Measuring success: Evaluating the business model of rural mini-grid ecosystems

Energy Research & Social Science 106 (2023) 103296 Available online 22 November 2023 2214-6296/© 2023 The Author(s). Published by Elsevier Ltd. This is an open access article under the CC BY license (http://creativecommons.org/licenses/by/4.0/). Original research article Measuring success: Evaluating the business model of rural mini-grid ecosystems Henock Dibaba * , Leticia Tomas Fillol , Antti Pinomaa , Samuli Honkapuro LUT University, School of Energy Systems, Yliopistonkatu 34, 53850 Lappeenranta, Finland ARTICLE INFO Keywords: Business model Business model evaluation Mini-grid Rural electrification ABSTRACT In Sub-Saharan Africa (SSA), the challenge of widespread electricity access, especially in rural areas, persists, with approximately half the population lacking basic electricity services. To tackle this issue, decentralized energy resource (DER) technologies, including solar home systems and micro/mini-grids, have gained prominence, aiming to revolutionize the SSA energy landscape. This paper aims to introduce a framework for evaluating business models in the context of rural mini-grid ecosystems. Conventionally, developers of rural mini-grids are responsible for all aspects of the project, from conception to operation and maintenance. However, with the emergence of new private sector facilitators, value creation in this ecosystem has become more complex. As multiple stakeholders apply different business models and patterns to create and capture value, evaluating the efficacy of these models is critical. The evaluation framework presented in this paper draws upon various business model theories and evaluation approaches and includes indicators for assessing performance. To demonstrate the framework’s usefulness, we applied it to six companies currently operating in rural mini-grid projects in Africa. Consistent evaluation of these business models is essential for adapting to changing conditions, identifying areas for innovation, and sustaining competitiveness, furthering the field of business model assessment. By bridging this gap between business model evaluation methodologies and rural electrification studies, this paper contributes to understanding the transformative effects of mini-grid projects, extending beyond traditional energy access metrics. 1. Introduction In the Global South, particularly in Sub-Saharan Africa (SSA), the challenge of ensuring widespread access to electricity remains a significant issue. Approximately half of the population in this region lacks access to basic electricity service, with a notable concentration residing in rural areas [1]. To address this critical problem, the emergence of decentralized energy resource (DER) technologies has gained momentum, particularly in the form of off-grid solutions like solar home systems and micro/mini-grids [2]. These innovative approaches seek to revolutionize the energy landscape throughout SSA. Solar home systems are particularly well-suited for sparsely populated regions with limited energy demands, serving various residential needs including lighting, household appliances, computers, and water pumps [3]. These systems typically operate at low power levels, usually under 100 W. Another pioneering strategy, the swarm grid, envisions the connection of individual solar home systems through peer-to-peer energy-sharing platforms [4]. Each home is equipped with a controller that is interconnected through cables, facilitating the sharing of power. The controllers actively monitor power flows, with energy payments being conducted through mobile money platforms. Mini grids, featuring generation units ranging from 10 kW to 10 MW, are particularly effective in areas characterized by high demand and population density but are challenging for the primary grid to reach promptly. In places where the main grid’s expansion is cost-prohibitive and time-sensitive, mini grids emerge as an economically viable option [5]. The decreasing cost of technical components, such as solar photovoltaic (PV) panels and battery energy storage systems, has made minigrids a cost-effective energy resource option. Moreover, technological advancements such as Radio Frequency Identification (RFID), Information and Communication Technology (ICT), Geographical Positioning System (GPS), Remote Sensing (RS), and data communications, including cloud and edge cloud computing technologies with 3G, 4G, and 5G technologies, have made it possible to enhance the energy * Corresponding author. E-mail addresses: [email protected] (H. Dibaba), [email protected] (L. Tomas Fillol), [email protected] (A. Pinomaa), [email protected] (S. Honkapuro). Contents lists available at ScienceDirect Energy Research & Social Science journal homepage: www.elsevier.com/locate/erss https://doi.org/10.1016/j.erss.2023.103296 Received 2 January 2023; Received in revised form 10 September 2023; Accepted 22 September 2023 Energy Research & Social Science 106 (2023) 103296 2 utilization, digital payment options, and remote-control features of mini-grids. These features also enable communities to engage in economic activities using income-generating productive-use appliances and machinery, as well as digital tools and platforms [6,7]. Rural mini-grids in developing regions are commonly developed by government organisations, non-governmental organisations (NGOs), and private companies. The conventional value network of a rural minigrids revolves around the developer, which is the centre of every process from initiating the project, to designing, procuring the different components, installing, and later operating the mini-grid after the project has been commissioned. With the newer generation of mini-grids, however, the value network is expanding, that is, new private-sector stakeholders (facilitators) have started to get involved in different parts of value creation processes. This value creation can range from supporting activities, such as software providers and analytics, to core activities, such as technical services, flexibility options, energy storage systems, digital payment technologies, civil work, and finance [6] (see Fig. 1). As the value network expands, the business landscape for mini-grid projects in developing regions is undergoing significant changes. Previously, developers held responsibility for all tasks; however, in