertising levy).  However, success in franchising is not always guaranteed, but requires the (complex) delineation of roles for the principal (franchisor) and agents (franchisees) and this involves clear lines of communication, training and monitoring. In this way, trust and commitment to the brand is built within the network and the franchising concept is more sustainable.   

             

            As franchising success is predicated upon replication through standardisation (that is, adherence to standards), monitoring of franchisee units is necessary.  However, franchisees have a vested interest to work hard and build their businesses as their remuneration is based upon their own efforts (i.e. residual claimants). Moreover, given the relational nature of the franchise contract, they are often permitted to have some control over local marketing initiatives. This level of autonomy afforded to franchisees may be useful in that they know their particular regions (and clientele) and they may be a valuable source of information (and innovation) in regions in which the franchisor has little 'on the ground' knowledge.

             

            So the unique aspects of franchising which are particularly beneficial in the context of sustainable energy is that it promotes rapid replication of the business concept and business brand, employs committed semi-indepenedent business owners and ensures adherence to quality standards through instruction/training and monitoring (so as to support the system brand and further replication of the business). One other consideration when thinking about international franchising is warranted.  Through utilising master franchisees who buy the rights to sell franchises in particular territories (and are most often sourced from local communities in the host country) franchises can expand internationally whilst minimising cultural barriers to entry. 

            • Re: E-Discussion #5: Exploring the Franchise Approach for Off-Grid Electrification
              C4D Enthusiast

              We need to walk before we can run…


              Franchising could be a viable route to replicating off-grid energy models but what is first needed is a successful and sustainable business model. Since 2010, the GSM Association has been exploring the opportunity for GSM operators and mobile tower companies to contribute to improving access to energy first through the IFC funded Community Power from Mobile programme and now through the UK Government funded Mobile Enabled Community Services programme.

               

              While the opportunity is immense there are still only a handful of ESCos who have had the opportunity to test the A-B-C model in the field and who have the scale (measured by long term energy contracts with mobile operators or tower companies) to build a replicable model


              One of the main barriers to trialling these models has been the lack of patient capital to test promising ideas. The £2.4M MECS Innovation Fund was developed to fill this gap by providing grants up to £350k for service providers to trial innovative business models with the potential to scale. 


              South Asia presents one of the better opportunities to develop a franchise model for energy access due to the high population densities of off-grid areas but it is not without its challenges. The social dynamics of communities can greatly impact how energy access is delivered and the overall cost of running a franchise. We should not underestimate the challenges of converting an ESCO with a B2B model providing power to towers to an ESCO with a B2C approach where they provide services directly with the community.


              Before we declare the franchise model to be a viable/unviable route to scaling the A-B-C model the sector needs to trial more models. The MECS Innovation fund fill some of the missing risk capital required but our experience from the 1st and 2nd round calls for Concept Notes is that we have more great ideas than there is funding.


              If you would are an investor/donor and are looking for deal flow please do get in touch. Likewise if you are an ESCO and are looking for funding please do contact us; we expect the entire £2.4M to be allocated to applicants we already have in process but are actively trying to fundraise more money.

               

                • Re: E-Discussion #5: Exploring the Franchise Approach for Off-Grid Electrification
                  C4D Enthusiast

                  Dear Mary,

                   

                  I agree that franchise model should be tested before we declare it is successful. However, providing grant as seed fund to franchisees will not create a sustainable business model. In your views what is the process to select franchisees and prove it as successful or not?

                  On a separate note, there are clear economic and environmental benefits for telecom towers to switch from diesel to renewable sources. If that's the case, why has it taken so long for telecom towers to realize this? What in GSMA's views are the policy or regulatory barriers? Is it because of favorable subsidies for diesel (at least in India)?

                   

                  Best

                  RK

                  • Re: E-Discussion #5: Exploring the Franchise Approach for Off-Grid Electrification
                    944020 C4D Explorer

                    Mary,

                     

                    I would like to think that franchise-ability could be a potential test of the sustainability and viability of a business model. Given the scale of the challenge, we do need to be able to build on the experience of the pioneers.

                     

                    From your extensive experience of supporting business models, what do you think could be a good indicator that a private enterprise is ready to take on the role of a franchisor? or that a business model is ready for packaging and franchising?

                     

                    Bests,

                    Monali

                      • Re: E-Discussion #5: Exploring the Franchise Approach for Off-Grid Electrification
                        C4D Enthusiast

                        Hi Monali,

                         

                        This is a great question but difficult to answer. The speed and scale to which we would like to grow a business are important factors to take into account.

