3:31 9 d570fe81f53aa8cf8... @ ILLUMINATION SOLAR: DELIVERING ENERGY POVERTY SOLUTIONS CleAnse Gabe MwStry, and Shine Thatcher chilly bo provides forces at the water do cord to race orice wig of a person. The who may lave disguider ces and other to power This publication may not be tied podpind digid or other reproduced in warm or by any means that the gestor Torretan erregut person to opredes, com Nyttig heyra School Watum Lively, London, Ontario, Caw, GOOI.220 www.vec.COM CASA y Barwa School for In October 2017, Shane Thatcher, co-founder of Australian social enterprise humination Solar Tlumination) had mixed feelings. He was rethinking his company's Give Power campaign After five marginally profitable year designing and supplying portable solar lighes (scarlates to some of the world's most energy impoverished communities, including refugee camp. Thatcher had decided to markes his products to Australian customers for outdoor uses such as camping and hiking. Under the Give Power campaign. Illumination donne solar lanter to a commonly in need for every solar product purchased hy Australian customers. However, this strategy was not successful. Thatcher's main goal for his company was to sustainably provide good quality solar lights to impoverished people in developing countries. To reach that goal, he wondered which strategy to follow. should her to the original business mode- structure the Give Power campaign, or come up with something entirely new to generate higher profits? COMPANY ORIGINS Illumination was a social enterprise co-founded by Thatcher in 2009 to address energy poverty in some of the world's poorest communities Energy pwerly referred to a lack of ces to medemeny TVICES and affected about 1.1 billion people globally. By 2017. with the vision to help improve the health, wealth, and education of people who live without power." the company had distributed more than 600,000 solar products in over 20 countries Originally, Milumination sold eco solar products in Arusha, Tanzania. From the beginning, its founders had a strong social and environmental mission. They wanted to provide a solar light that could replace the use of kerosene in households without electricity. When burned, kerosene produced toxic fumes and raised the risk of fire-related injury if used indoors. Kerosene lamps were also considered a poor source of light making it difficult for children to study after dark. Solar-powered lights provided an effective and environmentally friendly nlemative. Hy early 2018, llumination had won several awards for its work, including a Business 3000+ Award in 2011, a Premier's Design Award in 2012, and a StartupSmart Award in 2012. International Energy Agency Energy Access Outlook 2017. Rom Poverty to Prospery report. 11.osed May 13, 2018, www ang public republiceWECTS Report traceutsko Page 2 9818M152 SHANE THATCHER At the end of 2017, Thatcher was a 45-year-old surfer and environmental economist. By the time he co founded Illumination, he had spent 15 years working in the management area of the energy industry in renewable energy business development, and as an economist in the carbon trading sector corporate life for social enterprise, Claire Heaney of The Herald Sum described him as refugee." Thatcher was dissatisfied with life in the corporate sector and wanted to have an impact on the lives of people affected by energy poverty around the world. ENERGY POVERTY AND PORTABLE SOLAR LIGHTS IN DEVELOPING COUNTRIES Energy poverty referred to a lack of access to modernergy services. The absence of sufficient choice in coussing and affordable, reliable hig-quality, safe and environmelly benign energy services and negatively affected the well-being of large numbers of people in both developed and developint countries worktwide. Lack of access to electricity was one of the most critical challenges shey Page 2 9B18M152 SHANE THATCHER At the end of 2017. Thatcher was a 45-year-old surfer and environmental economist. By the time he co- founded inice, he had spent 15 years working in the management area of the energy industry, in renewable energy business development, and as an economist in the carton trading sector. After he left corporate life for social enterprises, Claire Heaney of The Herald Sun described him as a corporate refugee." Thatcher was dicatisfied with life in the corporate sector and wanted to have a more profound impact on the lives of people affected by energy poverty around the world. ENERGY POVERTY AND PORTABLE SOLAR LIGHTS IN DEVELOPING COUNTRIES Energy poverty referred to a lack of access to modern energy services. The absence of sufficient choice in accessing adequate, affordable, reliable, high-quality, safe and environmentally benign energy services had negatively affected the well-being of large numbers of people in both developed and developing countries worlwide. Lack of access to electricity was one of the most critical challenges they faced. Despite improvements in access to electricity, it is estimated that one of seven people gibally lived without electricity in the home see Exhibit In Countries in sub-Saharan Africa and developing Asia continued to have the lowest rates of access, furticularly for those living in rural areas for this reason, Illumination targeted end users in these markets. Portable solar lights and solar lanterns became an cod solution to the challenge of electricity wess. The lights contained photovoltaic solar panek, which captured energy from the sun and converted it 10 electricity. Compared to kerosene lamps, solar lights were considered a safer and more environmentally sustainable source of light for rural households in developing countries. In addition, the portability of solar lights made them an ideal solution for communities in remote locations not connected to a centrally controlled electricity network infrastructure. Although the United Nations did not consider homes powered solely by solar lights "Tully electrified, sour lamps changed the lives of many people. An estimad AUS27 billion was spent on traditional portable lighting sources (e.g. kerosene lamp. buttery orches, and candles) each year by the 1.2 billion people who were living without access to electricity. In the previous decade, wer 20 million-generic pico-solar products were sold, and the market had grown to include er 100 companies." or concem, however, was the growth of the generic market. Combined sales of both the generic and non-generic markets were estimated to be as high as 44 million mits in 2016. Portable solar lights make a difference in the lives and livelihood of many households around the weld In areas where electricity was either unaffordable or