the current scenario, private companies have taken on a significant portion of these responsibilities. This shift has led developers to transition into roles that involve orchestrating overall development efforts while placing emphasis on community engagement and electricity sales [7]. The increasingly complex value network has also resulted in different stakeholders adopting various business model patterns to create and capture value. In the ever-changing business landscape, it holds strategic significance for companies to consistently assess their business models, ensuring the refinement of their services and the sustenance of competitiveness [8]. This principle is equally applicable to organisations engaged in the realm of rural electrification and mini-grid businesses. Business model evaluation is a critical aspect of the planning process, enabling firms to determine the feasibility of their models in the current and future business landscape. This evaluation can be conducted before implementing a new business model or improving an existing one [9]. Furthermore, mini-grid developers and facilitators can evaluate their business operations to maintain service quality, reduce costs, increase profitability, and remain competitive in the market. Business model evaluation also enables such companies to identify potential risks and hazards and operate sustainably. Additionally, the evaluation results can help companies identify areas for innovation and product development. In this paper, we emphasize the importance of a comprehensive evaluation of business models in rural mini-grids. This evaluation should encompass the assessment of collaborative efforts among various stakeholders who actively participate in community projects. The ultimate goal of such evaluations is to ensure the provision of affordable, reliable, and sustainable energy services that effectively support socioeconomic activities within these communities, fostering both productivity and communal engagement. While several studies have outlined business model evaluation methods in Section 3.1, there is a limited number of evaluation methods available for rural electrification or minigrids. Most studies on business models for mini-grids (e.g., [10–17]) tend to concentrate mainly on subjects like business model frameworks, ontology, commercial and social impacts, as well as socio-technological configurations. Furthermore, different international organisations’ reports (e.g., [6,7,18–20]) provide studies regarding the implementation of mini-grids. The ongoing discourse surrounding mini-grids business model is multi-faceted, with a primary focus on the pivotal role of social enterprises in addressing energy access challenges in rural Bottom of the Pyramid (BoP) markets [10]. Simultaneously, there is growing acknowledgment of the technical and organizational complexities inherent in providing energy services in these underserved areas, often leading to conflicts between social and commercial objectives when configuring mini-grids [11]. At the heart of this discussion lies the critical issue of ensuring the sustainability of mini-grid-based social enterprises, which hinges on their ability to expertly design, manage, and operate the sociotechnical aspects of these systems, striking a delicate balance between technological efficiency and social impact [14]. Despite its paramount importance, the discourse on business models for rural electrification and mini-grids frequently lacks in-depth Fig. 1. Depiction of the latest mini-grid value network and its components. Source: own compilation. H. Dibaba et al. Energy Research & Social Science 106 (2023) 103296 3 discussions regarding evaluation. This gap emphasizes the necessity to establish a connection between the existing business model evaluation methodologies rooted in business disciplines and the specialized realm of rural electrification studies. Bridging this gap holds the potential to yield valuable insights into the effectiveness and sustainability of minigrid business models and contribute to the field of business model evaluation. Furthermore, the significance of addressing this research gap extends to the realm of impact assessment. By incorporating business model evaluation into the impact assessment process, it becomes possible to gauge the transformational effects of mini-grid and rural electrification projects on the livelihoods of the target communities. Such an approach enables a more comprehensive measurement of project impact, transcending the conventional metrics of energy access and infrastructure development. Therefore, it is necessary to identify evaluation indicators for the mini-grid business ecosystem that encompasses the roles of both developers and facilitators. With this in mind, this paper aims to bridge the following research gaps with the following contributions: •Identifying evaluation indicators for the mini-grid business ecosystem that assess the roles of developers and facilitators in evaluating the business model comprehensively. •Provision of business model evaluation methodology for the rural mini-grid business. The paper is organised as follows: the second section provides an overview of the business model and business model reviews the current microgrid business environment in developing countries. The third section provides business model evaluation concept and present related literature. The fourth section proposes a conceptual framework design for business model evaluation for the mini-grid business ecosystem. The fifth section presents an analysis of a case study from different mini-grid developers and facilitators based on the proposed evaluation method. Finally, the sixth section provides the discussion and conclusion of the paper. 