schemes for the large-scale dissemination of renewable energy technologies in developing countries. Market-based mechanisms overcome partly the limits of donor aid-projects. They build on public-private partnerships where a network of local entrepreneurs contributes to the maintenance of systems.
Solar home systems
Rural energy services companies.
Case studies: Zambia, South Africa, Bangladesh, China...
Institutional and regulatory framework
Navigating the Deluge_ Dubai Floods and the Resilience of Dubai International...
Course on Regulation and Sustainable Energy in Developing Countries - Session 2
1. Delivery mechanisms for Rural Energy Services
with Renewable Energies in Developing Countries
Selected case studies
Leonardo Webinar 8th December 2011
Dr Xavier LEMAIRE, Research Associate
Sustainable Energy Regulation Network - REEEP
University College London – Energy Institute
Course on Regulation and Sustainable Energy in Developing Countries – session 2
2. Summary
1. Cases of large-scale dissemination of photovoltaic systems
Fee-for service rural concessions
Small companies: Zambia
Large concessions: South Africa
Micro-credit schemes
Indonesia
Bangladesh
Non-regulated market in Kenya
2. Cases of large-scale dissemination of RET in China
Bio-digesters
Mini-hydro
Small wind
3. Criteria selection of case studies
Decentralised generation with RET
Large-scale dissemination
Several hundreds to ten thousands units (small wind generators, mini-hydro)
Ten thousands to several hundred thousands or even million units (bio-digesters or
solar home systems)
Market-driven approach
Market for installation
Number of systems disseminated justify local installers
And even the implementation of local manufacturers
Market for maintenance
End-users pay for maintenance contract
Enable small operators in rural areas to run an energy business
Public organisations / State
Subsidy / Capacity building
Create an enabling environment
4. Large-scale dissemination of PV systems
1. Cases of large-scale dissemination of photovoltaic systems
Fee-for service rural concessions
Small companies: Zambia
Large concessions: South Africa
Micro-credit schemes
Indonesia
Bangladesh
Non-regulated market in Kenya
2. Cases of large-scale dissemination of RET in China
Bio-digesters
Mini–hydro
Small wind
5. Large-scale dissemination of solar home systems
Regulated rural energy services concessions (regulation / price + quality)
“fee for service model”
South Africa (currently 34,000+), Zambia, Uganda, Ghana, Benin, Togo, Cap
Verde, Morocco (80,000+), Argentina (70,000+), Peru, Bolivia, Kiribati, Fiji, ,…
(Un)regulated competitive private sector (regulation / quality)
“dealer sales model”
Micro-credit: Indonesia, Bangladesh, Sri Lanka, China, Vietnam, India, The
Philippines,…
Cash sale: Kenya (200,000+)
Other variants: leasing (=hire-purchase)
TOTAL world wide 2,400,000+ / 3.000,000 households?
6. Fee-for service scheme vs. micro-credit scheme
Fee-for service scheme Micro-credit scheme
International funding International funding
Soft loan or grant Soft loan or grant
Government Government
Loan or capital grant Loan or capital grant
Energy service companies Micro-finance institutions Energy service companies
Install and maintain SHS
Provide a credit Install and maintain SHS
Monthly fee
Reimburse credit
End-users End-users
Source: X. Lemaire, 2011
7. Fee for service – Utility model (“(R)ESCOs”)
1. Government give a subsidy to an enterprise to buy PV solar
systems & install them in the houses of their clients
2. Clients pay a monthly fee to get the small utility to maintain the PV
solar systems for them.
This kind of scheme helps to solve the question of up front cost
and the question of maintenance (unlike a simple loan).
It helps also to:
- centralise decisions and aggregate environmental benefits of
individual systems (bulk purchase, climate funding)
- facilitate enforcement of standards and codes of practices
therefore lower costs of systems for users.
