Stand Alone Renewable Energy

There is an important economic niche for stand alone systems within rural electrification programs. Stand alone systems – including solar home systems, pico hydro systems or micro wind systems - are an effective complement to grid-based power, which is often too costly for sparsely settled and remote areas. For such rural conditions, fuel-independent, modular stand alone systems can offer the most economical means to provide lighting and power for small appliances. Individual systems can be cost effective compared to grid supply at low levels of electricity use. Exhibit 1 shows an example of the least cost frontier for grid electrification and solar PV calculated for Vietnam’s rural electrification program. In general, four main reasons for including stand alone renewable energy initiatives in rural electrification programs can be identified :

(i) least cost economic solution;

(ii) environmental sustainable;

(iii) contributing to Millennium Development Goals and World Bank renewable energy targets;

(iv) ability to bring service faster than waiting for grid supply. more  

Key Issues

In most countries, the development of the stand alone systems industry is in its introduction phase where many issues need to be addressed simultaneously. This first phase has proven to be the most challenging one as expectations for immediate electricity service delivery are countered by the often time consuming growth of a conducive business environment. 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 inclusive rural electrification policy to clearly define the roles of grid extension and off-grid options, and ensure a level playing field for the stand alone service providers to fairly compete with traditional utilities

Guarantee minimum quality of (after sales) service to ensure the quality of the products and services

Understand customer needs and increase service awareness to know consumers’ ability to pay and offer products that are tailored to consumers’ needs

Scale up capacity building to rapid increase understanding of the industry’s specifics to all business partners involved

 Policy and Regulatory Framework

Government commitment for stand alone system programs is important not only through policy documents but also through public communications of politicians with their constituencies. International experience draws the attention to three key policy areas:

Level playing field and inclusive rural electrification planning to clearly define the roles for grid extensions vs. off-grid options, and ensure a level playing field for stand alone service providers to fairly compete with the traditional utilities

Fiscal policy rationalization to remove tax and duty discrepancies for systems and components of the stand alone systems in comparison to other energy systems

Technical specifications and after sales services to ensure qualities of products and services

 Business Models 

A multitude of business models have been used around the world to deliver electricity service with stand alone systems. They range from fully public funded to small entrepreneurs selling the systems for cash over the counter. Two main models for larger scale industry development can be identified:

Dealer model in which consumers own the stand-alone systems, and private dealers sell systems on cash or credit basis in the open market

Fee-for-Service model in which public or private organizations retain ownership of the systems but provide the electricity service for a fee. This includes leasing or hire-purchase model and Energy Service Company (ESCO) model. Under a concession model, an ESCO is usually selected by a competitive public process and given the exclusive obligation to provide electricity services in a defined service area.

 Financing Mechanism 

Finance restricts stand alone industry grow at different stages of its development path in several ways. Tailored finance products for different users are important, in particular:

Finance for service providers to overcome high initial cost of the systems and fulfill substantial working capital requirements during business expansion phase
Finance for end users to overcome high initial cost of the systems

 Technical Requirements and Descriptions

All of the systems provide basic energy services for lighting, radio, television, and the operation of small appliances for households and cottage industries. The main used stand alone technologies are:

Solar Home Systems

Pico Hydro Systems

Micro Wind Systems