Like many cities, Nairobi greets visitors with the sight of densely packed buildings, the scent of roasting food and the sound of honking horns, mostly from motorcycles weaving through traffic. While these popular motorcycles provide an affordable and fast form of transportation in Kenya’s capital, they are also contributing to air pollution and serious health risks, as motorcycles pollute up to 10 times more than cars.
Switching these motorcycles to electric would result in cleaner air for millions, but high costs present a major barrier. Electric motorcycles in Kenya cost around $1,350-1,500, currently, with the battery accounting for 40% of the total cost, which is why it is more expensive than the $850-1,200 for a typical internal combustion engine motorcycle. ChargeUp!, an innovative partnership led by Energy 4 Impact, ARC Ride, Fika Mobility, Imperial College London, and Strathmore University, and funded by WRI’s Partnering for Green Growth and the Global Goals 2030 (P4G), has set out to overcome this challenge.
Its solution? A Battery as a Service (BaaS) model.
The BaaS model decouples battery and motorbike ownership, meaning the cost of the battery is not included in the price of the vehicle. Instead, drivers access batteries at swap stations, where each time they pay a small fee to quickly replace their depleted batteries with fully charged ones. They make the swap in a few minutes, similar to petrol refueling (speed is essential, as motorcycles in Nairobi typically travel 100-120 kilometers per day, requiring extensive battery capacity). By reducing the need to purchase batteries upfront, BaaS can help make electric motorcycles price competitive with internal combustion engine motorcycles. BaaS can also offer other benefits. Because the swap stations offer enhanced traceability by tracking batteries and monitoring the swap process, some financiers are willing to decrease interest rates because of reduced theft and damage. Moreover, the partnership anticipates the model will create long-term green jobs for charging station mechanics and electric vehicle (EV) drivers and include more women in the ecosystem.
While this model seems like an ideal solution, barriers to making BaaS profitable limit wider adoption. There are high capital expenditure requirements, due to the cost of real estate to build stations in Nairobi, labor costs to staff the stations, and station infrastructure to build. Most electric motorcycles are imported from Asia, but Nairobi’s rough roads, intensive daily usage, and rain and mud require local companies to modify the motorbikes to withstand conditions.
The ChargeUp! partnership has analyzed learnings from its own experience setting up battery swapping stations across Nairobi and published several reports with recommendations to expand the BaaS model. Here, we share key recommendations for stakeholders so that BaaS investments and interventions can help create an accessible, affordable e-mobility transition everywhere.
Fair Battery Pricing
The partnership recommends a prorated pricing structure where if a swap station charges $1.50 for a full charge and the customer returns a battery with 50% charge left, the customer would pay $0.75 for their new fully charged battery. This is the most accurate method of measuring energy consumption, enables fair pricing and gives riders a clear understanding of their energy usage to make informed decisions about travel choices.
When it comes to purchasing the vehicles themselves, though the companies in the ChargeUp! partnership focus on battery swapping currently, others offer financing, and in their reports the partnership recommends pay-as-you-go solutions to further reduce initial costs for operators.
Policy Support for Infrastructure
The government of Kenya has shown a strong commitment to the e-mobility transition, most prominently by setting a target for EVs to account for 5% of imports in 2023, halving the excise duty from 20% to 10% in the 2019 Finance Act, and requiring developers to allocate at least 5% of parking space to EVs in the 2022 National Building Code.
To build on these measures, Kenya wants to develop a National Electric Mobility Policy, and ChargeUp! has some suggestions on what it could include. A new retail tariff, proposed in January 2023, would reduce the electricity tariff to KShs$17 (US$0.12) per kilowatt hour for e-mobility, leading to savings of 22% compared to the ordinary domestic tariff of KShs$22. A lower tariff is backed by key sector actors and would increase revenue streams for charging and battery swap station operators as well as lower charging costs for consumers.
Reducing import duties, excise duties and Value Added Tax for imported EVs, batteries, and charging and battery swapping infrastructure could help make electric motorcycles more cost competitive. This approach incentivizes manufacturers to increase production and supply, and any loss in revenue due to reductions in taxes would be offset by the expected increase in import volumes. Kenya took a similar approach with its solar industry, which led to expanded capacity over the past 10 years. The government could also incentivize charging during off-peak hours, enabling stations to feed energy back into the grid during peak use.
In addition to financial incentives, the government needs to develop national guidelines for charging and swapping infrastructure. By standardizing these infrastructure requirements, Kenya can ensure electric motorcycles and their batteries are more accessible. National standards could include requirements and guidance on where to locate public charging and swapping infrastructure, licensing and permitting requirements, and favorable tariffs and metering.
Creative Financing Models
One of the greatest challenges for small businesses looking to build Kenya’s e-mobility market remains the financial hurdle to enter the nascent market. That’s why it’s essential that philanthropies, governments and development finance institutions collaborate to provide multiple financing models and accelerate the transition.
Rolling out electric motorcycles requires significant capital expenditure (capex) for swap networks and vehicle imports. Funders should provide debt for capex and growth, so companies can access affordable debt financing, ideally in the local currency, to mitigate exposure to the volatile foreign exchange market.
Alternatively, investment readiness programs that support businesses through the growth process can help improve e-mobility companies’ maturity and capacity to engage in financing agreements, helping them access more cash. Grant funding and technical assistance, coming from organizations like P4G that are committed to getting early-stage businesses ready for investment, can also play a catalytic role. Such assistance can help companies develop strategies for activities such as customizing charging stations and implementing usage scenarios to understand and optimize vehicle use in the market.
Going forward, ChargeUp! has received funding to optimize the BaaS model’s interface in Nairobi and enhance its user-friendliness. By doing so, the partnership aims to make it easier for other e-mobility companies to adopt and implement their own BaaS models, utilizing best practices and lessons learned.
As Nairobi looks to offer clean, affordable transportation to more people, it has the opportunity to lead on what the e-mobility transition looks like. With companies, policymakers and funders already onboard, the BaaS model represents one approach to making an electric future a reality.
P4G is a multistakeholder initiative hosted by WRI with the aim to contribute to in-country climate transitions in ODA-eligible countries. It does so by providing grants, technical assistance and government support to green growth partnerships to become investment ready, contributing to partner countries’ capacity to improve the enabling systems, and sharing these learnings with P4G countries and beyond.
Hali McKinley Lester is Communications Manager at P4G.
Leila Surratt is Director of Strategy and Engagement at P4G.
Tilen Ogola is Senior Technical Advisor at Energy 4 Impact.
