Description

The Pay-As-You-Go (PAYG) model is a financial mechanism allowing consumers to pay for services or products incrementally rather than making a single upfront payment. In the energy sector, PAYG is typically implemented using digital payment systems (e.g., mobile), enabling consumers to make a series of modest payments to purchase units of electricity, based on their usage, often on a daily or weekly basis. The service provider can remotely manage and monitor usage, ensuring payment compliance. If a payment is missed, the service can be suspended until the required payment is made. Several PAYG business models exist, some allowing customers to own the equipment after a specific number of payments (i.e., leases).  

Benefits

In the energy sector, the PAYG model is a game-changing credit system that enables low-income consumers to affordably access to energy. By spreading costs over time, it reduces upfront financial barriers to entry. Additionally, PAYG supports the adoption of renewable energy technologies by making them accessible to off-grid and underserved communities, which might otherwise be unable to afford the upfront costs of such systems. This model also fosters innovation by supporting micro-grid and/or community-owned renewable energy projects, helping nations manage investment plans for access to the grid.

Case Study

Solar Pay-As-You-Go solution in Sub-Saharan Africa

Launched in 2011, the Azuri PayGo Energy initiative proposed a PAYG service to provide access to clean energy in Sub-Saharan Africa by combining solar and mobile technology. Targeting regions where traditional energy sources like kerosene are costly and polluting, Azuri's Pay-As-You-Go solar home systems provided an affordable alternative. After a small installation fee, users could purchase energy through scratch cards or mobile money, reducing their weekly energy costs by up to 50%. Over 28.5 million hours of clean light and 9.5 million hours of emission-free phone charging were delivered, avoiding 3,504 tonnes of CO2 emissions. Tens of thousands of units were distributed across 11 countries, benefitting hundreds of thousands of people.

Azuri's PAYG model not only provided clean energy but also fostered local economic growth. By eliminating high upfront costs, the model enabled customers to own the solar system after 18 months of regular payments. Surveys indicated that typical customers saved up to USD 70 in their first year, with many reinvesting these savings into education, food, water, and business ventures. In 2013, the initiative also created jobs, with locally-employed sales agents, technicians, and customer support operatives. The scalability of Azuri’s model was recognized by a USD 1 million award from USAID to expand operations in Rwanda. With partnerships established, such as with a leading mobile network operator in Tanzania, Azuri aimed to procure an additional 100,000 units over the following two years, further scaling the impact of its innovative PAYG solar solutions across the continent.

Additional Sources

• Pay As You Go Models, Innovation Landscape Brief, IRENA, 2020, https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2020/Jul/IRENA_Pay-as-you-go_models_2020.pdf
• https://unfccc.int/climate-action/momentum-for-change/financing-for-climate-friendly/azuri-paygo-energy