unavailable, the lights enabled children to study after dark. In communities where handicrafts were an important source of income, portable solar lights improved quality and output enhancing the livelihood of many. The following testimony, reported by Illumination's Give Power Mozambique project, illustrated the impact of portable solar lighting: * Claire Heaney, Light Bulb Moment Gits power to Poor." Harald Sun May 28, 2016, sed July 7, 2018, www.pressreader convers/20150628282827884743438 Wie Gorill-Liquira tratar Powerly. An Der Red Sanble way we 47, 2015 TT- *Amulya K. Ricky Wendy Arracha, Korria Bick, David Boom, Brenda Burman, Anton Brand, Jurura Park, Quorion Wodon, and Anita Kang Mohd Zoid Energy and Sociales Won Energy Assos 2000:44 Tregon Strategy for Alaed May 13, 2018 www.rangemang Bloomberg New Energy Finance and Lighting Global in Cooperation with the Global On-Ond Lighting Motion, ON-Ond Sorowe Trends Raport 2016 February 2016, report, accessed May 13, 2018 www.energy.co.uk/webm_sod 1690 AUS - Australian dollar AU51 - 55077 on March 31, 2016 al currency amounts are in AUS unless otherwise specified Bloomberg New Energy France,p...2 ibid. Page 3 9B18M152 "With Mandarin 2 Solar Lights, our children will study kager. Our eldest likes to teach his siblings but has to stop when it gets dark" says Joaqim Paniero from Bomba Village. The children will also be much safer. An incredible in 3 of the residents have direct experience of dheir home or a friend's home buming down due to kerosene lamps or candles." The quality of solar lamtems has also made a difference in the lives and natural environment of end users in developing countries. The IFC-World Bank Lighting Global program and other similar initiatives endoesed a select range of high-quality solar light products for distribution to communities in developing countries According to Lighting Global's Pico-PV Quality Standard these products meeded to pass various tests including quality of light durability, battery safety and durability, and truth-in-advertising. Page 3 9818152 "With Mandarin 2 Solar Lights, our children will study lager. Our eldest likes to teach his siblings but has to stop when it gets dark." says Joaqim Paniero from Bomba Village. The children will also be much safer. An incredible in 3 of the residents have direct experience of their home or a friend's home buming down due to kerosene lamps or candles." The quality of solar lastems has also made a difference in the lives and natural environment of end users in developing countries. The IFC-Woeld Hank Lighting Global program and other similar initiatives endorsed a select range of high quality solar light products for distribution to communities in developing countries. According to Lighting Global's Pica-PV Quality Standarck" these products orded to pass various tests including quality of light, durability, Battery safety and durability, and truth-in-advertising. There was an expectation, therefore, that businesses supplying solar lanters would use these standards 10 determine the best products for their respective market. The best quality solar lanterns produced optimal lighting conditions for night time uses and lasted longer, thereby postponing environmental issues in developing countries, caused by the disposal of the products and their batteries. THE SUPPLY CHAIN FOR PORTABLE SOLAR LIGHTS IN DEVELOPING COUNTRIES Although the supply chain for solar lanterns varied from country to country, sakcho 3/9 sol lighting market chain included manufacturers, logistic and transport providers, and dist large non-governmental organizations (NGOs) In developing countries, the supply chain was usually a Variation of the main stages. First, solar lantem importers lissed with overseas manufacturers to being the product into the country. Second, the importers either acted as distributors themselves or passed on the imported procact to local distributors. Third, local retailers received stock of the solar products, which they sold in local communities to individual household There were many options for variation along this supply chain. For example, local co-operatives or NGOs often sold or donated (of funding was available) products to end users creating an additional step in the supply chain between retailers and households. Illumination was a distributor and importer in the developing countries in which it operated (sce Exhibit 2 Issues with supply chain development and management were also prevalent. In 2013, Lighting Africa commissioned a report examining the supply chain for solar lighting products. Globally, there were merous challenges In Mali, in particular, the supply chain faced three challenges: lack of consumer and retailer awareness of solar light technology, lack of affordability for retailers and consumers, and limited after-sales support Lack of Consumer and Retailer Awareness of Solar Light Technology Despite ongoing market growth, there was a lack of consumer awareness of portable solar power products, particularly when comparing Mali with East Africa. Low product demand from retailers and customers acted as a disincentive for suppliers Our ProLight Cirera Action," llumination, accused 2 May 2013, html.com.u-project. "Lighting Good Pico PV Orly StandardsWasion 7.1. Sember 2017, accessed May 1 2018 www.ligheingiobal.org/wp-contenuploads/2017/05P MOS 7.1.pdf www.ligheingarica.org up-contenuploads/2014/02 -Supply Chain Mapping Fird pat Ligting Aria Maring the Spy Chor Sor Lighting Products, sport, July 2012 May 12, 2018 Page 4 9B18M152 Lack of Affordability for Retailers and Consumers Although portable solar products were more affordable in the long run, removing ongoing costs associated with traditional portable lighting, such as crome or boies, the upfront cost was higher. Many people did not have the means to purchase portable solar products, particularly higher-quality band Limited After-sales Support Page 4 9B18M152 Lack of Affordability for Retailers and Consumers Although portable solar products were more affordable in the long run, removing ongoing costs associated with traditional portable lighting, such as kerosene or batteries, the upfront cost was higher. Many people did not have the means to purchase portable solar products, particularly higher quality brands Limited After-sales Support Retailers did not have the resources to provide adequate post-sale support. Ressons included a lack of technical training or capacity to offer product warranties. In addition, the remoteness of any end users made last-mile distribution and after-sales support a significant logistical challenge. This had a negative impact on both consumer trust and knowledge