Managing complexity - digital tools for the mini-grid space

Speaker 1: 0:09

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Speaker 2: 0:35

Hello, this is Nico. Today's subject is Managing Complexity Digital Tools for the Mini-Grid Space. My guests are Tobias Engelmeyer from Vida and Emily McAteer from Odyssey Energy Solutions. Emily is the CEO and co-founder of Odyssey Energy Solutions, a platform to scale distributed renewable energy development in emerging markets. Tobias is the CEO and co-founder of Vida, a map-based risk analysis software. He lived and worked in India, africa and Europe as a technology and infrastructure entrepreneur.

Speaker 2: 1:10

Many mini-grid companies are trying to keep their operations simple, to reduce complexity. When you talk to mini-grids CEOs or mini-grid management staff, they keep telling you oh, mini-grids are so complex, that's because mini-grid companies don't just operate mini-grids, they also construct mini-grids, they plan, they develop mini-grids, they identify sites, they procure equipment, they do the logistics in a very complicated area and, after all, establish the mini-grid system on site, connecting to the community, establishing good relationships. All of that is very complex. And then the operations come in, and operations means you have to understand your customer, you have to work with the community, you're in, and then there are a lot of quite difficult technological tasks, and these technological tasks comprise collection of payments for electricity, provision of appliances to customers and many more. So, after all, mini-grids business is complex, would you agree? What do you think Is the mini-grid business complex and what is so complex about the mini-grid business?

Speaker 3: 2:24

I was talking with someone this morning actually, who said to me we need to start calling it mini-grid utilities all the time, rather than just the mini-grid sector, because that's really what these companies are they're utilities, and no one has ever thought that utilities are simple, right, the utility business in any shape or form is a very complex business where you're managing massive infrastructure, matching supply and demand and then connecting with many small and consumers. So mini-grid companies in that way are no different from any vertically integrated utility company. That's partly what's so complex about mini-grid operations is that every single company is pretty much vertically integrated. They are developing, building and operating full assets, full power plants albeit small ones, but still complex ones and managing their customer base, who are often in rural areas, a customer base that hasn't had a lot of exposure to utilities before. There's various sort of complex ways that these customers pay for power. So in some ways mini-grids are as complex as utilities, but in other ways far more, because of the way that they operate and where they operate.

Speaker 2: 3:37

Yeah, I would even say that what mini-grid companies do goes well beyond what a large utility does. As you already said, a large utility would not construct and commission large power stations themselves. They have their subcontractors for that. But in the mini-grid space you don't find a subcontractor which can do that at a relatively low cost, so you do it yourself. That increases complexity, of course. And then I agree that even large utilities have a lot to do in managing their customers.

Speaker 2: 4:13

But in the mini-grid space it's not just managing your customers but also equipping your customers with the right appliances, making sure that their indoor installations are proper, like in large utilities. If customers come and say, hey, my light is not working, what does the utility do? It says, go to an electrician. But in the mini-grid space you cannot do that. There's no electrician in the village. So what do you do? You take care of the light in the house and make sure that it works again. That makes the business very complex. And at the same time in a large utility you have a few customers with relatively large revenue, and in the mini-grid space you have got many customers with very little revenue. But the number of questions by these inexperienced customers in the mini-grid space are probably more than in a large utility space. So yeah, very, very difficult and very complex.

Speaker 3: 5:09

I think you raised an important point there. The mini-grid companies are responsible for demand as much as they are for supply, which is very different from utility. Utilities deliver power and their customers sort of buy the appliances and have a lot of pretty consistent demand. But because mini-grid companies are often operating in a place that has never had power before, not only are they expected to supply power, but they're expected to play a key role in the things that use power, which just adds a whole, nother complex dimension of their operations on top of an already pretty complex business model.

Speaker 4: 5:43

I think when I look at the mini-grid sector, then I wouldn't say it's more complex than utilities necessarily, and I'm not sure the comparison matters, because if you want to build it, nuke their power plan. That's probably pretty complex too, and they're trying to match demand and supply in many ways as well, especially in the new kind of energy transition scenarios. What really for me stands out in the mini-grid sector, and if we speak about electrification especially, is the location of where business is operated. Emily, you mentioned it, nico, you mentioned it too. It's customers that have often a low ability to pay. The margins are very thin. They might not use much energy to begin with, so it's the stimulation part that's really important, and they're just very difficult to reach and get to in many places. So it's just everything becomes very costly for a customer base that doesn't have much of an ability to pay for it. So I think that's probably where the complexity stems from in my mind.

Speaker 2: 6:39

Yeah, and now. The interesting part of our discussion here today is that all three of us are trying to help mini-grid companies handle that complexity through digital tools that we developed in our respective companies. Who wants to start introducing quickly what?

