Basic Energy Services - Solar PV (SHS, Solar Lanterns)

Basic Energy Services in a Nutshell: Context| Basics | Energy Systems

Overview

A Solar Home System (SHS) is a small scale, solar powered autonomous power supply to private households living in sparsely populated rural areas, far away from the electricity grid. PV off-grid systems are mainly defined through power dimension and the number of users. The systems comprise of one or more solar modules of different sizes and various appliances. Frequently used categories include, Multiuser systems (MUSs), SHSs and the very small Pico PV systems. Below is an illustration.

Multi User System (MUS)	Solar Home System (SHS)	Pico PV system
2-400 households 200-5000 Watts	1 household 10-200 Watts	1 household 1-10 Watts

Solar Home Systems

Estimates from GIZ and other institutions show that over a million Solar Home Systems (SHS) have been installed worldwide with majority in the rural areas of Latin America and Asia.An estimate by Renewable Energy Development Program indicates that 400,000 solar home systems were distributed during the period 2006 to 2011.The most mature off-grid PV markets exist in India (450,000 installed SHSs), China (150,000 SHSs), Kenya (120,000 SHSs), Morocco (80,000 SHSs), Mexico (80,000 SHSs), and South Africa (50,000 SHSs). However reliable statistics on the number of systems in operation do not exist because majority of the systems were installed through donor funding and often very highly subsidized programmes.

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Technology and Application of SHS’s

A solar home system (SHS) comprises of four components:

• PV module for power generation,
• Charge Controller for battery protection and overall management of the system,
• Direct current (DC) Appliances like DC energy saving lamps, radios, DC TV and special DC fridges directly usable by the system
• Battery for storage of electricity is the most important device.
  

For bigger Solar Home Systems , the integration of AC loads is possible with the use of a DC/AC inverter, however these loads are often inefficient and over-sized and thus can have a long-term impact on the storage capacity, which might be quickly damaged if let in a state of permanent deep discharge. Consequently, good design and the use of an optimized charging technology is required. Trained technicians for the installation and suitable operation and maintenance (O&M) will easily allow the SHS to provide reliable energy supply for years. Moreover, a SHS provides higher power output than PicoPV systems and therefore potential additional services.

On average a typical SHS produces a power output of up to 250 watt peak (Wp) and provide 12 volts (V) direct current (DC) which is capable of replacing not only traditional energy sources like kerosene lamps and candles but also dry cells for radios and cassette recorders, thus addressing both economic and environmental aspects. According to the energy consumption pattern of an average rural household, a minimum panel capacity of 50 Wp should be capable of providing rural households with electricity for lights and, possibly, for a small TV-set, a radio and/or other small domestic appliances.

These solar home systems sometimes vary in size, with some systems having 10-20Wp Panels, some with as low as 6 WP panels only. These very small PV- sysems are mostly sold in cash in countries like China, Indonesia, Kenya and Morocco.

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Factors Affecting the Dissemination of SHSs

As markets mainly for SHS are still developing in many countries, there are still many constrains faced in their dissemination, these constrains include:

• Affordability- In the case where Potential SHS users are usually faced with a purchase price which is often a multiple of his yearly income.
  
• Lack of access to commercial credit-Where a potential user in a developing country (remote rural area, no access to grid electricity in the longer run, low income and no regular cash flow) lives.
  
• Hesitation from both formal and semi-formal financial institutions to voluntarily enter into SHS lending for the low-income sector of the rural population since this business is not compatible with the criteria for financial sustainability of a financial institution.
  
• Commercial credit according to the criteria of institutional sustainability would hardly be affordable for rural SHS-customers for two main reasons. First, the desirable short payback period requires high regular payment rates (amortization, market interest rates and administration fees) and, second, rural customers can usually not offer suitable guarantees (collateral).
  
• For users who can afford to pay cash, other problems related to SHS technology apply as well. Both cash payers and local implementing organizations go often for the cheapest PV systems and components on the local market with often poor quality resulting in higher maintenance and operational costs than expected.
  
