SPIS Toolbox - Evaluate the Business Environment
| ►Back to the Start Page | ►Back to the Module Page | ►Go to the Next Chapter |
3. Evaluate the Business Environment
While adoption of SPIS within a region may be feasible from a geophysical perspective, the operative business environment plays a key role in the actual uptake of the technology. There are various factors that contribute to an enabling environment for the adoption of SPIS, and whose significance varies with the entity promoting SPIS adoption. The 9 parameters presented in this chapter are seen to play the most significant role.
3.1 Government Interventions
3.2 Development Organization Interventions
3.3 Financing
3.4 Availability and Cost of Alternative Fuels
Technical Capacity
A successful intervention to promote and upscale adoption of SPIS would require the technical capacity for solar solution providers to design, implement and maintain the systems. Lack of such capacity makes it difficult to sustain the SPIS market in the country or region. The availability of this capacity is especially crucial at the infancy stages of a market – this is the time when end users are introduced to the technology and when first impressions are critical to long-term adoption. As an example, poor installations leading to frequent SPIS breakdowns and lack of timely repairs on SPIS may result in a negative attitude towards SPIS by end users, limiting the market potential for SPIS.
Technical capacity evaluates the availability of skilled personnel for the installation and maintenance of SPIS. It may be inferred from:
- Availability of training courses on solar systems;
- Number of accredited institutions offering solar courses and;
- Licensing of solar technicians.
In addition to the presence of skilled technicians, the presence of a licensing and regulating body for SPIS practitioners is key. Licensing indicates the existence of standards of professionalism and a regulator for the market. For instance, the energy regulator in Kenya – Energy Regulatory Commission (ERC) – registers all solar practitioners who have to adhere to a certain code of conduct and standards. It also maintains a members database that acts as a pool for obtaining qualified technicians for installation and maintenance of solar PV systems.
Outcome/Product
- Assessment of level of skilled capacity in the country/region
Data Requirement
- List of solar training institutes and courses
- List of licensed technicians
People/Stakeholders
- Energy agencies
Awareness of Solar PV Technology
General awareness of solar technologies (solar lighting and solar water heating) and irrigation systems, mainly pumps, may be indicative of a population’s willingness to adopt similar technologies. The converse is also likely - lack of knowledge and information about solar technologies can pose a barrier to public discussion and decision making on the use of solar as an alternative energy solution. By way of example, high levels of awareness among end-users about the benefits, long-term costs and payback periods, and performance of solar lighting compared to use of alternative fuels for lighting (e.g. kerosene) can act as an enabler in the adoption of SPIS. Lack of exposure to real-life solar PV installations, on the other hand, is likely to lead to low confidence in new solar technologies.
Awareness of solar PV technologies may also affect the public’s access to market based financing. For instance, financial service providers who are not well-versed with SPIS and its related benefits may be hesitant in disbursing loans for their acquisition, and where loans are available, they may be under limiting conditions (e.g. high-interest rates). This hinders the technology adoption due to lack of financing for the high capital costs associated with SPIS.
The level of awareness of SPIS in a region or country can be deduced from various factors including:
- Trends in the adoption of irrigation pumps: Presence of suppliers and distributors of global brands of irrigation pumps and their associated spare parts may be considered a key indicator of market potential. This is especially relevant for SPIS suppliers where presence and growth rate of competitors may be indicative of the markets appetite for SPIS.
- The percentage of solar energy in a country’s energy mix: A significant proportion of solar power may be indicating of an enabling environment for the adoption of solar PV technologies.
- Solar PV adoption trends over a period of time, say 5 years can be assessed to determine uptake of the technology in the country/region.
Outcome/Product
- Assessment of awareness level of the country/region
Data Requirement
- Trends in solar technology adoption
- Number of distributors and suppliers of global brands of irrigation pumps
- Number and distributors of global brands of solar equipment
- Solar energy proportion to the country’s energy mix
People/Stakeholders
- Government bodies in energy and trade
- Research institutions
Significance of Agriculture in the Local Economy
This parameter examines the contribution of agriculture to a target area’s economy. Relevant indicators would include:
- Proportion of the population engaged in agriculture – the higher the proportion of the population practicing agriculture, the higher the probability of good market potential for SPIS. This is because there is a higher population that may be seeking to ensure their water security for farming. Also, there is a higher probability of favorable government and non-governmental interventions to ensure employment opportunities within the sector.