Speaker 4: 6:59

you do. We provide a map-based software that allows people to assess the risk of investing into infrastructure in a location. In the case of mini-grids, the risks that we're looking at are especially demand risks. Where do people live? Where are settlements of a certain density? How easily can you reach them? So accessibility risks, climate-related risks, changes that are happening around the villages, risks around longer-term off-take, what's the agriculture around? All the risks that are contextual are assessed in VEDA. There's the aggregation element where you can look through VEDA at countries. We're just starting work now with the World Bank on 56 countries. It's all of Africa. It's going to be many other countries outside. This data will become freely available where we just map out where grids are, where villages are, where people live, and from that extract interesting, attractive potential locations to build these grids Interesting Emily.

Speaker 2: 8:00

What does Odyssey Energy Solutions do?

Speaker 3: 8:02

We have a digital platform to support every phase of the project development process for mini-grids and distributed renewable energy projects. We support financing projects, procuring equipment and then remotely operating assets. The idea is that if you can standardize and use great software for every step of the process, you can streamline your operations and scale faster. Within the finance part of our platform, we work with two different types of capital. We work with commercial capital banks, international finance institutions that are looking to provide debt or equity to portfolios of distributed energy assets. We also have some specific software tools built for concessional capital providers. I think governments, donors, development finance institutions that are deploying capital through results-based financing schemes.

Speaker 2: 8:53

All right and Inensus started developing some 12 years ago a software which has evolved over time and is called the MicroPower Manager, which is a mini-grid customer management tool. The core of it is that it handles all customer requests through a ticketing system, it integrates bi-directional SMS communication with the customers, it helps managing cash flows from the customers, it helps selling appliances electric appliances to the customers through deferred payment schemes, and records all the data and all the energy flows and cash flows and communications between the company and the customer in one database. Yeah, now I think the interesting part of it is that each of our companies has gone through a development. I already said like we started this 12, 13 years ago and initially we thought, okay, this could be a software that mini-grid companies would need after some time. And then initially we developed it for our own subsidiary, and I know that many other companies did the same thing. They developed software for their own use.

Speaker 2: 10:08

And then after some time we said, okay, well, if we just use it for ourselves, it's a lot of money spent for very little effect. But if we now make it a product, then more companies could use that. But after all, companies were not really interested in paying for such a product. Then we said, okay, but still it's needed and people ask for it. They are then just not ready to pay for it. And then we said, okay, let's make this open source, and we published it at an open source license in 2020. And I understand that your respective companies, emily and Tobias. You have gone through a journey which is not too far from what I just explained. Do you want to tell that story?

Speaker 4: 10:52

Sure. So you're right, nico. We actually started off with Vita with the specific premise to help mini-grid developers identify sites faster and develop sites faster. At that time we were supported by the European Space Agency and we really looked at that. And when we developed the first product we had a lot of really valuable input from mini-grid companies. I remember especially PowerGen. They gave us enormous support, helping us understand the challenges, and then we built a software and I think that was just around the COVID time.

Speaker 4: 11:26

So everything kind of slowed down. So in one sense it was good because we brought a digital tool to market that allowed people to find sites, maybe to some extent. Initially we thought maybe replacing site visits, that's not the case. We thought that. But then the whole market slowed down a lot and we got into a situation where we thought as a company we need to understand how we can really build the best possible technology and what that takes. So we knew, even if we wanted to serve and continue to serve the mini-grid market, we need to find people who are paying us for it, which weren't the mini-grid players at that time. But you know and actually, emily, actually we have some good use cases where we worked together on that.

Speaker 4: 12:07

We found that there were the donors behind it, the big development banks, even the governments, that were really interested in playing the groundwork for expansion of electrification and using software tools like ours.

Speaker 4: 12:17

We then went even further and said look, if we build a software that fundamentally helps people identify locations and assess the risk around them, that's not only something for energy, that's something that can be used for infrastructure more broadly, which is what we're doing today.

Speaker 4: 12:33

So you then have a journey, and that journey can either take us away from the mini-grid market because the mind chair, the part of the product might move in a different direction and larger infrastructure, but what we're really driving towards is we want to use that bigger market that we're serving to build an excellent technology that can really be useful in the mini-grid sector. And what we see now is the first kind of and maybe that's another part of your question, so I don't want to go into it too much, but we now see the first kind of shoots of hope. Or we see, okay, there's actually a couple of companies now that have raised significant amount of money. There are a couple of companies now that have very ambitious expansion plans. So is this market now finally taking off and are we then ready with a product for the market that is really, really useful and it's actually much better than what it was a couple of years ago through our other iterations?

Speaker 3: 13:23

So we actually had a little bit of a different journey. Odyssey started out as a platform for financiers. Our first customer was the World Bank, who was deploying many millions of dollars into distributed energy assets in Nigeria through the Nigeria Electrification Project and needed a software to standardize the way mini-grids were assessed, the way that administrators of the program were interacting with all of the different companies that were participating in it, and they really sort of had the foresight to understand that software was going to be an important part of scaling capital deployment. So that was sort of where Odyssey started, and as we brought more and more mini-grid companies onto the platform through the financing programs that we were running on the platform, we realized, hey, we could be useful and offer more to these mini-grid companies than just a place to go get their concessional capital financing. So it was later on, a few years into the company, that we actually started to roll out technology and services for mini-grid companies directly.