2. Theoretical background 2.1. Business model and business model patterns A business model describes how an organisation creates, delivers, and captures value [21,22]. The term “business model” was first mentioned in scientific literature in 1947 by Lang, and later by Bellman et al. in 1957 [23,24]. However, it wasn’t until the 1990s, with the emergence of e-commerce and the New Economy, that the concept gained popularity [25]. The New Economy was characterized by a shift towards more online based and high-tech services, made possible by the increasing adoption of the internet and greater computing power. However, the term “business model” has been frequently misused and overused, leading to a vague understanding of its meaning [22,25]. In the late 1990s, the term was often used to compare the new e-business value creation to the traditional “brick-and-mortar” model. The interchangeable use of the term with other similar terms, such as strategy, economic model, and revenue model, further contributed to a lack of clarity around the concept [26,27]. The Osterwalder and Pigneur model, which includes value proposition, customer interface, infrastructure, and finances, has been widely accepted and tested [24]. Their definition of a business model as “the rationale of how an organization creates, delivers, and captures value” has become the standard [27–29]. This model provides a comprehensive framework for understanding and analysing business models and has been used extensively in both academia and industry [8]. Business model patterns are tested and proven models that can act as a base for innovating a new business model or improving an existing one [30]. These patterns are specific to different parts of a business model and can be combined to establish a new business model, fostering innovation and competitive advantage in the ever-changing business environment. For example, an internet trading company could use a digital service provider pattern to offer services to customers, a shared infrastructure pattern as the channel to reach customers, a freemium pricing mechanism to provide digital services for free and charge for premium features, and a brokerage fee pattern for revenue streaming [31]. By using established patterns and frameworks, organisations can innovate and improve their business models, creating more value for their customers and stakeholders. 2.2. Rural mini-grid value network and available business model The classical value network of a rural off-grid system makes developers to be the centre of every activity of the development and operations [6]. These developers can be community cooperatives, government energy utilities, private investors, public-private partnership-based organisations and non-governmental organisations (NGOs) [10]. They coordinate the necessary finance and technology and establish relationships with different stakeholders. Developers have a first-hand or business-to-customer (B2C) relationship with off-grid users. Today, however, the value network is expanding, and new players are participating in new value creation activities. These stakeholders can range from original equipment manufacturers (OEMs) that supply hardware and software to the off-grid system to those who provide supportive activities, such as technical services, flexibility options, energy storage systems and finance, as illustrated in Fig. 2. They have a business-to-business (B2B) relationship with the developer and a business-to-business-to-customer (B2B2C) relationship with both developers and customers. For instance, companies such as Okra Solar 1 provide energy management and operation systems that enable to integrate individual solar home systems in a mesh grid; Sparkmeter 2 provides smart meters, energy management software and digital solutions for mini-grid systems; OXTO Energy 3 provides flywheel energy storage systems (FESSes) to rural mini-grids for stabilising the grid by frequency regulation; GnuGrid Africas’ Credit Reference Bureau 4 (CRB) helps financial institutions and off-grid solar companies to identify highrisk borrowers by utilising credit information, thereby reducing the upsurge of high default rates in such informal sectors. Furthermore, other companies such as Zuhura Solutions 5 and Baridi 6 provide chilling and storage services for agricultural producers that require cold chain logistics. Such a trend had also been followed by companies—which once operated in a vertically integrated value chain—to break up their value chain and focus on their core business [6,32]. As the value network expands, it brings about a shift in the business environment of mini-grid initiatives in developing areas. Companies operating within the value network are compelled to adopt various business models and strategies to create and capture value. Table 1 outlines typical business model patterns employed in rural off-grid projects. 1 https://okrasolar.com/. 2 https://www.sparkmeter.io/. 3 https://oxtoenergy.com/. 4 https://gnugridcrb.com/. 5 http://www.zuhurasolutions.com/. 6 https://baridi.co.ke/. H. Dibaba et al. Energy Research & Social Science 106 (2023) 103296 4 3. Business model evaluation Business model evaluation is a systematic approach and procedure that is used to attain a quantifiable perception of a given business model [8,45]. The evaluation outputs can be used prior to the implementation of a new business model (ex-ante) or to improve an existing business model. The evaluation can benefit different stakeholders in the business environment by enabling them to recognize their strengths and weaknesses and evaluate their business performance. Furthermore, evaluation of a business model helps organisations to develop future goals and restructure their business for increased success and profit [46]. The evaluation process starts by setting the evaluation objectives. These objectives can be economic (profit earning, growth, survival to exist in the future, creation of new customers, innovation) or social (e.g., creation of employment, provision of fair prices), or a combination of different objectives. Based on the objective set, suitable indicators with a respective weight can then be developed. Indicators are markers of accomplishment or progress made towards achieving outputs of a work plan. In the case of a business model, the evaluation indicators are set to answer the evaluation questions and provide a useful insight about the business activities of an organisation. 3.1. Business model evaluation in scientific literature The domain of business model evaluation methods has not received extensive examination, yet the scientific literature offers a wealth of proposed approaches. Within this literature, a diverse range of business model evaluation methods exists, tailored to specific domains and originating from authors with varied backgrounds. These diverse approaches are designed to evaluate a range of dimensions, including enterprise performance, entrepreneurship, innovation, and technology development. Together, they offer a comprehensive framework for assessing business models within the realm of scientific literature. While some existing methods concentrate solely on appraising the fundamental components of a business model, others go further by conducting comprehensive scenario analyses and rigorous risk assessments. In the discussion that follows, we highlight some of these noteworthy approaches. 