                         

                        I believe the proof of concept and proof of replicability are key. If an organisation is capable of running one plant successfully the proof of whether the model is ready to franchising probably happens when they can successfully replicate that model in 5 to 10 other places and sustain those sites for 6 months to a year. But in the rush to grow, in part fuelled by the great demand and in part fuelled by the need to attract investment, I believe many organisations are trying to replicate much too quickly.

                         

                        Some of the success factors would include: strength of the management team, strength of the field staff and their understanding of their customers' needs,  sound technology, operational reliability (a benchmark could be created to monitor this), written and followed processes,  good repayment history ....

                    • Re: E-Discussion #5: Exploring the Franchise Approach for Off-Grid Electrification
                      C4D Explorer

                      India has the second largest and fastest growing mobile telephone market in the world. In past less than two decades, the telecom industry has been able to penetrate well across the country, where even the grid has not been able to reach in more than half century. One of the biggest challenges being faced now is power deficiency in most of the areas along with lack of power infra, while the telecom focus is now more towards deep rural penetration.

                       

                      As per license conditions, a telecom operator needs to maintain a network availability higher than 99.5 %. Assured power 24x7 is, therefore, a pre-requisite for any telecom tower site.  This forces telecom infra companies to use Diesel to generate backup power resulting huge financial burden upon telecom players just to meet the deficit of power supply & maintain the uptime.

                       

                      The challenges being faced by telecom tower industry are actually common to the local community. More than 300 million people in India do not have access to electricity and over one third of India's rural population lacks electricity. This adds to the woes of power industry, requiring huge capex inflow for capacity additions, T&D infrastructure development for rural penetration, and huge T&D losses. The practical solution to this appears to be through decentralized power generation and distribution – A need of Exploring the Franchise Approach for Off-Grid Electrification.

                       

                      RESCOs are conceptualized to provide power with multiple green energy sources, but the main barrier is the absence of business models that would enable these costs to be recovered. While the overall power demand from a community may be less and fluctuating, the unique presence of telecom towers, needing 24x7 power, may prove to be a key to the sustenance of such model. Telecom tower industry may provide anchor load in widely distributed geographies with deep penetration in the country, as a single largest user of the clean energy that RESCOs / Telecom Infra providers can produce, aiming towards Grid parity. This will provide the much needed scale to RESCOs and address the cost-price deficit to a certain extent. As a result, the communities around the RESCO facilities too could receive power at an affordable cost.

                       

                      The said model shall be a programme to bring Industry to village and negate rural migration to urban areas in search of lively hood.

                      • Re: E-Discussion #5: Exploring the Franchise Approach for Off-Grid Electrification
                        C4D Enthusiast

                        Hello everyone, and greetings from Malawi in southern Africa, where I am currently on a short visit together with my colleague Monali
                        Ranade.  Thank you to the presenters and participants for the excellent webinar and launch of the e-discussion yesteday, Sept 9th.

                         

                        In my opening statement, I just want to say a few words about why I think the concept of “franchising”  is indeed very relevant to promoting the
                        spread of private sector led off-grid energy access to un-served customers in rural areas all over the developing world.

                        Yes, I am consciously referring to the clients as customers rather than “rural poor” or “beneficiaries” because they are customers, even if they have very lowincomes.  Today they are customers of mobile phone companies, and they are customers of kerosene suppliers, who sell them kerosene for lighting, and if they are micro-enterprise manufacturers they might be customers of diesel suppliers for their small generators.

                         

                        So we are trying to switch their current expenditures on kerosene and diesel, over to spending on clean energy solutions forlighting, phone charging, running small equipment, and more.  Furthermore, Anil Raj, CEO of OMC Power, has pointed out that there is also a “pyramid at the bottom of the pyramid”, i.e. not everyone living in an off-grid remote rural area has a low income. This is an important point to keep in mind.

                         

                        Successful and innovative business models for private energy entrepreneurs to serve rural customers are emerging in various parts of the
                        world, most commonly in South Asia and East Africa, with India and Kenya/Tanzania in the lead.  The clean-energy technologies being used in these business models are varied: battery charging services; home delivery of small appliances which are fully charged and ready to use; delivery of several hours of DC power through a micro-grid connecting nearby houses to a limited number of roof-top panels; delivery of 24/7 AC power through a micro-grid; pay as you go systems for solar rooftop panels, removing the need to go into debt to buy a solar panel; innovative mobile technology-enabled payment systems for advance payment of energy credits, including M-PESA in East Africa; delivery of community-owned power from micro-hydro power stations operated by the community and leased to a private operator; delivery of AC power through a so-called “skinny grid” (extra thin wires buried underground); and many more. 