of portable solar products. Distribution channels and acciated difficulties varied from one country city to mother. The South Sudan city of War, for example, had its own us. Wau was situated closer to the border with Sudan and the supply chain of solar-powered goods involved trucks smuggling goods through the mofficial border crossing between Sadan and South Sudan, called New Sukun, to reach Wan Goods were then taxel when they reached W. The road network on this moule was not good and was not passable by truck during the rainy season. Solar power retailers in Waa were Sudanese and a significant portion of the supply chain to Www was made up of Sudanese individuals. Retailers in Wau placed orders in groups of up to 20 people per truck. to Sudanese traders located in China and Dubai. These products were then shipped to Port Sale in Sudan, driven overland to Khartoum, and then trucked to Ware INTERNATIONAL COMMITMENT In 2015, world kaders agreed to adopt 17 Sustainable Development Goals as part of the United Nations 2030 Agenda for Sustainable Development Goal 7 specified commitment to miversal access to "affordable, reliable, sustainable and modem energy for air by 2030. The Energy Access Practitioner Network supported this al connecting stakeholders from the private and social sectors in over 170 comtries to enable a collaborative approach to ensure the target of energy for all by 2030." In May 2018, there were 400 partnership initiatives listed against Goal 7. Of these 56 were specifically targeted to improve infrastructure and technology for sustainable entry services in developing countries." ILLUMINATION SOLAR In the solariket, there was often a trade-off between quality and price. Moet enders were unable to afford the best quality solar products. Instead, they purchased low quality lanterns that were not durable. A Consulting South Sudan Keping the Supoy Chain By Solar Lining Products report, 17. July 2014, accessed May 13. 2018 www.absconsulting Com-content/uploads/201502Sout-Sudan Mapping the Supply Chain Ay-2016.pdf Sustainable Development Goals. 17 Goals to Transform our World." United Nations, accessed on May 13, 2018 www.unor sustainable development energy Our Goal? Uniweral Erary Acoby 2000 Energy come Pacionar Network: United Natiora Foundation, acessed May 14, 2016, presso Partnerships for the SDGs Gol 7 Ensure Access to Alordable, Reliable, Sustainable and Modem Energy For All United Natore, ed May 13, 2018, http:stardient unang panahon Page 5 9B18M152 poorly designed or produced low quality light. Renewable energy entrepreneurs warned that this poor reputatice would make and users in emerging markets averse to solar technology, having the united etfect of slowing uptake in the communities that needed it most. To address this challenge, Illumination developed its own efficient solar light-the Mandarin Ultra. When it was first developed the product retailed at a price equal to about two months' supply of kerosene. Mumination was also able to access the European Union Emission Trading Scheme, claiming credits to reduce the price per unit for end users. Later, the company expanded its prochetrage to include solar-powered radios and mobile changers From its roots in Arusha, Tanzania, Illumination soon expanded to the rest of Eastern Africa. Its solar products were also appearing in their emerging markets in Southeast Asia. The enterprise initially 3:31 d570fe81f53aa8cf8... Q Page 5 9B18M152 poorly designed, or produced low-quality light. Renewable energy entrepreneurs warned that this poor reputation would make end users in emerging markets averse to solar technology, having the unwanted effect of slowing uptake in the communities that needed it most. To address this challenge. Illumination developed its own efficient solar light-the Mandarin Ultra. When it was first developed, the product retailed at a price equal to about two months' supply of kerosene. Illumination was also able to access the European Union Emission Trading Scheme, claiming credits to reduce the price per unit for end users Later, the company expanded its product range to include solar-powered radies and mobile chargers From its roots in Arusha, Tanzania, Illumination soon expanded to the rest of Eastern Africa. Its solar products were also appearing in other emerging markets in Southeast Asia. The enterpri initially operated under five managers. In January 2018, dee to profitability and supply chain challenges, Thatcher was the sole manager of the enterprise and was based in Australia. Illumination's main competitors in Australia included Kathmandu Limited and Anaconda Group Pay Lid, who also supplied portable solar lanterns. However, the lanterns of these two competitors were marketed mainly for use in camping and other door leisure and adventure activities (see Exhibit 3 THE AID AND DEVELOPMENT MODEL-PARTNERING WITH NON-GOVERNMENTAL ORGANIZATIONS In is carly days in Tanzania, Iluminio integrated itself fully in the supply chain for its sole products. Thatcher and the other managers at the time did not just design the lights, they also commissioned Tromfacturing in China and managed delivery from the manufacturer to NGOs and sid agencies on the ground in impoverished communities of emerging markets. Thuicher learned quickly that creating and maintaining distribution channels could be costly and difficult, particularly in emerging markets. A significant ongoing challenge for Illumination was the need to create distribution channels while preserving a low unit price for the cost. As Thatcher explained. "In some markets it is possible to increase the market profile of the product to justify its price, but when you are working within communities who are experiencing energy poverty there is like opportunity to do that because people camot afford the product at the end." This triggered his first business model change. Thatcher and his team decided to sell the distribution aspects of the enterprise and focus instead on designing and marketing a useful, good quality product Thatcher focused on establishing relationships and successfully tendering to aid agencies and other NGOs who could deliver his solar products as part of and packages on the ground in impoverished communities. Illuminations Mandarin products became so popular that aid agencies and NGOs requested them by tume. Thatcher and his thes-putters would introduce these agencies to their distribution partners who would coordinate the delivery of the products. Partnerships with these organizations enabled the distribution of Illumination's products in refugee camps and areas struck by disaster However, as Illumination began winning more tenders