3.1.1. Business model assessment tools Osterwalder and Pigneur [29] proposed a two-step assessment method: the first step assesses the business model blocks with respect to their degree of importance to the business model mapped with a business model canvas (BMC), and the second step evaluates each block with a strength, weakness, opportunity, and threat (SWOT) analysis. The Fig. 2. Multi-tier mini-grid ecosystem. Source: own compilation. Table 1 Example of mini-grid business model patterns. Business model pattern Description of the model Specific business model area Reference Appliance financing Offering appliances with credit to rural customers to prompt electricity demand Financial viability [33,34] Revenue sharing Sharing the total generated income with stakeholders to incentivise and maximise participation of rural communities Financial viability [35] Anchor-Business-Community (ABC) Model Reducing the risk of uncertain power demand by leveraging anchor customers first followed by businesses and community Financial viability [36] KeyMaker Enabling mini grid power-based rural manufacturers to be part of the value chain of product trading businesses Value proposition [12,37,38] Energy-telecom-nexus Providing integrated power, telecom and digital services using mini-grids and base stations to communities that lack mobile broadband coverage and electricity Value proposition development [38,39] Energy-Food-Nexus Enabling rural agriculture-based productive-use customer (agricultural cooperatives) to be the central load mini grid and complimenting household loads with excess power Value proposition development [40,41] Split asset Reducing the capital cost burden of the developer by dividing the financing of the generation and distribution assets between the developer and the government or community Infrastructure [42,43] Pay-as-you-go Enabling users to pay for the electricity they use when they need it Payment method [44] Pay-as-you-store(chill)/ Chilling-as a-service Enabling agriculture producers in the cold-value chain to pay for using cold storages when needed Payment method [32] H. Dibaba et al. Energy Research & Social Science 106 (2023) 103296 5 evaluation outcomes are assigned quantitative values between −5 and +5. Similarly, Batocchio et al. [47] presented a method for assessing the performance of start-ups by combining the BMC and the balanced score. The balanced score card is another strategic performance management tool used by organisations to identify and improve their services. Accordingly, for each BMC element, indicators are initially selected and then measured with a targeted set of values. 3.1.2. Indictor-based approaches Mateu and March-Chorda [48] proposed eight indicators for evaluating an ex-ante business model, with a focus on managers and experts for assessment. Building on this work, Mateu and Escriba-Esteve [9] analysed and enhanced these methods and provided ex-ante business model evaluation techniques. They expanded the evaluation model to incorporate a broader range of stakeholders, including potential customers in the assessment design. Their evaluation framework includes intuitive weightings for each indicator, enabling a more comprehensive and inclusive evaluation process. 3.1.3. Stress testing and decision support Haaker et al. [49] provides a business model stress testing and decision support system. The stress testing involves assessing business model elements regarding market scenario as well as regulatory and technology uncertainties. The decision support system helps companies in choosing the best-fit available business model from a financial point of view. Furthermore, Biloshapka et al. [50] developed a scaling matrix with four quadrants (looser, winner, giver, and taker) that include a company capture and what it provides for the customers. The authors also gave directions on how to move business models to the winning side. 3.1.4. Risk assessment methods Tesch and Brillinger [51] identified and analysed the risk factors in a business model by mapping all actors within the value network from the value creator, value delivery and the end customer, as well as the value and delivery stream for a digital business model. The visual representation built by the authors enables identification of the risk-related factors and analysis of the role of partners, business owners and the efficiency and complexity of the value network. 3.1.5. Computational simulation methods Groesser and Jovy [52] conducted a computational simulation modelling to test the viability of a business model in three different future scenarios, characterised by the introduction of a superior competing product, an increased contact rate and tightening supply. Moreover, Sharma and Guti´ errez [53] developed a business model evaluation framework for mobile commerce-related organisations. The authors use a business model framework to understand the dynamics of the digital business. The framework includes value proposition, interface and service platform, organisation model and revenue/cost. The paper identifies success factors for a viable business model that enables to support mobile-commerce in the IT service. 3.1.6. Weighting factors in analysis Kayaoglu [8] proposes a dynamic business model evaluation tool that applies weighted indicators to each block of the business model at different hierarchical levels and criticality. This approach provides a clearer evaluation outlook of a specific business model by assigning different weights to indicators in each block. Additionally, Kayaoglu developed a software for business model evaluation that offers recommendations to users on adaptive measures to be taken at each business level, based on the proposed dynamic evaluation method. In a similar vein, Jaˆ afar Berrada [54] developed a comprehensive business model evaluation methodology as part of the H2020 European Project SHOW. 7 This methodology is intended to evaluate the business operations that support the deployment of shared, connected, and electrified automation in urban transport, in order to promote sustainable urban mobility in the EU region. The evaluation methodology assigns scores to the business/operating model based on the average value of all the goal scores, with each score weighted according to its importance. 