                         

                        We would like to see these business models TRANSPLANTED to new off-grid areas of the world, and adopted by new local “agents of access” who will be supported to implementwhichever of these business models is best suited to their respective market conditions. 

                         

                        We look forward to sharing ideas and thoughts with you on your views regarding such transplanting, what to emphasize, and what to watch out
                        for, if we want proven business models to spread.  A quick note on terminology: in my view, the original energy entrepreneur who developed the business model (franchisor), will do “scale up”.  The agent (or franchisee) will do “replication”.

                        So here we are mainly focusing on the local “agent of access” who may be in another country orin another location of the franchisor’s home country, and trying to understand how this replication can best be undertaken.  We look forward to a rich discussion. Specifically we’d like to get inputs on the following questions, to start off:

                         

                        1. How do we define the franchisee/franchisor relationship to keep it very simple? Do you have examples? From other sectors as well? What lessons exist?
                        2. How should the local agents (franchisees) be identified? What makes a suitable "franchisee"?
                        3. What kind of technology packaging should be matched with various local conditions?

                         

                         

                         

                         

                         

                          • Re: E-Discussion #5: Exploring the Franchise Approach for Off-Grid Electrification
                            C4D Explorer

                            Dear all,

                            This is a great platform, just joined today after the workshop in Lilongwe, Malawi that Mohua has mentioned in her post. Our organization is participating in the Off-grid electrification program.

                            My first observation is to second the comment that the solutions discussed are to serve clients who may reside in rural communities - it is a paradigm shift in some circles. We are a Community Based Organization in Malawi but have long decided and operated for-profit ventures that help us fund our other projects and graduate entrepreneurs.

                            Secondly, I think a franchise model that can carefully transfers skills in critical areas of the business and maintains support from franchisors for functions that may not easily transfer will work. One comment I saw earlier from Tsugaye noted that service and support issues lacked in the businesses he had observed. The challenge hence remains to prepare the human capital necessary to operate in a rural community and find the proper balance of the functions that can transfer. If the cost of such a model may be higher than normally seen, perhaps it causes "would be" franchisors to stay away. There must be ways to mitigate such risk.

                            On our part - as an organization deeply rooted in the community with "for-benefit" objectives; we represent a somewhat different type of entrepreneur and measure successes differently. I know that our experiment offering a service-for-pay by an NGO is new, but we expect that we do have some advantages in that "social responsibility" is what we do, with it we see deep trust, shared responsibility for success - both of which are critical in our communities.

                            • Re: E-Discussion #5: Exploring the Franchise Approach for Off-Grid Electrification
                              C4D Explorer

                              Hi Mohua,

                               

                              Your question on the franchisee franchisor relationship is crucial. It is also important to clarify the degree of control the franchisor exerts on the franchisee. For instance, I'd imagine, a franchisee for this model would be a rural villager/entrepreneur who will have to pay franchisee fee. When we talk about rural villagers paying franchisee fee, it's not the same as a normal franchisee (like for McDonalds or others). So who would help the rural entrepreneur raise this franchisee fee? It's also crucial to discuss who would own the equipment? Is it the franchisor or franchisee? How would this then be transferred to the franchisee if it is owned by the franchisor.

                               

                              From Mr. Anil Raj's presentation it seems like OMC was referring to franchising within one power station, therefore franchisees of OMC model will distribute OMC's lanterns to the villagers and collect them daily for charging. Whereas what would help expand rural electrification into the remote villages would be franchising the whole model of OMC. Ideally there will be an entrepreneur who would get the technical and capital support but will maintain and operate the power stations. Therefore, the OMC model will be franchised into various districts and villages and not just within one power station. please correct me if I'm wrong.

                               

                              Additionally, franchising will only work for models that have been tried and tested within this space which are validated by the market and are ready for rapid scale up. Therefore, it's worth asking the question if franchising is too early for rural electrification since there aren't any models that have been tried and tested successfully so far as far as I'm concerned.

                            • Re: E-Discussion #5: Exploring the Franchise Approach for Off-Grid Electrification
                              C4D Enthusiast

                              Hello All,

                               

                              I believe that the franchising matter is part of the initial discussion E - 2 about the model and the "Policies and Regulations". we are talking about conflicts between existing concession contract and the emerging mini-grids in the same concession area. We are talking about system compatibility and potential interconnection with the main grid, and potential trade or exchange of excess of energy perhaps using a kind of Smart Meter device.


                              Do not forget that also the EU regulation is moving to mini-grids and their interconnection and exchanges with the main grid, such as a reccent news - Vestas wins 42 MW order for one of the largest citizen-owned wind power plants in Germany

                               

                              Then "Policies, Regulations and Standards" are a must, in order to assure compatibility and efficiency  and leverage "Fast Implementation", "Energy Access", "Energy Security", "Universal Energy Access", "Infrastructure Adequacy" and "Commercial Efficiency"

                               

                              If you do not have standards, you risk in a double cost for the Poor who is paying the bill.