• There is lack of information regarding the capacity limitations of high quality SHS as well as the consequences of using low-quality systems is another barrier for SHS dissemination.
  

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Costs of SHSs

The basic DC SHS With a 50 Wp panel, battery control unit and battery, capable of powering a small rural household, costs between 500 US$ to 1,200 US$. However this price depends on, size, origin of components and country-specific taxes and duties.Domestic system price for an installed SHS ranges from 7 US$/Wp (e.g. in Indonesia, 1994) to 26 US$/ Wp (in Kenya, 1993). The price of PV modules dropped from 20 US$/Wp in 1980 to presently about 5 US$/Wp and is expected to decrease further due to economies of scale. Operations costs which cover maintenance, repair, and replacement of battery, lamps and electronic ballast over the lifetime of the SHS must also be included in the purchase price. Concurrently typical monthly payments of 5 to 10 US$ must be borne by the end-users to cover only the credit repayments and – if at all - a service/ administration fee. Price trends in SHS can be illustrated below:

Country	Estimated SHS cost (50 Wp; US$)	GNI/ Capita ( US$ per year)	Cost/ Income ratio
Eritrea	650	160	4.06
Ethiopia	750	100	7.5
Kenya	550	350	1.57
Lesotho	1000	530	1.87
Somalia	> 800	296	> 2.7
Sudan	650	340	1.91
Tanzania	850	270	3.15
Uganda	500-700	260	2.8
Zambia	1200	320	3.75
Zimbabwe	800	387	2.07

SHSs have a cost advantage for households who spend more than around $US 90 per year. However, broad income segments of the rural population in developing countries can only afford SHS with the help of a loan or on a rental basis. The high initial investment cost of SHSs means that to date, SHSs have been beyond the economic reach of the lowest income bracket.spite of falling PV prices, this is not expected to change in the next decade.

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Financing Solar Home Systems (SHSs)

The need for a interested rural customer to mobilize enough money so as to purchase a SHS is an important precondition of PV electrification. Unless system prices decline substantially in the near future, the cash sale of SHS will be limited to the higher income classes of developing countries.Wherever there are available lending services, average rural households might be able to pay in cash but nonetheless be willing to acquire a SHS with credit. However this, SHS have not yet been established on the market as mature commodities like standard appliances and are not commensurable with them in terms of technical maturity, reliability, after sale service etc. This is one reason for the hesitation of financial institutions to offer attractive financial services for SHS.

Income generation from PV-installations - if any at all - is rather marginal, users have to finance a SHS from their current income. This refers not only to the initial investment for a SHS but also to the operational cost over the lifetime of the system. Without having access to an affordable credit scheme or other forms of financing mechanisms like hire purchase, leasing, etc. the interested rural customer will hardly be in the position to acquire a SHS. From the viewpoint of a financial institution, the assessment of a loan application for SHS would usually have to be based on a cash-flow analysis including a sensitivity analysis that assesses the risk exposure of various income sources and expenses; how income/expenses will change with the acquisition of a SHS and what surplus is expected in the future. To consider, however, how much has been spent historically for other sources of energy over a longer period of time would provide loan officials with a reference for the minimum average expenditures for energy and therefore, provide additional information for the risk assessment.

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Business Models for Solar Home Systems (SHSs)

To stimulate and achieve commercialization of SHSs, two different approaches can be followed, the sales model or the service model.

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Sales Model

Private dealers sell SHS to rural households, who pay cash or receive credit. Rural households have to maintain the systems and are responsible for debt service in the case of a credit sale. Credit may be provided by the dealer, by a micro-finance organization, or by a development bank.

• The effectiveness of the sales model depends much on the long-term credibility of the SHS technology, which is a question of assuring the quality of both hardware and service.
• The customer should as well have ample knowledge on proper maintenance.
• Credit risk is a serious concern of both dealers and financiers and makes credit sales particularly challenging. Again, adequate after-sales service is a key to adequate credit repayment performance.
• Dealers’ cash flow should also be considered especially when selling the SHS on credit. The dealer should be selected upon clear eligibility criteria such as existing business competence, sales/ service infrastructure in rural markets, and a refinancing agreement with a participating bank.
• In the case of funding from a development finance organization, a long-term commitment is essential.
• A strong and long-standing micro-finance organization with high creditworthiness is needed, if this type of sales model is selected.
  

