Startup Series: Nithio

Oct 7

Today's guest is Kate Steel, Co-Founder and CEO of Nithio.

Nithio is an energy financing platform powered by a proprietary AI-enabled risk analytics engine. Nithio developed its innovative approach to standardize credit risk assessments to unlock and scale energy access in Sub-Saharan Africa. Nithio advances energy financing at scale through its Financial Intermediary, Nithio FI B.V., which offers receivables-backed funding to off-grid energy providers in Nigeria, Uganda, and Kenya. Driven by the Risk Analytics Engine, Nithio FI's innovative approach expands access to off-grid clean energy for households, micro-businesses, and smallholder farmers.

Kate co-founded Nithio in 2018. Before Nithio, she had a long career in the off-grid power sector, most recently as Energy Director for Power Africa. In addition, Kate was on the Energy Access and Investments team at Google and the World Bank-IFC Lighting Africa initiative manager.

In this episode, Kate takes me through Nithio's approach and what led her to co-found the company. She explains why energy access is a climate problem and policy's role in the equity and clean energy transition. We also discuss the existing funding tools available to startups across Africa, the importance of integrating impact into the startup's mission, and what holds lenders back from investing in energy access startups. Kate is a great guest, and it was exciting to learn more about the important work Nithio is doing.

Enjoy the show!

You can find me on twitter @jjacobs22 or @mcjpod and email at info@myclimatejourney.co, where I encourage you to share your feedback on episodes and suggestions for future topics or guests.

Episode recorded September 27th, 2021

In Today's episode we cover:

Overview of Nithio, their approach, and how the company got started
How Kate first became interested in power in Kenya and what motivates her to focus on climate
The tools available for startups across Africa and the investment risks in the off-grid energy sector on the continent
How Nithio is both demystifying the industry for investors through analytics and a lender themselves
The entities that Nithio primarily works with from governments to development financial institutions to private investors
The solar power solutions Nithio is providing and why energy access is one of their main focus points
How important it is to integrate impact into a company's mission
Why we can't uncouple climate change, decarbonization, and energy poverty
Whose responsibility climate change is and how much responsibility the global north should take on creating a solution
The most significant factors that affect energy poverty across the globe
What holds lenders back from engaging in this space
The importance of policy in the clean and equitable energy transition

Links to topics discussed in this episode:

Jason Jacobs: Hey everyone, Jason, here. I am the, My Climate Journey show host. Before we get going, I wanted to take a minute and tell you about the My Climate Journey or MCJ as we call it, membership option. Membership came to be because there were a bunch of people that were listening to the show that weren't just looking for education, but there were longing for a peer group as well. So we set up a Slack community for those people. That's now mushroomed into more than 1300 members. There is an application to become a member. It's not an exclusive thing. There's four criteria we screen for. Determination to tackle the problem of climate change, ambition to work on the most impactful solution areas, optimism that we can make a dent and we're not wasting our time for trying, and a collaborative spirit. Beyond that, the more diversity, the better.
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Hello everyone. This is Jason Jacobs and welcome to My Climate Journey. This show follows my journey to interview a wide range of guests to better understand and make sense of the formidable problem of climate change and try to figure out how people like you and I can help. Today's guest is Kate Steel, the co-founder and COO of Nithio. Nithio is an AI driven platform for clean energy investment. They've standardized credit risk to catalyze billions of dollars of capital to address climate change and achieve universal energy access. Nithio sustainably invest in the renewable off-grid solar sector to scale energy access and climate change resiliency.
Now I was excited for this one because energy poverty is an issue that doesn't get talked about enough and it's also one that is deeply interrelated with climate change. Topics like whose job is it to clean up for the emissions that are already up there? Is it the job of the people, historically, who did the emitting or is it the job of the people looking forwards that are coming up that haven't had access to basic electricity before? How do we think about resiliency and how big a role can it play? What's holding back the billion plus people that don't have access to basic electricity from getting access to a subset of the living standards that you and I have become so accustomed to.
We'll cover all of this and more in this episode, including Kate's journey to doing the work that she's doing, Nithio's origin story and approach, their progress to date, their long vision, and we'll also talk about just how that work fits into the bigger picture and what else matters. If nothing else you're gonna leave here a lot more informed and with a lot more to think about as well. Kate, welcome to the show.
Kate Steel: Thanks Jason. Good to be here.
Jason Jacobs: Psyched to have you. Africa is such an important topic. Developing countries are such an important topic. Energy access is such an important topic and emissions and decarbonization is such an important topic. And since you kind of live at the intersection of, of these things, I'm super psyched just to take some time and learn more about your journey and, and what you're doing at Nithio. So thank you for making the time.
