Alternative Energy Development Corporation

EMPOWERING NON-GRID COMMUNITIES THROUGH INNOVATIVE FUEL CELL TECHNOLOGY

Headquarters:	Randburg, South Africa
Established:	2000
Impact Areas:	South Africa, Namibia, Zambia, Malawi, and Lesotho
Type:	For-Profit
Energy Sectors:	Power Source: Other Power Sources, Fuel Cells Power Use: Off-Grid Lighting and Electricity
Business Model Types:	Product Sourcing: Self-Design, Local Manufacture, Uniform Product Distribution: Microfranchising Affordability: In-House Financing, Subsidization Organization Financing:Owner Financed, Grants and Donations, Loans and Equity Scaling: New Locations Social Impact: Scope / Number Reached
Staff Size:	11 and 3-6 volunteers
Annual Budget:	$404,000
Major Funders:	Investors and mines (corporate social investment projects)
Awards:	2006: Second Place Top 100 technology company in South Africa 2008: Energy Globe Award 2009: Tech Museum of Innovation Award 2010: Santa Clara Global Social Benefit Incubator Africa Award for Best Rural Electrification Solution Ashoka Fellow

Problem Addressed

Non-grid communities in South Africa and neighboring countries have limited options for lighting and electrification.
Paraffin and candles are expensive, unsafe, and unhealthy.
Home batteries must be taken into town to be charged every three days.
Further, these communities typically have 80% unemployment rates, leaving little disposable income for investment in better solutions.
In addition, many other areas are in need of portable energy solutons with no carbon footprint.

Target Market

Township households and small businesses with no grid power
Farm and mine owners offered subsidized power solutions to their workers
AEDC is also targeting other users in need of small-scale energy, such as remote campers, vacationers, and telecom towers.

AEDC sells low-cost rechargeable zinc-air fuel cells and accompanying energy products to non-grid communities in South African townships and other remote users.

Watch this video on YouTube.

Value Proposition

AEDC also provides recharging services through a franchise system which creates a monthly annuity income for franchisees with a high profit margin.
AEDC’s system provides customers with clean energy at a lower monthly operating cost than using candles or paraffin
This improves customers’ quality of life, health, education, and creates sustainable local jobs.
It also reduces carbon emissions and improves the environment by generating no waste.

Revenue Streams

Sale of fuel cells
Sale of complementary products- lights, mobile chargers- powered by fuel cells
Sale of top-ups for fuel cells
Partnerships with mines and companies subsidizing electricity for their employees

Energy Products/Services

Milestones Achieved

2000: AEDC founded to make fuel cell technology available to off-grid communities
2002: First significant funding from shareholders
2006: Pilot project demonstrating reliability of developed technology and initial commercial production
2008: First commercial installation into a village of some 300 community members
2009: Commercial projects in 2 villages, reached positive cash flow
2011: Registered to do business in California
2011: Moved factory next to zinc mine where zinc is purchased and used fuel cells are recycled.
2011: Developed new 300w fuel cell.

Growth Plan

Scale up from 3 to 20 outlets in the near future
Implement rent-to-own System
Manufacture and Sell 50,000 fuel cell sets
Set up franchise models in S.A. and joint ventures in other countries
Achieve profit margin of over 35%
Set up a research and development section based in California to advance its fuel cell technology to higher levels

Impact to Date:

AEDC’s fuel cells have benefited over 4,600 community members in 4 countries.

Investment Required:

CAD$ 4 million for expansion into South East Asia and Canada.

Product Sourcing

AEDC produces its fuel cells at a factory next to a zinc mine, where it sources the zinc they contain.

Distribution

AEDC’s current distribution model is based on service shops run by independent entrepreneurs, based in target market townships, who sell and recharge fuel cells and also sell complementary products (lamps, phone chargers) and other goods such as mobile airtime.
Shops are situated in commuter areas such as railway stations so customers can drop them off on the way to work for recharging.
Distributors are responsible for their own product maintenance, and are trained at no cost at AEDC’s factory for two weeks.