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Service Model

In this model an energy service company supplies solar electricity for a monthly fee to rural households. The systems are owned and maintained by the energy service company, and from an organizational point of view, the service may be provided by a regulated concessionaire (existing utility or competitively selected private firm), an unregulated open market provider, or a community based provider.

• A trend is discernible in favor of this approach reflecting the after-sales service issue, which implies enormous transaction costs to dealers who have not yet established a service infrastructure in rural areas.
• Despite the seeming advantages of the service model, SHS market expansion may be impaired by unrealistic and often false promises by politicians about rural grid extensions. Such practices are counterproductive whether the service comes from a regulated concessionaire, unregulated open market provider or a community-based provider.
• If governments attest rural electrification high priority even in areas where grid extension is not economical, regulated concessions (e.g. for specific franchise areas) are more likely to be favored. For such regulated energy service concessions, a government agency at an appropriate level must learn to serve as an effective regulator (approval of tariffs, attracting capable bidders, ensuring service quality etc.)
  

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PicoPV Systems

Pico PV Systems are small independent appliances providing light (Solar Lanterns) and/or additional small electrical services, such as radios, mobile phone charging, mp3 player, etc. They are usually of few Watt peak (Wp) capacity but can be as small as 0.3 Wp or up to 10 Wp. They are powered by a solar panel and use a charge controller and rechargeable battery for electricity storage.

Due to relatively high costs, SHS are owned by middle and upper class households in developing countries, hence low income households have to depend on PicoPV systems which offer low-cost energy access.

For rural households who prefer grid connection for more power for their appliances, pico PV can only serve them on a minimal level. But for a majority of the 1.5 billion people without grid connection and no possibility of having it in the near future, pico PV systems may help in providing a few essential energy services. In a number of regions, these systems are being sold as simple off the shelf consumer appliances, however, providing this initial level of service does not imply that these populations should be considered as “electrified”.

As with any new product or product range, PicoPV systems have their strengths and weaknesses and also provide new opportunities and experience barriers as illustrated in the SWOT analysis below.

Strengths	Opportunites
Portable PV system. Expandable, so extra services can be supplied. Much lower costs than SHS, so larger target group. No risk of “solar trap”.	Millions of households will not be connected to grids in years to come. Combining mobile phone payments with phone charging.
Weakneses	Threats
Output relatively modest. For majority of potential users credit sales still required. System has to be put in the sun manually.	Devices can easily be stolen. Quality assurance must be provided.

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Technology and Application of PicoPV Systems

Pico PV systems are characterized into the following:

• Solar Lantern- lighting service
• Multifunctional PicoPV Systems- provides lighting as well as additional services
• Bigger PicoPV Systems- allow for the operation of external devices as well.
  

The components of a Pico PV system incude:

Solar Panel
The PV panels for the lights are mostly made of polycrystalline or mono-crystalline silicon. The nameplate power ranges from 0.3 Wp for a solar lantern with an integrated panel up to 12 Wp for the combined system. The majority of the systems are equipped with panels from 1 to 3 Wp. In ideal circumstances and in sunny areas each Wp of a fixed PV panel can produce up to 5 Watt hours (Wh) per day (1825 Wh/yr. per Wp). For a portable PicoPV system the panel is not always in the best position, and sometimes can be shaded for some time, so that even in sunny areas it is safer to assume a lower output ratio of about 3 Wh/day per Wp.

Battery
There are different types of batteries used in the systems, lead-acid (33%) and NiMH (60%) batteries being the most common types, while Li-Ion (7%) batteries are presently used only in few cases.These replace lower quality batteries, such as the lead-acid battery. A charge controller is important to protect the battery from damage through overcharging or deep-discharging.With a round-trip battery efficiency of about 80% for most batteries this implies that, if all energy is consumed in the evening or night, the practical available energy for the consumer of a PicoPV system is about 2.5 Wh/day per Wp of the PV panel.