Kate Steel: You very welcome. I'm happy to share and I'm gonna add to your list that's super exciting is adaptation resilience as well. I think we're, we're at that point with the climate journey, unfortunately.
Jason Jacobs: Totally. And that's an active pillar for us in terms of investment and in terms of what we believe is, is important. And even if it doesn't address the root cause it can help us better adapt to keep quality of life high and casualties lower and better manage us to adapt to a world that is becoming less stable over time.
Kate Steel: Yeah. Absolutely.
Jason Jacobs: Well, taking things from the top, what's Nithio?
Kate Steel: [laughs] Great question. So, so Nithio was founded to drive investment in energy access space in Africa that we were looking at, I, I think maybe a lot of your listeners are aware, but there's nearly a billion people that don't have access to electricity worldwide, close to 600 million of them are located in Africa. And I mean, if you're just thinking about what that really means is there's people who don't have lights, don't have access to even basic electronics or really a lot of the things that give high quality of life and productivity.
And so we were looking at, at that problem, there's a really great solution for most people. Obviously there's a central grid that can reach a lot of people but at least half those people that are currently off-grid will probably be best reached by a decentralized solution. So if that's a micro grid in some cases but in a lot of cases it's going to be a small solar home system. And this would be a small panel with all of your basic appliances and lighting that can be very easily installed anywhere and bring basic electricity access to a household.
And no one needs to reinvent the wheel not on that. So the technology that exists, it's a technology that the prices have really come down to a place where we have financing. It's affordable to most of these households. And what we really saw was if you have a technology that works and you have a price point and a financing model that works with this, what's called pay as you go payments for energy, then [laughs] why is this still a problem? Why is this market not scaling just really, really quickly and millions and millions of people gaining access through this, this method?
And what we saw was the bottleneck was there just wasn't a large amount of money coming in and investment. That this is a really capital intensive business. You're basically pre-financing these solar home systems as they get installed and so you need a lot of working capital to keep that really running and scaling. And so we were looking at why that money wasn't coming in and especially why you weren't seeing private sector money coming in on the debt side and really zeroed in on inability to understand household risk. That we saw that if you're selling these solar home systems, you're selling them on a finance basis, you really need to know who's gonna pay you back and kind of in, in what time period they're gonna pay you back.
And so if you're a distributor like, you need this information to understand your cash flows, understand what your risk profile looks like. And if you're not really able to understand it yourself, it's really hard to convince investors to invest in this space either. So we felt like if we could develop this model for better understanding household credit risks that unlocks financing, this all scales up as it should and you end up with millions and millions of houses on a clean energy path.
And this really gets back to the, why I added adaptation resilience. I think there's, there's two sides to the story in terms of, we see this as a way that you do it to reduce emissions. If you're replacing kerosene, you're replacing diesel generators and set people on a cleaner, more sustainable energy path, but it also allows them to better control their energy supply and not be dependent on things that may be impacted by, by storms or by drought or by flood events and things like that. So it's, it really has both pieces to the kind of climate story in terms of the re- reduction emissions as well as adaptation resilience.
Jason Jacobs: And what's, what's your story and journey look like? What led you down the path of looking at ways to address this problem in the first place?
Kate Steel: Yeah. It goes way back. I've been working [laughs] in this field for, for quite a while now. So I studied engineering initially and after that, I was working right after undergrad as a teacher in Kenya and not somewhere really remote. I was in Nairobi and it happened to be when they were having a power crisis. There was power rationing in terms of when the power was on and when it was off. And that really got me interested in what was going on with the electricity supply. You know, it's not a really challenging technical problem just from how do you deliver electricity. But I started looking into more of the development of the system, how they management, the radical issues that went into how the power system they developed. And then really saw the statistics on how few people actually had access to electricity in Kenya at the time, this was 20 years ago.
And that kind of made me look into bigger picture, how many different countries in Africa had those low access rates. I had a little bit of exposure to electrification during some travel I'd done in Southeast Asia previously, but really latch onto this as this was a really big problem. This was not a technical problem. This was something that was going to involve a lot of financing and management issues and regulatory issues and kind of got hooked on. This was the big issue I wanted to try and address 'cause I think energy is really fundamental to everything else. I think if you can have consistent, reliable, low cost energy supply, then you can improve quality of life, you can improve economic prospects, you can improve health outcomes, education outcomes, it's really what ties everything together.