Speaker 3: 14:24

That's where the procurement part of the platform came into play, as well as our acquisition of a company called FernTech that does remote management and control of assets. On the procurement front, the sort of willingness to pay issue is a little less relevant, just because what we're trying to do with procurement is actually bring cost savings to companies. So can we aggregate orders, develop relationships with OEMs on behalf of smaller developers and then deliver savings to them through economies of scale. But on the remote management and control part of our platform, which is essentially an entire platform, to either install hardware or, through API access, monitor your assets, turn things on or off, set logic loops to optimize the way your systems are run, all of that very much kind of follows a similar profile to what you described, where it's critical for streamlining the operations of mini-grid companies but also tough for mini-grid companies to be able to pay for that software.

Speaker 3: 15:22

What we have found is a company will reach a size and portfolio sort of complexity of portfolio in which they start to absolutely need the software, and those are the companies that we engage with. And then for the smaller companies that would benefit from the software but don't have the sort of urgency because they don't have the size of operations, they're not using our software and they're using kind of whatever they can cobble together, which is usually sort of the out of the box monitoring that comes with a inverter manufacturer, or we're working through donors to bring them the technology they need to help them scale, but they're getting it through a different route versus paying for it directly. So we have a partnership, for example, with AMDA, the African Mini-Grid Developers Association, to provide some of these technology solutions to mini-grid developers, so that they're both able to provide really important sector data to AMDA, as well as start to scale their operations by having access to good management technology.

Speaker 2: 16:18

You just said, emily, that larger companies you're working with make enough revenue to also be able to start paying you right For the services that you offer, besides the other things that you do for the donors and besides the other things that you do on procurement. So now, how do you think we can get the small companies, all these small companies, to get to that level? Because at the moment I see three, four, maybe five large companies. Some of them have their own software. They don't even use their party software because they say, well, we are a large utility or so we have our own software in-house. Or they say we have ample experience in mini-grids and right from the start we had started developing also our software.

Speaker 2: 17:05

Now why should we switch to a different software?

Speaker 2: 17:09

Because all our knowledge is in the software and it's also a USP that they sell to their investors and say, hey, nobody can copy us because we have our own software. But if you look deeper into what they actually have, the software that they are running is not that sophisticated in most cases. If you put, for example, odyssey and MPM Micro Power Manager together, you probably have a wider range of services that you could deliver to these companies, to the customers, especially to the mini-grid customers, compared to what most mid-size or large-size companies have? Do you see that there is some kind of consolidation coming to the software market? Do you see a future where even smaller companies embrace digitization and make use of these opportunities that come with the digitization reducing OPEX and so on? Or do you think we will just continue working as we're doing, with kind of running from one donor to the next and offering services to those and not actually asking those people to pay for the software which could have the best use of what we have to deliver?

Speaker 3: 18:25

Yeah, I mean, I think the dynamic that you just described is a very common one for enterprise software more broadly. This is not necessarily a trend that's specific to mini-grids. In nascent sectors, where digital solutions are also nascent, you often see companies sort of trying to develop solutions in-house until there's an enterprise solution that actually saves them money and has more functionality, as you describe, versus what they can build in-house. Their investors aren't necessarily seeing their technology capabilities as their competitive advantage. Rather it's sort of their mini-grid business model. Okay, I think in that regard we're sort of just going through a pretty standard industry development.

Speaker 2: 19:08

We have reached that point when mini-grid companies finally change or switch over to more professional software than those that they build in-house.

Speaker 3: 19:17

The real question is when will we start to see more of the sector scaling? When will we move beyond the top three or four that have portfolios and need these solutions? Because you can get by for a long time cobbling things together if you only have three or four mini-grids that you're maintaining, but as soon as you have even a dozen, you start to realize that it's going to be a lot cheaper using digital tools to manage your operations than manual tools and sending folks out to site. Those cost savings are palpable pretty quickly.

Speaker 4: 19:44

In my experience, the mini-grid sector has actually been quite tech savvy. I mean, if I compare it to some of the other user groups we have, including in Europe or the US and the kind of utilities infrastructure investors, these are much more inflexible structures. They think very, very long term. They're very, very risk averse. Compared to that, the mini-grid guys, based on their sheer challenge they faced, which we discussed in the beginning, they're very innovative. They're frugal. A lot of the software actually came out of the sector. It's people who said we've built something for ourselves and let's take it out. Your question also points to the fact that there's not an established suite of maybe odyssey the exception nowadays but there's no established suite of software in the market that all the mini-grid guys use and that just follows their workflows currently. I would think that's probably because the market just hasn't grown enough yet. There aren't enough players that build enough mini-grids at the moment. There's another kind of angle to this, which is that willingness to pay element. What I find there is that the business is often driven of the mini-grid developers, that when we interact with them, it's often driven by processes that are only partially in their control, but they're driven by how programs are run in certain countries and how donors operate. They follow these processes and they have all kinds of challenges around the tendering processes and all that. There's a lot of headaches that they have to deal with In few countries. Is it really a free market where you can just look at it and say, okay, what should we do? What are the best options? I invest here? What's my best way of doing that? Where can I build a profitable site or sustainable site and then choose the best way of getting there? The industry seems to still be driven by these competing non-market drivers too much. That's one angle to it. There isn't that much money in the market yet because companies aren't that big and because customers don't have much money. That's just a current fact. That might change over time.

