 To support the introduction and expansion of the use of stand alone systems several core issues need to be addressed in just about all programs. Successful programs have managed to provide solutions for six core issues during the introduction phase concurrently:
 Provide access to finance to overcome high initial cost of systems for end users and service providers
Establish delivery infrastructure to connect the remote and dispersed markets to the often urban based suppliers Adopt rural electrification policy to allow for a level playing field in which the stand alone system industry can compete fairly with alternate service providers Guarantee minimum quality of (after sales) service to markets which have imperfect access to information Understand customer needs and increase service awareness to know what products are desired and to inform the potential users of the (new) alternative systems (to be) offered Scale up capacity building to rapid increase understanding of the industry’s specifics to all business partners involved
Access to Finance One of the key financing issues for private entrepreneurs and end users is to overcome the high upfront costs of stand-alone renewable energy systems, and gain access to financing for initial investment and growth. For example, for an energy service company (ESCO) longer term loans are required to better match the cash flow of the operation; for a dealer working capital is needed when the business is rapidly expanding; while for end users financing is needed to reduce the high initial cost of a system. To address these different needs, three main financing approaches can be identified: (i) tailored credit provision which could include easier accessible and/or longer term loans offered through local banks; and, household credit specifically for stand alone systems through Micro Finance Institutions; (ii) performance-based co-financing grants to buy down initial capital cost for service providers; and (iii) mitigating risks and enhancing credit for local banks to service providers and MFIs to consumers through for example partial risk guarantees. To address consumer affordability issues, several approaches have been attempted: offering rural consumers smaller solar home systems such as 10-20 Wp systems on a cash sale basis; providing rural households with consumer credits; leasing; and charging a monthly fee by ESCOs through the fee for service arrangements. For more click here 
Delivery Infrastructure An important challenge is to connect the demand for modern energy services in rural areas to the initially urban based suppliers of stand alone renewable energy systems. The disperse nature of the business provides a profound challenge to build this infrastructure when sales are low and the expenses for transportation, communication, training and after sales service are high. A successful growth of this infrastructure balances the use of existing rural networks with the introduction of easily replicable business models. In Kenya and Zimbabwe, the early sales of solar home systems were facilitated by the existing network of rural products supply businesses, such as battery companies, sellers of household goods and hardware/electronics stores. In Sri Lanka and Bangladesh, market growth was achieved with the entering of an existing rural micro-finance institution and reputable large scale commercial companies with sufficient investment capital. In Uganda and Mozambique, initial market growth is created through sales of systems to institutions and organizations. Solar dealers are required to open sales and service outlets to also connect with the rural household market. Stand alone system programs should be operated as businesses. They should generate revenues sufficient to recover capital investment, service debt, pay for administrative and support services, cover payment defaults and, in the case of for-profit operations, provide satisfactory returns for investors. In the past, the fees charged under many donor- and government-sponsored programs were set at levels comparable to the monthly cost of kerosene for low-income households. This was based on the assumption that rural consumers have a very limited capacity to pay. Such stand alone programs are intrinsically unsustainable over the long term. Experience shows that consumers are often willing and able to pay more for highly valued services than has previously been assumed. To address this challenge industries around the world have focused on two business models: (i) dealer model; and (ii) fee-for-service model. For more click here
Rural Electrification Policy Grid extension and off-grid options should complement each other rather than compete. In locations where stand alone systems are the most economically viable option, governments should explicitly consider and encourage diffusion of stand alone systems in lieu of grid extension. This should be articulated in rural electrification policies not only to raise awareness and acceptance among policy makers, financiers and potential beneficiaries but to counter grid extension plans rendered unreliable by politicians overriding them through ad hoc decisions. With the dispersed market and the often multitude of service providers, the role of government is to encourage business expansion and competition through the establishment of a conducive institutional and regulatory environment. This includes rationalization of duty and tax structures if these discriminate against stand alone system development. Relatively high import duties and other taxes can severely limit the potential for commercially viable, market-driven stand alone systems program. For more click here
Guarantee Minimum Quality of After Sales Service
Often businesses of stand alone systems do not have industry-wide technical standards to ensure quality, safety and longevity and thus reduce commercial risks. It is recommended that a stand alone systems program introduces technical specifications for these systems. The World Bank has supported several countries in developing these technical specifications and a guideline has become available. Furthermore, it is important that the end user has access to support after the installation has taken place. The better programs have standardized after sales service programs which provides the end user options to file their complaints. Initially with the companies but if these don’t provide the expected feed-back to a more independent organization. This could be program management; an industry association; or a regulatory body. For more click here
Understand Costomer Needs and Increase Service Awareness To address the lack of awareness, the industry can conduct generic promotion campaign on stand alone systems. It educates end-users on the advantages and limitations of stand alone systems, informed them about service and warranty arrangements and about available loan schemes. User education is essential for stand-alone system program success. Initial market surveys and pre-investment studies should scope the market for the new technology systems to attract early developers to enter the market. More lessons can be identified through detailed surveys, especially in relation to: (i) willingness by the end users to pay more for modern energy services, as long as the energy supply is reliable and safe. It has been recorded that a typical household is willing to pays 3 to 15% of its income on energy services (for example see China Market Survey); (ii) investments for market development to increase success and sustainability of a renewable energy program; (iii) local or community participation in, and cash contribution for, the implementation and monitoring of off-grid projects to ensure ownership on part of the communities involved; (iv) Identification of early adopters, often the middle to upper income rural people. With economies of scale a much wider dissemination takes place. For more click here
Scale up capacity building
The introduction of a business/service delivery approach coincides with learning of new skills within almost all organizations involved. For exmple, for the project developers it includes the knowledge of a technology, the closing of a deal with a (micro) finance institution and the preparation of a bankable proposal; for the financiers it is the analysis of the risks; and, for the end-user it is the quality of the product offered. In the initial stages of the market uptake, the capacity building initiatives are often conducted on project by project basis. This takes time and is one of the reasons for an often slower than anticipated uptake of the industry. With the market growing, the industry should start to bundle capacity building efforts including: technical training for hundreds of installers of systems through industry associations; formal training with integration of curriculum in regular programs; a “innovation solicitation” process to stimulate further market growth with the key members of the industry; and, establishment of a framework for wholesale capacity building initiatives. These kinds of initiatives could train quickly thousands of employees. For more click here
|
RSS