and Thatcher's Mandarin products became more recognized, other organizations began copying Illumination's products While some of these products were cheaper they were lecessarily better value they were often less durable and produced a much lower quality of light. Illumination worked with a dual mission of providing both affordable and environmentally sustainable lights, and refused to compromise on quality. However, the company found it increasingly difficult to competece price and started king lenders. As the sole manager of the enterprise, this new challenge led Thatcher to change focus a second time, adopting a new business model Ce-Anne Gabriel and Joyenne Kirkwood Dames Models for Model Bages: Lessons from Renewable Energy Entre in Developing Country Policy (2016): 338-34 David Site Kelly, Adam During, Rebec Ford, Cie Anne Gabriel, and Sara Walton nopeidere Completion Report Ligning Vanuatu, OFAT Auswaian Aid 2014, report. August 2014 accessed August 24, 2018 ht:dat gowo-publications Documentslighting-van- independent-ww.pol. Page 6 THE GIVE POWER MODEL As competition frased and profits declined. The rester began looking for new ways to generate income. while getting hislar products to communitie that needed them. He noticed staff. friends, and family were borrowing lights and charges to go camping on weekends. He realized that there was a marks for the company's products in Australia This let him to establish Give Power. For every solar Page 6 9818M152 THE GIVE POWER MODEL As competition increased and profits declined, Thatcher began looking for new ways to generate incom, while getting his solar products to communities that needed them. He noticed that staff, friends, and family were borrowing lights and chargers to go cumping on weekends. He realized that there was a market for the company's products in Australia. This led him to establish Give Power. For every solar product purchased in Australia, Give Power would donate a solar light to a household in need in Communities in an emerging market Under Give Power, Thatcher also established a corporate gift-giving model. Working with several other foundations, this model had some success, particularly in the Philippines. Over a 12 month period. Martination partnered with the Morris Family Foundation, Kakasig Aid and Disaster Relief, and Path Foundation to distribute solar lights and chargers to 1.200 families living without electricity in countries such as Mozambique, Indonesia, and the Philippines However, by one year later, the Give Power program was still not as successful as Thatcher had hoped. The cost of maintaining the program was too high. Specifically, the marketing, product development, and distribution costs of both the buy-one give-on program and the compeale gift-giving model outweighed the income generated. After all, there was considerable logistical effet involved in doing one lantem caly occasionally, after an Australian customer purchased one of the products. Without significant sales through the remaining NGO and aid agency purinerships, the Give Power program was not able to efficiently provide sole products to families living in energy poverty. Yet, similar initiatives by communities and NGOs had been successful in Australia (see Exhibit 4). In 2017. Illumination had an annual tumower of $400,000, compared to over $2/0200 in 2013 Sales of Mandarin solar lights dropped to 80,000, from 250,000 in 2013. Under the Cive Power campaign, Illumination distributed less than 5 solar lights, which sat in contrast to the 600,1600 lights distributed to refugee camps with the previous business model. WHAT NEXT? The International Energy Agency's 2017 World Energy Access Outlook sugested that there has been considerable improvement in the number of people with access to power. It credited the decreasing cost of decentralized solutions and the emergence of new entrepreneurs" as an important contributing factor Thatcher wondered if he should reinvest in Illumination's original aid and development model, making solar lanterns available to the world's most energy poor through partnerships with NGOs and aid species. Alumnatively, he wondered how he could improve his success with the Gine Power strategy, or were there other model that Thatcher should consides? Thanks go to takizunika for her contribution to the 6/9 masonal Energy Agency, op. Page 7 9818M152 Region EXHIBIT 1: ELECTRICITY ACCESS BY DEVELOPING REGION AND YEAR Rate of Access (%) Population without National Urban Rural Access (in Millions) 2000 2005 2010 2016 2016 2016 2016 701 021 00 77 VIORI 10cn towergy Agency, op. Page 7 9818M152 EXHIBIT 1: ELECTRICITY ACCESS BY DEVELOPING REGION AND YEAR Rate of Access (%) Population without Region National Urban Rural Access (in Millions) 2005 2010 2016 2016 2016 2016 WORLD 73 76 82 86 96 73 1,060 DEVELOPING 64 69 75 COUNTRIES B2 94 70 1,060 Africa 34 39 43 52 77 32 588 North Africa 90 98 99 100 100 99 c1 Sub-Saharan Africa 23 27 32 43 71 23 588 Developing Asia 57 74 83 89 97 81 439 China 99 98 99 100 100 100 India 63 58 BE 82 97 74 239 Indonesia 33 67 91 99 02 Other Southeast Asia 67 76 83 89 97 82 42 Other Developing Asia 32 30 53 73 87 65 135 Central and South 87 91 94 97 86 17 Middle EAM 91 80 91 93 79 17 Sourbe: Energy Access Date immational Energy Agency, accessed May 132018 www.generacebase America EXHIBIT 2: TYPICAL SUPPLY CHAIN FOR SOLAR LIGHTS IN DEVELOPING COUNTRIES Manufacturers Importers Distributors Retailers NO End Users Michi GI Pic Opera Rodes perted by N NGO-governmental organisation Source: Created by the case autos 7/9 EXHIBIT 3: COMPARISON OF ILLUMINATION AND COMPETITORS IN AUSTRALIAN MARKET www Soute Created by 5652 EXHIBIT COMPARISON OF ILLUMINATION AND COMPETITORS IN AUSTRALIAN MARKET Try como comowy ASSA W? med May be Vie M. para com So Whou Unt.. r.com Download, 2011 www.com Ancordant 20 cod 10 www.acade Social conde de 14.20 www.core.com.br Posible Soriguarie 2. Od 1.200.com Good RNDr. Golo Low Parduod www 1428 wandelings- Barber AS EXHIBIT SELECTION OF AUSTRALIAN NATIVES SIMILAR TO ILLUMINATION ONE POWER Alan Harapan Bay INGGGG Gradca reputa building, but for pc w ther. So hen Thosen demo ger girl Tran Thol. Thand agara The Dar sy 141420 Yew yhure 14 EHDIT COMPARISON OF ILLUMINATION AND COMPETITORS IN AUSTRALIAN MARKET |tai . has t - | Tv - - Ts AL -- | , " 1. - 4 2 H, TN Paran - ", 14, 11 - 2, 14, 1 P 1.Barossa - uri Tu A Hams H. 211. are Oranghairyta , pa IEE ME are 14, 2011. atarkuttargation- EIVIER EXHIBIT 4: SELECTION OF AUSTRALIAN INITIATIVES SIMILAR TO LUMINATIONS GIVE POWER Paari Haran 01 Pro AND Buary OL in the proge School | , | Taasaainated | - hair tasty ignar RA PA SHE HA A - | ) ME - 