Speaker 4: 21:56

One way that we find to get out of there is that currently in discussions with. So with Vita, we sell licenses to use the software and there's data. The data will be made on where good sites are, for example, will be made available, as I said before, for example through an investment from the World Bank, to all these countries. It's just going to be there. It can be ingested into Odyssey, it can be ingested in Minigame Manager. It can be, it's there. The second thing the software itself, the Vita software, which allows you to work with that data, to add your own data to it, to your analytics, that part where you pay a license, a software user license. There we're also currently speaking with donors about whether they will just buy a whole packet of licenses and then make it available to minigame developers. It's not a perfect solution by any means, but it might be a way to just move along and get everybody onto the same digital page.

Speaker 2: 22:54

Yeah, my experience with minigame companies shows that the companies don't only shy away from using the computers, but they are always very hesitant in establishing the backbone, so to say, like establishing reliable internet connection on site. In many cases this means satellite communication, establishing basically the IT knowledge in house. Most minigame companies don't have IT staff. They do it with the engineers they have, but there's so much data that needs to be handled by minigame companies that it makes a lot of sense to have IT staff, but minigame companies cannot afford yet many of them. Is that also your understanding that this may actually keep minigame companies from embracing digitization fully?

Speaker 3: 23:52

Yeah, I will say it is our experience that we do a lot of capacity building with minigame companies when we're working with them to use our technologies. So one challenge that we have in providing a suite of remote management and control technologies to minigame companies is that we end up providing a lot of services alongside that a lot of education around how to use these IT technologies, even engineering and design decisions early on that start to factor into how they monitor their assets, and that's a struggle for our business model, because it means that every customer we work with it's not just an off the shelf license hey, go plug this in and start operating. It's a very close working relationship that requires a lot of resources from our side, which we love doing, because we learn a lot from every minigame developer that we engage with and feel like we can provide them a really good solution if we understand their operations intimately. But as we think about scaling, it'll become a pretty big challenge for us.

Speaker 2: 24:49

And it's building. Let's take that up a fold probably takes a lot of effort and cost a lot of money, probably to offer that one-on-one individual service. Who's paying for that? Is that the mini-grid company? Are you taking funds from I don't know third-party donors, or how are you setting up that service? How are you paying for your staff providing that service?

Speaker 3: 25:09

Yeah, I mean sort of wherever we can get it. So you know, we do charge mini-grid developers for customization. As I mentioned, we work with donors who sometimes will pay for Odyssey on behalf of mini-grid developers as an effort to get more data into the sector. But it's certainly not a straightforward business model yet because of the challenge that mini-grid developers have in paying for digital solutions. I was also reflecting as Tobias was talking.

Speaker 3: 25:34

I think even the representation of the three companies here today speaking speaks to how complex digital solutions need to be for mini-grid operations because, as we talked about in the very beginning of today, they're just complex operations.

Speaker 3: 25:47

So even if you had more IT resources within your company, you'd still have to have a lot of in-house capabilities just to understand and manage a full suite of digital tools. And to give you an example, odyssey, I mean. We've invested a lot in remote management and control technologies but even as a company specifically focused on software solutions for the sector, we haven't touched, for example, what MPM does right. We don't do customer management, we don't do ticketing, because it's just a lot for us to handle the management of the system and then move into customer operations. Similarly, we don't do geospatial analysis like Vita does, because again, that's just one more step, a whole another set of technologies. That would be a lot for us to invest in. So you can imagine a mini-grid developer having so many digital solutions that they need and it just being a little bit overwhelming because it would be completely impossible to invest in the full suite of what could really streamline their operations from beginning to end.

Speaker 4: 26:48

Can I just throw in a question here, because that opens an interesting alley and we might be slightly different in how we're approaching this at the moment. So in our case we're saying what we do is relevant for mini-grid developers but it's also relevant for other planners of infrastructure in other markets. So we're building a technology based on a larger market and we're hoping that that will make it better for mini-grid developers. In your case, emily, if I understand correctly, you really kind of build for this market as it is and it's this kind of specialization, this focus, that you think makes it better for the industry. Right, it's a very different approach and it might be along this complex technology stack that you just outlined. There might be technologies that come in from the outside, there might be technologies that are specific to the sector and there will be kind of different types of solutions along the way.

