Overview: PAYG KPI Framework
The Distributed Energy Service Company sector is growing rapidly, especially the segments that use a variation of the Pay-As-You-Go (PAYG) business models, which alone have provided more than 700,000 off-grid solar energy connections over the last six years in East Africa.
PAYG companies deploy various lease-to-own or direct pay-per-use business models. Through these services, they offer accessible and flexible payment plans to customers, including those that typically do not have credit histories or bank accounts. Through scratch cards or a cell phone and a mobile wallet, customers are able to pay for energy as they go, and benefit from electricity to light their house, charge their cell phones, and power essential appliances and electronics.
The distributed Pay-As-You-Go (PAYG) solar energy industry has shown vast potential and attracted various types of financial support. However, it is a very capital intensive sector, so while the PAYG industry has raised over USD 300 million capital since 2012, commercial level capital is still needed to finance the increasing capital demands of the sector.
Being a relatively new industry/asset class, there is limited information around market size, effective policy incentives, business model dynamics or financial and operational performance of PAYG companies. Both investors and companies agreed that increased availability of data and reporting standards could help increase transparency and manage perceptions of risk. Looking at how other sectors have dealt with similar challenges, it was agreed that a KPI framework and increased capacity around data reporting and standardization would be of great benefit for the sector.
The WB and IFC, together with the Global Off-Grid Lighting Association (GOGLA) Secretariat and its members, have developed a KPI framework for the PAYG solar off-grid sector. The framework seeks to increase transparency around operational and business model performance of energy service providers, expand market data availability and reliability, and ultimately enable a more robust understanding of the sector — facilitating investments and sector growth.
The KPI framework can be a basis for the development of financial vehicles, operational tool-kits and policy programs that are critical for the sector’s growth. Once fully implemented, it will enable the establishment of new industry standards on well-defined indicators that (1) quantify the major risk factors, (2) are practical to compute given the industry’s data collection and analysis capacity, and (3) are useful for both PAYG companies and financiers as a starting point for identifying and assessing investment opportunities.
The KPIs are only valuable when used. Together with several partners we are working to develop knowledge resources and toolkits to help companies report on the KPIs, investors better understand the KPIs and other actors to draw insights from the KPIs. Stay tuned for more information, including whitepapers, blogs and ways to increase your data management capabilities.
- Announcing the First-Ever Key Performance Indicator Framework for the Off Grid Solar Pay-As-You-Go Sector, May 25, 2017
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