3:31 9 d570fe81f53aa8cf8... @ ILLUMINATION SOLAR: DELIVERING ENERGY POVERTY SOLUTIONS CleAnse Gabe MwStry, and Shine Thatcher chilly bo provides forces at the water do cord to race orice wig of a person. The who may lave disguider ces and other to power This publication may not be tied podpind digid or other reproduced in warm or by any means that the gestor Torretan erregut person to opredes, com Nyttig heyra School Watum Lively, London, Ontario, Caw, GOOI.220 www.vec.COM CASA y Barwa School for In October 2017, Shane Thatcher, co-founder of Australian social enterprise humination Solar Tlumination) had mixed feelings. He was rethinking his company's Give Power campaign After five marginally profitable year designing and supplying portable solar lighes (scarlates to some of the world's most energy impoverished communities, including refugee camp. Thatcher had decided to markes his products to Australian customers for outdoor uses such as camping and hiking. Under the Give Power campaign. Illumination donne solar lanter to a commonly in need for every solar product purchased hy Australian customers. However, this strategy was not successful. Thatcher's main goal for his company was to sustainably provide good quality solar lights to impoverished people in developing countries. To reach that goal, he wondered which strategy to follow. should her to the original business mode- structure the Give Power campaign, or come up with something entirely new to generate higher profits? COMPANY ORIGINS Illumination was a social enterprise co-founded by Thatcher in 2009 to address energy poverty in some of the world's poorest communities Energy pwerly referred to a lack of ces to medemeny TVICES and affected about 1.1 billion people globally. By 2017. with the vision to help improve the health, wealth, and education of people who live without power." the company had distributed more than 600,000 solar products in over 20 countries Originally, Milumination sold eco solar products in Arusha, Tanzania. From the beginning, its founders had a strong social and environmental mission. They wanted to provide a solar light that could replace the use of kerosene in households without electricity. When burned, kerosene produced toxic fumes and raised the risk of fire-related injury if used indoors. Kerosene lamps were also considered a poor source of light making it difficult for children to study after dark. Solar-powered lights provided an effective and environmentally friendly nlemative. Hy early 2018, llumination had won several awards for its work, including a Business 3000+ Award in 2011, a Premier's Design Award in 2012, and a StartupSmart Award in 2012. International Energy Agency Energy Access Outlook 2017. Rom Poverty to Prospery report. 11.osed May 13, 2018, www ang public republiceWECTS Report traceutsko Page 2 9818M152 SHANE THATCHER At the end of 2017, Thatcher was a 45-year-old surfer and environmental economist. By the time he co founded Illumination, he had spent 15 years working in the management area of the energy industry in renewable energy business development, and as an economist in the carbon trading sector corporate life for social enterprise, Claire Heaney of The Herald Sum described him as refugee." Thatcher was dissatisfied with life in the corporate sector and wanted to have an impact on the lives of people affected by energy poverty around the world. ENERGY POVERTY AND PORTABLE SOLAR LIGHTS IN DEVELOPING COUNTRIES Energy poverty referred to a lack of access to modernergy services. The absence of sufficient choice in coussing and affordable, reliable hig-quality, safe and environmelly benign energy services and negatively affected the well-being of large numbers of people in both developed and developint countries worktwide. Lack of access to electricity was one of the most critical challenges shey Page 2 9B18M152 SHANE THATCHER At the end of 2017. Thatcher was a 45-year-old surfer and environmental economist. By the time he co- founded inice, he had spent 15 years working in the management area of the energy industry, in renewable energy business development, and as an economist in the carton trading sector. After he left corporate life for social enterprises, Claire Heaney of The Herald Sun described him as a corporate refugee." Thatcher was dicatisfied with life in the corporate sector and wanted to have a more profound impact on the lives of people affected by energy poverty around the world. ENERGY POVERTY AND PORTABLE SOLAR LIGHTS IN DEVELOPING COUNTRIES Energy poverty referred to a lack of access to modern energy services. The absence of sufficient choice in accessing adequate, affordable, reliable, high-quality, safe and environmentally benign energy services had negatively affected the well-being of large numbers of people in both developed and developing countries worlwide. Lack of access to electricity was one of the most critical challenges they faced. Despite improvements in access to electricity, it is estimated that one of seven people gibally lived without electricity in the home see Exhibit In Countries in sub-Saharan Africa and developing Asia continued to have the lowest rates of access, furticularly for those living in rural areas for this reason, Illumination targeted end users in these markets. Portable solar lights and solar lanterns became an cod solution to the challenge of electricity wess. The lights contained photovoltaic solar panek, which captured energy from the sun and converted it 10 electricity. Compared to kerosene lamps, solar lights were considered a safer and more environmentally sustainable source of light for rural households in developing countries. In addition, the portability of solar lights made them an ideal solution for communities in remote locations not connected to a centrally controlled electricity network infrastructure. Although the United Nations did not consider homes powered solely by solar lights "Tully electrified, sour lamps changed the lives of many people. An estimad AUS27 billion was spent on traditional portable lighting sources (e.g. kerosene lamp. buttery orches, and candles) each year by the 1.2 billion people who were living without access to electricity. In the previous decade, wer 20 million-generic pico-solar products were sold, and the market had grown to include er 100 companies." or concem, however, was the growth of the generic market. Combined sales of both the generic and non-generic markets were estimated to be as high as 44 million mits in 2016. Portable solar lights make a difference in the lives and livelihood of many households around the weld In areas where electricity was either unaffordable or