Lamp
More than 50 PV lamp models are available on the market, which can be equipped with compact fluorescent lamps (CFL) or light emitting diode (LED). In most models available so far, a small solar module is separate from the lantern, so that it can be placed outdoors without the lantern being exposed to the weather. The best of these lanterns can be hung indoors or placed on a table, but are also portable enough to light the way when walking at night.

The daily energy demand for lighting can be estimated on the basis of the number of lights, their power and the number of hours per day in use. Examples are given in the table below, based on LED lights with 100 W:

Load	Type of Service	nr	Watt	Hr/day	Wh/day
Study Light	50 Lumen	1	0.5	3	1.5
Main Light	200 Lumen	1	2.0	2	4.0
Night Light	10 Lumen	1	0.1	8	0.8
Phone	Charging (50%)	1	2.0	1	2.0
Radio	Sound	1	0.5	2	1.0
TOTAL					9.3

An increasing number of mature PicoPV systems provide additional energy services through various appliances which can be integrated in a multipurpose system or connected as external devices through a plug. The presently most common and popular appliance is a mobile phone charger which is either connected to the main device (the lamp) through a cable for charging from the battery, or directly to the module. These systems usually come with a set of different phone charging pins intended to cover a range of the most widely spread mobile phone types.

Simple mobile phones have battery capacities of 700 to 1000 milliamp hours (mAh). As most have lithium-ion batteries, the voltage is 3.7 V and their typical battery capacity is between 2.6 and 3.7 Wh. With a charging efficiency of 90% it takes about 3 to 4 Wh to fully charge an average simple mobile phone (2 watt, 1.5 to 2 hours). Charging a smart phone roughly doubles the requirement.

Many models of PicoPV systems also allow for the operation of other small electric devices such as a small radio, small loudspeakers, or a MP3-player. Operating a small radio takes about 0.5 Watt or about 1 Wh for two hours listening per day.In general, the size of the module and the storage capacity of the battery determine the range of electric appliances which can be connected to the system. If required even a small TV or a little fridge can be operated.

Recently expandable solar PicoPV systems have entered the market. Households can start by buying a small kit serving small loads, such as two lights and a radio. Gradually they can add an extra kit, so extra lights and services can be connected and even a small TV can be considered. Nonetheless, it remains important to state that these services should not be considered as a full substitute for grid quality electricity.

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Quality of PicoPV Systems

Information on pico PV is still inadequate and inaccessible to many thus making it a challenge in finding a lamp in terms of quality and type, thus to prevent customers from buying bad quality products and to preserve the market as well, several laboratory tests and field tests have been conducted in various countries to evaluate products.
There are some organizations which ensure that good quality products reach the end customer. An example of this is the GIZ and Fraunhofer Institute Solar Energy ISE which have developed a comprehensive analysis of solar lanterns through laboratory tests of 12 solar lanterns on the market in 2009. From this tests, some of the technical problems that were observed with solar lanterns include:

Poor mechanical design and workmanship; Missing over-current protection of the LED; Poor electrical design; Insufficient light output; Bad quality of the LEDs; Solar panels and batteries did not show nominal values; Defective protection of the battery; and Defective ballast for CFLs or LEDs.

As a result, a detailed test procedure is recommended as well as a series of technical requirements to improve the quality and the sustainability of the lanterns.Lighting Africa also rigorously tests the various lighting products on the market and they their specifications that should give the customer satisfaction for the products.The system should give a bright light, be affordable, multipurpose (lighting two rooms, charging a phone), portable, easy to use, safe and secure and have a long battery life.

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Costs of PicoPV Systems

Initial investment cost of PicoPV systems ranges from 36 US$ to 120 US$. Such relatively high initial investment costs prevents the large-scale diffusion of PicoPV lanterns among low income strata for the time being, given their severely restricted household budgets (typically US$ 2-5 per month for lighting, with no buffer for savings) and lack of access to financial services.