So from there I ended up doing a lot of grad school, looking at different energy issues and energy system development. And then have gone in career post grad school, going back and forth between really public and private sector, looking at how to best address energy access. So I've worked on the public sector side at the World Bank and USAID as part of the Power Africa program. And then on private sector was at Google for a couple of years, looking at investments in energy access projects and development of new models for energy access. And then about three and a half years ago, co-founded Nithio as something that I really saw that could help drive private investment and help really scale energy access.
Jason Jacobs: And maybe talk a little bit about the origin story for Nithio. How did it come about and what convinced you given how determined you were to address this problem most impactfully that Nithio would be the best use of your time and resources?
Kate Steel: Sure. So Nithio actually starts with Kupanda Capital. They're a venture builder investor working in a wide range of African businesses. And so two of the co-founders of Nithio are from Kupanda Capital. They had met at the African Development Bank, had seen how the large scale energy infrastructure work that the development finance institutions had been doing, but they were interested in what else could be done to address the energy access. They had previously co-founded a company that really provides the best demographic information on African households and now much more beyond Africa, but they started thinking about how that data could be used to work in energy access and really honed in on this idea about the risk profile of households and being able to offer better financing and better understanding of risks that would bring in additional financing.
So it really started from there. And then I had started talking with them. They had brought in another co-founder and I started talking with them from the, when I was at Power Africa. We were all in Washington, DC. Mostly from, I was just looking at, [laughs] was this a good idea and would this be helpful to the problem? And then it ended up, they were getting ready to launch and asked me if I would come on as a co-founder and really try and make this successful. And yeah, I was really hooked on the idea of the scalability. I think that's been the missing piece is a lot of, there's a lot of things you can do that kind of incrementally move things along, but I think there's is things that you can do that really unlock scale for the sector.
And so this seemed to be something that I think, it doesn't try to mitigate all the risks. It tries to better understand the risk and I think that's actually what will bring in more money than trying to say, it's not risky to invest in, in off-grid energy in Africa. There is some risks. It's a difficult market but I think if you can understand that risk then you can bring investors in.
Jason Jacobs: And so can you talk a bit about the landscape in terms of understanding that risk? What types of tools are out there and where do they miss the mark?
Kate Steel: So there's actually very little. There's quite a big gap. There's, there's, 90% of Africa doesn't have credit bureau coverage. There's not these traditional forms, especially once you get out of South Africa. And so the solar home system companies that were selling in the space, if they were doing underwriting, some were looking at a few, like questions they were asking different households. A lot of them did rely on also, if, if you could pay the down payment then we assume you can probably keep making the regular payments, things like that. But there is, there's a strong push to make it not too burdensome in the sales process. You don't want to, you know, ask a hundred questions before you [laughs] can sell someone a solar home system. So it's difficult to do the underwriting.
And I think that's where we can come in and do that at, without having to have, you know, that large questionnaire. We actually developed a model where we bring together payments data, past payments data from a company, merge it with that underlying demographic dataset that kind of worked with previously. And then that's where we can start to build a predictive model of what is actually indicative of ability to pay. So I, I think that's where we kind of do something a little bit different than what's been in the market typically. I think we're, some of our other differentiators are just we're, we can be across all of Africa than I think a lot of the, the companies that have been in the space has stayed in pretty narrow markets and it's a little bit easier to see if you're operating in one geography.
You know, the next household probably looks more like the households you just served but that limits your ability to move into an entirely new market and out in a different country. I think that's one differentiator. I think the other one is that we're not looking at personally identifying information. I think, you know, a lot of the same privacy concerns that we have in the, the US and Europe are shared across a number of African countries and I think on a growing basis. So we're, we can do our credit assessment without having to pull like social media records or things that might be personally identifying and I think that's increasingly important.
Jason Jacobs: Who are you selling to?
Kate Steel: So we have two business lines. On the analytics side, we actually are targeting more working with investors. The goal is to bring in additional capital. So what we wanna do is help demystify the market for, for investors that are out there as well as for new investors. So there hasn't been a standard for how you actually look at portfolios of, of solar home system sales. And so our tools, we have a portfolio portal that can really help visualize that information and help you understand what are the cash flows likely to be from those receivables, from those sales.
So we're working with a number of investors for them to use that for either their due diligence process or for their monitoring. And we're the first customer for that because we actually use that internally for, for our own investments. So we have a financial vehicle, Nithio FI, and what we actually lend to solar home and other energy access technology companies. So it's used as an internal tool.
Jason Jacobs: Is that the second line of business?
Kate Steel: Yes. As a lender.