                               

                              Then any Franchising approach can not add additional costs (such a fee); if we analyze the mobile phone carriers and service providers. they are regulated and the regulation assures compatibility.

                               

                              Then the potential mini-grid service need to be prepare to connect to a main grid on AC for any exchange, any mini-grid need to have some definitions on potential energy toll;

                               

                              The idea is deploying a sustainable and affordable solution in order the Poor pay a fair rate.

                               

                               

                              Regards

                               

                              Alejandro

                                • Re: E-Discussion #5: Exploring the Franchise Approach for Off-Grid Electrification
                                  C4D Explorer

                                  We are one of the Renewable energy companies in Malawi that has been around for the past 15 years. We would like to move out of our comfort zone and try new ideas. We think this approach is worth trying. Franchises that have been tried in Africa and ideally southern Africa would be attractive to us. We do have clients that we have worked with for the past 15 years and they would want us to find them a cost effective solution to help them expand their businesses into remote areas.

                                   

                                  Please feel free to get in touch: tawanda@ipcs.mw

                                • Re: E-Discussion #5: Exploring the Franchise Approach for Off-Grid Electrification
                                  dangada C4D Explorer

                                  I manage an Access to Renewable Energy Project in Nigeria, West Africa. The project is being supported by UNDP and implemented by Nigeria's Bank of Industry. We see the concept of Franchise as a good idea for Off-Grid Electrification especially through Renewable Sources.

                                   

                                  Could you therefore provide a list of Companies or Products that we could seek for Franchise from them.

                                   

                                  Please reply to Lgada@boinigeria.com

                                  • Re: E-Discussion #5: Exploring the Franchise Approach for Off-Grid Electrification
                                    C4D Explorer

                                    Hello Everyone,

                                     

                                    In India recently, the Forum of Regulators (FoR) — an independent regulatory body —  came out with guidelines for

                                    "Off-grid Distributed Generation Based Distribution Franchisee Model" (ODGBDF). It might be interesting for the participants at this platform to have a look at it. Refer chapter #9 in the following link http://www.forumofregulators.gov.in/Data/Reports/CWF%20Off-grid%20final%20report%20nov%202011_Latest_feb2012.pdf.

                                    For a concise analysis on this policy note please refer http://smartpowerindia.org/E-newsletter/Pdf/ODGBDF_Article_for_SPEED.pdf.

                                     

                                    The ODGBDF business model, though with some shortfalls, essentially tries to address one of the major challenges which the ESCO's or the mini grid entrepreneur in India are facing – What  will happen to their mini grid infrastructure once the national grid infrastructure arrives? It proposes, as one of the options, that the ESCO would act as a franchise to the state distribution company (when the grid integration takes place) and will have the responsibility of billing and collecting tariff from consumers.

                                     

                                    I hope this also serve's to answer few of the queries raised by Ms. Mohua on examples of franchise/franchisor.  

                                      • Re: E-Discussion #5: Exploring the Franchise Approach for Off-Grid Electrification
                                        C4D Enthusiast

                                        Hello Abhinav,

                                         

                                        Thank you for sharing this information with us.

                                         

                                        As I highlighted in my previous comment it is necessary clarify any potential conflicts between existing concession contract (DISCOM) and the emerging mini-grids (ESCOs) in the same concession area. Then it is necessary to clarify system compatibility and potential interconnection with the main grid, and potential trade or exchange of excess of energy perhaps using a kind of Smart Meter device.

                                         

                                        If you do not have Standards/Regulations, you risk in getting a double cost for the Poor who is paying the bill!!

                                         

                                        Regards,

                                         

                                        Alejandro

                                          • Re: E-Discussion #5: Exploring the Franchise Approach for Off-Grid Electrification
                                            C4D Explorer

                                            Dear all,

                                             

                                             

                                            Apologies for my late entry, I have been on leave, but delighted to join in this fascinating discussion.