Speaker 3: 27:39

A bigger market for us is not mini-grids, it's CNI, another distributed energy project. So what we found is the way to be able to scale our software is to make our technology equally applicable across mini-grid and adjacent sectors, and now we're looking even at mobility sectors, for example, a lot of the tech in terms of how do you finance assets at scale, how do you remotely manage distributed infrastructure, is pretty similar across a number of different sectors. The challenge that we've all experienced is building just for the mini-grid sector can be a challenge just because of its size and pace of growth.

Speaker 2: 28:13

Emily, earlier you mentioned data. There is a lot of data involved here and a lot of data is stored on your platform. And in the Vita case, well, you don't get the data from the electricity customers. You probably don't get data from the mini-grid company itself, but you also handle a lot of data which is also confidential, right? Because if a mini-grid company selects a site, definitely they don't want others to know which site they're actually looking at because they heavily invest into that site. So now my experience again with mini-grid companies is that they don't like to share data, really. So how do you convince mini-grid companies that you can handle their data and that it's safe on your server and that no other company and no other individual competitor or whoever would be able to touch that data and make use of it for their own purposes, right? Like, how do you do that, especially Emily? Like how do you do that in Odyssey?

Speaker 3: 29:15

We had to basically take a very conservative stance on data ownership and sharing on the platform.

Speaker 3: 29:22

So since day one of Odyssey, we have made it clear that we don't own any of the data that's put into the platform.

Speaker 3: 29:27

We can't do anything with the data even polish anonymized data sets without the explicit permission of whoever put the data into the platform. So that certainly, I think, held us back in some regards and even held the sector back. I mean, there's days that I wish that we could publish beautiful reports about all of the amazing data we're getting from the 4.7 million meters that we have on our platform. But we felt like that was a really important stance to take to make sure that we could build the trust with the developers that were using our platform, and so our approach now is to work through industry players that do have trust from their partners and then they explicitly permission the data to be shared. So I mentioned this earlier, but we have a partnership with the African Mini-Grid Developers Association, who works with their partners to determine what data can be shared and what would be useful to publish for the sector, and then Odyssey simply plays the technology role of making that happen securely and safely.

Speaker 4: 30:23

But we don't work to go through the data from mini-grid developers and in our case the same is true, as Emily just said, the data that is added by users. So users add data in their site selection process so they might add information about a prospective site and that is very kind of sensitive information for many mini-grid developers what sites they're looking at and what their criteria are for selecting sites. At the moment I think they get a lot of the information from our geospatial analytical sources, but then they add their photographs, observations, notes, all that kind of stuff, and that isn't shared across the spectrum. We are, of course, a European company, so we've fallen with all the data laws, which are very stringent, especially when it comes to personal data and data of individual people. But I just wanted to mention one very interesting case where this data sharing does work, and that's if you look across sector and we do that currently in.

Speaker 4: 31:15

That's an example where this is done in Nigeria on the Vita platform, where there are companies that electrify, that provide notification solutions, minigrid developers. Then there's companies in the agricultural agribusiness market. They sell machinery, they sell various agricultural products, they're companies that purchase agricultural produce and they work together in parts on the Vita platform to see, okay, where are places that we could jointly go and develop, and that seems to be quite attractive. And we've even brought in now the, the REA, the government, that can now say how they want to support it in different ways. So there you have some degree of collaboration.

Speaker 2: 31:56

Have you ever tried calculating how much money minigrid companies can save using your software compared to conventional approaches of manually managing minigrid, for example, or assets or identifying sites traveling there? And that as I?

Speaker 4: 32:15

said, we don't have minigrid companies currently as a important customer base, but the value proposition is. Two faults. So the immediate one is, yes, how do companies find sites today? They send somebody around on a bicycle, on a motorbike, on a bus, they take pictures. Some cases they tried out drones, so you know they're different kinds of, but it's basically it's that they use Google Maps. They kind of try and cobble data together, information together. It's a very, very low cost activity for them, right? Sending somebody around on a bicycle doesn't cost a couple of you know, 10, 20, 30 dollars a day or something like that. The real cost, and the real kind of cost, comes when you select a site that isn't a good site because you then invest your, you build your infrastructure there and that's it. You know you're there, you're not going to fold it up and bring it somewhere else. And bad site selection, I think, is a huge contributor to cost or, if you like, to limited revenues and sustainability of mini-grid sites.

Speaker 3: 33:19

The way we think about cost savings is there's sort of three areas in which you can reduce cost if you're using good management and control technology for your operations. The first is obviously avoiding sending someone out to site, so remotely troubleshooting, as much as possible. The amount of savings that's associated with that is very dependent, obviously, on where the sites are, but we've seen significant savings even for sites that are in Lagos, for example, because getting a technician to make a four-hour journey across Lagos and back is a full day just to to check you know one thing out. So that's the first area. The second is in terms of just sort of optimized operations, so using your diesel generator less, because you're using our, our logic loops to essentially have the different components of the system work better together and be more demand responsive. And then the third savings use case which is really interesting and has sort of come to light recently with some of our users is Cat-Bak savings, because if you can design the system knowing that you'll be able to optimize operations, you can actually buy, for example, a smaller battery than if you knew that you'd have to cover sort of all periods of low PV production with your battery. And so we've seen customers very tangibly making design decisions up front, taking into account the fact that our technologies will save them money. We have anecdotal use cases of about 30% savings, but I think that's very conservative.

