Huautla de Jiménez is a town of 35,000 in the southern Mexican state of Oaxaca. Four hours from the nearest city, it is not an easy place for people who do not live there to reach. That has not stopped outsiders from coming to visit the small town, which earned a reputation in the 1960s for its hallucinogenic mushrooms. But travelers passing through over the decades have had relatively little impact on the day-to-day life of Huautla. Most of its residents earn a living by running small farms or shops, and the town is largely sustained by what the locals can grow and trade.
Huautla is also a place that lacks access to services that better connected cities, towns and villages in Mexico enjoy. The Martínez family, for example, is just one of many in Huautla that did not have access to power until very recently. As a result, their 11-year-old daughter Esther had to drop out of school for eight months in 2014, because she was unable to complete her homework after the sun went down, extinguishing her only source of light.
The Martínez family and many of their neighbors are among the roughly three million people or 600,000 homes in Mexico that are not connected to the electricity grid. Lack of passable roads and proper infrastructure have also made it difficult for renewable, off-grid energy sources to reach remote communities like Huautla, leaving many to rely on candles and kerosene lamps for home lighting.
As a source of constant illumination, candles and kerosene lamps are a financial burden. Most families spend US$18 to $30 each month— about 15 percent of their monthly income—to keep their shared spaces dimly lit at night. Nevertheless, these costly forms of lighting are inadequate for important activities like children’s schoolwork. And they are also dangerous.
“There are a lot of stories about homes that burned down because one candle was left unattended, [as well as] other examples that have to do with security and health,” says Ana Lucia Coll, commercial and business development director of Iluméxico, a homegrown social enterprise that is working to change this reality.
Iluméxico started in 2010 with a mission to bring solar energy to unserved and underserved Mexican communities. It does this by tackling the entire energy value chain, from technology design to manufacturing to last mile distribution, including providing credit to customers without bank access.
Off-grid households in Mexico spend 15 percent of their income on basic lighting sources, like candles.
“We decided that energy poverty [in Mexico] was an area needing development and innovation,” says Coll. Since about 97 percent of Mexico’s population is electrified by the national grid, the clusters of small, remote communities without power get little attention. “We want to make technology accessible to those who need it the most,” she adds.
Iluméxico’s approach is to build integrated solar energy systems around individual household and community needs. Its systems range from basic household lighting and charging to productive use systems that can power agricultural equipment. Existing packages cost between $225 and $800 and are supported by Iluméxico’s full service platform, which includes delivery, installation, training and loan-based repayment plans.
Recognizing a need
Iluméxico was started by Manuel Wiechers and a group of former engineering classmates from the National Autonomous University of Mexico and the Iberoamericana University. Wiechers was working as an engineer in GE’s energy and thermal division when the idea for the business came to him. “Through my [alumni association], I attended a discussion on energy access and global development, and that was what first brought the issue of energy [poverty] to my attention,” Wiechers explains. “After that, a colleague [at GE] and I looked into how big the issue was in Mexico, and learning that [energy poverty] is a problem here too motivated us to [try to] resolve that.”
The team focused its initial research on what an average family in a remote, off-grid village in Mexico would need to light their homes. They then drew up a business plan around a starter lighting system, comprised of a 15-watt solar panel, 12-volt battery, two 3.5-watt LED lights, and a 5-amp charge controller. The charge controller would be designed and manufactured by Wiechers and his team, while the rest of the components—the photovoltaic panels, light bulbs and wires—would be sourced from different suppliers. As families’ energy needs expanded, Iluméxico would curate packages of add-on products, like inverters and basic appliances. The enterprise envisioned eventually building a line of products to serve community spaces and establishments like shops, parks, schools, and clinics.
“We didn’t believe our key differentiator would be [developing] the technology, so most of our investment has not been in [product] R&D,” Wiechers explains. “What we wanted to do was figure out what people need and [assemble] integrated systems around that.”
By targeting the poorest and most remote Mexican communities, the Iluméxico team recognized that most of their potential customers had no experience with solar products; the few customers that did often had bad experiences because they rarely received the education and ongoing support they needed to use the technology. To effectively help these communities transfer to renewable energy, Iluméxico knew it would have to help them understand how the technology works and provide customers with ways to learn about and manage their energy consumption. The team saw charge controllers as a way to do this.
All commercial solar panels are equipped with built-in charge controllers to moderate the panel’s energy output levels, but Iluméxico’s device—called Prometeo—aims to give its customers direct control over how they use their home system’s energy. The Prometeo allows the user to regulate the flow of energy from the solar panel to the batteries with a button, giving users control over the system’s lighting intensity settings. The design team used solar lamps that have low- and high-lighting settings as a model, Wiechers explains.
“We took those characteristics that allow someone to modulate the amount of lighting emitted and put them into a larger capacity controller,” he says. “Traditionally, solar charge controllers have an on-off, 12-volt direct output. We built that [idea] into a household level controller that gives users additional hours of lighting per day because they can control the system’s intensity levels.”