3.1.7. Evaluating rural markets In a more recent study into rural markets Zhang et al. [55] developed an evaluation framework for businesses operating in rural China. By identifying critical factors from case studies, two frameworks were proposed using open and axial coding. The firms in the case study were from manufacturing, agriculture, retail, telecom, and biotech sectors. By analysing the case studies, the authors identified the key indicators for measuring rural enterprises’ business models and suggested key points that must be considered. Accordingly, the authors argued that rural market-based firms need to understand the consumption habits, preferences, and capabilities of the rural customers. The study also suggested that firms should engage in training and facilitating rural customers to also enhance the value creation process further. A summary of the method described above can be found in Table 2 below. Despite the importance of mini-grids in rural electrification, there appears to be a scarcity of evaluation methods available to assess such cases. This lack of evaluation methods highlights the need to develop new methods and identify relevant indicators for evaluating the minigrid business ecosystem, which includes both the developer and facilitator’s roles. By utilizing the above-mentioned evaluation methods, as well as additional user-centric indicators, our objective is to create a comprehensive methodology and evaluation framework that considers all actors within the mini-grid environment. 4. Proposed methodology In order to achieve our research objectives, which involve assessing mini-grid business models, we propose a comprehensive approach that draws from the methods reviewed earlier. Our aim is to create a generic and replicable methodology applicable to various mini-grid ecosystems. To accomplish this, we outline a four-step process as illustrated in Fig. 3. Firstly, we will focus on identifying the key stakeholders within the value network, with particular attention to developers and facilitators. Secondly, we will carefully select relevant evaluation indicators that will help us gauge the performance of these business models effectively. Thirdly, we will assign criticality ratings to different components of the business models and weight factors to the evaluation indicators to ensure a well-rounded assessment. Finally, we will calculate an overall score based on the quantified data gathered through this structured process. This approach will enable us to systematically evaluate and compare mini-grid business models across different ecosystems. Step 1: Classification of stakeholders Evaluating the business model of rural mini-grids requires classifying the stakeholders based on their location in the value network and objectives. We propose a tier-based approach to evaluate the mini-grid business environment, as presented in Fig. 2. The tiers are set to distinguish the different stakeholders (players) in mini-grid development based on the organisation’s main objective and proximity to the end user. The developer tier is responsible for initiating the project and in some cases operating the mini-grids. These developers can be community cooperatives, government energy utilities, private investors, public–private partnership-based organisations and NGOs. They coordinate the necessary equipment, finance and technology and establish relationships with different stakeholders. Developers have a first-hand or business-to-customer (B2C) relationship with mini-grid customers. In 7 https://show-project.eu/. H. Dibaba et al. Energy Research & Social Science 106 (2023) 103296 6 this tier, organisations manage the finances (revenue and cost) and coordinate the necessary technical requirements to provide an uninterruptable power supply to the customers. The second tier includes organisations and vendors that provide technology and services to mini-grid developers. These organisations can be energy management and efficiency software providers, smart metring suppliers, hardware suppliers, technical services (O&M), civil work, financial service providers, smart home appliance suppliers, productive-use (income-generating) machinery suppliers and energy storage providers. They have a business-to-business (B2B) relationship with the developer. In this tier, the organisation’s main goal is to engage in one-time sale or provide ancillary services in shortand long-term periods to the mini-grids. Step 2: Business model evaluation indicators To evaluate the business ecosystem, we propose evaluation indicators in relation to the business model elements. As can be seen in Table 3, the evaluation indicators are divided into core indicators and sub-indicators. The evaluation indicators are adopted mainly from the Table 2 Summary of business model evaluation examples. Category Subcategory Methods References Business model assessment and enhancement Two-step assessment Combining BMC analysis and SWOT analysis to systematically evaluate and enhance business models. Osterwalder and Pigneur [29] BMC and balanced scorecard approach Using BMC framework with the balanced scorecard to evaluate start-up performance and identify key performance indicators. Batocchio et al. [47] Ex ante evaluation Proposing eight indicators for ex-ante business model evaluation, with a focus on managers and experts. Mateu and MarchChorda [48] Inclusive ex ante evaluation Expanding the Mateu and March-Chorda [48] evaluation model to incorporate a broader range of stakeholders and introducing intuitive weightings for each indicator. Mateu and Escriba Esteve [9] Scaling matrix for guidance Developing a scaling matrix to categorize companies and offer strategic guidance for business model enhancement. Biloshapka et al. [50] Risk assessment and mitigation Value network risk analysis Conducting risk factor analysis by mapping all actors within the value network to identify risk-related factors. Tesch and Brillinger [51] Computational simulation modelling Employing computational simulation modelling to assess business model viability under various future scenarios. Groesser and Jovy [52] Mobile commerce model framework Developing a comprehensive framework for mobile commerce business model evaluation, covering critical elements. Sharma and Guti´ errez [53] Dynamic evaluation tool Introducing a dynamic business model evaluation tool that applies weighted indicators to different hierarchical levels and criticality within the business model blocks. Kayaoglu [8] Comprehensive evaluation Creating a comprehensive business model evaluation methodology that assigns scores to business/operating models based on goal scores with weighted importance. Jaˆ afar Berrada [54] Rural market evaluation Rural market business models Developing frameworks to evaluate business models operating in rural markets, emphasizing critical factors derived from case studies across various sectors. Zhang et al. [55] Fig. 3. Flow chart of the evaluation process. Table 3 Evaluation indicators for developers and facilitators. Core indicator Sub-indicator Description Stakeholders Developer Facilitator Service offer Adequacy Acceptable amount of energy service X Affordability Ability to provide affordable energy services X X Reliability Degree of confidence in the energy system or appliances X X Safety Ability to prevent dangerous and harmful effects on users X X Suitability Quality or degree of providing the right type of service or product X X Environmental impact Measuring the environmental impact of the service X X Gain creation Ability to improve income and welfare by energy services X X Financial status Cost/revenue balance Measuring the financial balance of operations X Cost reduction Measuring taken to reduce and optimise costs X X Revenue increase Possibility of increasing the revenue from the service or product sale X X Customer segment Consumption needs Segmentation based on electricity consumption need X Consumption trend Segmentation based on electricity consumption trends (behaviour) X X Consumption capacity Segmentation based on electricity consumption capacity X Service needs Segmentation based on the electricity service required X X Customer relationship Customer satisfaction Inclusion of customer satisfaction X X Customer support Availability of customer support X X Service improvement Engagement in improving a better service for customers X X Partnership Relationship with stakeholders Identification of the availability of key partners X X Depth of relationships Measuring the degree of partnership X X New partnerships Establishing new partnerships with other parties X X Resource management Resource availability Identifying whether the resources needed are easily available X Resource utilisation Degree of how resources are efficiently utilised X X Resource standardisation Resources used according to the standards X X H. Dibaba et al. Energy Research & Social Science 106 (2023) 103296 7 BMC block elements presented in [29], user-centric business and marketing model development [56,57] and different rural electrification monitoring and evaluation guidelines and case studies [58,59]. In this paper, we only focus on the developer and facilitator tier for the evaluation, given that their business operation can have a significant effect on the overall energy ecosystem and its proximity to the end user. Besides, OEMs have more diversified customer groups other than minigrids, for which their products are also suitable in other sectors. As can be seen from Table 3, not all the indicators are shared by both facilitators and developers. In some cases, such as ‘consumption need’ and ‘consumption capacity’ indicators are mainly assigned to developers than to facilitators, considering that developers are the main responsible party for such tasks. Step 3: Criticalness factor The success of a business model hinges on its individual building blocks, but their relative importance in achieving overall success can vary in practical situations. For example, for mini-grid developers whose primary goal is to provide sustainable and affordable power supply, the “value proposition” block carries more weight than the “channel” block, which is focused on finding ways to reach customers. This means that even if both blocks receive the same score, their impact on the overall evaluation should differ based on their criticality. To address this issue, we propose a critical level-based evaluation of each business model block utilized by mini-grid developers and facilitators in off-grid projects. Our approach involves a two-level analysis: first, we assign a criticalness level (0, 0.5, 1) to emphasize the level of importance of each business model block, following Kayaoglu [8] framework (see Fig. 4). Step 4: Quantifying qualitative data In this study, we quantify the questionnaire data to be able to retrieve numeric representation of indicators. The questionnaire comprises Net Promoter Score (NPS) and matrix types of questions. The mean values of the score values of sub-indicators are then used to calculate the overall score for the core indicator. A sample example from the questionnaire is presented in Table 5 as follows: Other types of sub-indicator questions are designed within a matrix that asks respondents to evaluate the raw sub-indicators with column choices. Table 6 provides an example of questions from the questionnaire: Our approach emphasizes the various attributes of the business model blocks rather than exact numerical values, and it is designed to be easily understandable. It is worth noting that assigning a numeric weight factor for evaluating different elements of a business model is subjective and depends on various factors such as the industry, the specific business, and the evaluation’s goals. We can then determine the aggregate mean score by utilizing the criticality factor associated with each indicator concept through the equations presented below. Overall mean score =∑n i=1(xi*CFwi) n(1) where: xi =cumulative score of sub-indicators n =number of sub-indicators CF =criticalness factor 5. Case study 5.1. Sample To further examine our proposed evaluation method, we investigate six companies that are engaged in rural electricity development projects. Two companies focus on development and operation, and the other four provide service as facilitators and OEMs in the value network. The investigated cases are presented in Table 7 below. 