Appliances marked as Productive Use of Energy (PUE) are a class of energy-enabled goods that, when used by users, assist them in creating new or extra revenue streams. Research has demonstrated that using PUE products improves income, productivity, and quality of life. Electric sewing machines, water pumps, solar refrigerators, and egg incubators are a few examples.

PUE is necessary to sustain livelihoods in a variety of industries, such as food processing, tailoring, aquaculture, and agriculture. Nevertheless, obstacles such as exorbitant initial expenses, inadequate funding, transportation inefficiencies, and subpar post-purchase support impede their acceptance among susceptible customers. This paper examines various end-user and business financing methods that can facilitate PUE adoption, with a particular emphasis on the pay-per-use model that was developed by the rural Indian farming-as-a-service provider Oorja Development Solutions Limited (Oorja).

PUE APPLIANCE DEMAND IN AGRICULTURE

Large rural populations in South Asia and sub-Saharan Africa rely heavily on agriculture; these people are primarily made up of small and marginal farmers who experience social and economic hardships. Many of these farmers live in poverty and lack access to essential utilities like energy, sanitary conditions, healthcare, and education, despite the fact that they significantly increase their countries’ agricultural productivity and food security. Furthermore, these areas are extremely vulnerable to significant weather changes, which are becoming more frequent as a result of climate change, because of how heavily agriculture depends on rainfall.

A growing number of consumers are requesting PUE appliances for food production and agriculture (agri-PUE) as a result of these problems. PUE appliances are necessary for a variety of agricultural tasks carried out by farmers, who use equipment such as tractors, sprayers, irrigation pumps, harvesters, and agro-processing mills. They also use them for post-harvest requirements, including equipment for packing, branding, and other value-adding tasks, as well as appliances like freezers, dryers, and refrigerators. Agri-PUE goods are now more reasonably priced thanks to technological advancements, which has opened up a sizable market and the possibility of revolutionizing these farmers’ livelihoods, lowering poverty, and slowing down climate change. Nonetheless, a variety of obstacles have prevented PUE products from being widely adopted by the most vulnerable customers.

DIFFICULTIES WITH SCALE IN AGRI-PUE

The primary obstacle to agri-PUE’s wide adoption is its cost, since most users make between $100 and $150 per month or less, and cannot afford the initial capital investment required for expensive things like water pumps. According to the World Bank’s Lighting Global program, when farmers’ incapacity to make upfront investments is taken into account, the $11.3 billion total market size for solar water pumps, agro-processing, and cooling in sub-Saharan Africa only amounts to a $734 million serviceable market. This implies that a sizable portion of farmers in the Global South are compelled to rely on costly and environmentally harmful fossil fuels for on-farm energy, which has a negative influence on their earnings and raises their carbon footprint. Products having a clean energy PUE offer a good substitute that might lower carbon emissions. However, the most vulnerable farmers are unable to purchase them due to a lack of readily available and reasonable finance, despite the fact that solar-powered devices are now the most common type of PUE due to a global decline in off-grid solar pricing.

Agri-PUE has a huge market potential, but in order to take advantage of it, we must solve these affordability issues. Business and end-user finance methods are one way to address this issue. By enabling farmers to adopt high-impact PUE products, they may significantly improve their agricultural output, income, food security, nutrition, and quality of life. By utilizing this strategy in our ground-breaking Pay-Per-Use business model, Oorja hopes to expand rural India’s access to PUE products. The demands of underserved consumer segments—who were excluded from direct sales methods—are centered in this concept. These comprise women, Dalit communities, low-income users, smallholder farmers, and other underprivileged populations. These customers need PUE goods and services that are nearby, reasonably priced, high-quality, dependable, have prompt maintenance or post-purchase assistance, and may meet several needs at once.

We’ll show a case study of the effective application of the pay-per-use model in granting access to decentralized solar infrastructure for agricultural use now that we have a good understanding of the demand for PUE equipment and the scaling problems. Other pay-per-use examples from various regions will also be shown, and we’ll talk about how this business model could be expanded to serve millions of users and be used in sectors other than agriculture to support non-farm livelihoods.