Speaker 3: 34:45

When you sort of put off three of these different saving pieces together, I think the cost savings can be quite significant.

Speaker 3: 34:52

And then just one more thought on this is on the donor and sort of funder side.

Speaker 3: 34:55

I think there's been a number of collaborations between Vita and Odyssey to support donors and setting up financing programs, and those almost always start with feasibility analyses, which used to be an extremely expensive effort for donors. I mean they'd pay consultants who had one by one build very detailed analyses of each individual site and usually right away need to send folks out to site to survey them. And Odyssey and Vita put together we've come up with a very sort of standardized and streamlined way to get 90% of the way there just with digital technologies identifying sites geospatially via Vita and then moving those sites into Odyssey and using software technology to run standardized, for example, financial models across 100 sites at once rather than manually putting each site into an Excel model. So those savings probably take a while to trickle down, but I think it does, at the end of the day, mean that concessional capital can get up and running faster and probably have more available for the subsidies for projects versus spending money on the preparation of a facility.

Speaker 4: 35:54

I think that's a really good point there. The cost savings is one side of it. The other is the acceleration and aggregation, and that's just absolutely critical. It's really about time right. The pace at which we're currently progressing doesn't do justice at all to the problem we're trying to solve, so we really need to massively accelerate it, which these digital tools enable, in a way that non-digital just can't do. All right, fine.

Speaker 2: 36:20

Let's go back to the mini-grid companies. If you put yourself into the shoes of a mini-grid company and you start off a new business in a new country where you have some capital not too much like little capital for one or two mini-grids to start off with, what technology or technological solution on the IT side would you select? Would you say, okay, let's spend large amounts of our budget to really have highly sophisticated IT and software right from the beginning? How would you start integrating those? Would you buy from the market? Would you try to develop yourself? I know it's a tricky question. Can I rephrase?

Speaker 4: 37:01

the question Nicole.

Speaker 4: 37:02

Yeah, okay, rephrase the question why start with one or two mini grids. Why not find a way to start with 50 mini grids or 100 mini grids? Why not try and figure out how to do that at scale, because all software solutions work at scale. If you're not scale like Emily said before, if you're not scaling, then you can do everything manually. You're testing things and, as we know as well, that's really really expensive. Right, you need to build everything from scratch for this one. It's not going to work. So, in order to change the unit economics, we need to figure out how to do things at scale and rather than kind of starting with one and then going to two, and then going to five and then going to seven, and by that time you know three years have gone by and you've kind of you're really struggling. Is there any way? I didn't know it was very difficult and I know it's very tough, but is there any way we can start with 50 or 100?

Speaker 2: 37:49

Well, my experience is nobody will give you the money for 50 on your first day because you've never proven that you can actually do a good job and handle the technology, handle the customers, handle the complexities that we're discussing today. So any bank, any investor would first want to see that you can actually do what you promise and they say, okay, set up two, set up five, whatever. But I don't give you money for 50 now, but show me that you can do it and then you will get the money for 50. But that is not the question. If you are supposed to start with two or five, what should you do? And that is exactly the question and the challenge that most domestic African mini good companies are facing.

Speaker 4: 38:31

So then my answer would be don't do digital, just do one, two, three, four, five. Prove the case. Then go back to your funder, say I want to do 100 and work with Odyssey and Vita and everybody at digital.

Speaker 2: 38:44

Yeah, but then if you do everything manually, your investor will say, hey, we're so far from EBITDA positivity you will never break. Even if you do it like this, this is not scalable.

Speaker 3: 38:56

Ideally, you want to have all your digital institutions set up at the outset. So then you build your first couple of mini grids. You collect really great data on them. You can tell your investors hey, I understand intimately exactly how the revenue profile every single customer is going to look like and I can show you that I'm running my system as optimized as possible. But that is a bit of a pipe dream, obviously, because that's a lot of investment for your first two mini grids.

Speaker 3: 39:20

If you are looking to build two mini grids and you want to make sure you're at least collecting good data so that you can figure out how to scale from there, there are some out of the box solutions that don't cost anything that you can make use of.

Speaker 3: 39:33

So choose a inverter manufacturer.

Speaker 3: 39:37

That's going to give you pretty good data from the system Not as good as what you'd get from installing our fern suite, but you know Victron will give you good information about what's happening and you can start to do analytics on that data that can show that you're learning from the data and as you scale, you'll automate some of the maybe manual data analysis that you're doing in the beginning.

Speaker 3: 39:56

Similarly, you know you'll have to use a smart meter from the outset. So leverage the tools that the smart meter does provide in understanding your customers and collecting data from those smart meters. Use the CSV exports that the smart meter is going to send you and start to set up at least the processes of analyzing data so that when you do start to scale, you can figure out how to plug in technologies that will allow you to automate that. So a perfect example is you know you've got two mini grids, get an export from Spark meter, run manual data analysis on those and then, when you do your next 10, come to Odyssey and automate the smart meter analytics, because you know what you need from more advanced technology solution.

