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close this bookPhotovoltaic Household Electrification Programs - Best Practices (WB)
View the document(introduction...)
View the documentForeword
View the documentAcknowledgments
Open this folder and view contentsExecutive summary
View the documentAbbreviations and acronyms
View the documentIntroduction
Open this folder and view contentsThe place for photovoltaics
Open this folder and view contentsThe economics of PV household electrification
Open this folder and view contentsBarriers to affordability
Open this folder and view contentsInstitutional models
Open this folder and view contentsAttaining financial sustainability
Open this folder and view contentsTechnical requirements
Open this folder and view contentsBest practices: conclusions and recommendations
Open this folder and view contentsAnnex 1 : ASTAE case studies in PV household electrification
Open this folder and view contentsAnnex 2 : Economic and financial comparisons of rural energy alternatives
View the documentReferences
View the documentDistributors of World Bank Publications
View the documentRecent World Bank technical papers

Introduction

1.1 Most governments in the developing world give high priority to rural electrification to meet economic, social, political, and regional development goals. By 1990, after nearly two decades of aggressive public investment in the energy sector, an additional 1.3 billion persons in developing countries had gained access to grid-based electricity.' Of these, about 500 million lived in rural areas. Despite these efforts, the pace of electrification could not keep up with world population growth, which increased by 1.5 billion persons during this same period. In 1990, about 1.8 million people in rural areas of developing countries were still without grid-based electricity.

1.2 Grid-based electricity is more expensive in rural than in urban areas due to lower load densities, lower capacity utilization rates, and often higher energy losses. Rural customers increase the costs of generating electricity disproportionately, since rural areas add to the evening system peak, when power is more expensive. The costs of grid-based rural electrification extensions have ranged from $230 - $1,800 per connection, with a median cost of about $520 per connection (excluding the cost of basic generating equipment and high-voltage transmission lines) (Mason 1990). Since these costs rise considerably in areas with small loads and low load densities (i.e., areas with low population density), alternative approaches are necessary in order to meet rural electricity needs in the least expensive way.

1.3 Over the past decade, the use of photovoltaic-(PV-) powered solar home systems in remote communities has received increasing attention as an economically viable alternative to grid connections, kerosene lighting, and rechargeable or disposable batteries that power appliances. Governments, non-governmental organizations (NGOs), the private sector, and the donor community have acquired considerable experience in the design and implementation of solar home system projects. The PV niche within a national rural electrification strategy would comprise those areas where small amounts of electricity are required and load densities will remain modest.

1.4 Early solar home system programs encountered a variety of difficulties. These included unreliable technical performance, organizational and cost recovery problems, and user dissatisfaction resulting from unrealized expectations. More recent projects utilizing improved systems have incorporated lessons learned from these experiences and are performing quite well. As a result, the number of PV programs has grown substantially. About 400,000 solar home systems are now installed world-wide. These include 50,000 in China, 40,000 in Mexico, 20,000 in Kenya, 20,000 in Indonesia, 10,000 in Brazil, 4,500 in Sri Lanka, 4,000 in the Dominican Republic, 4,000 in the Pacific Islands, and 1,000 on the Navajo reservations in the southwest United States.

Box 1-1
Government Initiatives in Indonesia

In Indonesia, the government-supported BANPRES Project has installed more than 3,300 solar homes systems in 13 provinces since 1991. The project has also led to commercially oriented initiatives and additional government-sponsored programs that have installed nearly 20,000 systems to date. The BANPRES Project makes effective use of existing rural structures and capabilities. With the assistance of local governments, participating villages are selected. Selection criteria is based on factors such as the community's desire for electricity, lack of access to grid services, householders' ability to pay, and the effectiveness of local cooperatives which play a key role in project implementation. The cooperatives collect down payments and monthly installments and employ technicians to provide maintenance services. Despite the low monthly fees of the BANPRES Project, which are about the same as those for grid-connected service, the collection rate has hovered at around 60 percent. The Project included pilot demonstrations and tests to identify the optimal solar home system configuration which are now being replicated, virtually unchanged, in both commercial and government-sponsored programs.