FINANCIAL MODELS FOR ENTREPRISES AND END USERS TO SUPPORT PUE UPTAKE

In order to address issues in the water-energy-food nexus, a variety of proven and creative business models and financing schemes are being investigated and put into practice in the Global South. These models address concerns including farm productivity, gender participation, climate mitigation, and the decrease of fossil fuel use in order to improve access to large-scale PUE technology in the agricultural sector.

In order to address the needs of these client groups within the local agricultural environment, innovative business and end-user financing models can prioritize price, reliability, and closeness. This will help to boost the uptake of income-generating appliances among low-income agrarian communities. The following are a few of the end-user finance plans and business models that are now being utilized to give access to PUE technologies:

Pay-as-you-go (Payg): Once the product is fully paid for, ownership is passed to the customer. They pay an upfront cost (10–20%) and then regular installments after that. Credit scores are necessary to be eligible for this strategy, which is appropriate for tiny PUE items.

Subscription model: Similar to Payg models, users pay a regular cost regardless of consumption, however ownership is not always changed. The company, project, or organization delivering the appliance, known as the implementer, is able to maintain a consistent revenue stream that surpasses the expenses incurred by it for maintenance and upgrades.

Pay-per-use: This model removes the initial cost barrier for the end user by requiring consumers to pay only for the services they actually use. The asset or appliance is operated and maintained by the implementer for the duration of its life, in addition to covering the capital cost. The usage fees cover operating and maintenance expenses and are less than the alternatives available today. Every appliance can be utilized by a group of people as opposed to just one, unlike other types.

Rental: PUE assets and appliances are rented by customers on a “as-needed” basis; this strategy is generally applied to expensive farming equipment. Although this arrangement is flexible, it might eventually cost more than ownership.

Cooperative model: A group of customers pool their resources to pay for PUE equipment upfront or through bank loans. The appliances are owned by the group, and non-members are charged a usage fee to use them. These usage fees give the group extra revenue in addition to covering maintenance expenses.

Pay-by-produce: In order to synchronize payments with the crop cycle, consumers pay for PUE appliances using the produce they have harvested. To pay for expenses, the implementer sells some of the fruit; whatever extra is given back to the customer.

These financing strategies might all be able to access a variety of funding and assistance sources. For example, governments in certain nations might provide capital subsidies to lower the cost of large-scale PUE devices for consumers. However, these typically don’t pay for PUE appliance upkeep or all of its expenses. In addition to subsidies, implementers themselves may look to bank loans, impact investments, crowdfunding, or nonprofit contributors for funding.

While the goal of each of these funding models is to alleviate financial constraints, each has unique difficulties and factors to take into account.

Payg and subscription models, for example, have been successful in providing these communities with access to small agricultural and household appliances. However, because of their longer repayment periods, which can be burdensome for vulnerable households, these models are not appropriate for larger and more expensive PUE products. When clients are unable to pay for repairs, rental and cooperative models fail to meet their after-sales servicing obligations, which can result in asset disuse. Effective maintenance and service are only possible with the pay-per-use model, which also incentivizes the implementer to reduce downtime.

THE OORJA-PIONERED PAY-PER-USE MODEL

Acknowledging its distinct benefits in catering to these communities, Oorja has been in the forefront of the pay-per-use model for three PUE products: cold storage units, flour and spice grinders, and solar irrigation pumps. These products are in great demand, increase farm revenue, depend on advanced solar technology, and cost a lot of money. All of them use solar photovoltaic technology, which has a large potential to reduce carbon emissions when compared to fossil fuels.

Smallholder farmers with less than an acre of land, mostly from underprivileged populations, are Oorja’s target market. Our fixed tariffs for irrigation, milling, and cooling are less expensive than those for diesel-based alternatives. High-priced PUE goods, such solar cold rooms, multifunction pulverizers, and water pumps, are made more accessible by offering them as services, which eliminates the need for an initial investment thanks to the pay-per-use business model.