unavailable, the lights enabled children to study after dark. In communities where handicrafts were an important source of income, portable solar lights improved quality and output enhancing the livelihood of many. The following testimony, reported by Illumination's Give Power Mozambique project, illustrated the impact of portable solar lighting: * Claire Heaney, Light Bulb Moment Gits power to Poor." Harald Sun May 28, 2016, sed July 7, 2018, www.pressreader convers/20150628282827884743438 Wie Gorill-Liquira tratar Powerly. An Der Red Sanble way we 47, 2015 TT- *Amulya K. Ricky Wendy Arracha, Korria Bick, David Boom, Brenda Burman, Anton Brand, Jurura Park, Quorion Wodon, and Anita Kang Mohd Zoid Energy and Sociales Won Energy Assos 2000:44 Tregon Strategy for Alaed May 13, 2018 www.rangemang Bloomberg New Energy Finance and Lighting Global in Cooperation with the Global On-Ond Lighting Motion, ON-Ond Sorowe Trends Raport 2016 February 2016, report, accessed May 13, 2018 www.energy.co.uk/webm_sod 1690 AUS - Australian dollar AU51 - 55077 on March 31, 2016 al currency amounts are in AUS unless otherwise specified Bloomberg New Energy France,p...2 ibid. Page 3 9B18M152 "With Mandarin 2 Solar Lights, our children will study kager. Our eldest likes to teach his siblings but has to stop when it gets dark" says Joaqim Paniero from Bomba Village. The children will also be much safer. An incredible in 3 of the residents have direct experience of dheir home or a friend's home buming down due to kerosene lamps or candles." The quality of solar lamtems has also made a difference in the lives and natural environment of end users in developing countries. The IFC-World Bank Lighting Global program and other similar initiatives endoesed a select range of high-quality solar light products for distribution to communities in developing countries According to Lighting Global's Pico-PV Quality Standard these products meeded to pass various tests including quality of light durability, battery safety and durability, and truth-in-advertising. Page 3 9818152 "With Mandarin 2 Solar Lights, our children will study lager. Our eldest likes to teach his siblings but has to stop when it gets dark." says Joaqim Paniero from Bomba Village. The children will also be much safer. An incredible in 3 of the residents have direct experience of their home or a friend's home buming down due to kerosene lamps or candles." The quality of solar lastems has also made a difference in the lives and natural environment of end users in developing countries. The IFC-Woeld Hank Lighting Global program and other similar initiatives endorsed a select range of high quality solar light products for distribution to communities in developing countries. According to Lighting Global's Pica-PV Quality Standarck" these products orded to pass various tests including quality of light, durability, Battery safety and durability, and truth-in-advertising. There was an expectation, therefore, that businesses supplying solar lanters would use these standards 10 determine the best products for their respective market. The best quality solar lanterns produced optimal lighting conditions for night time uses and lasted longer, thereby postponing environmental issues in developing countries, caused by the disposal of the products and their batteries. THE SUPPLY CHAIN FOR PORTABLE SOLAR LIGHTS IN DEVELOPING COUNTRIES Although the supply chain for solar lanterns varied from country to country, sakcho 3/9 sol lighting market chain included manufacturers, logistic and transport providers, and dist large non-governmental organizations (NGOs) In developing countries, the supply chain was usually a Variation of the main stages. First, solar lantem importers lissed with overseas manufacturers to being the product into the country. Second, the importers either acted as distributors themselves or passed on the imported procact to local distributors. Third, local retailers received stock of the solar products, which they sold in local communities to individual household There were many options for variation along this supply chain. For example, local co-operatives or NGOs often sold or donated (of funding was available) products to end users creating an additional step in the supply chain between retailers and households. Illumination was a distributor and importer in the developing countries in which it operated (sce Exhibit 2 Issues with supply chain development and management were also prevalent. In 2013, Lighting Africa commissioned a report examining the supply chain for solar lighting products. Globally, there were merous challenges In Mali, in particular, the supply chain faced three challenges: lack of consumer and retailer awareness of solar light technology, lack of affordability for retailers and consumers, and limited after-sales support Lack of Consumer and Retailer Awareness of Solar Light Technology Despite ongoing market growth, there was a lack of consumer awareness of portable solar power products, particularly when comparing Mali with East Africa. Low product demand from retailers and customers acted as a disincentive for suppliers Our ProLight Cirera Action," llumination, accused 2 May 2013, html.com.u-project. "Lighting Good Pico PV Orly StandardsWasion 7.1. Sember 2017, accessed May 1 2018 www.ligheingiobal.org/wp-contenuploads/2017/05P MOS 7.1.pdf www.ligheingarica.org up-contenuploads/2014/02 -Supply Chain Mapping Fird pat Ligting Aria Maring the Spy Chor Sor Lighting Products, sport, July 2012 May 12, 2018 Page 4 9B18M152 Lack of Affordability for Retailers and Consumers Although portable solar products were more affordable in the long run, removing ongoing costs associated with traditional portable lighting, such as crome or boies, the upfront cost was higher. Many people did not have the means to purchase portable solar products, particularly higher-quality band Limited After-sales Support Page 4 9B18M152 Lack of Affordability for Retailers and Consumers Although portable solar products were more affordable in the long run, removing ongoing costs associated with traditional portable lighting, such as kerosene or batteries, the upfront cost was higher. Many people did not have the means to purchase portable solar products, particularly higher quality brands Limited After-sales Support Retailers did not have the resources to provide adequate post-sale support. Ressons included a lack of technical training or capacity to offer product warranties. In addition, the remoteness of any end users made last-mile distribution and after-sales support a significant logistical challenge. This had a negative impact on both consumer trust and knowledge