8. Photovoltaic ESCOs in Zambia (1)
1. Energy Service Companies are small existing local enterprises
selected in 1998 and staff trained
2. Government gave a loan to the ESCOs and bought SHS
3. ESCOs installed & maintain SHS in the houses of their clients
4. Clients pay installation cost of 100-150 US$ and a monthly fee of
8-13 US$ which covers running costs
5. ESCOs reimburse the loan over 10 years & benefit from a capital
subsidy of 50% of SHS
12. Photovoltaic ESCOs in Zambia (2)
Multiple actors:
Swedish International Development Agency for funding
Stockholm Environment Institute, University of Zambia and
Department of Energy involved in monitoring/training
Regulator issues of licences and definition of codes of
practice and standards
In 2006, 3 ESCOs, more than 400 clients + waiting list of several
hundred clients
2 fully operational – one had financial difficulties
Good record of payment - Few thefts
4-5 jobs consolidated/concession
13. Photovoltaic ESCOs in Zambia (3)
Good social impact
Extended hours of business for small shops
Improved results for pupils in schools with solar systems
ESCOs fragile financial equilibrium
Limited customer base
High inflation rate in Zambia (400% 10-20%)
Pilot project
Huge investment – limited number of system
Only standard 50 Wp
Pre-electrification
Extension of the grid to the three towns
Reduce customers base to outskirts
Disruption of activities
14. Rural electrification in South Africa
Massive rural electrification effort since 1994, end of apartheid.
More than 2.5 million households connected to the grid BUT more
than 1.5 million households in remote areas unlikely to be
connected.
Concessionaire fee-for service with solar photovoltaic has been
adopted in 1999 to install more than 300,000 Solar Home Systems.
Currently 3 concessions, only 34,000 SHS. Subsidies for extension
stopped while other PV projects went on (schools, health centres).
Project initially monitored by the national regulator, now
Department of Mineral and Energy.
15.
16. The Nura Concession
The biggest and one of the
most successful concession in
South Africa
Very large concession of
10.000 Km2 with 11.000 Solar
Home Systems
Eight energy stores (LPG +
solar electricity) +
Headquarters
Economies of scale and more
than 70 jobs created
17. Organisation of the reporting system
Tokens
from SHS
Clients Energy stores
Technicians
Headquarters
Source: X. Lemaire, REEEP,2006.
21. Cost off-grid /on grid in South Africa
Solar Grid
Capital Cost per R 4,000 R 10,000 – 15,000
(530 US$) (1,300 – 2,000 US$)
Household
Subsidy per R 3,500 R 4,000
(460 US$) (530 US$)
Household
Utility Cost per R 500 R 6,000 – 11,000
(70 US$) (770 US$ - 1,470 US$)
Household
Pre-paid monthly fee = 61 Rands (8 US$)
Free Basic Alternative Energy = 50% of the fee
Source: NuRa, 2006.
22. Successes and difficulties in South Africa
Proximity with clients and delay in maintenance?
good human resource management
Software + system of reporting + GPS
Complaints mainly linked:
To small size of the systems (no colour TV! no cooking!)
Cost of the fee (4-8 US dollars) even subsidised remain high for rural people
Understanding of the contract? Question of ownership of the systems
Difficulties linked to:
Lack of coordination with grid authorities
Differentiated fees due to non-homogeneous interpretation of free tariff
Fees can vary according to the policy of the municipalities who give or not a
subsidy (Free Basic Electricity for first 50 kWh/month) (since 2007 Free Basic
Alternative Electricity of 55 R)
Lack of continuous support
No more/limited subsidies to buy new systems and increase the number of
systems managed from 2006 to 2010,
23. Sharp increase of installations?
Solar Vision
NuRa
KES
(Shell Eskom)
24. Small or large rural energy companies?
Very small companies Large companies
(e.g. Zambia, Pacific) (e.g. South Africa)
100-150 clients each 11,000 -30,000 clients each
900 US dollars/SHS 550 US dollars/SHS
2-4/5 jobs + 70 jobs
Only photovoltaic Multi-energy
Specialised technicians LPG, paraffin,…
Low maintenance Other RE and diesel
Proximity with the client Reduction of costs
Cost of systems remain high Logistic difficulties
Customer basis limited Complexity management
Fragile-only highest income - Local stores
- System of reporting
Break-even point?
