Business Model Dynamics of Renewable Electrification in Africa

The research is set out in context of the global effort to provide electricity access to millions of people in Africa. A part of the effort also emphasizes on the empowerment of people to earn a means of living for themselves. In the this backdrop, the efforts for electrification are two-fold; large centralized power plants on one hand, while distributed generation from technologies like diesel, solar, hydro and wind on the other. The former strategy seems to be aimed at places with adequate grid access, such as cities and developed towns. However, the demographics in Africa are such that there are densely populated rural settlements, where the main grid has not reached yet. For such places or communities, the grid based energy could be expensive, and therefore distributed generation is being held as a viable solution. Through several research studies in the past it has been established that for such densely populated remotes, distributed generation (through mini-grids or solar home systems) is indeed a financially sustainable alternative. This alternative has been emphasized time and again by organisations such as the United Nations and the World Bank, who have actively been working of universal electricity access for a long time. Despite this international impetus, distributed generation from mainly solar PV mini-grids and home systems continue to face challenges in deployment. The research here in sets out to attempt to understand the effort and the challenges, and constitutes the main societal problem driving our research. In order to understand these issues, different perspectives are explored. Technology and policy lenses have already been applied to understand the effort, and it is for long understood that technology isn't a problem anymore. In contrast, the idiosyncrasies of business models and associated frameworks, is found to provide a unique perspective to look at these issues. Since businesses are the ones actively involved in the electrification effort, it can be argued that businesses can shed more light on the matter. Within business model frameworks, the dynamic perspective to look at businesses has been gaining momentum although a lot seems left to be explored. The dynamic perspective, as the name suggests considers a business as constantly changing entity, rather than conventional static representations. Given the rapidly evolving markets for electrification in Africa, the business model dynamics methodologies are interesting to explore. Additionally there are gaps in literature about the frameworks applicability to bottom-of-the-pyramid (BOP) markets, which is an aspect that the analysis herein can help develop. Frugal innovations and associated idiosyncrasies have a lot of potential and application to BOP markets, and can be used to fill such gaps. Therefore the main research question question that this thesis wishes to address emerges as: How can we develop a Business Model Dynamics framework with the help of Bottom-of-Pyramid Frugal innovations and business models perspective, and understand the electrification effort in Africa?” To start with, a detailed literature study is conducted on researches about the electricity market situation in Africa, business model dynamics and frugal innovation. The former is carried out to give us an understanding of the value chains of the approaches to electrification (mini-grids and solar-storage solutions), and set a baseline for our analysis. Next, Business models and business model dynamics idiosyncrasies are understood, and frameworks developed in the past are studied. In the third past of the literature study, frugal innovations theory is examined to understand how can we identify steps that firms take to fit-in the BOP markets. With this knowledge gathered, in the next step this research proceeds to develop its own unique framework. A conceptual framework is developed using a pre-established methodology, which captures dynamics of the business models of firms in the market. In addition to that, it captures the frugal aspects or strategies employed by businesses. Then the framework was applied to the firms in two different markets for electrification- the solar hybrid mini-grids and individual solar home systems. The designed framework is novel and its reflected upon with the applications. Through this research the business model dynamics theory and its intersection with frugal innovations theory, is understood and demonstrated. The framework's overall performance is tested through the applications, and we learnt that it is indeed possible to create a framework that can capture both perspectives together. This research contributes to the advancement of business model dynamics theory and frameworks, which are useful tools to analyze businesses particularly in bottom of the pyramid markets. It is established that frugal innovations indeed take shape due to constantly changing business models, and therefore there is synergy in both topics. This is the academic contribution that the research makes. Besides that, the framework's application to firms in different markets, regions and circumstances is discussed. Furthermore, the framework's results are analyzed to understand generalizations for the market of electrification. Understanding the micro-challenges within the market, some possible strategies are developed and applied to a few companies. The practical contributions of this research therefore include a few strategies to increase the deployment of electrification technologies in Africa. Finally, the research concludes with recommendations on directions for further exploration.