of portable solar products. Distribution channels and acciated difficulties varied from one country city to mother. The South Sudan city of War, for example, had its own us. Wau was situated closer to the border with Sudan and the supply chain of solar-powered goods involved trucks smuggling goods through the mofficial border crossing between Sadan and South Sudan, called New Sukun, to reach Wan Goods were then taxel when they reached W. The road network on this moule was not good and was not passable by truck during the rainy season. Solar power retailers in Waa were Sudanese and a significant portion of the supply chain to Www was made up of Sudanese individuals. Retailers in Wau placed orders in groups of up to 20 people per truck. to Sudanese traders located in China and Dubai. These products were then shipped to Port Sale in Sudan, driven overland to Khartoum, and then trucked to Ware INTERNATIONAL COMMITMENT In 2015, world kaders agreed to adopt 17 Sustainable Development Goals as part of the United Nations 2030 Agenda for Sustainable Development Goal 7 specified commitment to miversal access to "affordable, reliable, sustainable and modem energy for air by 2030. The Energy Access Practitioner Network supported this al connecting stakeholders from the private and social sectors in over 170 comtries to enable a collaborative approach to ensure the target of energy for all by 2030." In May 2018, there were 400 partnership initiatives listed against Goal 7. Of these 56 were specifically targeted to improve infrastructure and technology for sustainable entry services in developing countries." ILLUMINATION SOLAR In the solariket, there was often a trade-off between quality and price. Moet enders were unable to afford the best quality solar products. Instead, they purchased low quality lanterns that were not durable. A Consulting South Sudan Keping the Supoy Chain By Solar Lining Products report, 17. July 2014, accessed May 13. 2018 www.absconsulting Com-content/uploads/201502Sout-Sudan Mapping the Supply Chain Ay-2016.pdf Sustainable Development Goals. 17 Goals to Transform our World." United Nations, accessed on May 13, 2018 www.unor sustainable development energy Our Goal? Uniweral Erary Acoby 2000 Energy come Pacionar Network: United Natiora Foundation, acessed May 14, 2016, presso Partnerships for the SDGs Gol 7 Ensure Access to Alordable, Reliable, Sustainable and Modem Energy For All United Natore, ed May 13, 2018, http:stardient unang panahon Page 5 9B18M152 poorly designed or produced low quality light. Renewable energy entrepreneurs warned that this poor reputatice would make and users in emerging markets averse to solar technology, having the united etfect of slowing uptake in the communities that needed it most. To address this challenge, Illumination developed its own efficient solar light-the Mandarin Ultra. When it was first developed the product retailed at a price equal to about two months' supply of kerosene. Mumination was also able to access the European Union Emission Trading Scheme, claiming credits to reduce the price per unit for end users. Later, the company expanded its prochetrage to include solar-powered radios and mobile changers From its roots in Arusha, Tanzania, Illumination soon expanded to the rest of Eastern Africa. Its solar products were also appearing in their emerging markets in Southeast Asia. The enterprise initially 3:31 d570fe81f53aa8cf8... Q Page 5 9B18M152 poorly designed, or produced low-quality light. Renewable energy entrepreneurs warned that this poor reputation would make end users in emerging markets averse to solar technology, having the unwanted effect of slowing uptake in the communities that needed it most. To address this challenge. Illumination developed its own efficient solar light-the Mandarin Ultra. When it was first developed, the product retailed at a price equal to about two months' supply of kerosene. Illumination was also able to access the European Union Emission Trading Scheme, claiming credits to reduce the price per unit for end users Later, the company expanded its product range to include solar-powered radies and mobile chargers From its roots in Arusha, Tanzania, Illumination soon expanded to the rest of Eastern Africa. Its solar products were also appearing in other emerging markets in Southeast Asia. The enterpri initially operated under five managers. In January 2018, dee to profitability and supply chain challenges, Thatcher was the sole manager of the enterprise and was based in Australia. Illumination's main competitors in Australia included Kathmandu Limited and Anaconda Group Pay Lid, who also supplied portable solar lanterns. However, the lanterns of these two competitors were marketed mainly for use in camping and other door leisure and adventure activities (see Exhibit 3 THE AID AND DEVELOPMENT MODEL-PARTNERING WITH NON-GOVERNMENTAL ORGANIZATIONS In is carly days in Tanzania, Iluminio integrated itself fully in the supply chain for its sole products. Thatcher and the other managers at the time did not just design the lights, they also commissioned Tromfacturing in China and managed delivery from the manufacturer to NGOs and sid agencies on the ground in impoverished communities of emerging markets. Thuicher learned quickly that creating and maintaining distribution channels could be costly and difficult, particularly in emerging markets. A significant ongoing challenge for Illumination was the need to create distribution channels while preserving a low unit price for the cost. As Thatcher explained. "In some markets it is possible to increase the market profile of the product to justify its price, but when you are working within communities who are experiencing energy poverty there is like opportunity to do that because people camot afford the product at the end." This triggered his first business model change. Thatcher and his team decided to sell the distribution aspects of the enterprise and focus instead on designing and marketing a useful, good quality product Thatcher focused on establishing relationships and successfully tendering to aid agencies and other NGOs who could deliver his solar products as part of and packages on the ground in impoverished communities. Illuminations Mandarin products became so popular that aid agencies and NGOs requested them by tume. Thatcher and his thes-putters would introduce these agencies to their distribution partners who would coordinate the delivery of the products. Partnerships with these organizations enabled the distribution of Illumination's products in refugee camps and areas struck by disaster However, as Illumination began winning more tenders