Speaker 2: 40:36

Yeah, and that was also the point where we decided to make the micro power manager open source, because we thought, ok, if people can start with at least a free of charge basic software that works for them, then they can scale faster and show their investors and financials here. This is our data. We already optimized our operations. We are using digital tools to communicate with our customers, we are integrated with mobile money and so on. But what we identified and what we found is that all these things like setting up the bi-directional SMS communication in a specific country with your network operator, setting up your mobile money with your mobile money provider all these kind of things are ready to complex running your own server, even if it's a small digital server like a small cloud server somewhere, it takes a lot of knowledge and insight into many different processes and it takes a lot of money, capex, basically investment to get this up and running, and most of the companies are still not ready to do that.

Speaker 2: 41:43

And then we took the decision to not only make this software open source, but also put it on a cloud server, so that many good companies don't need to operate their own server anymore.

Speaker 2: 41:55

So and now slowly, slowly, step by step with a lot of services that we still provide, funded by various donors, to support the mini good company, to embrace digitization, set up all these connections with the mobile money and with the SMS communication and these kind of things. It's step by step now finally working and it's going into the right direction and small companies are step by step making use of this technology, but it's a very, very long and difficult and tedious kind of small steps process. So now we can talk about integration of various software tools and, to be as an Emily, you said that you have been working together in the past and probably there are some APIs where you exchange data between your two servers or your two databases, and we already discussed that. This is probably something that needs to happen more to reduce complexity of mini grid development and operational management further. But what exactly needs to happen? Where Does integration need to happen more and better, and which software should be integrated?

Speaker 3: 43:12

We think about this a lot with our remote management and control technology because, as I mentioned earlier, there's a lot of different components to manage a mini-grid operation and we're focused on the system itself. But there's customer relationship management tools, there's ticketing systems, there's ERP systems, and the approach that we've sort of leaned towards in the past, and I think we'll probably lean even further into, is integrations with solutions that have already been developed that sort of specialize in some of those. So, to give an example, there are some really great technology solutions out there for managing solar home system customers and managing ticketing associated with solar home system customers, and so we've been exploring how can we leverage the tools that have already been built to kind of tie those into our system alerting features so that you can automatically generate tickets based on what's happening for the mini-grid system itself as well as for the customers. And we've seen a lot of willingness to collaborate in the sector on that front, because I think everyone recognizes that no one company is probably going to have every solution within their tech stack.

Speaker 2: 44:22

And we're seeing partly the opposite development. To be honest, we're seeing solar home system companies approaching us and telling us well, the software for managing my solar home systems is so expensive, can we use open source for this? And say, yeah, sure, well, the features are there, Just go and use it. And it's probably relatively diverse market with many different players, and there are players who want professional software, well maintained all of the time, and then there are others who want it just cheap and it should work. But it does not need to be fancy. In the long run there will be users for all different types of setups.

Speaker 4: 45:03

For us, the two points of intersection are slightly different because we're at a different stage in the tech stack. On the one side, we have lots and lots of global data sets that we bring into Vita and we really tap into this astonishing incredible growth in, especially, earth observation driven data sources, but also the way we stream data, the way we interpret the data using AI and all these, and there's some fantastic solutions coming up all the time. We make them available to our users through Vita. So there's an intersection there. And then, on the other side, where does our data go? It can be either used on the Vita software, of course, but then at some point it will be plugged into other, more operational softwares. And that's where the collaboration with Odyssey, for example, comes in, where we're not working with mini good developers, we're going to working with it on the donor side. But it's exactly that. It's identifying locations at scale, and then at some point there's a handover to the Odyssey team and then they do a deeper analysis of these locations.

Speaker 2: 46:04

All right, thank you. Now, to wrap this up, do you want to tell our audience what your latest innovations are?

Speaker 3: 46:12

We're continually sort of updating the software as we learn how to make each part of the software more useful, and certainly especially the concessional financing programs that we're running, constantly getting feedback both from program administrators and from companies on what we can do to make that process smoother, because it is a very complex process, especially the connections based, results based financing, which involves uploading millions of solar homes systems that were sold or mini grid connections that were achieved, and then pulling data from each of those connections, verifying them and running through a payout process.

Speaker 3: 46:45

Based on that. We'll keep pushing out new features, keep learning and trying to make that process as streamlined as possible. But the big thing that we launched in 2023 that we're excited about is our procurement platform, and we've done this in collaboration with the Global Energy Alliance for People and Planet, called the Dart Initiative, the Demand Aggregation so many acronyms, demand Aggregation for Noble Technologies and essentially what it is is a platform to streamline the procurement process for mini grid developers and other distributed energy project developers, gain access to working capital finance, which is really needed in the sector, and eventually bring down the cost of equipment through aggregated purchasing, and we're doing that in close collaboration with the concessional financing programs that are being run on our platform, because it's such a unique opportunity to aggregate equipment that's being ordered under the same umbrella. So we'll keep scaling that, and scaling it will continue to translate into more and more cost savings for project developers, which will improve the unit economics of mini grids and then hopefully play a critical role in scaling the sector.