5.2. Data collection For this study, we designed a survey that contains self-evaluation questions that are based on the evaluation indicators and subindicators mentioned in the above section. Questionnaires were sent to companies via Webropol. The questionnaire starts with general information about the companies and where they fit in the value network, followed by self-evaluation questions in relation to how they conduct their business activities. Questions about the companies’ business Fig. 4. Proposed criticalness level for the developers’ business model. Table 5 Sample sub-indicator questions. Sub-indicator Sub-indicator question Score range Adequacy and gain creation – How do you rate your customers’ typical satisfaction? 0 (not satisfied) and 10 (extremely satisfied) – How do you rate the social benefits that your service is typically bringing to your customers? 0 (not beneficial) and 10 (extremely beneficial) – How do you rate your organisation’s ability to support the productive use of energy? 0 (unable to support) and 10 (able to support) Table 6 Column choice-based sample questions. Sub-indicator question Score range How do you rate the current state of power supply that your organisation typically provides for your customers? Uninterrupted Power 0 (below average) and 5 (top tier) Adequate supply Affordability Safety Environmental impact H. Dibaba et al. Energy Research & Social Science 106 (2023) 103296 8 activities are divided into service offer, customer segmentation, customer relationship, resource management, partnership with stakeholder, financial status and the applied business model patterns. The questionnaire link can be found in the appendix section of this paper. 5.3. Data analysis The data were initially examined in detail through a case-by-case (within-case) approach and later across cases. The analysis was carried out in two steps. First, we analysed the companies’ generic responses to how they conduct their business, and second, we quantified their responses in relation to the proposed indicators. 5.4. Within-case analysis In this section, we describe business activities as experienced by each individual respondent. The questionnaire responses are summarised in Table A1 in the annex section. 5.5. Cross-case analysis In this section, we conduct a cross-case analysis for the cases based on Eq. 1. Table 8 presents a comparison of six companies (A through F) based on their performance on core indicators, which are service offer, financial viability, and resources management. The criticalness level for each of these indicators is 1, meaning that they are of high importance to the overall performance of the companies. The table also includes three additional indicators, which are customer segment, customer relationship, and partnership. These indicators have a criticalness level of 0.5, indicating that they are of moderate importance to the overall performance of the companies. The mean value for each indicator is also provided in the table. This gives an overall indication of how well each company is performing across all indicators. In addition, the table displays a colour gradient (red-green-yellow) to signify where values fall within a specific range. 5.5.1. Cross-case analysis for developers (company A and B) According to the result, Company B scores higher than Company A on service offer, financial viability, and resources management. For example, Company B scores 0.90 on the service offer indicator, while Company A scores 0.73. Similarly, Company B scores 0.83 on the financial viability indicator, while Company A scores only 0.75. Furthermore, Company B has a higher mean value for the highly critical core indicators as compared to Company A. However, on the moderately important indicators, A and B have scores that are quite close to each other with mean values of 0.59 and 0.61, respectively. Another interesting aspect revealed by the evaluation is that neither of the companies applies customer segmentation in their operation Table 7 Overview of the investigated cases. Cases Organisational role in the mini-grid ecosystem Financial backing Focus area Countries of operation Business model pattern use cases Company A Developer & operator Loans, grants and result-based financing (RBF) PV-based mini-grid development and operation in rural areas Kenya Pay-per-use as the revenue model with a fixed-rate pricing model and mobile money as the payment method Company B Developer & operator Loans, donors and private investors Hybrid solar photovoltaicand batterypowered mini-grid plants Kenya, Nigeria Usage-fee as the revenue model and mobile money as the payment method Company C Facilitator & OEM Private investors Grid management solutions (smart meters, energy management platforms, digital solutions) Nigeria, Uganda, Tanzania, Benin Usage-fee as the revenue model and mobile money as the payment method Company D Facilitator & OEM Loans, donors, and private investors Mesh grid control asset management digital tool and geo-spatial-based project design platform Cambodia, Philippines, Nigeria, Haiti Usage-fee as the revenue model and mobile money as the payment method Company E Facilitator Grants and private investors Fintech services and a renewable energy aggregator platform for solar home systems and mini-grids Nigeria, Ghana, Uganda Pay-per-use as the revenue model for its agents Company F Facilitator &OEM Grants and private investors, Resultbased Funds (RBFs) Energy management software providers, hardware suppliers, technical services (O&M), financial service providers, smart home appliance suppliers Kenya, Rwanda, Togo, Nigeria Pay-per-use as the revenue stream model, mobile money and instalment for payment method, consumptionbased pricing Table 8 Evaluation score for case studies. Core indicators C.F Level Company A Company B Company C Company D Company E Company F Service offer 1 0.73 0.90 0.90 0.85 0.78 0.85 Financial viability 0.75 0.83 0.85 0.78 0.73 0.83 Resources 0.93 0.96 0.89 0.96 0.96 0.89 Mean value 0.80 0.90 0.88 0.86 0.82 0.85 Customer segment 0.5 0.00 0.00 1.00 1.00 1.00 1.00 Customer relationship 0.93 1.00 1.00 0.93 0.93 1.00 Partnership 0.83 0.84 0.72 0.77 0.90 0.79 Mean value 0.59 0.61 0.91 0.90 0.94 0.93 Overall mean value 0.70 0.76 0.89 0.88 0.88 0.89 Overall mean with C.F 0.55 0.60 0.67 0.66 0.65 0.66 H. Dibaba et al. Energy Research & Social Science 106 (2023) 103296 9 although both reported having diverse customer groups. Further, Company A’s questionnaire response reveals that it’s not fully capable of providing and satisfying customer needs. Additionally, prospects for market growth are limited in its area since the market is already saturated. On the other hand, Company B believes that there is room for growth in the rural electrification market and prospects to have an additional revenue stream. 