In contrast, monthly costs are low (2 US$ to 9 US$, except for the poorest price performer) in comparison to running costs of kerosene wick lamps and candles (2-5 US$), not taking into account their inferior lighting output. In terms of lighting service costs (0.10 US$ to 0.60 US$ per kilo lumen hour), good PicoPV lamps perform much better than all traditional lighting alternatives, except for the kerosene pressure lamp (which in turn is as expensive in monthly cost and initial investment cost similar to most PicoPV products). This causes purchasing limitations associated with the various lighting products which strongly depend on income.

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Financing PicoPV Systems

In achieving a sustainable Pico PV market, financing of local retailers and end users is essential. Households especially those at the bottom of the pyramid particularly in rural areas have limited access to financing services to bridge the gap between one-time up-front costs for the new lighting products and their monthly disposable budget for lighting. The financing services can either be provided directly from Micro Finance institutions to supply chain actors at national or local level or to consumers, or through consumer credits from retailers to end users. Sale on commission basis will be a viable alternative to direct financing services for local retailers if the master distributor has the sufficient financial buffer.

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Business Models for PicoPV Systems

There are four different delivery models/ business models each having their specific financing models.

• Commercially led approaches- This is where suppliers and dealers develop a market typically relying on cash sales.
• Programmes managed by a variety of stakeholders-this was typically relying on consumer credit.
• Utility models (often, but not exclusively, with fee-for-service payment)
• Grant-based models (typically used for institutions, highly managed and structured).
  

Commercially Led Delivery Model

In this model the PV system is sold for cash to the end-user, who then directly becomes the owner of the system. Sometimes the dealers or vendors also operate a simple consumer finance scheme, called layaway. The consumer makes an informal price agreement with the supplier, pays monthly installments (usually without interest) and receives the system after the installments have reached the required level.

Multi-Stakeholder Programmatic Delivery Model

This model typically relies on credit sales which are distinguished into three different types:

Dealer Credit
In this system the PV supplier/dealer sells the PV system to the end-user, who enters into a credit arrangement with the PV dealer. Depending on the arrangements, the end-user immediately becomes the owner of the system, or becomes the owner when all payments are made.

End-user Credit
This is where the PV supplier/dealer sells the PV system to the end-user, who obtains consumer credit from a third party credit institution. Usually the end-user becomes the owner of the system immediately, but this can be delayed until all payments are made. The PV system can be used as collateral against the loan.

Lease / Hire purchase
The PV supplier/dealer or a financial intermediary leases the PV system to the end-user. At the end of the lease period, ownership may or may not be transferred to the end-user, depending on the arrangements. During the lease period, the lessor remains owner of the system and is responsible for its maintenance and repair.

As illustrated by some of the highlighted solutions, some of the difficulties faced by this financing models are the fact that financing and bank branches may not be available in the targeted rural areas. Unless the bank agrees to take the system / panel as collateral, insufficient guarantees will be an issue. Furthermore the cost of processing such small transactions is high for the banks which lead to high interest rates and consequently weighing on the price the end user has to pay. In some countries, this is overcome when energy or solar services are made eligible through public-ally supported rural infrastructure financing schemes. The cost of collection is critical as it can approach 60% of payments although the further and more scattered the households are, the higher the collection cost. However this can be solved by Involving local intermediaries or use of innovative phone-based payments.

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After-sales Service of PicoPV Systems

After sales maintenance and repair services are important in the market structure for the supply of PicoPV lighting to end users in developing countries. These services are required to ensure the access to high quality and certified products, the protection of user rights (warranty claim) and the availability of spare parts and replacement of components (batteries mainly). Replacement of batteries is typically after four to five years which makes a recycling solution necessary especially for lead-acid batteries. However, the lack of infrastructure for recycling is a major challenge in the waste management of PV batteries. And although a new generation of batteries which lasts much longer therefore generating less battery disposal, the problem of where to dispose and how to recycle them still exists.