and Thatcher's Mandarin products became more recognized, other organizations began copying Illumination's products While some of these products were cheaper they were lecessarily better value they were often less durable and produced a much lower quality of light. Illumination worked with a dual mission of providing both affordable and environmentally sustainable lights, and refused to compromise on quality. However, the company found it increasingly difficult to competece price and started king lenders. As the sole manager of the enterprise, this new challenge led Thatcher to change focus a second time, adopting a new business model Ce-Anne Gabriel and Joyenne Kirkwood Dames Models for Model Bages: Lessons from Renewable Energy Entre in Developing Country Policy (2016): 338-34 David Site Kelly, Adam During, Rebec Ford, Cie Anne Gabriel, and Sara Walton nopeidere Completion Report Ligning Vanuatu, OFAT Auswaian Aid 2014, report. August 2014 accessed August 24, 2018 ht:dat gowo-publications Documentslighting-van- independent-ww.pol. Page 6 THE GIVE POWER MODEL As competition frased and profits declined. The rester began looking for new ways to generate income. while getting hislar products to communitie that needed them. He noticed staff. friends, and family were borrowing lights and charges to go camping on weekends. He realized that there was a marks for the company's products in Australia This let him to establish Give Power. For every solar Page 6 9818M152 THE GIVE POWER MODEL As competition increased and profits declined, Thatcher began looking for new ways to generate incom, while getting his solar products to communities that needed them. He noticed that staff, friends, and family were borrowing lights and chargers to go cumping on weekends. He realized that there was a market for the company's products in Australia. This led him to establish Give Power. For every solar product purchased in Australia, Give Power would donate a solar light to a household in need in Communities in an emerging market Under Give Power, Thatcher also established a corporate gift-giving model. Working with several other foundations, this model had some success, particularly in the Philippines. Over a 12 month period. Martination partnered with the Morris Family Foundation, Kakasig Aid and Disaster Relief, and Path Foundation to distribute solar lights and chargers to 1.200 families living without electricity in countries such as Mozambique, Indonesia, and the Philippines However, by one year later, the Give Power program was still not as successful as Thatcher had hoped. The cost of maintaining the program was too high. Specifically, the marketing, product development, and distribution costs of both the buy-one give-on program and the compeale gift-giving model outweighed the income generated. After all, there was considerable logistical effet involved in doing one lantem caly occasionally, after an Australian customer purchased one of the products. Without significant sales through the remaining NGO and aid agency purinerships, the Give Power program was not able to efficiently provide sole products to families living in energy poverty. Yet, similar initiatives by communities and NGOs had been successful in Australia (see Exhibit 4). In 2017. Illumination had an annual tumower of $400,000, compared to over $2/0200 in 2013 Sales of Mandarin solar lights dropped to 80,000, from 250,000 in 2013. Under the Cive Power campaign, Illumination distributed less than 5 solar lights, which sat in contrast to the 600,1600 lights distributed to refugee camps with the previous business model. WHAT NEXT? The International Energy Agency's 2017 World Energy Access Outlook sugested that there has been considerable improvement in the number of people with access to power. It credited the decreasing cost of decentralized solutions and the emergence of new entrepreneurs" as an important contributing factor Thatcher wondered if he should reinvest in Illumination's original aid and development model, making solar lanterns available to the world's most energy poor through partnerships with NGOs and aid species. Alumnatively, he wondered how he could improve his success with the Gine Power strategy, or were there other model that Thatcher should consides? Thanks go to takizunika for her contribution to the 6/9 masonal Energy Agency, op. Page 7 9818M152 Region EXHIBIT 1: ELECTRICITY ACCESS BY DEVELOPING REGION AND YEAR Rate of Access (%) Population without National Urban Rural Access (in Millions) 2000 2005 2010 2016 2016 2016 2016 701 021 00 77 VIORI 10cn towergy Agency, op. Page 7 9818M152 EXHIBIT 1: ELECTRICITY ACCESS BY DEVELOPING REGION AND YEAR Rate of Access (%) Population without Region National Urban Rural Access (in Millions) 2005 2010 2016 2016 2016 2016 WORLD 73 76 82 86 96 73 1,060 DEVELOPING 64 69 75 COUNTRIES B2 94 70 1,060 Africa 34 39 43 52 77 32 588 North Africa 90 98 99 100 100 99 c1 Sub-Saharan Africa 23 27 32 43 71 23 588 Developing Asia 57 74 83 89 97 81 439 China 99 98 99 100 100 100 India 63 58 BE 82 97 74 239 Indonesia 33 67 91 99 02 Other Southeast Asia 67 76 83 89 97 82 42 Other Developing Asia 32 30 53 73 87 65 135 Central and South 87 91 94 97 86 17 Middle EAM 91 80 91 93 79 17 Sourbe: Energy Access Date immational Energy Agency, accessed May 132018 www.generacebase America EXHIBIT 2: TYPICAL SUPPLY CHAIN FOR SOLAR LIGHTS IN DEVELOPING COUNTRIES Manufacturers Importers Distributors Retailers NO End Users Michi GI Pic Opera Rodes perted by N NGO-governmental organisation Source: Created by the case autos 7/9 EXHIBIT 3: COMPARISON OF ILLUMINATION AND COMPETITORS IN AUSTRALIAN MARKET www Soute Created by 5652 EXHIBIT COMPARISON OF ILLUMINATION AND COMPETITORS IN AUSTRALIAN MARKET Try como comowy ASSA W? med May be Vie M. para com So Whou Unt.. r.com Download, 2011 www.com Ancordant 20 cod 10 www.acade Social conde de 14.20 www.core.com.br Posible Soriguarie 2. Od 1.200.com Good RNDr. Golo Low Parduod www 1428 wandelings- Barber AS EXHIBIT SELECTION OF AUSTRALIAN NATIVES SIMILAR TO ILLUMINATION ONE POWER Alan Harapan Bay INGGGG Gradca reputa building, but for pc w ther. So hen Thosen demo ger girl Tran Thol. Thand agara The Dar sy 141420 Yew yhure 14 EHDIT COMPARISON OF ILLUMINATION AND COMPETITORS IN AUSTRALIAN MARKET |tai . has t - | Tv - - Ts AL -- | , " 1. - 4 2 H, TN Paran - ", 14, 11 - 2, 14, 1 P 1.Barossa - uri Tu A Hams H. 211. are Oranghairyta , pa IEE ME are 14, 2011. atarkuttargation- EIVIER EXHIBIT 4: SELECTION OF AUSTRALIAN INITIATIVES SIMILAR TO LUMINATIONS GIVE POWER Paari Haran 01 Pro AND Buary OL in the proge School | , | Taasaainated | - hair tasty ignar RA PA SHE HA A - | ) ME -