1.5 To identify commonalties and best practices, ASTAE commissioned four in-depth case studies of solar home system programs in Indonesia, Sri Lanka, the Philippines, and the Dominican Republic. These programs were implemented by governments, NGOs, cooperatives, and the private sector, sometimes with donor assistance. The case studies have yielded valuable insights into the elements for successful solar home system initiatives. The individual reports, available on request to ASTAE, are summarized above and below in Boxes 1-1 to 1-4. Further details on each country's experience are provided in Annex 1.

1.6 In addition to the case study findings, the Report reflects ASTAE's consultation with World Bank staff and PV professionals around the world. Experiences with solar home system initiatives in Kenya and the Pacific Islands, documented in other World Bank studies, have added to our understanding of successful programs (World Bank 1994a). The Report has also benefited from a review by an international panel of PV program experts, convened at the Roundtable on Photovoltaics and Rural Electrification held in Waikoloa, Hawaii, in December 1994.

Box 1-2
The Solar Home System Market in Sri Lanka

Solar home systems in Sri Lanka have been supplied through a combination of private sector, NGO, and government-sponsored programs. The 4,500 systems installed since 1982 serve a small portion of the 2 million households without access to grid-based electricity services. The private sector sells the PV systems through its own distribution network, providing trained technicians who make house calls and customer education on proper maintenance techniques. NGO projects, which rely on local technicians, are characterized by active local participation in project design and maintenance and in the collection of loan payments. Government programs, executed by private firms, also offer maintenance services. Sri Lanka has some experience in solar home system financing through bank credit or hire purchase agreements. However, the limited availability of long-term credit in Sri Lanka presently constrains solar home system use and more than 80 percent of private sector sales have been cash transactions.

1.7 The Report is organized as follows:

· Chapter 1 sketches the evolution of household PV systems.

· Chapter 2 describes solar home systems, their costs, consumer perceptions and the potential niche for household PV in rural electrification.

· Chapter 3 analyzes the economics of solar home systems vis-is grid and off-grid options.

· Chapter 4 outlines financial constraints to solar home system diffusion, such as firstcost barriers and market distortions.

· Chapter 5 examines vehicles for program implementation such as energy service companies (ESCOs), leasing arrangements, consumer financing, and direct cash sales. It also identifies how government and donor agencies can assure sustainable household PV electrification programs.

· Chapter 6 sets out financing and cost recovery requirements.

· Chapter 7 focuses on technical standards.

· Chapter 8 lists the main conclusions and recommendations.

· Annex 1 summarizes the four ASTAE case studies of household PV experiences in Indonesia, Sri Lanka, the Philippines, and the Dominican Republic.
· Annex 2 details the economic analysis and assumptions used to define the economic niche for solar home systems in rural electrification. It also examines the impact of productive loads and load growth on solar home system competitiveness.


Box 1-3
Bilaterally-Assisted Programs in the Philippines

The dissemination of solar home systems in the Philippines has been dominated by two rural PV electrification programs assisted by the German BMZ/GTZ. In addition, about 10 local private companies sell 100-150 units annually. Such efforts have begun to tap the potential market of the more than 6 million Filipino families not connected to the grid. After the first PV project was initiated, demand for solar home systems grew faster than the program could accommodate. This led to the creation of the Philippine/German BMZ/GTZ Special Energy Program (SEP) in 1987.

The SEP's strategy is to distribute small solar home systems in clustered sites, gradually increasing the demand for electricity and the area covered until grid extension becomes economically feasible. Rural cooperatives oversee servicing and fee collection, and local NGOs have direct responsibility for collections, maintenance, and monitoring. PV modules are purchased in bulk to help lower costs to consumers. Only about 10 percent of the households can pay cash for the systems. For the others, the SEP has established revolving funds to finance some systems and is seeking to expand its credit supply.

Box 1-4
The NGO Experience in the Dominican Republic

The Dominican Republic currently has 400,000 households without access to grid services. NGOs are working with the private sector to facilitate the distribution of solar home systems. NGOs promote PV technologies, provide technical and management training, and finance sales through revolving funds. Businesses supplying equipment are able to meet the demand but lack the training, working capital, and physical resources to develop further. In addition, lack of access to credit and price increases (due to the devaluation of the peso) have severely constrained the dissemination of solar home systems.

Because commercial banks in the Dominican Republic do not typically offer credit, NGOs have set up revolving funds with international donor organizations and have successfully begun offering credit to consumers to purchase systems from local entrepreneurs. Thirteen small businesses have sold over 2,000 systems throughout the country.