                                             

                                             

                                            A few thoughts based on our experience of having worked with a range of social mission focused organisations to help them franchise in a very practical way and the comments above:

                                            • I find the architectural principle 'form follows function' helpful - the form of the organisation must follow its function. So in having a discussion about franchising we are immediately starting with a solution looking for a problem. Problems are solved like this because we are bringing in new interesting ideas that do work in some contexts and may be applicable  - but it is worth noting the very real risk that franchising may not be the right solution for the specific problem. Despite this caution, at the ICSF we find franchising a helpful paradigm to assess a social businesses through as it is the tightest form of control over independent operators. Because of this you can quite quickly flush out if franchising is the right route or if another approach may be better. A quick example: the founder of Starbucks was initially totally against franchising and kept his business wholly owned in its entirety. After a while he noted that certain concessions were not operating as well as others and so he experimented with franchising - now over 30% of Starbucks are franchise operations but only in the places where franchising makes sense for the businesses. 
                                            • Mary - I could not agree more with your comment about the initial business model being proven being the first step. I find it helpful to think about this in the context of these 5 stages  http://www.the-icsf.org/wp-content/uploads/2013/08/5-phases-to-social-replication.pdf. In the developed world we generally find more 'proven' projects that are ready to franchise. In the developing world many sectors are still very early stage and when you really start to dig into the 'proven' models - there are not many, or any, that are ready to consider if franchising is the right scale up approach. Having said this I think that the solar sector is a really interesting one because projects are rapidly becoming 'proven'. For example we are working with Solar Aid to help them scale up across Africa at the moment and they sold 64,000 lights in just the month of February this year. M-PESA has been mentioned as a project that's reached scale, watch out for M-KOPA http://www.m-kopa.com/, made up of some of the M-PESA team who are aiming to crack scale in this sector.
                                            • In theoretical conversations like this I find it helpful look for examples that have worked from other sectors, or ideally the same one, to get a better idea of what is possible. The examples that give me some hope franchising can work in solar are Husk, Sidai and Sanergy. Husk Power Systems http://www.huskpowersystems.com/ are franchising their way across India using BOM - Build Operate Maintain. Franchisees can either do all three, just operate and maintain or choose just operate if they would prefer (At least when I last spoke to them a few months ago - these things can change quite rapidly as business models develop). Sidai http://www.sidai.com/ who provide quality services to livestock keepers across Kenya have in the last 18 months already got around 40 franchisees, many of whom are making very good financial returns on their shops. This model I see as probably the most likely to positively disrupt life for countless millions using a franchising approach. Sanergy http://saner.gy/ is a chain of franchised pay per use toilets but the brilliance is that the franchisor makes their money out of selling the waste as fertiliser and so does not need to make profit off the franchisees.
                                            • One of the main challenges we are seeing at the moment is that it is relatively straight forward to get your franchisees making enough money to run a business. What is much harder to get right is the central franchisor making enough of a profit from their franchisees for the whole system to be profitable. The three projects mentioned above are still relying on subsidies until they reach the holy grail of financial sustainability - but they are on the right path.  
                                            • Franchising works when it is part of a whole system supporting it. McDonalds were able to expand so rapidly because there were suppliers of food and packaging that could grow with the business. The issue we face when working with developing world franchise businesses is that there are so many problems that need to be solved before a franchise can flourish. After-sales has been mentioned but I bet if that this problem was 'solved' others would appear as scale up is happening - problems with last mile delivery, maintaining a brand, theft of intellectual property and the list goes on. Of course problems will arise scaling any business in any context but they are magnified in the developing world because of generally poor infrastructure to piggy back solutions off.
                                            • We have a lot of relevant resources on our web site to answer some of the other questions and we are developing more all the time. Have a look at the resources section of www.the-icsf.org including a 10 questions, 'are you ready to replicate' questionnaire.    

                                             

                                            Despite all the issues noted above, I got so excited about the idea of social franchising two years ago that I quit my job to found a charity that helps others franchise their organisations to increase their social impact. The good news is that despite all the challenges, I am even more excited by the idea now than I was two years ago. If we can find the right proven projects and carefully apply the right franchising principles to them, empowering hundreds and thousands of small business owners, we have the potential to dramatically change the lives of so many for the better.

                                             

                                            Best wishes

                                            Dan

                                             

                                              • Re: E-Discussion #5: Exploring the Franchise Approach for Off-Grid Electrification
                                                C4D Enthusiast

                                                Dean Dan,

                                                 

                                                Thanks for sharing this with us. With regards to your third point on various franchisee business models, I'd like to refer the Franchisee guidelines developed by the Rural Electrification Corporation of India. This guideline expands on your views on BOM  (Build Operate and Maintain) and outlines that there are four franchisee business models which have been identified to distribute electricity.

                                                1. Revenue Collection franchisee - such franchisee is mainly responsible for collection of revenue on behalf of utility from the ultimate consumers in the area franchised.