Jason Jacobs: Got it. So you have the analytics that you are licensing to lenders and then you eat your own dog food, if you will, and have become a lender yourselves, relying on your analytics data to power that?
Kate Steel: Exactly.
Jason Jacobs: Uh-huh [affirmative]. And the customers that you do sell to the lenders or the investors, as you said, what do they look like? What profile of affirms, how much capital do they have under management? Does it, does it run the gamut?
Kate Steel: Yeah. So we do, in the past we've done more kind of bespoke projects for specific lenders that are coming in to answer kind of one question of, should they invest in this company or are wanting to get a picture of what's going on. And it's not just investors in that case. We have worked with government entities or development finance institutions, as well as some of the distributors themselves, where they're looking for additional data on understanding what's going on. But we've been transitioning that to more of an ongoing service basis where we're providing kind of a dashboard of information and looking at other ways we can integrate our data into their decision making. So that's more kind of where we see the product going.
It also has a lot of application outside of energy access. I think this is a, it's a good starting point both for one, it's just a massive problem. Like I said, that we still believe energy is fundamental to everything. So if you're going to solve one key problem, this is really, this is really it. Energy access has actually created also a nice dataset. Most of the, the systems sold do have digitize payments. So it's an easier dataset to work with but we see a lot of potential with working with micro finance institutions, working on asset financing for, for additional products beyond energy access.
Jason Jacobs: Uh-huh [affirmative]. And within energy access you mentioned these solar homes, is that the only offering that you're focused on today and what does that roadmap look like?
Kate Steel: It's one of the main ones. So solar home systems, wide range of sizes. I would say the smallest you would be looking at would be quite a small panel just for lighting, cell phone charging, kind of the basic needs for electricity, up to quite a bit larger systems that would be, I won't say it's an entirely replacement, but can power most small appliances and it can really provide an energy service that's almost equivalent to a grid. It's definitely equivalent to like a diesel generator. But then we're also working with companies that are doing productive use appliances. So this can be products that plug into a solar home system or things that are standalone that you can think of solar powered cold storage, refrigeration, or solar powered water pumping. Most countries in Africa are very culturally driven so solar water pumping.
Again, bringing it back to climate. This is something that is one, will offset emissions if they were using a diesel genset previously or just increases productivity, which is great for, for the household and the area, but also it can really benefit households and helping them manage climate change impacts that, it may be that they were pulling from a water source that is no longer reachable. They need additional support to be able to irrigate land. So it's something that we see as again, having that climate link as well.
Jason Jacobs: Uh-huh [affirmative]. And you talked about energy poverty and resiliency. Do you consider this company purely financial focused or how do you think about impact and how explicitly is it integrated into the mission?
Kate Steel: Definitely very integrated. That we are, we see ourselves as, most of our team is coming from an impact space but we're not going to have an impact if we're not financially viable. So that's kind of the lens that we think of it from that, yes, we want to be very successful as a business, but a piece of that is always going to be that we're able to have the impact as well.
Jason Jacobs: Uh-huh [affirmative]. And let's say those are product, for example, that helped with resiliency but didn't have a strong climate story. Would you take that one on?
Kate Steel: Definitely. So I think, and this is one of the challenges with looking at it exclusively from an emissions reduction lens when you're looking at most countries in Africa. So there's a few examples. South Africa obviously has large emissions profile. Half the electricity in, in Sub-Saharan Africa is produced in South Africa and their substantial portion is through coal. We do have some other countries that have a large amount of generation like Nigeria from, from fossil fuels, but you also have a number of countries that have very relatively clean grids that have really significant hydro-power resources. Kenya is a world leader in geothermal, large-scale solar coming online in a number of different countries.
So on one hand, so you have, you're reducing emissions by transitioning people off of kerosene. That's great. There's fantastic health benefits [laughs] and other benefits of transitioning off of kerosene. It does reduce emissions, but nothing compared to say driving less in the US or a lot of the other things you could be doing to reduce emissions. And I think there's a strong story to say that you're putting people on a cleaner energy path and I think that's extremely important. But again, if you're, if you're a household in Kenya and you're connecting to the grid, you're getting your electricity from relatively clean sources as well.
So I think it's, you know, we're never gonna be able to argue that this is the greatest emissions reduction impact you could have right in this moment. I think there is something to be said for the, the future impact. Most of the modeling shows Nigeria being larger, larger population in the US in 2038, I believe. So that is a lot of people that are gonna be consuming a lot more energy. I think you do wanna try and make sure that there's a cleaner path there, but that's in the future. I think what you're looking right at this moment now, we've had, you know, in the US in the past few months, we've experienced a number of really severe climatic events with severe wildfires, as well as large-scale storms and hurricanes at really unprecedented scale.