- Existing irrigation culture – practice of irrigation farming that is mostly powered through fossil fuels and electricity presents a ready market to shift to solar energy.
- Proportion of the GDP attributed to agriculture – regions with a significant proportion of GDP attributed to agriculture are likely to offer an attractive market for SPIS as agriculture would be an established economic driver. It is, however, important to take note of the main crops or livestock contributing to the GDP. For example, coffee and tea could be significant contributors but these do not present obvious avenues for SPIS uptake. This could be contrasted to the export of horticultural products (e.g. flowers and vegetables) which are water intensive and therefore ready markets for SPIS.
Outcome/Product
- Contribution of agriculture to the GDP
Data Requirement
- GDP figures
- Agricultural output numbers
- FAOstats
People/Stakeholders
- Government ministries in agriculture
Important Issues
- Although the economic contribution of agriculture to a country’s GDP may be steadily declining it may be in sight of the country's broad-based economic growth and agriculture may still be the broadest economic sector in terms of demographics, and plays a significant role in the nation’s overall socio-economic fabric.
- In addition to agriculture‘s contribution to the GDP, the type and method of agricultural practice should be assessed. Areas that practice irrigated farming would be more ideal markets for SPIS.
Land Access and Tenure
is an agribusiness, land is at its foundation and it is therefore important to determine land rights, land access and land tenure terms in an area under assessment. Therefore, it is key for an area to have a pragmatic land policy environment. A desirable land policy is one that has emphasis on land access and development, secure property rights, is backed by reliable information and has clear permitting processes. A proper land policy has the land administration services including surveys and mapping, land use planning, rural and urban development, housing and market information service providers well established. Paucity of information about the laws, procedures and/or information required to safely and legally complete land and real estate transactions creates uncertainty and discourages investments.
Land access is defined by the availability of land with the required security of ownership, desirable physical and economic attributes and level of transparency and fairness in transactions.
Land tenure is the institutional structure that determines the political, economic and social framework by which individuals and groups secure access to land and associated resources. The absence of reliable information to guide rapidly expanding land market is, by far, the most persistent bottleneck undermining long-term development in most countries.
Clear tenure rights are an important consideration when investing into SPIS. Not only do they provide investment security, but may also serve as collateral when applying for loans. For some countries, there are clear demarcations between commercial land (with fixed title deeds) and communal lands (with only informal land use rights and agricultural practices limited to subsistence farming).
Outcome/Product
- Country land ownership patterns and statistics
Data Requirement
- Land access and tenure rights in the country
People/Stakeholders
- Government Ministries especially that of land
Transport and Communication Infrastructure
Infrastructure is an organizational system of resources that is needed for a society or business to run. Transportation infrastructure such as roads, harbours, airports and rail, and telecommunication infrastructure are physical systems that are needed for efficient operations within a country or region.
Transport infrastructure determines the ease of movement of goods and people. Lack of transportation infrastructure (e.g in deep rural areas and islands) can have significant cost impacts - inefficient transport systems make it difficult to obtain inputs and to deliver products to customers affecting scalability and quality of services. For SPIS market potential, good transport infrastructure would mean reduced costs of system installation as well as easier access to skilled labour for installation and maintenance. Additionally, lower transportation costs could lead to better allocation of funds in running businesses and ease of access to new markets. Good physical connectivity in the urban and rural areas is therefore essential for SPIS users.
Communication infrastructure (especially mobile phone connectivity) would be relevant to SPIS as indicative of access to mobile banking in rural areas and implementing monitoring devices in SPIS. Mobile phone use can also be used as a proxy indicator for income levels. Mobile phone usage in rural areas also shows the users can access services such as agricultural information and financial services such as mobile remittances and loans.
Outcome/Product
- Assessment of transport and communication infrastructure
Data Requirement
- Data on transport network especially roads in rural areas
- Data on mobile penetration particularly in rural areas
People/Stakeholders
- Government ministry of transport and communication
- World Bank ease of doing business report