                                                2. Energy purchase, sell and collection franchisee – such franchisee shall purchase energy from the utility/RESCO at a pre-determined rate and sell to the consumers in the franchised area

                                                3. Energy purchase & sell, collection and O & M franchisee – such franchisee who, in addition to purchasing, selling and collection of energy bill (as mentioned above), shall also be responsible for the operation and maintenance of the local distribution system within the area franchised

                                                4. Rural Electric Co-operative Societies as franchisee - This approach calls for the State to authorize the creation of traditional electric cooperative society that is organized, owned and operated by its members. The society owns the distribution utility assets and is responsible for all utility functions including operations and maintenance, metering, billing and collections, accounting and finance, procurement, stores and system planning and expansion.

                                                 

                                                In addition, this guideline contains a draft franchisee agreement format which will be useful for RESCOs who hope to test the Franchise approach shortly

                                                To view the REC Franchisee guidelines click http://www.recindia.nic.in/download/franchisee_guidelines.pdf

                                                 

                                                 

                                                 

                                                 

                                                 

                                          • Re: E-Discussion #5: Exploring the Franchise Approach for Off-Grid Electrification
                                            C4D Explorer

                                            Hi everyone,

                                             

                                            Kudos to the team that organized the webinar and now facilitates discussion within this group! I work with TERI and co-manage the program to support rural energy enterprises in order to strengthen clean energy value chain across India.

                                             

                                            To begin with, I would re-emphasize on the basic premise that Mohua has put forth: the rural population already represents a group of customers who pay for unsustainable fuels and should NOT be termed beneficiaries. The issue is to facilitate sustainable technology transition, using innovative instruments such as franchising etc. However, the idea of creating rural franchisees in off-grid regions JUST to promote clean energy does not seem to be the most efficient one. Bundling could offer significant efficiency improvement.

                                             

                                            One of the impediments that I have observed (in the context of franchising) is the trade-off between standardization and autonomy. In India specifically, standardized renewable energy products/services carry with them higher transaction costs as compared to other locally available substitutes. This owes to the techno-commercial constraints long embedded within the RE supply chain. To tackle this, TERI seeded the concept of energy entrepreneurship (EE) in certain regions and created a brand called ‘Uttam Urja’ (English: Best Energy). These franchisees (image attached herewith) are given access to a network of reputed solar lighting products and other facilities such as returnable inventory, branding, ERP and other marketing support from TERI. Upon establishment, the EEs become cognizant of the massive market demand and some of them (the more entrepreneurial ones) start procuring local but non-standard equipment for sale and also deviate from the standard processes laid down in the agreement. Unfortunately, this has become one of the prominent mechanisms that franchisees exploit to make themselves financially viable (sustainable??).

                                             

                                            This brings me to the point that Alejandra made i.e. absence of standards can lead to double or triple costs for the poor customer. Does deviation from standards really matter if the franchisees are ready to service/replace the non-standard products under their traditional arrangement with the customer? Unfortunately, that traditional arrangement does not exist with the ‘poor’ customers because of lack of agency and bargaining power (I recall here Anil’s point on a Pyramid at the Bottom of the Pyramid). What could be the incentives (other than cash transfers) that could drive the franchisees to serve the community in a sustainable way? How can we communicate the proven benefits of franchising; long term sustainability by adhering to standards etc. vs. short term financial gains?

                                            SOlar House.jpg

                                             

                                            • Re: E-Discussion #5: Exploring the Franchise Approach for Off-Grid Electrification
                                              C4D Enthusiast

                                              Dear Dan, great post! thank you for sharing your resources.

                                               

                                              Dear Raj,

                                               

                                              to answer your questions:

                                              • On grants:  I agree that the way certain grants are structured do not support the pursuit of viable business models, but I don't think that is the case for all grants. The Monitor/Acumen report "Blueprint to Scale" highlights the role of the Shell Foundation in providing venture philanthropy (ie grants) to support organisations in pursuit of a commercially viable model to delivering energy access. In fact several of the success stories discussed in this thread are partners of the Shell Foundation. This report and the work of the Shell Foundation have informed the design of the MECS Innovation Grants to support an enterprise-centered approach. Could we not see a grant mechanism designed that focusses purely on the "systematising" step outlined in the Step 3 of ICSF diagram shared by Dan (http://www.the-icsf.org/wp-content/uploads/2013/08/5-phases-to-social-replication.pdf)
                                              • On why the uptake of the 3rd party ESCO model is slower than expected: I think everyone involved agrees that the uptake has been slower than expected but with good reason. The mobile operators and specifically the tower companies of India have been supportive of the switch to renewable energy sources and the altogether outsourcing of power to 3rd party ESCOs but it needs to make operational sense to the mobile operator/tower company AND (most importantly) they need to find the right partner. A tower company or a mobile operator must maintain 24/7 power availability to their network to ensure that they are delivering uninterrupted services to their customers. A great example of how effective they are at maintaining a reliable network was the July 2012 blackout in India.  Calls could be made without interruption.  Marrying the needs of the mobile industry with the operational capabilities of ESCOs operating in off-grid areas is easier said than done: can these ESCOs deliver 99% reliable power 24/7, do they have the capacity to operate at scale (100s or 1000s of towers), do they have the financial health to take on the risks of penalties etc... As a result it takes 18 months-2 years for many ESCOs to go from first discussions to pilots to large commercial contracts.
                                              • Our views on the policy barriers: This is hard to comment on as they are different in different countries. In general we think that more can be done to remove barriers for community power models to flourish. The models present significant risks for the telecom providers (placing the reliability of their network into their partners hands) and to the ESCOs (serving a market segment that is thought to be risky and cash strapped). Enablers that we have seen which we would like to see replicated: special concessions made for ESCOs with less than 1MW of installed base, subsidies that support home connections, the government being open to either a mini-grid or energy hub approach (like OMC) to support different models emerging, discussions between the telecom and energy ministries to see how they can work together to improve access ( a mobile customer is also an energy customer) and a fee for service be accepted vs. a fee for kWh.
                                                • Re: E-Discussion #5: Exploring the Franchise Approach for Off-Grid Electrification
                                                  C4D Enthusiast

                                                  This is very informative. Thank you. I understand that GSMA had done some great work around green towers and then published some reports. They have gone silent now comparatively. Would be great to know the focus of GSMA and their vision/strategy on green towers. Informally I hear that GSMA thinks greening all telecom towers is not possible in the near future. This may not be shared widely by GSMA. Would be great to hear your brief thoughts on this too?

                                                   

                                                  Best

                                                  RK

                                                    • Re: E-Discussion #5: Exploring the Franchise Approach for Off-Grid Electrification
                                                      C4D Enthusiast

                                                      Hi Raj,

                                                       

                                                      I would actually say we have been more active recently publishing reports on the opportunities to green towers but we are touching many more geographies.   A full list of our Green Power for Mobile programme's reports can be found here.

                                                       

                                                      You are correct that not all tower sites are good candidates for green solutions. Continued advancements in energy storage technologies and reductions in renewable energy technologies will help. But I do think we are still several years off!

                                                  • Re: E-Discussion #5: Exploring the Franchise Approach for Off-Grid Electrification
                                                    C4D Enthusiast

                                                    Dear All,

                                                     

                                                    The good news is there is an emerging need to develop mini-grid structures inside power utilities worldwide,  because not only the Rich is looking for Cleaner and Safer and Reliable supply avoiding black-outs (many problems with big utility that did not provide good service in weather problems and so); but also the Poor is looking for Energy Access and Reliable service for Economical Development.

                                                     

                                                    For those reasons franchising opportunities need to be related to regulatory rules that allow the development of these mini-grid structures within the main utility with a concession contract in that area, including standards and compatibility that later allow connection and energy exchange.

                                                     

                                                    Furthermore, on this discussion and the potentiality of these mini-grid structures; please find here a work from the Professor Ilic from Carnegie Mellon on her presentation on Dynamic Monitoring and Decision Systems (DYMONDS)

                                                    http://dimacs.rutgers.edu/Workshops/Infrastructure/Slides/Ilic.pdf

                                                     

                                                    This topic is also under discussion on the power utility regulatory councils in USA. Adding to this dialog is “Americas power plan” which was just released yesterday and covers these ideas in more detail. http://americaspowerplan.com/ ; where  Prof Ilic was one of the reviewers.

                                                     

                                                    Similar approach is under development in the European Union.

                                                     

                                                    I hope it helps,

                                                     

                                                    Regards,

                                                     

                                                    Alejandro

                                                     

                                                    • Re: E-Discussion #5: Exploring the Franchise Approach for Off-Grid Electrification
                                                      1231309 C4D Extraordinaire

                                                      Concluding Remarks

                                                       

                                                      Dear all,

                                                       

                                                      Thank you for the very interesting contributions made by both 'expert contributors' and fellow participants. While I recall below some of the points made during the e-discussion, we would like to invite all participants to provide some concluding remarks addressing some of the main issues raised during the 2 weeks long e-discussion:

                                                       

                                                      • One of the main considerations raised by participants while discussing the 'franchise approach' lies in the maturity of possible franchisors and their business models. Recalling Monali's and Raj question, we would appreciate your views on when can we consider that a private sector player is robust enough to expand through franchising? and when a particular business model is ready for replication? Is the fact that private sector led energy access business models have a short track record an impediment to franchising? Or can franchising still be implemented, helping therefore to demonstrate and develop further business models that have proven to be successful elsewhere?