The Prometeo allows users of Iluméxico’s most basic system to switch between three lighting settings. At the lowest setting, a fully charged solar panel can provide 80 hours of dim lighting—enough for someone to see through the dark at night. The medium setting provides illumination for eight hours of cooking or visiting with friends and family members, while the highest setting provides five hours of bright light that can be used for lighting-intense activities like studying. Colored LED indicators on the controller correspond to the various settings.
Because not every day is sunny, Iluméxico designed its charge controller to auto-adjust the system’s voltage based on a how much sunlight the panel has absorbed over the prior three-day period. This ensures that customers always get the same number of hours of lighting each day. Wiechers says the brightness adjustments made day-to-day by the system are not discernable to the customer.
Finally, the Prometeo monitors the solar system’s battery status and protects the batteries from under- or over-charging. The device is also safeguarded against short-circuiting. Off-the-shelf charge controllers are available in Mexico, but Coll explains that what differentiates the Prometeo is that it was designed to meet the specific needs of rural Mexican users. “Some of the [commercial] controllers available are not as resistant. For example, if you plug in a TV that requires more power than you have [available], a commercial controller will shortcircuit and break,” she says. “Ideally, customers would not tamper with the system, but it happens, so we designed ours to be a little more resistant. It will not work with devices that require more power than the system can provide, but it [also] will not break.”
The Prometeo also costs only $15—about 40 percent less than the cheapest commercial charge controller available in Mexico.
Trials and tribulations
Six years on, Iluméxico now offers four product lines, which include the basic home lighting package; a slightly higher-powered home system that comes with an inverter for connecting appliances; a small productive use system that powers water pumps, livestock fences, refrigerators and small agricultural milling machines; and a community option that can power schools, clinics or community centers. Individuals or families can start with the most basic package and add components to the system as their energy needs grow.
“Our goal is to introduce solar energy to allow people to build up to productive uses that will improve their income earning potential,” Coll says.
Home systems, which come with the 5-amp Prometeo, are the core of Iluméxico’s business, comprising over 80 percent of its sales. As of June 2016, more than 6,200 of these systems have been installed in rural Mexican households, providing first-time power for more than 23,000 people. To support its long-term growth strategy, the company is a developing a 10-amp version of the Prometeo that will substitute the commercial controller that is currently being used for its higher-end systems.
Many factors come into play when designing an energy service that aims to anticipate and deliver power to communities at the extreme base of the pyramid, however. Some of the fundamental questions Iluméxico’s early team had to consider were how to introduce new technology, how to deliver it to extremely hard to reach areas, how to ensure customers can and will pay for the products they are provided, and how to engage with customers on an on-going basis. The first field tests for the Prometeo taught the engineers and their support team a lot about the communities they were looking to serve, and helped them shape the Iluméxico business appropriately.
The Prometeo’s first prototype was developed with a seed grant given by the Electric Power Research Institute (IIE) and Mexico’s National Council of Science and Technology (CONACYT). The team hand-welded all of its early devices, with surface-mounted electrical circuitry. By early 2013, they had built 43 devices, which they paired with solar panels and MR16-style LED bulbs and sent for piloting in Los Tuxtlas in the eastern state of Veracruz. The testing highlighted a few technical faults that the team factored into its design revisions, but overall feedback was positive. Iluméxico used the successful pilot to secure additional funding to scale up manufacturing and field installations.
"The first [launch] phase was a disaster. But [our customers] saw that we would always come back and fix things. They really valued that."
By mid-2011, the team had won a major project with Mexico’s energy ministry SENER to install 1,081 basic solar home systems in three regions: Veracruz, Guerrero, and Yucatán. The engineers realized that to reach that scale, they would have to redesign the electrical circuitry on the charge controller to make it more efficient to manufacture, so they simplified the surface mount in preparation for the first 300 installations. They also swapped out the MR16 LEDs for normal flourescent bulbs.
“The first phase was a disaster,” Wiechers recalls. “The day after the first 100 installations, 70 percent of the units started failing. At first, we thought it was just that the bulbs weren’t working, so we switched them out [with LEDs]. A week later, more started failing, and we realized that we had gotten a bad batch of bulbs from China.”
“We also realized that one of the components on the charge controllers wasn’t calculated correctly,” he adds, explaining that the batteries were too small for the amount of energy the solar panels were generating. This caused the systems to overheat and burn out. “Between the LEDs and the charge controller, it was clear that the system wasn’t optimally designed. We basically had to go back and redo everything,” Wiechers says.
Coll adds that spotting potential problems was easier with the small number of units that were handmade by the team. When Iluméxico switched to assembly line manufacturing to produce more units, the new process masked potential issues with the early product because the team had less oversight. Iluméxico ultimately went through twelve iterations on the Prometeo before it had a product that was ready for commercialization.
The tragedy of a failed product launch is that a negative first experience can put potential customers off of a new technology entirely. To avoid that outcome, Iluméxico’s team responded quickly to system failures by going back to each of its early customers, explaining the problems, and replacing every faulty part. “What we learned is that as long as you are really honest with people, and you explain what you’re doing, and you repair problems, and you [generally] make yourself available to them, they will be patient with you,” Coll says.
