UPSIDES - Tanzania. Despite its high annual growth rate of 6.8 percent and its recent transition to a market economy, access to electricity is scarce and expensive, especially in rural areas. Electricity from renewable sources represent zero percent of total installed capacity. This is where Devergy comes in. The energy services company started its operations in Tanzania in 2012, providing highly efficient, reliable and affordable micro-grids in rural off-grid communities.
Upsides interviewed the founders of Devergy, Fabio De Pascale and Gianluca Cescon. Originally from Italy, Fabio and Gianluca are engineers turned entrepreneurs that want to change the access to energy in developing countries. While on a business trip in Europe, Upsides met with them to discuss Devergy, the energy sector, the challenges they met and the impact their amazing company has on local communities.
Tell us a bit more about Devergy.
‘Devergy was set up in 2010 but operations started in 2012. We are an energy services company focused on small communities in developing countries that are not served by the national power grid. We use the term “energy services” because we provide more than electricity. We have a more organic approach, providing appliance and service as a whole package. We work similarly to a mobile operator, we provide the appliances (basic offer is lighting and phone charging) but we also offer entertainment devices such as stereos, televisions. We also offer refrigeration appliances, sewing machines, grain mills. We try to serve all possible needs of consumer and business customers. The idea is that everything is pre-paid, all payments go through mobile payment systems (which is widespread in Africa and does not exist yet in Europe).
We install solar smart grids, controlling and monitoring the data that come in. We know how the grids are doing at every moment, the information helps us to support our customers better by assessing issues and providing maintenance in a cost-efficient manner. Each community has a trained local technician who checks the meters and is remotely guided through the maintenance operations by our micro-grids experts.’
What made you want to set up your company in Africa?
‘When we came up with the idea, we had no specific preference or feeling about a country. We decided to base our decision on parameters of merit, for instance GDP and electrification rate. We attended a meeting with the Netherlands Enterprise Agency on Africa and a few months later we were in Tanzania. We are lucky to be there, as we found a thriving business environment and an ideal regulatory framework to implement our business model.’
What makes Devergy unique compared to your competitors?
‘Well, the typical approach to electricity is the grid, grid extensions are very expensive and superfluous. In our business model, grid extension is not necessary. We use resources in a more efficient and adequate way for the demand. We do micro grids in a scalable way and that can respond to energy consumption. We increase capacity quickly and in small amounts, so it grows with the consumption and the customers’ financial capabilities. We make sure that consumers have enough power every day. We’re good at scaling up with the consumption.
Our approach is unique. All assets deployed are based on real demand versus projected demand, we invest more in the grid and it is safe.’
What challenges did you face when establishing the company?
‘The challenges were twofold: the financing and the lack of start-up network in the Netherlands, where we initially founded the company. For the financing part, there was a sparse and unorganized set of financing options, most impact investors tend to focus on later stage companies. In 2011, traditional grant programmes were shut down due to the crisis. At the beginning we managed to raise money through family, friends and crowdfunding and we could put our first grid together.
Fundraising is heavily connected to being in a network of startups and investors. Holland back then hardly had social enterprises in developing countries, and we could not find a cohesive venture capital network or startup network. We realize that Holland is a great place for businesses but not for startups where losses are expected in the first few years. Fabio spent a year in Boston and had access to a startup network where you can get and share knowledge, learn new skills and meet investors.’
How do you work with the local communities?
‘When we have identified a village to install a grid, we approach the village community and they sign a letter where they authorize us to proceed and they also provide support. It takes a week to install a grid and we recruit someone in the village both as an agent and technician. We go to villages to audit and monitor the quality level. Local person is guided and monitored via the grid, as said earlier.’
You are now based in Tanzania. Are you looking to expand your operations in other African countries and beyond?
‘No, not at the moment. We’re looking at other countries but not rushing it. Tanzania has a pool of six million customers, today we provide service to one thousand. We still have a long way to go.’
Since its inception, how has Devergy contributed to energy in the region you operate in?
‘We service six communities which represents a total of a thousand people, primarily providing lighting, phone charging and entertainment appliances.’
How do the prospects look for your company? Do you feel your activities are gaining traction?
‘Yes. Energy is a booming sector, like mobile operators fifteen years ago. We’re looking at a market with much larger revenues and impact potential than mobile, though. Electricity is a life changer. Pioneers in the energy access and micro-grid business are getting more recognition, we are regularly invited by international organizations like the World Bank or by energy ministries which recognize the need to ask about alternatives as expanding grids does not work. It’s a challenging but very exciting and interesting sector to be in right now.’
What are your goals for Devergy for the next five years?
‘We would like to increase the number of connections, 100,000 connections ideally, reaching half a million people with electricity.’
If you could do it again, what would you change?
‘We would start our business in a place where the startup community is active, we would learn to speak finance and we would definitely have a larger founder team. We started with two founders – three at the very beginning, but one dropped out very early on – and it was not enough. We wished we were four in the team with different business backgrounds such as marketing and finance. That would have been good.’
by Marthe Reinette