Insights from CaVEx to enable the generation of carbon credits via battery rentals
A blog by Jon Ridley, a Frontier Tech Implementing Partner.
This post is the second of two blogs which capture learnings from our pilot — ‘IoT-enabled household battery distribution via micro-retailer networks’.
“Rentable” batteries can unlock access to clean, affordable energy for low-income communities in the Global South
The objectives of the Frontier Tech Hub-funded project are for 4R Digital to develop and scale new, digitally-enabled products and services that Mobile Money Agents (MMAs) can offer to their end customers. In the first instance: a daily rentable battery offering is being tested that MMA customers can use in their homes for lighting and mobile phone charging.
Rentable batteries are an affordable solution, and an innovative approach, to lowering the barriers for low-income households disproportionately affected by the lack of access to clean energy. Customers rent a battery unit that provides more than three hours of daily lighting (as well as phone charging), displacing kerosene lanterns and associated emission reductions in carbon dioxide and black carbon. Additionally, households experience secondary benefits, including reduced indoor air pollution and risks of fires and injury.
While the Pay As You Go (PAYG) solar home system (SHS) market has unlocked clean energy access, rentable batteries address the needs of low-income customer segments who cannot take on the considerable long-term debt of a complete system. Customers of rentable batteries pay per swap (usually each day), providing them with flexibility, and the overall cost of the system is shared with the MMA charge-station owner, who derives an income from leased batteries. This helps to establish a sustainable model for continued flexible clean energy access.
Applying industry standards and protocols at a platform level
Corporate interest in voluntary carbon markets (VCMs) is growing rapidly, with an increasing number of companies funding climate-positive projects alongside initiatives to reduce their own operational footprint through decarbonisation (outside of legally binding mechanisms such as compliance markets). The mechanisms through which emission reduction standards are recognised are set by international bodies, including the International Organisation for Standardisation (ISO) and the United Nations Clean Development Mechanism (CDM). They are very precise, but registration is so lengthy and costly that most projects cannot register, access the markets, and prove their validity to buyers. This limits the potential of incentivising widespread climate action as small-medium scale projects are excluded.
Transparency and Access through Data
CaVEx focuses on making climate finance available to small-scale projects previously excluded from the VCMs. Other than reducing CO2, small-scale projects are proven to have large positive socio-economic and ecologic externalities. CaVEx’s digital approach maximises payments down to those people on the ground who are creating a positive impact.
CaVEx’s data-centric approach bases project registration and carbon credit creation on a robust set of required data that flows continuously from project activities. The data are screened manually and using automated processes to ensure the validity of every carbon credit. This approach lowers the entry barriers for projects, lets auditors have visibility of incoming data, and offers buyers “live” transparency to the source of the credits. Buyers have visibility of project data down to the single unit (for example, the electric vehicle or plot of a forest) that has produced the credit that is being purchased. CaVEx facilitates trades seamlessly so that buyers and sellers have full visibility of projects, prices, credit creation and environmental goals. Credits are generated in real-time and retired from a distributed ledger to ensure traceability. CaVEx enables carbon revenues to be channelled directly to project participants, a mechanism that could offset the cost of charging stations for mobile money agents or reduce the price per swap for battery customers.
Eligibility for carbon financing via project activities and calculation of emission reductions
Like individual solar home systems, rentable solar-powered batteries help displace GHGs and kerosene lantern use through electric lighting. Such projects can be eligible for carbon financing, provided they clearly demonstrate their contribution to the reduction of GHG emissions, following key CDM principles:
Without the project activity (the baseline scenario), the battery customers would use GHG-emitting, fossil fuel-based energy. This primarily corresponds to fossil fuel-based lighting systems. The baseline fuel consumption projection assumes 3.5 hours of daily lighting per household. Any adjustments to the daily lighting hours would be captured in ground truthing and project set-up activities that account for region-specific features.
Additionality: emission reductions resulting from the project are in excess of what would be achieved without the project activity. Further, for a project to qualify, it must be demonstrated that the activity would not have occurred without the incentive provided by the carbon markets.