The provision of service structures is often a bottleneck in the development of sustainable PV product markets and needs special attention in support programmes. The importance of maintenance and after-sales service structures has also been highlighted by several respondents across countries in the GIZ PicoPV field survey.In a market-based dissemination model, chances for sustainability are higher if sellers also play a key role in after-sales service. In rural areas, PicoPV vendors have an intrinsic interest in putting into place service structures to ensure customer satisfaction, which is crucial as their business success will depend to a large degree on word of-mouth recommendations. In addition, service delivery should be easier to organize by those supply side actors who already have gained a minimum of the required technical expertise to make informed decisions for the choice of the right lamp model etc.
However Pico PV systems unlike SHSs or other complex innovative energy solutions are portable which enables it to be returned to the point of purchase in case of technical problems. This makes it relatively easy for retailers to offer after sales services as they do not have to visit the customers in their homes, but that is if they make the investment to gain the technical know-how for repair and maintenance of lamps.

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Benefits of PicoPV Systems

Economic Benefits for End-users

• Pico PV has the potential to reduce users’ expenditures for lighting and information and communication technologies (cell phone charging and radio) and thus relieve tight household budgets, as opposed to the use of kerosene lamps, candles and battery-run torches which are relatively expensive and inefficient. The cost for running the typically used low-efficiency kerosene wick lamps and candles is up to 150 times higher than for premium-efficient fluorescent lamps, thus, poor households currently pay relatively more per lumen and per month for qualitatively poor lighting services.
• Improved lighting conditions for studying and income generating activities after dark.
• The use of cell phones and radios for market information (market prices), education, social coherence and emergency situations which can all enhance economic growth and reduce economic and social risks to which poor households are particularly vulnerable.

Economic Benefits for Micro, Small and Medium-sized Enterprises (MSME)

PicoPV products have economic impacts for two categories of MSME: Those that sell PicoPV systems and offer after-sales services and, those that buy and use PicoPV to improve their business.

• As PicoPV products fall into lower price ranges than more complex off-grid energy solutions, there is a high potential to enable large-scale inclusion of MSME into supply chains in importing countries.
• MSME with limited cash flows and lack of access to financial services, including the informal sector, will find market entry barriers smaller than when dealing with more complex and costly products.
• Participation in PicoPV markets requires a minimum level of know-how with regard to solar technology, as well as marketing and business management capacities. Therefore it offers opportunities for “learning-by-importing” and “learning-by-doing” to dynamic actors along the supply chain, including MSME.
• Sustainable PicoPV markets call for business models that integrate financial and after-sales services with distribution, which will allow local retailers to skim higher portions of value-added.
• Larger numbers of domestic businesses acting as importers and distributors in emerging PicoPV markets are also desirable from a market efficiency perspective, as chances of monopoly pricing or price discrimination will be reduced.

Health and Safety Benefits for End-users

Improved health and safety conditions especially among women and children who are exposed to heavy indoor air pollution from the use of wood biomass and kerosene for cooking which causes respiratory diseases which kill nearly 2 million children in developing countries each year.

Improved Educational Opportunities

Traditional lighting devices like kerosene lamps and candles do not provide sufficient lighting conditions for studying and reading. Households’ access to electricity as well as modern fuels has been found to be positively correlated with educational enrollment ratios.

Gender Related Benefits

Women are often tasked with the provision of residential lighting. They not only bear the financial cost for lighting but also the burden of bringing in supplies for lighting, which substantially adds to the work load of women in the rural areas.

Environmental Impacts and Greenhouse Gas Emission Reductions

• PicoPV systems offer relatively low-cost opportunities for emerging economies with large rural populations to pursue low-carbon development paths without compromising the continuous improvement of living standards.
• Protection of local environmental resources by replacing torches which use dry-cell batteries which have a lifetime of only 2-20 hours, and involve a high risk of contaminating local water and soil resources with toxic heavy metals, as there are no appropriate disposal structures in place in many developing countries.
  

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Impacts of Pico PV

SHS Dissemination Programmes in Bolivia

The solar home system dissemination programme of the Bolivian electricity utility CRE does not involve commercial funding on the end user level, but it but is an example of utility-based SHS dissemination approach which can be increasingly used worldwide.