A lot of those climatic impacts have been happening in Sub-Saharan Africa for quite a while now. This is, it's not new. And so you're having the region that has arguably the lowest emissions having already experienced significant impacts from climate change. And that's where I think this adaptation and resilience is really essential. That's where a lot of places are now or a lot of markets are. They need to be managing that, that adaptation, that resilience. And I think that's where a lot of investment needs to be going, but you do see a lot of people wanting to reduce emissions. That's extremely important and I wouldn't say that it doesn't need to be done, but let's also make sure that we're not forgetting about the resilience side of things, because we're at a point where climate change is happening. It's not a future issue.
Jason Jacobs: When you look at the problem of climate change and decarbonization and then you look at energy poverty, we've touched on a little bit, but I wanna ask you explicitly, are they two separate and distinct issues or how do you think about them and how do you think about them in the context of each other?
Kate Steel: I think they are complicated [laughs] issues because I think I'd be hard pressed to argue that there should be no more spending on fossil fuels in Africa. There's been, have been mandates about no investment going into fossil fuels that we find as long as there's no investment going into fossil fuels in any other markets as well. And I think where we haven't seen that commitment being made on some of the developed countries aside, it's a bit tough to swallow to say that the developing countries who are still in the process of really growing their economies and growing their industrialization, to say that they can't use resources that are available to do that. I think there is, uh, an ethical question there.
But I do think that it's, maybe convenient is the wrong word, but is convenient that the best way to serve most de-centralized populations is solar. So it's not a question of, oh, this was chosen because it was the [threeness 00:22:31], it was chosen because it is the most suitable technology and the lowest cost to serve those areas. So I think that is where it's, you don't have to have quite as much of a questioning [laughs] of what is the, the trade offs because it is lowest cost option in almost all cases.
Jason Jacobs: And if you look at the fact that some of the more established Western economies have been historically such major contributors to the emissions problem that we have today, but then you also look at the fact that in the developing countries, as more people out of that billion plus that we talked about, get access to more energy and more energy intensive lifestyles, whose job is it to address the climate crisis? And how do you think about looking backwards versus looking forward?
Kate Steel: I think it's tough and I think that'll be, uh, that's always a big discussion at [inaudible 00:23:26]. [laughs] I'm sure it will be in Glasgow coming up and who's responsible for bearing those costs. I think the, I'll maybe put a positive note on it to say that by the time a lot of that energy consumption is happening in developing world, there are far more efficient ways to do it, to have that consumption. And I think if you look at, you know, energy efficiency, feel like in the US is sometimes a tough sell. Power is not cheap across the board, but it's relatively low cost for the service you get from it. And it's, it can be hard for people to change their patterns based on that.
And I think if you're then looking at places that electricity is very expensive and not always reliable, people are very engaged with their electricity supply in a way that they aren't always in the US. And so you see a preference for highly efficient appliances, highly efficient lighting with very easy to, to adopt in developing world. And I'm hoping some of that, some of the innovation that's happened to increase that efficiency, I'm hoping we'll come back to some of the developed markets as well.
And you see this even with solar home systems, that yes, there've been cost reductions in terms of the primary components, both the PV panels, but also the, the batteries and all the other components going into these systems. But some of the innovation has really been around creating extremely highly efficient DC appliances that pair up with small panels and small batteries. So the, the power that you're squeezing out of a small panel, a small battery is just that much better, the service that you can provide. And so I think those highly efficient innovations hopefully will expand into the broader further ecosystem so that even as people are starting to use, you know, white goods and what would have traditionally been really energy intensive appliances that the, the efficiency is so much higher.
Jason Jacobs: And as we sit today, what are the biggest causes today of the energy poverty that still exists? And then given how long you've been working on this problem, how does that compare to when you first came in or other points along the way?
Kate Steel: Sure. I mean, I think fundamentally delivering electricity to a de-centralized population is just really difficult. I think you see, you know, if I'm looking at Sub-Saharan Africa, it's a lower population density than pretty much anywhere. And so you're not looking at a really close centralized infrastructure that may be lower costs to deliver. You do still have a pretty rural population and it's high cost to run power lines and do in a way that is reliable and lower costs. So I think there is some fundamental challenges just in terms of how the population is distributed. And I'm trying to apply a model that was developed for places that were much more densely populated when the centralized grids were introduced. But if you think that's the beauty of, you know, if you're looking at the systems that are developing across a number of countries right now, it is more decentralized. Hopefully that will be more, more robust.