                                                       

                                                      • On the Franchising model itself, we have seen that different levels of customization or standardization can apply, and that the sustainability of a franchise model lies in the ability to define to which extent a model should be replicated as it is or adapted to the local conditions, cultural contexts, technology requirements, customers base, etc. In the particular context of energy access, is customization to local conditions absolutely required? and if yes, why, to which extent and for which specific parts of the business model?

                                                       

                                                      • Finally on the relation between Franchisors and Franchisees, what core attributes and capabilities are required respectively from franchisors and franchisees in order to successfully develop a franchise approach? Please highlight general considerations as well as specifics that should be emphasized while looking at the particular business of providing energy services to rural customers.

                                                       

                                                      Many thanks again to all and looking forward to hearing your views on all of the points mentioned above.

                                                       

                                                      Kind regards,

                                                      Yann

                                                        • Re: E-Discussion #5: Exploring the Franchise Approach for Off-Grid Electrification
                                                          C4D Enthusiast

                                                           

                                                          I would like to thank everyone who contributed to the rich discussion.  Reading your various comments has led to some new insights for me on the subject of franchising.  In my view, the role of the "franchisee" in our example of delivering access to electricity, is essentially to identify and "package a new customer base" for the "mother company" i.e. the franchisor.


                                                          The value added that the franchisee brings into the equation is his knowledge of a new market, getting new clients to sign up for the service, and his ability to follow a set pattern of service delivery and collection of customer revenues from that newly identified market.  The customer interface with new clients is his contribution.


                                                          The value added that the franchisor brings into the equation is the technology, the knowledge of how to configure an energy delivery system for a new group of customers, as well as how to troubleshoot, and how to price the service.  All this may be compressed into the term "tool-kit for commercially viable energy generation and delivery", which is the contribution of the franchisor.


                                                          If this is so, then perhaps the franchisee is initially serving as an outpost or a "branch" or a local distributor for the franchisor, and not actually functioning as a fully independent business in the true sense of a franchisee.  Initially therefore, he is fully integrated into the franchisor's supply chain.

                                                           

                                                          With time, as he gains familiarity and accumulates some savings and gains financial strength, he may be able to buy out the local "outpost" of the franchisor's business, making himself more independent, and thereby become a "true franchisee".  However, given the need for volume efficiencies in keeping technology/hardware procurement costs low,  it is likely that he will still procure his required hardware from the franchisor, whom he will then use as a centralized procurement agent.


                                                          The commentators who have cautioned that none of these business models are fully proven yet, are indeed correct.  But then I would like to ask our franchising experts whether a start-up company by definition can never be a franchisor, because it does not have a long enough track record of operation?


                                                          I will follow with great interest the answers to the questions posed by Yann above, i.e. how do we decide when a business is ready to be franchised? and what are the specific capabilities and attributes required for a successful franchisor?


                                                          Thank you

                                                           

                                                          • Re: E-Discussion #5: Exploring the Franchise Approach for Off-Grid Electrification
                                                            C4D Explorer

                                                            I would like to thank The World Bank and especially Yann for providing with this opportunity to discuss one of the pertinent issues relevant to increasing access to electricity. Although the focus is on franchiser and franchisee attributes/ business models etc, i would want to express the importance of external factors which needs to be looked at from ground experiences.

                                                            Franchisee model could really work subject to following:

                                                            1. The solution of three major challenges for any off grid electrification posed to a franchisee must be resolved for ensuring franchise model to work:
                                                              • to have a low cost effective solution (off the shelf) for collecting the revenue from the consumers.( e.g prepaid metering)
                                                              • what will happen to their investment once the government grid arrives- there needs to be clarity on this for any financial institute to lend to mini(micro) grid projects.
                                                              • innovative financial mechanisms including but not limited to revolving fund, catalytic facility, bridge finance.
                                                            2. Providing electricity is a state subject (at least in India) and hence if we are looking on sustaining franchise model on a longer term horizon state governments (electricity board/regulators/DISCOMS) need cognizance is necessary. For example the grid infrastructure standards that needs to be adhered, metering equipment etc.
                                                            3. my personal understanding is that in the rural market the dynamics of economics, cultural and social aspects are massive hence one solutions fits all can´t work. hence a level of customization will be needed in service delivery models.


                                                            Based on above i would conclude by stating the need of strengthening institution through regulatory interventions and technical standardization could be the starting point to have sustained franchise models for rural electrification.


                                                            Thanks and look forward to further comments and criticism.


                                                            Best Wishes,