25. Credit sales model: Indonesia
Company called Sudimara Energi
More than 30,000 systems installed
Company installed 50 Wp systems and provided maintenance contracts by
trained technicians
Credit reimbursed in 4 years – more than 95% repaid
Cost systems remained low as manufactured in Indonesia
Financial crisis of 1997
devaluation = increase prices solar modules
company folded
Main lessons
Loan and maintenance by the same company who install the system and
has a direct interest to keep them running to keep customers satisfied and
get them pay the credit
Solar business = fragile
26. Credit sales model in Bangladesh (1)
IDCOL – Government Owned
financial institution Infrastructure
Development Company Limited
(IDCOL) was established on 14 May
1997 by the Government of
Bangladesh
IDCOL is playing a major role in
bridging the financing gap for
developing medium and large-scale
infrastructure and renewable energy
Source: Mondal, 2009 projects in Bangladesh.
The company now stands as the
market leader in private sector
energy and infrastructure financing
in Bangladesh.
RE investment portfolio – 174 million
US$ - 97% on SHS.
27. Credit sales model in Bangladesh (2)
Grameen Shakti
Established in 1996
Company install mainly 50 Wp systems and provide maintenance
contracts by trained technicians so systems function and provide reliable
electricity
Belongs to the family of companies set around Grameen Bank
Grameen Bank set up in 1983
Grameen Shakti can rely on the network of micro-retailers of the
Grameen Bank
Activity
Till 1999, only 1,147 systems installed!
Only after a loan from the International Finance Corporation/ World
Bank, solar activity took off
More than 464,000 SHS installed in September 2010
636,322 SHS installed in May 2011
28. Credit sales model in Bangladesh (2)
Yearly installation of SHS by Grameen Shakti
Size of SHS proposed by Grameen Shakti Source: Komatsu, 2011
Source: Komatsu, 2011
29. Credit sales model in Bangladesh (2)
Options for purchase of SHS with Grameen Shakti (after loan from IFC/World Bank)
Options Cash Basis Loan 2 Loan 3 years
years
Initial 100% initial 25% initial 15% initial
payment payment with payment payment
4% discount
Interest 8% 12% interest
rate interest rate
rate
Source X. Lemaire, 2011 from Miller, 2009.
Moved today from 3 options to 6 options
30. Credit sales model in Bangladesh (3)
Main lessons
Need to keep solar systems running to keep customers satisfied and get them
reimburse the loan:
annual visit from technicians during the financing period
one year maintenance contracts for few dollars per month afterwards
Diversification of loans and systems (10 Wp to 130 Wp) proposed to end-users
Importance of training:
6,700 women trained as technicians;
they receive a 4 year technical degree in one of the 45 Grameen Technology Centres
Reasons of success
Costs systems are low as manufactured in Japan
Cost of 50 Wp = around 400 US$
Support from an international organisation to expand customer base
Existing dense network of retailers for micro-credit
Limits
Quality of installation and components could fluctuate
31. (Modular) cash sales models in Kenya
Advantages of direct sales
Base of hundreds of owner shops who sell PV system
They can (or not) install the system
End-users buy components by components of the PV system
More than 200,000 SHS disseminated but very small systems
10-14 Wp for less than 200 US$
Limits
Only a minority (5% of rural inhabitants) can afford to buy directly
a system without credit
People buy the cheapest components – size too small so
customers not satisfied
Installation is not properly done leading to low system
performance from the start and lack of maintenance leads to
early system failure
32. Cash flow /costumer base
Reach higher
number of
households
Cash flow for PV company
Source IEA, 2003 Source: World Bank, 2008.