It's actually an opportunity to develop a more de-centralized grid and that's something we've looked at in the US is how do you actually create a more distributed system? And it's really hard to bolt that onto the existing infrastructure that's out there. I do think that the off-grid technologies do offer a real opportunity to connect a lot of people that won't be connected to a centralized grid for a very long time, and may never be really cost-effective to have people connected. And I think there's just the fundamental challenge of, it's higher cost to deliver power to some of the people who probably have the least ability to pay for it. So the remote rural household is tough to reach. It's a really long power line to run and then probably their consumption will just be very low relative to that cost to deliver power.
So I think that is, that is a big challenge, but I do think since I started working in this, there have been, I say the two things that have really moved things along are one is the, the off-grid solar that was being used as, I'd say, go back to the '90s. I think in remote cases, in the, the '80s for off-grid power. But I think the innovation in terms of the lower cost of components, really, really driving down the cost, the kind of packaging of the system into something that is more of a fast moving consumer goods, than something that has to be installed by a technician and the financing models where people can really make it affordable, I think that has changed, you know, millions of lives at this point in terms of the people who have gained access, not just in Africa, but elsewhere.
And then I think the other piece of the puzzle, which is really most [laughs] more challenging is you really need a strong government push. I think anywhere in the world that has successfully electrified the vast majority of the rural residents, you can go back to the US in the '30s or looking at some of the Southeast Asian countries that have done this and even ones in Africa that have made the strongest push. You really need a government commitment to electrify everyone. I think it is, it's a social good and requires that, that push.
Jason Jacobs: And speaking a little bit about the government commitments. One thing that I've observed is if you've got a government that understands that this is what we need to do but they worry that in doing so, it will put them at a competitive disadvantage, at least in the short term, relative to other nations that maybe aren't getting as aggressive as quickly. And so there's a bit of a standoff where it's like, well, I'm not gonna do it unless you do it and I'm not gonna do it unless you do it and then no one does it and everybody moves slower. How do we get out of that chicken and egg and accelerate global progress?
Kate Steel: I would say that's a challenge with developed countries on the, I don't wanna reduce my emissions 'cause that's gonna put me at a disadvantage. I think on the, on the energy access side, I think solar actually, again, has an advantage of both of the grid scale and for off-grid, it's fast. It's much faster to build PV plant than it is to build a natural gas plant, including the scale on that is different, but in terms of how my megawatts you get out of an average installation, but, but you can install renewable energy technologies without a lot of the infrastructure that goes with say supplying natural gas or supplying a coal plant. And I think that is a key advantage.
I think you are starting to see like really cost competitive, of course, a lot of places you've already seen very cost competitive solar, but even more challenging markets you are seeing solar be able to compete head-to-head with fossil fuels. And same thing on the energy access side, [inaudible 00:29:33] the world bank. I think it was, it was a tough argument to make on the off-grid side because there was a feeling that this wasn't, this wasn't real power. No one's gonna win an election based [laughs] on talking about off-grid power. And I think the countries that have seen the benefits of how quickly you can bring solar power and get people out of the dark and, you know, listening to the radio, watching TV, if they choose, like, I think it's become an easier case to make where they actually wanna be able to say, “Look, I brought you electricity and I promised you a month ago, it was gonna be there and now it is.” And I think that, that has a powerful political message.
Jason Jacobs: And coming back around to a Nithio specific question. So where are you today in terms of traction and, and also where is the market in terms of deployment and where do you hope that you are and that the market is, if you look out say five or 10 years?
Kate Steel: So Nithio is both, as I said, selling the analytics as well as deploying capital. We've raised, the first round of the financing vehicle is 23 millions. We're actively deploying those funds right now in Nigeria, Kenya, and Uganda, but really looking to expand that pretty quickly. We're focusing across wide swath of the market, I would say that there's, the solar home system and energy technology market really ranges from larger international companies that have been in operation 10 years or more in few cases down to extremely small local operators that are really strong in the areas where they're working. We're trying to lend to companies across that full spectrum. And so I think this is, a differentiator for us is really our ability to work with some of the smaller operators who honestly are great companies and really know their market well and have really solid, fundamental business models.
So we're continuing to scale that up. We're raising additional funds for, our investment vehicle is ongoing. It's not something that's said a discrete fund. I think what we've seen is, and this is another reason for why Nithio was founded is that the investment in this space has really stagnated. That if you look at investment in, in energy access, especially on the off-grid side, over the past five years ago was really, had plateaued. And if we're going to achieve sustainable development goal seven with universal energy access, that number needs to continue to grow. It needed to have grown in the past five years. And it needs to be not in the, it's been in kind of low hundreds of millions. It needs to be in the billions.