5.5.2. Cross-case analysis for facilitators (Companies C, D, E and F) The evaluation results also shows that Companies C, D, E, and F have similar performance on the service offer indicator, with scores ranging from 0.85 to 0.90. However, there are differences in performance on the financial viability indicator, with scores ranging from 0.73 for Company E to 0.85 for Company C. When it comes to the mean value for the core indicators, Companies C and D have the highest scores of 0.88 and 0.86 respectively, followed by Company F with a score of 0.85, and Company E with a score of 0.82. Moreover, it is noteworthy that all companies have obtained higher mean scores, exceeding 0.9, across the core indicators of moderate importance. Moreover, all companies reported having established good partnerships with other stakeholders based on their questionnaire responses. However, it is worth noting that while developers can easily assess and compare the depth of their partnerships, facilitators may find it more challenging. This difficulty arises because facilitators offer different services in the value network, and the partnership requirements may differ for each service. Resource management is an area where all facilitators performed well, exhibiting proficiency in utilizing their physical, financial, and human resources. Regarding financial stability, while all companies had a positive outlook on the possibility of additional revenue streams, two respondents (Companies E and F) reported difficulty balancing their financial operations. 6. Conclusions and future perspective The objective of this paper was to conduct a brief review of rural mini-grid business models and evaluation methods available in the offgrid energy systems sector. As the business environment in this sector is constantly changing, it is essential to have tools to understand and evaluate organizational performance. Based on an analysis of the research gap in rural mini-grid business model evaluation methods, we introduced and tested a novel evaluation method. The presented method is designed to identify organisations by tier based on their position in the value network, followed by providing indicators that reflect the rural mini-grid business environment. The method proposes weighting and criticalness factors for each subindicator, enabling stakeholders to rank the indicators according to their importance for their organisation. These indicators were adopted from various business model theories, rural electrification guidelines, and marketing models, and the evaluation methodology was adapted from previous evaluation methodologies found in literature. The proposed method was applied to analyse the business model of six companies, including two developers and four facilitators, operating in the rural mini-grid sector/market segment. Our findings showed that the overall scores of developers and facilitators do not differ significantly, but there are more variations in individual business model segments between companies. For instance, both developers lack segmenting their customers according to specific energy consumption behaviour, pattern, or demand, which could help organisations better understand their customer groups. We argue that the proposed model makes contributions to science as it can provide better insight to evaluate rural cases compared to the current state of the art. Additionally, future research could analyse the mini-grid business environment that has customers, developers, and facilitators under one umbrella to evaluate overall business activities while analysing the individual effect of various business model elements on the operation. The evaluation results could also be compared with financial information (balance sheet or stock price) to check whether the performance in the business model evaluation correlates with the financial performance of companies. Another area of study could be to analyse different selection criteria based on the weighting and criticalness factor instead of intuitive assessment. While the proposed evaluation method has the potential to provide valuable insights into evaluating rural mini-grid business models, there are some limitations to consider. One limitation to consider is that the proposed method was tested on a small sample size of only six companies, which may not be representative of the entire rural mini-grid sector. Further testing and validation of the method on a larger sample size could enhance its accuracy and reliability. In addition, the method relies on subjective evaluations by stakeholders, which could introduce biases into the results. While the proposed weighting and criticalness factors attempt to mitigate this limitation, there is still a possibility of individual opinions influencing the evaluation process. Furthermore, the method’s applicability may be limited to certain contexts and may not be suitable for all types of rural mini-grid businesses. Other contextual factors, such as geographic location and regulatory environment, may need to be considered when using the proposed method. Lastly, it is important to note that the proposed evaluation method only provides a snapshot of a company’s business model at a particular point in time. Business models are dynamic and can change rapidly, which means that the evaluation method may not be effective in assessing long-term performance or adaptability. CRediT authorship contribution statement Henock Dandena Dibaba: Conceptualization, Methodology, Writing – original draft. Leticia Tomas Fillol: Writing – review & editing. Antti Pinomaa: Writing – review & editing. Samuli Honkapuro: Supervision, Writing – review & editing. Declaration of competing interest The authors declare that they have no known competing financial interests or personal relationships that could have appeared to influence the work reported in this paper. Data availability Data will be made available on request. Appendix A The questionnaire used for this paper can be found online at: https://link.webropolsurveys.com/S/81D0D871CC7C6507. H. Dibaba et al.