Distributor Financing

The average shop costs US$10,000 to set up, which includes installation of a water plant and electrolyte mixing station, and handles 250 fuel cell units/month, which are bought from AEDC.
Distributors earn an average of US$700/month.
Franchisees receive financing to pay for their service shop and working capital from the mine where AEDC sources its zinc.
Franchisees are given 5 years to pay back their loans, and AEDC owns the equipment until it is paid for.

Marketing

AEDC’s top-up model fits users’ existing usage patterns for batteries and mobile phone minutes. Everyone understands top-up models.
AEDC also offers silver, gold, and platinum cards to appeal to user’s aspirations, or ‘bling factor.’

Revenue and Affordability

The full up-front cost of AEDC’s fuel cells (close to US$250) is more than an average customer can afford.
While AEDC initially compensated by only selling to customers subsidized by their employers (mines and farms), they realized that this would make it impossible to scale.
AEDC therefore developed a model similar to mobile phones/razorblades, in which they sell the fuel cell at below cost and sign customers up to a 2 year contract which allows them to make the money back through recharges.
Customers buy a silver, gold, or platinum card, which gives them a fuel cell and different numbers of lights.
Customers also receive loyalty benefits- for every 10 recharges they get a mobile phone airtime voucher.
Customers can use the fuel cells as quickly or slowly as they want. Some use up a fuel cell in 2 weeks, some in 6 weeks.
CAPITEC, South Africa’s fourth largest bank (and fastest growing business), has recently partnered with AEDC to provide financing for this model.
CAPITEC is running the card system so the model is cashless, deducting payments from users’ CAPITEC bank accounts.

Financing

For most of its history, AEDC worked primarily with mines, which in South Africa are required to spend 3% of pre-profits on social investments.
Therefore, AEDC’s programs were for many years primarily set up in locations near mines, and the mining companies subsidized installation, training, service shops, and infrastructure.
For many years AEDC hoped to receive government financing to scale up, but it never came, which is what led AEDC to develop its current, more scalable distribution model.

MR. FUEL CELL

Description:
12 Volt Zinc-air fuel cell, sold with control box and LED light strip. The fuel cell generates power from the decomposition of zinc oxide.

How It’s Used:
The AEDC fuel cell provides 12 volts of power, 24 hours a day, and differs from other rechargeables in that it is a primary battery creating energy, rather than just using stored energy. In addition, the fuel cell gives users not only light, but electricity to power other devices to which they previously had no access, such as televisions, mobile phone chargers, and anti-mosquito devices, all of which AEDC also supplies. The operating costs are lower than using paraffin or candles (based on costs in the target market of South Africa). In addition, the production of the energy has no carbon footprint, the fuel cells have no negative environmental components, and the left-over zinc oxide after creating energy can be used as high value fertilizer. The fuel cells are very light weight, only 9kg and totally portable. They are ideal for disaster management as they can be deployed anywhere and provide long-term basic energy in any weather condition.

Product Type:
Rechargeable

Technical Data

Lumens/Watt:	285
Average Lamp Power and type:	1.4W LED
Battery Capacity and type:	320,000mAh Zinc-Air fuel cell
Hours Runtime/Charge:	800
Charging Hours from Flat:	20 minutes
Lumens:	399
Lumen-hours/year@4hr/day:	582,540
Service Delivered (lm.hr/$):	1,675
Kerosene Service Delivered (lm.hr/$):	872

Cost Data

Number of Households Served		1
Upfront Cost
Estimated Retail Price:		$350
Recurring Costs
Recharge Cost:		$20
Recharge Frequency:		4 weeks
Replaceable Products	Life(years)	Replacement Costs
Battery	7	$120
5-year Replacement and charging Costs		$1,388.91
5-year Ownership Cost		$1,738.91