And so we really see Nithio was the opportunity to unlock that capital and really bring in one scalable financing from DFI as an existing investors that really show banks and other private investors that have made commitments around climate finance and wanna put their money towards really innovative models that address climate change across the full spectrum, want to show them that this is a big opportunity for them and really drive those billions of dollars.
So I think in near term, we would see, continuing to grow the capital that we're deploying, trying to support the wide range of companies across the sector, really growing the sector, overall. Making that step change from millions to billions in terms of investment in the sector, and of course the goal is by 2030, if not earlier, to achieve universal access to energy. That's if we get, have any significant impact on that, I think will be a success.
Jason Jacobs: And the lenders who aren't ready to jump on board yet, what's holding them back? What kind of objections do you hear?
Kate Steel: There are a lot of people who are investing in the space. I think the inability to understand the risk is a sticking point in terms of being able to deploy more capital. I think there is always a shifting interest from some of the development space of what's the next thing, you know, there's been a lot of funding going into solar home systems. So what, what's coming on the horizon, I think that's on one hand great 'cause it's always good [laughs] to be investing in new things, but also energy access isn't solved. And this is a technology that can, can still have a significant impact on addressing energy access needs.
But then I think we do talk to a lot of investors who haven't done anything in emerging markets or especially haven't done anything in Africa. And so that's part of where I think really because we're in kind of the data and information business, we can really help understand that first investment in this market. And I think get them over the hurdle of not being able to, if they were looking, you know, without Nithio's ability to provide this data, It's probably is intimidating. It's a lot to get up to speed on at once and it's, if you don't feel like you can accurately assess the risk yourself, it's hard to justify that investment. And what we can say is you don't have to become an expert in this. We can show you the data and show you how the data works and help you understand what the space is so that you can invest money there.
Jason Jacobs: You mentioned how important the role of government is, how important is policy to the rate that you make progress?
Kate Steel: It is really important. I think it's, and you can see where significant policy changes do have an impact or where governments that are very kind of familiar and favorable to off-grid and really speed things along. I think Nigeria is a great case for that. That they had some significant changes in how they think about off-grid and how they try to enable greater off-grid access and as a result they've had a really active industry growing there. And I think this is when we're at maybe a lead by example, that I think there have been first movers in war, quick movers in terms of bringing in, because it is private sector companies that are, that are selling these systems. So it is enabling them to operate, enabling them to really be active in different countries. So I think the governments can play a significant role in that in not providing too heavy handed regulation but kind of smart regulation to bring in the companies.
And then there are some places that hopefully we'll start to see that the energy access rate in their neighbor is significantly higher or there is households that are gaining access and they want that for their citizens as well. So I think that's where a lot of the, the government intervention happens but also is through data. Like we have worked with either directly with governments or people who are talking to governments and they wanna see this information as well. I think governments generally are working to the benefit of their people and if there's a way that they can bring energy access faster and there's models that can help them do that, I think they're generally very interested.
Jason Jacobs: Is government relations and policy advocacy, are those areas that you resource to at all as a company and if not, do you aspire to in the future?
Kate Steel: No. We actually defer mostly to there's, uh, so long ago when I was at The World Bank, the Lighting Africa Program that I worked on set up a trade association for Stakeholders Off-grid Lighting Association. And so that's where most like advocacy goes through them as it should. It makes much more sense for them to speak for the industry then for each individual company to go to the government themselves. And I think we really look to them as, for policy guidance and for that kind of central convening authority.
Jason Jacobs: So if you look at the things that are outside of the scope of your control, what are the biggest things that you worry about? What are the biggest levers for change? And if you could change anything that would accelerate your progress the most, what would it be and how would you change it?
Kate Steel: It's funny. I think I would have said two years ago, maybe now that like the black Swan event was something that was [laughs] looked like it could be a significant impact. And when the pandemic started a year and a half ago, plus there was a real fear that this was going to take down the solar home system industry and that there was, people weren't gonna pay back. No one was going to be able to get out into rural areas to make sales and maybe a bit shockingly that it's shown the resilience of the sector that it has had impact, absolutely, but it hasn't all been negative. And most of the polling showed that people did continue to make their payments. They were still committed to, you know, energy access is something people valued so much that they were willing to defer a lot of other things in order to keep the lights on.