Rural Electrification and Status of SHS Dissemination

According to the 1992 census in Bolivia, it was seen that only 44% of the households had access to electricity. There is no available data on the number of rural households without electricity. About 100 rural co-operatives operating diesel-generators or small hydro-power plants provide electricity to about 30,000 rural households. With the new electricity law of 1994 and the law about people participation, rural electrification in Bolivia gained more momentum. The regional development fund FNDR (Fondo Nacional de Desarollo Regional) is responsible for rural electrification projects.

The Rural Electric Co-operative (CRE) of the low land plains of Santa Cruz in Bolivia, with some 140,000 members, is one of the biggest private electricity utilities in Bolivia. In 1993, it had an installed capacity of 131 MW and sold 600 GWh/year.

Supported by NRECA (National Rural Electric Co-operative Association, Washington), CRE started a first field-test of 90 SHS in 1993. Since 1995, CRE increased the number of installed SHS to more than 1,400 with financial assistance of NRECA and technical assistance of the GIZ supported Project PROPER (Programa para la Difusión de Energías Renovables). Under this project only the solar panels were imported, whereas all other components came from the local market with the main components produced in the country. Beside CREs SHS-dissemination programme there are about 3,500 SHS which were installed by international assistance. There are local PV dealers selling SHS directly to customers. Their sales are estimated to be in the range of 1,500 to 2,000 systems per year. Altogether, there are more than 20,000 households equipped with a SHS.

Socioeconomic Aspects

In Bolivia, 3.2 million people live in rural areas representing 42.5% of the total population. Only 32% of these people live in villages with more than 2,000 inhabitants; the rest lives in small, dispersed villages. Basic needs like drinking water supply cannot be satisfied at present. High income disparities among the population and extreme poverty in rural areas are some of the governing socioeconomic conditions in Bolivia. Due to the limited economic resources of the rural target group for SHS, the market for PV systems is still in the initial stages.

The NRECA/PROPER supported project of 1,300 systems was implemented by CRE based on the following approach:

• Creation of its own service department based on renewable energy technologies;
• Offer of SHS only under a rental scheme;
• Offer of two different types of SHS for residential (53 Wp) and for commercial use (2 x 53 Wp) requesting different service fees;
• Extension of technical service covering the complete system, e.g. including BOS components with their technical services.

Training was given to local technicians. The staff of CRE.s billing service was to collect the monthly service fee of the rented SHS. The technical service, which includes maintenance and operation services but also collection of service fees should be carried out by trained technicians, which were scheduled to attend about 200 SHS in a certain area.

Financial Scheme Parameters

Although there were customers willing to buy a SHS, CRE voted for a rental scheme. Apparently, the cost structure of the rental scheme is not monitored and therefore, not known to CRE itself, making it difficult to determine the degree of subsidies in the overall financial scheme. Since no confirmed data are available, the cost parameters have to be estimated. According to different sources, the purchase price is about US$ 650 including installation and administration fees. The monthly rental fee is fixed at US$ 8.50 for the residential SHS, for the larger commercial system the fee is US$ 10.30. There are other financial schemes with credit components and ownership transfer applied in Bolivia. All implementing or financial institutions are faced with the problem of the weak and underdeveloped financial sector, however. Credits are generally difficult to obtain, even for small and medium enterprises due to the lack of collateral acceptable to the banks.
Private banks, in particular, only accept property situated in urban areas as a guarantee and financial institutions are not interested in helping SHS target groups because the users are said to be not credit-worthy. There are no commercial banks in rural areas. For the main group targeted for SHS electrification this issue is even more critical. For this group, the only
way to get a credit via is the informal sector (i.e. moneylenders) with extremely high interest rates and short repayment terms.