Provided these conditions are met, solar battery projects can be eligible to issue and sell carbon credits through CaVEx. Depending on their capacity and core functions, solar battery projects may use different carbon emission reduction calculations, all of which are based on distinct CDM methodologies.
While larger battery systems may fall under a different methodology, this project focuses on the CDM-approved methodology: AMS-III.AR – Substituting fossil fuel-based lighting with LED/CFL lighting systems. To qualify for GHG offsets under this methodology, solar battery projects should meet certain conditions, such as being equipped with LED or CFL-based lighting systems of a certain quality, luminosity, and expected operational life.
Industry data from other projects applying this methodology and through organisations such as GOGLA, which report industry-wide impact metrics, are publicly available as reference points. These set a precedent for baseline estimates in target markets to be validated during CaVEx project setup activities. Based on system size and utility, an indicative market reference point can be used to assess the emission reduction potential - a baseline annual emission factor of 0.28 tonnes of CO2e per customer. The product specification and market research project activities have informed a station design that can simultaneously charge an array of ten battery units. The charge station is also designed to be modular, and mobile money agents will have options to link additional charge station modules and purchase battery packs. Assuming a customer leases a battery 95% of the time, this could generate emission reductions of up to 0.26 and 3.93 tonnes of CO2e per battery unit and charge station, respectively, every year. An assumed carbon price of $15 per tonne equals $3.93 per customer per year (the value of 20 battery swaps) and $59 per charge station per year.
Although the effect of the carbon financing will not be sufficient on its own to drive the commercial deployment of a new project with connected devices, it will become meaningful as projects reach scale and incentivise MMAs to adopt and maintain the solution as a means of generating additional revenue. The assumed carbon price would generate revenues equal to 12% of agent device repayment costs, reducing barriers to affordability, or the value of 295 customer battery swaps.
Opportunities beyond climate financing?
Climate finance provides a very specific opportunity to direct funds to micro-projects, communities, and/or individuals who otherwise would not have access to these funds. In addition, the same mechanism can direct other types of funding intended to incentivise certain types of behaviour. These might include “results-based financing”, “demand-side subsidies”, and perhaps some types of cash transfers linked to quantified and verifiable outcomes.
Design Evolution: Production-Ready Units
The pilot phase of this project deployed a rudimentary charging station prototype. Following its success, we focused our efforts on developing a production-ready design, aiming for a reliable unit suitable for commercial usage and maintaining a data channel for remote monitoring and validation of associated emission reductions. Each charging station can capture, process, and transmit customer battery swap data that underpin high-quality carbon credits. Additionally, our design principles revolved around creating a model that would stand the test of time and maintain operational excellence, ensuring our customers would always have access to efficient, high-quality charging solutions.
Given the compact spaces of kiosks, we designed our charging station to be space-efficient and modular. With limited available space in mind, our charging station doesn't command much room yet packs substantial power. The modular aspect enables agents to incrementally add capacity to meet growing demand. The flexibility of our design ensures that our stations can evolve in parallel with an agent's growing business, presenting a cost-effective and scalable solution.
We recognised the importance of durability and reliability in our charging stations' environments. Hence, our product design incorporates dust covers for ports, ensuring longevity and reducing maintenance requirements in the typically dusty environments of the region. The rugged exterior is built to withstand daily wear and tear, promising consistent and reliable performance. Furthermore, we implemented LED lights on both the charging station and individual battery units. These lights provide crucial information, such as connectivity status and charge levels, allowing for better usage monitoring and more efficient energy management. This intuitive feature allows our users to optimise their use of our products and ensures they stay connected, even in the most challenging conditions.
To serve system users better, we designed the battery units with integrated USB connectors compatible with standard cables used to charge phones and power LED lamps. This ensures that units can seamlessly interface with various commonly used devices. Moreover, the batteries are constructed to possess sufficient capacity to offer eight hours of uninterrupted lighting and reliable phone charging. By catering to these essential requirements, our battery units serve as versatile power solutions that can reliably cater to the everyday energy needs of our users.
If you’d like to dig in further…
📚 Read the first blog of this series — “Navigating the Dynamic Landscape of Sub-Saharan Mobile Money Markets: A Solar Charging Station Pilot Experience”