So I'm less worried about that now 'cause I think that that has been, it's really shown the strength of the sector that COVID had a little bit, less of an impact than was originally thought. I don't wanna downplay that there weren't companies that struggled but there were a lot that did not have significant impact and some had increased sales because people were going to be isolated in their homes and wanted to make sure they had energy access or had this services that it provides. There's a lot of things on the horizon and I think always my fear, and this is why Nithio exists [laughs] is that things just won't scale fast enough.
I think, I think it's hard to understand how fast things need to move to really make a difference. And I think this is a problem across the kind of climate change in people's heads, it's always, it's always far off. I think if you don't understand exponential growth, then it's really hard to see how immediate this problem is. And I think that's the same way you think about energy access, that you, you can kind of move along incrementally and feel like you're making progress. And then, you know, we're 10 years from now and there's still more than half a billion people that all have access to electricity.
So I really wanna see that acceleration. I wanna see the industry grow so that, my ideal is that you have consumer choice where if you're living in a country in Africa or you're living, you know, anywhere, you, you have a lot of options for where you get your, your energy supply and that you can choose something that is clean. You can choose something in it's decentralized. You can choose something that fits your budget, but I'd love to see a really thriving industry that, that offers that consumer choice.
Jason Jacobs: And Kate, speaking to listeners for a minute, for anyone that is inspired by what you're doing and wants to help, who do you wanna hear from and how do you need help?
Kate Steel: Oh, I love to hear from people and I think the work frame [laughs] is same as most does. Early stage companies we're, we're always looking for good people. If you go to our, our website, it's nithio.com, we will have job descriptions out but we're always looking for additional people to join our team across a wide range of things. We're always looking for partners. We're looking for people to re-preview some of our new portfolio portal versions. We're always looking for feedback on that. Of course, looking for investors, people are looking for something that's scalable and something that's gonna have a significant impact, especially people who are in the climate space. We'd love to have more kind of climate first investors who don't just see this as energy access, but really see that resilience side of things and, and want to, to be making a contribution there. And so, yeah, I think we're [laughs] willing to talk to, to people kind of across the board, but yeah, please do reach out.
Jason Jacobs: Any, anything I didn't ask you that I should have or any parting words for our listeners?
Kate Steel: I don't know if is something you should have asked, but I, I think, I feel like there's a lot of gloom and doom in both energy access and climate and with good reason on both. And I do think we have the tools, all the technologies where, we need exist on a lot of these to solve a lot of these problems. I think the two biggest things are, have personal will and funding. And I think, you know, for me talking about that as kind of government push on energy access and financing for energy access space, that can also be just better decision-making about how people consume energy in other countries and whether the will is there. But I think with a lot of collective action and a lot of funding, I do think that we can mitigate some of the worst effects and also be able to provide basic services to everyone who needs them.
Jason Jacobs: And if you weren't working on Nithio, but still wanted to maximize your impact on addressing the problem of energy poverty, what would you be doing?
Kate Steel: Yeah. I think there's a lot of great organizations out there. And as I said, I think this is something that it is, because it is both a social good but has to be something sustainable, that's partly why I've gone back and forth between public and private sector. And I think there's fantastic work being done on both sides. I think you need the public side to make sure that everyone can be reached, not just the people who have the means to do so. I think that's a really strong role of government and public sector also to push the market in new directions.
So I think that there's fantastic programs. I mean, I have some bias towards the Power Africa by pretty good job. I think they're doing great work, but then I think there are a lot of private institutions that are from the distributors themselves that are really on the ground doing the difficult work, trying to reach households. I think that's really fantastic space to be in. And even just on the innovation side, there's a lot of new research going into better ways to reach people, better energy systems, better decentralized models. So I think there's, there's a lot of different roles for people who, who want to be in this space.
Jason Jacobs: Great. Well, this was a fascinating discussion. I definitely learned a lot and you gave me a number of things to think about and I suspect that means that you will have done the same for listeners as well. So Kate, thanks so much for making the time and best of luck to you and the whole Nithio team.
Kate Steel: Thanks very much Jason. I enjoyed the conversation.
Jason Jacobs: Hey everyone, Jason here. Thanks again for joining me on, My Climate Journey. If you'd like to learn more about the journey, you can visit us at myclimatejourney.co, note that is .co, not .com. Someday we'll get to .com, but right now .co. You can also find me on Twitter @jjacobs22 where I would encourage you to share your feedback on the episode or suggestions for future guests you'd like to hear. And before I let you go, if you enjoyed the show, please share an episode with a friend or consider leaving your review on iTunes. The lawyers made me say that. Thank you.