Speaker 4: 47:49

Yeah, thank you, nico. That's a really nice question to ask. So our innovation happens along two strands. One is on the data side. It's just bringing in more and more relevant data to make risks more transparent and thereby reduce the cost we associate with risks, which we think is going to be a very important driver to make electrification faster and more attractive for everybody. So here we're looking at all kinds of new data sets that are looking at specific types of demand related risks relating to populations, to income levels, to agriculture, risks that are accessibility rated risks around existing infrastructure, road infrastructure, other grid infrastructure, all that kind of stuff.

Speaker 4: 48:36

Bringing in data sets around where hospitals are, where schools are, where telecommunication towers are. We really kind of strengthen that and, as I said before, tap into that ability that we now have to monitor what's happening on the planet in ever more granularity, ever more regularity and ever more breadth as well in the range of signals we're getting. That's one thing that we're doing. The second thing is we're strengthening the software experience on Vita. Just recently I relaunched the due diligence function. We have an Explorer section where you can identify sites, you can look at sites, you can have a first pass analysis when you like a site. You can take it to your due diligence and you can dive deeper into it. You can collaborate. You invite the bank, the regulator, maybe an insurer, maybe people on the ground whoever works with you on a site to that site. People can add information, can add notes, can talk to each other. You can draw in more detailed, higher resolution global data sets if you need to, if you want to, and so can we start working with the data.

Speaker 2: 49:35

All right, thank you. Yeah, and we are integrating solar home systems and mini-grids now into one platform, making it applicable in more countries, making it plug and play applicable with the respective mobile money, data services, with various meter manufacturers and data providers, and so on. And, yeah, we are thinking about even integrating a feature which allows monitoring mini-grids and rural industrialization processes in the agricultural value chain and in other value chains all at once, but this is coming probably next year or the year after. Only Now, what do you think will the sector look like in five years from now?

Speaker 4: 50:21

I continue to be optimistic about it. My optimism increases. I know that it's tough, it's difficult, it's slower, etc. Etc. But I think that there is an enormous opportunity, with a growing economic base, to bring electricity to all parts of the world that don't have electricity. Also, very importantly, to parts of the world that have electricity, but very unreliable electricity. So that opens the market up hugely.

Speaker 4: 50:46

So that might be where the growth really is going to happen. These are under the grid situations or even city electrification, and I'm hoping that as we get better with fine-tuning the subsidies and that's also something that Emily is working on we can really use that overall momentum in the sector where I think there will be a lot more growth received in Nigeria today already, in places that are economically wealthier and that have more energy demand. But that kind of creates the industry, the ecosystem as a whole, and if we can fine-tune the subsidy scheme in a better way, then we can really bring that to the harder to reach parts, and I think that's viable, I think it's going to happen, it has to happen, it just simply has to happen.

Speaker 3: 51:27

So that's my optimism, that my optimism stems from a similar place around what we're seeing on the financing side. There's a lot of really exciting capital that's sort of preparing to be put into the sector and I think that the donors have learned a lot from sort of the first phase of concessionary capital that went into the mini-grid sector the performance-based grants program in Nigeria, the universal electrification facility, the UEF and we're seeing donors take those learnings and incorporate them into even more advanced designs of the next phases of those facilities. And one of the exciting developments we're seeing is a much closer integration between concessional capital and commercial capital. So some of the big, let's say, world Bank programs, for example, that are being set up now are actually being set up within banks and the bank will be running both a concessionary finance component as well as a commercial capital component. And that type of truly blended finance is what the sector needs and what I expect to really sort of help mini-grid developers access the finance they need and start to scale.

Speaker 2: 52:35

I believe that is one of the opportunities that the sector is facing and I hope, emily, that what you described earlier will actually happen and that we'll get from this very early nascent stage of okay, I use my individual software that I developed, into the phase where finally, mini-grid companies start using the more professional software that is out there, willing to pay for that software, and that the software can also be developed further based on real customers, not just donors, which are kind of a little bit artificial customers for this sector. Yeah, thanks a lot, both of you, thanks Emily, thanks to BS. This was exciting and yeah, I'm hope that all of our softwares and companies will develop nicely and we'll talk in some time from now and say now everybody's using our softwares.

Speaker 4: 53:35

Thank you, Nikko. Thank you for inviting us.

Speaker 3: 53:37

Pleasure speaking with you, bye-bye.

Speaker 1: 53:41

This episode of the mini-grid business has been brought to you by Inensis, your one stop shop for sustainable mini-grids. For more information on how to make mini-grids work, visit our website, inensiscom, or contact us through the links in the show notes. The mini-grid business powered by Inensis.