“People were angry with us [though], because it was the first time they were getting electricity, and then [the systems we installed] wouldn’t work,” Wiechers adds. “But after the first month, they saw that we were always there and that we cared enough to always come back and fix things. They really valued that.” It was an important early lesson that ultimately informed the young company’s distribution and service model.
Hub and spoke
For three years thereafter, Iluméxico operated out of a single facility in Mexico City, far from its customers. Most of the villages the company targets are small, isolated indigenous communities in Veracruz, Oaxaca, Guerrero, Chiapas, San Luis Potosí, and Campeche. Staff would spend days travelling, often by foot or donkey, to reach them, and then go door-to-door to speak with existing and potential customers. Factoring in travel time, customer information and payment collection (by paper), and report production, it was not unusual for one sale to take up to a month to complete. The team realized the process was financially unsustainable.
Their solution was to set up regional branches—called Ilucentros—that are strategically located near its rural customers and employ local distributors and technicians to deliver and service its products. “These representatives work through the Ilucentros to handle all of the customer engagement, from education workshops to payment collection,” Wiechers explains. Among the regional offices’ responsibilities is handling micro-finance lending for customers who wish to purchase an Iluméxico system but cannot afford to pay the full cost upfront. Most of the loans provided from the offices are structured so families can make payments based on what they would have spent each month on traditional lighting sources, like candles. Typically, payments amount to $10 to $18 per month, and on such a plan, customers can pay off the basic system in about a year. Such short duration financing plans ensure that families do not remain under debt for very long, and that the payments are in line with what they can afford, Coll explains, adding that once families have paid off the basic system, Ilucentro representatives encourage them to continue investing in household energy products, particularly those that can be used for income-generating activities.
The Ilucentros also handle electronic collection of customer data, which has not only cut down required manpower but has also enabled the company to readily analyze trends and impact, such as customer needs, payment information and product performance.
Overall, the Ilucentro model is working, Wiechers says. “We set baseline targets for [the branches] to hit each quarter, and that is going pretty well. Most of them are close to breaking even,” he explains. Nevertheless, Iluméxico runs a difficult business, and the team is realistic about their prospects for turning profits from their products and services.
“It’s complicated to make this business work, and we are still working on it,” Wiechers admits. “Our growth margins have to be really high, because our operating costs—especially for distribution—are really high. Also, we run into issues with cash-flow, because we have to hand out so many loans.”
Some of the limitations and costs of serving Mexico’s most economically disadvantaged are simply unavoidable, however. For example, Iluméxico has streamlined its data and information collection process by switching from paper to smartphones, but most of its payment collections still have to be done in person every month. This is because other alternatives—namely mobile-based payments—are not an option for the company’s customers.
“There is no mobile reception in 80 percent of the places we work,” Wiechers says. This is unlike other growing small-scale home solar markets like Kenya, where 80 percent of the population—most of which is rurally based—has a mobile phone and an even higher percentage of the adult population uses mobile money services, according to 2014 data from Kenya’s Communications Authority.
Adding further pressure on Iluméxico is growing competition from other solar ventures and organizations. For example, the Spanish foundation ACCIONA Microenergía has a project in rural Oaxaca to install 10,000 domestic home PV solar units, according to its website. It also looking to expand into other states as well, Wiechers says. Iluméxico is also seeing an increase in the number of local retail shops and hardware stores that sell solar products.
Still, Iluméxico feels that its unique advantage is that it is both a solar technology developer and last-mile distributor. Coll says she is unaware of any other solar companies in Mexico that do both. The team also recognizes that they are serving a segment of Mexico’s population that ultimately needs greater access to energy products and services, so there is significant room for them and their competitors. Iluméxico hopes to deliver lighting and power to 50,000 off-grid homes through 50 Ilucentros by 2020. The team’s goal is to create 180 jobs through its regional centers, half of which will be for women. And while their larger solar packages currently support 64 community institutions, Iluméxico is looking to expand its productive use and commercial offerings once it launches the 10-amp Prometeo. To this end, Wiechers says that a new product—a solar powered electric fence that it developed for livestock corrals has become popular among family cattle owners. The company is also piloting a solar-powered corn mill to replace manual mills. Iluméxico envisions eventually scaling up to systems that can power local hair salons, community water purifiers, and even a small cinema.
The social enterprise is also looking to expand two other capabilities. The first is diagnosing and rehabilitating rural community solar installations that were implemented under the Mexican government’s Secretariat of Social Development (SEDESOL). Many of these were installed years ago, but are no longer working due to lack of proper maintenance. The second is increasing its own capabilities for collecting and retrieving data from its charge controller devices. Coll explains that the Prometeo already has the capacity to store usage information, like how many hours per day each household system runs and the level of lighting used. “But right now we don’t have a system to recover that information,” she says, adding that having this capability would allow Iluméxico to better understand and serve its customers’ needs as it expands.
It would also help the team devise ways to make its products more accessible to more of Mexico’s off-grid families. Coll explains: “Our main junction is achieving the right volume and scale to make our system even more affordable for families that may have even lower economics than the people we currently reach.”