33. Conclusion on delivery mechanism for SHS
No best delivery mechanism
Choice and adaptation
according to existing institutional framework and cultural habits in a country
according to target / number of people to reach
Finance
Necessity of external funding to cover capital cost & expand scheme to new customers
Difficult to do without subsidies at the start
Equilibrium of solar companies always fragile
Tension between high fees <-> capacity of payment of end-users
Coordination between different actors needed
E.g. MFIs and installers
Future
Mobile phones
Generate a demand for small load (0.5 billion mobile phone users do not have electricity)
Reduce transaction costs for micro-payments
34. Large-scale dissemination of RET in China
1. Cases of large-scale dissemination of photovoltaic systems
Fee-for service rural concessions
Small companies: Zambia
Large concessions: South Africa
Micro-credit schemes
Indonesia
Bangladesh
Non-regulated market in Kenya
2. Cases of large-scale dissemination of RET in China
Bio-digesters
Mini–hydro
Small wind
35. Dissemination of bio-digesters in China (1)
A long story
First institutions to promote biogas in the 30s
State support from beginning 70s with high priority to rural biogas
digester for small farms
Opening of the countries in the 80s with numerous environmental
laws and regulations and standards to support bio-energy
National Rural Biogas construction Plan 2003-2010
Above 30 million bio-digesters
Two types of bio-digesters (280-300+ US$ for 8m3)
Concrete: small/big maintenance every 2-3 years/every 4-5 years
Glass Fiber Reinforced Plastic from 2000 – no maintenance
36. Dissemination of bio-digesters in China (2)
Fiberglas reinforced
plastic digesters
http://greeningchina.wordpress.com/
Source: Zhang, 2009.
37. Dissemination of bio-digester in China (2)
60% of biogas digesters were operating in 2007
Mainly the ones constructed before 1990 in China not
operating
Poorly constructed – leakage
Technology temperature well above 10C
Level of biogas production acceptable low in cold regions
North China 5-8 months per year
Central China 7-9 months per year
Southern China 10-12 months per year
Lack of maintenance and technical support
In the past financial support only for construction
Not enough follow-up : most provinces have small rural energy offices with
lack of staff
38. Dissemination of bio-digester in China (3)
Technology and policy changes in China
Modern biogas technologies
Scheme of Low-temperature Biogas Production and Commercialized Utilization Technology
Size of bio-digesters tend to increase
Linked to increase size of farms
Increase productivity to provide gas/heat, cooking
10,000 pig farm = 100 kW electricity capacity
Standardization engineering equipment and materials used in
construction
31 standards for biogas construction
From 2003 to 2009, 3 billion US$ invested
82% for households bio-digesters (subsidy around 150 US$ for 8m3 +/- half of the price)
10% medium & large scale bio-digesters
8% to finance service system
Encourage creation of local consultancy and service providers
39. Dissemination of small hydro in China (1)
SHP < 50 MW
SHP integrated most of the times with the grid
Small hydro responsibility of local government while large hydro
responsibility of central government
Preferential tax policy
Profit reinvested in SHP and local grids
State subsidy to multi-channel fund (local self-financing + loan from
banks)
ratio state funding : private& individual funding 1:25
More and more Independent Power Producers
End 2007:
54,317 SHP power stations
47,389 MW installed capacity
28,934 SHP business with shareholders
40. Dissemination of small hydro in China (2)
SHP < 50 MW
SHP integrated most of the times with the
grid
End 2007:
54,317 SHP power stations
47,389 MW installed capacity
Source: CREIA, REN21, 2009
41. Dissemination of small hydro in China (3)
Research
Increased efficiency of SHP station
More stringent technical specifications
Established standard planning procedures
Limits
Low quality of equipment
Only few stations uses new technology when upgrading
Low cost of sale of electricity to large grid
Sub-optimal use of equipment
Low annual utilization hours
High distribution losses
Low automation
42. Dissemination of small wind in China
Off-grid turbines for rural electrification
100W to 100 kW
Promotion of local manufacturing
From 1983 to end 2008, China has produced more than 500,000
small wind turbines
36 turbine production companies + 28 parts production
companies
Network of retailers for maintenance
Particular efforts:
Training technicians
Users manual
43. Conclusion on RETs in China
China emerging country
Huge customer base <->small fragmented markets like
most developing countries
State/public banks facilitate access to funding at low costs
Lessons
Some renewable energy technologies are mature and
already very cheap
Nurture a local market for manufacturing takes time
Tax breaks, customs barriers, stable policy framework,…
Importance of creating also a local market for maintenance
& follow-up of installations
44. References for solar home systems (1)
Delivery models for solar home systems
Schultem B., van Hermert B. H., Sluijsc Q. Summary of Models for the
Implementation of Solar Home Systems in Developing Countries. Report IEA
PVPS T9-02. IEA, Paris, France, 2003.