Technical Aspects

Field experience with SHS:

An evaluation of the field test with approx. 90 SHS after 6 months revealed problems at both the technical and the institutional level. The imported deep cycle-batteries were undersized, and a high number of them went out of operation after only half a year. Since the batteries were not properly maintained, problems with the BCU developed, causing problems with the fluorescent tubes electronic ballast and forcing some technicians or end-users to by-pass the BCU. As a consequence, fluorescent tubes had to be replaced as well after short periods of use. On the CRE level, it turned out that the internal structure was not adequately prepared to take over responsibilities concomitant with the new task of implementing SHS. The first round of fee-collection proved difficult and, subsequently, no more collection trips were undertaken. Afterwards, a technical readjustment programme was prepared and internal organizational measures were taken in order to solve the problems.

Experience with technology transfer:

As of 1994, GTZ supported in Bolivia the Special Energy Program (SEP) PROPER. Aware of the importance of quality assurance, the focus was on technology transfer to local manufacturers of PV components. Selected companies were given special training in the production of high-quality components accompanied by quality assurance procedures. One of these local companies was the winner of a SHS tender of the regional electric utility CRE. However, exactly at the time when quality monitoring was most needed, the process of technology transfer to this local company came to an end, resulting in a serious reduction of product quality.
These examples point out that technology transfer must not be an isolated, short-term measure, but must be seen as part of a long term strategy, carefully planned and assuring constant product quality over an extended period of time.

Lessons Learned

1. PROPER was an integrated project intended to promote the use of renewable energies in rural areas in which the dissemination of SHS was an essential activity. The support of CREs SHS programme was meant to support an innovative SHS dissemination approach in Bolivia in terms of technical and managerial aspects. Despite encountered problems, CREs renting scheme was regarded as being an innovative and promising approach by an electric utility. CREs problems in setting up appropriate M&O service structure as well as with the rental fee collection is not a specific Bolivian problem but a typical one for any electricity utility entering the SHS market. The process of adapting their traditional organisational structure, not only to new target groups but also to the new challenges like technical service, tariff collection patterns, training of staff etc. requires considerable time and effort and may result in difficulties.
2. Critical issues in this approach are the lack of transparency of the cost structure within CRE in relation to both capital and operating costs, as well as in the degree of cost recovery with the service fees applied.
3. In the early stage of PROPER, the criteria for success were identified as being training, research and investigation, finance, support of private entrepreneurs and information. However, to what extent the CRE programme has been successful cannot be stated as yet.
4. The Bolivian experience strongly supports the finding of many other case studies that reliable operation of the SHS and its components is crucial to willingness to pay, irrespective of the underlying financial scheme. Quality assurance is a most crucial issue in Bolivia, too.
5. There are indications that with electricity available, the daily workload for women gets bigger. Since household work can now be postponed to the evening hours, the daily work time in the field gets longer. Despite the belief that PV electricity supply leads to higher productivity, there is no documented evidence of this as yet.
6. There are hire purchase schemes offered in Bolivia by private PV dealers. This approach, however, is limited to an environment where the customers are well known to the dealer. After an initial down payment, the SHS credit must be paid back within a period of 24 months.
7. Although many efforts have been made to increase the awareness of target groups, financial intermediaries and PV dealers of the possibilities of SHS, after the termination of the project PROPER much remained to be done. It confirms that building up awareness is a long lasting process and often goes beyond the given time frame of a project.
8. An overall important fact is that during the duration of the CRE programme (1993 -1996) many more SHS have been implemented by private PV dealers than by the internationally supported projects. While these projects, including the CRE project installed altogether only 76 kWp (equivalent to approx. 1,000 to 1,500 SHS) about 10,000 SHS were installed by the private PV sector.
   

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Further Information

• Alliance for Rural Electrification, 2011. Renewable Electrification with Renewable Energy - Technologies, Quality Standards and Business Models.
• Financing Mechanisms for Solar Home Systems in Developing Countries - The Role of Financing in the Dissemination Process.
• Monitoring and Evaluation of Solar Home Systems - Experiences with Applications of Solar PV in Developing Countries.
  
• Renewables 2012 Global Status Report
• WHO-A Review Focusing on the Least Developed Countries and Sub-Saharan Africa
• Financing Solar Home Systems in Developing Countries - The Role of Financing in the Dissemination Process.
• Does the Use of Solar Home Systems (SHS) Contribute to Climate Protection?.

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References

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