Oorja builds community trust prior to installing solar infrastructure and employs a meticulous site selection procedure that includes user demand surveys. For the first establishment costs, our strategy depends on a combination of grant funding and equity. By using this strategy, we have effectively offered 4,000 clients solar-powered services, which has decreased costs, raised agricultural yields, and enhanced revenue. The business ensures dependable and high-quality services by managing the solar infrastructure’s installation, upkeep, insurance, and repairs. In addition to time savings and improved convenience of on-farm services, users have reported less drudgery, which has improved agricultural output and climate resilience.

Utilization-based pricing for Oorja’s services results in volumetric rates that can save customers up to 60% over diesel-based alternatives. This lowers the initial cost barrier associated with technology acquisition for high-priced PUE devices, which might have a hefty price tag. As an illustration:

Solar water pumps cost between $3,000 and $5,000 per system, with capacities ranging from 3 to 5 HP.

Each multipurpose pulverizer with a 3 to 5 HP capacity costs between $500 and $1,000 (without including solar PV).

The cost of a system of two to five MT solar cold rooms ranges from $10,000 to $16,000.

OTHER PIONEERS OF PAY-PER-USE AND PAY-AS-YOU-GO

Aptech Africa, which provides solar-powered irrigation services in Uganda through upfront payment, pay-as-you-go, or lease-to-own options, is another pioneer in the usage of pay-per-use and pay-as-you-go models. In sub-Saharan Africa, Futurepump and SunCulture use comparable models to produce inexpensive tiny solar pumps. In East Africa, Agsol supplies solar-powered agricultural processing equipment and offers Payg model financing. In order to lower post-harvest losses, ColdHubs provides pay-as-you-store subscriptions for solar-powered cooling as a service in Nigeria. Growers of high-value horticulture produce in Kenya benefit from SokoFresh’s pay-per-use farm-level cold storage and market connection services. These creative ideas have improved rural communities’ economic standing, societal transformation, and standard of living.

Many of the aforementioned companies use the Payg model to offer micro or small-scale PUE items, frequently with funding from nearby banking institutions. For the purpose of sales and payment collection, they spend in building agent networks. Yet, clients with erratic incomes might find it difficult to make payments on schedule, running the danger of system lockouts. In contrast, pay-per-use arrangements provide greater flexibility. Consumers do not own any assets and pay according to the use of the services. This concept opens up access to solar water pumps, freezer rooms, and agro-processing mills for high-value PUE goods that cost more than $2,000.Pay-per-use models have the potential to increase accessibility to agricultural appliances, including agri-processing machines, farm mechanization tools, and micro-irrigation equipment, as well as non-energy appliances. They also apply to appliances used for non-farm livelihoods, such as power looms and sewing machines.

FINAL VERDICT

The primary obstacle to PUE product adoption in the agriculture industry is cost. Pay-as-you-go methods are not appropriate for larger products and do not usually reach the majority of low-income customers, but they have been successful in mainstreaming access to tiny agricultural appliances, including mini solar pumps, and domestic solar appliances. Additionally, smallholder farmers’ inability to afford PUE items, even on credit, has hindered their uptake for equipment like water pumps and agri-processing mills that cost more than $2,000 and have a capacity greater than 1,000 W. Some models have trouble meeting the criteria for after-sale support.

Oorja is the pioneer of the emerging pay-per-use model, which eliminates upfront expenditures, takes care of maintenance, is very inclusive and appropriate for low-income clients, and can be used with a variety of PUE devices. In rural India, Oorja has successfully introduced pay-per-use systems for solar water pumps, mills, and cold storages. Together with many other types of farm, non-farm, energy, and non-energy-related machinery and appliances, this model can also be used for food processing, animal feed milling, equipment leasing, and clean cooking. With Oorja’s pay-per-use approach, end users could be able to boost agricultural output, cut carbon emissions, become energy independent, alleviate poverty, and strengthen their resilience to climate change. This concept could be duplicated and scaled up globally.