Krause M., Nordstrom S. (eds.). Solar Photovoltaics in Africa – Experiences
with Financing and Delivery Models. UNDP and GEF, New York, USA,
2004.
Zambia
Lemaire X., 2009. Fee-for service companies for rural electrification with
photovoltaic systems: the case of Zambia. Energy for Sustainable
Development. 13, 18-23.
Gustavsson M. 2008. Solar Energy for a Brighter Life – A Case Study of
Rural Electrification Through Solar Photovoltaic Technology in the Eastern
Province, Zambia, PhD dissertation.
45. References for solar home systems (2)
South Africa
Lemaire X., 2011. Off-grid electrification with solar home systems. The experience of a
fee-for-service concession in South Africa. Energy for Sustainable Development, 15,
277-283.
Integrated Rural Energy Utilities – A review of Literature and Opportunities for the
Establishment on an IREU, REEEP – Restio Energy, July 2008.
NuRa In-depth Case study – Integrating further?, REEEP – Restio Energy, March 2009.
Bangladesh
Barua D. 2001. Strategy for promotions and development of renewable technologies in
Bangladesh: Experience from Grameen Shakti. Renewable Energy. 22, 205-210.
Komatsu D. 2011. Are micro-benefits negligible? The implications of the rapid
expansion of Solar Home Systems in Bangladesh for sustainable development. Energy
Policy. 4022-4031.
Mondal A. M. 2010. Economic viability of solar home system: Case study of
Bangladesh. Renewable Energy. 35, 1125-1129.
Sovacool B. K., Drupady I. M. 2011. Summoning Earth and Fire: The energy
development implications of Grameen Shakti (GS) in Bangladesh. Energy, 36, 4445-
4459.
46. Other references
China
Chen Y. et al., 2010. Households Gas use in rural China: A study of opportunities and
constraints. Renewable and Sustainable Energy Review. 14. 545-549. 6073-6081.
Jiang. X. 2011. A review of the biogas industry in China, Energy Policy, 39.
Zhang et al. 2009. Renewable Energy in China: Pattern and Policy, Renewable Energy,
2813-2823.
CREIA/REN21, Background paper: Chinese Renewable Status report, October 2009.
To go further
Designing sustainable off-grid rural electrification projects: principles and practices, World
Bank/ESMAP, 2008.
Lemaire X., Kerr D. SERN literature review 2010 – an annotated bibliography and reference
guide on off-grid and rural electrification, REEEP.
Softwares
HOMER
http://homerenergy.com/
RET-Screen
http://www.retscreen.net/
47. Contact
University College London -Energy Institute. Central House - 14
Upper Woburn Place London WC1H 0NN United Kingdom
Xavier.Lemaire@reeep.org
REEEP - Sustainable Energy Regulation Network
http://www.reeep.org/830/sern.htm