In 2011, armed with a grant awarded under the Energy and Climate Partnership of the Americas (ECPA), nonprofit organization Trees, Water & People launched an initiative to increase the use of clean technologies in several Latin American countries. That pilot project has since spawned a social enterprise that is making solar lighting products accessible to customers in rural areas of Central America.
It all began with a three-year, $1.2 million ECPA grant awarded by the U.S. State Department to Colorado-based Trees, Water & People(TWP) for an initiative called “Improving Access to Clean Energy in Latin America.” The goal was to develop effective ways to reach off-grid markets with climate-friendly products such as clean cookstoves, solar lanterns, and small solar home systems.
While such products provide tangible benefits—cleaner indoor air, reduced expenditures on conventional energy, and higher-quality lighting and cooking—a major challenge is how to create a sustainable supply chain to reach markets with the greatest need. Last-mile distribution is complex, unpredictable, and expensive. Roads are sometimes impassable, mobile communications are often unreliable, and many rural households have no access to financing.
TWP worked hand in hand with a social enterprise called PowerMundo—which had tackled some of these problems in Peru—and with partners in Nicaragua, Honduras, and El Salvador to develop a sustainable commercial model for hard-to-reach areas in Central America.
After trying several different approaches, TWP found that existing rural institutions such as agricultural cooperatives, nongovernmental organizations, and rural savings and loans groups could be effective distributors and retailers of the clean-technology products. Since such groups often already have a credit relationship with small-scale farmers for agricultural investments, they can provide these same farmers with the payment terms they need to invest in products that have a true impact on their lives.
Last year, TWP took a step toward making the initiative sustainable by establishing a social enterprise called Luciérnaga LLC (the name means “firefly”) to serve Central America with solar lighting products. “We wanted to create a vehicle through which the project could continue to grow,” explained TWP International Director Sebastián Africano.
Luciérnaga fills a business niche by providing a link between manufacturers and small local distributors. It imports solar lighting products in bulk to a central location in El Salvador, handling logistical details and ordering in large enough quantities to keep the price per unit low. The items can then be distributed over land to partners and clients throughout the region, in Nicaragua, Honduras, and Guatemala. Any profits would be reinvested in the company.
The growth of this business model and the birth of Luciérnaga as an independent company with an international presence show how short-term grant funding can be leveraged toward longer-term sustainable development objectives, according to Africano.
Today, TWP is working to standardize its methods in each country and implement a mobile phone-based monitoring system where distributors can keep track of their sales, collections, and warranty processes through a common online database. The goal is to keep costs low and provide a new source of income for rural individuals and institutions while potentially reaching millions of households in Central America that don’t have access to electricity.
Since launching this program, Luciérnaga and PowerMundo have sold close to 10,000 solar lighting products through their networks, providing illumination, device-charging capabilities, healthier households, and over $200 in cash savings per year, per product, to more than 50,000 people in Latin America.