Income of Actors in the Value Chain of Different Technologies

Overview

Examining and analysing value chains is necessary to be able to strengthen the single links that make it a whole and in consequence develop them further. This evolvement leads to economic advancement and thus to an upturn in the incomes of the players along the chain. This article provides an insight into the income of actors in the value chain of different technologies.

Actors in the Value Chain of Different RE Technologies

Who are Value Chain Actors?

All providers of operational and/or supporting services to produce, market and deliver a product are actors of the value chain. These are individuals, private companies as well as public agencies. If government institutions subordinate to the business environment of the respective value chain play an integral part they can also be value chain actors.

GTZ, ValueLinks Manual – The Methodology of Value Chain Promotion – First Edition. http://www2.giz.de/wbf/4tDx9kw63gma/ValueLinks_Manual.pdf

Solar Systems

The Off-Grid Solar sector has evolved continuously in the last years. The market now accommodates a wide spectrum of actors, various stakeholders, a broad range of products as well as innovative business models such as PAYGO. Furthermore, recent developments enabling SHS to power productive use appliances will have a great impact on the market and its players.

Lighting Global/GOGLA, 2018. Off-Grid Solar Market Trends Report 2018. https://gallery.mailchimp.com/cb42ca6d63b6f335fac8f0694/files/40b8690a-3325-4c05-89fa-21931059c24f/2018_Off_Grid_Solar_Market_Trends_Report_Full.pdf

 

PicoPV

The number of actors in a PicoPV market depends on the type of the distribution models in place. There are two common schemes which are the integrated supply chain model and the distribution dealer model. In the first one all actions along the value chain down to the retail are taken over by one solar lantern company. The latter describes a scenario where several actors play a role in the value chain. There is the lantern producing company, the importer, commercial retailers as well as FBO’s/CO-OP’s/SACCOs (Figure 1, Figure 2).

 

Figure 1. Integrated supply chain model (EUEI PDF 2015).

 

Figure 2. Distribution dealer model (EUEI PDF 2015).

 

 

EUEI PDF, 2015. Building Energy Access Markets – A Value Chain Analysis of Key Energy Market Systems. http://www.euei-pdf.org/sites/default/files/field_publication_file/150907_euei_value-chain_en_rz_03_web.pdf

 

Solar-Home-Systems

The Solar Home System (SHS) (https://energypedia.info/wiki/Market_for_Solar_Home_Systems_(SHS) ) market has similar value chain scenarios as described for the PicoPV market (https://energypedia.info/wiki/Market_Trends_in_the_PicoPV_Sector_and_the_Role_of_Development_Cooperation ). Thus, common players can range from one dominating enterprise to several importers, distributors, associations and cooperatives. However, in addition franchises engaged in retail and/or rental and leasing can also be found in the SHS market (Figure 3).

 

Figure 3. Fee-for-service business model (EUEI PDF 2015).

EUEI PDF, 2015. Building Energy Access Markets – A Value Chain Analysis of Key Energy Market Systems. http://www.euei-pdf.org/sites/default/files/field_publication_file/150907_euei_value-chain_en_rz_03_web.pdf

Solar Mini-Grid

Different organisational structures determine the number and type of actors in the Mini-Grid Value Chain. Import, manufacture and assembling, retail, supply and installation can be carried out by various actors. Apart from the operational services, supporting services are provided by project developers, electricity companies, financial institutions, companies tasked with maintenance and consultants.

Mali, S. et al, 2016. Value Chain Analysis of the Solar PV Market in Pakistan. https://www.solarwirtschaft.de/fileadmin/user_upload/BSW_VCA_Report_Final.pdf

Improved Cookstoves (ICS)

In the ICS market the type of players engaged is based on the manufacturing method of the stoves. For locally and centrally produced stoves most of the value chain is covered by the stove producers themselves. Whereas for local-decentral and artisanal production as well as internationally produced stoves more actors such as importers and assemblers, distributers and national and local retailers are involved in the process.

Clough, L., 2012. ‘The Improved Cookstove Sector in East Africa: Experience from the Developing Energy Enterprise Programme (DEEP)’ (GVEP International, 2012). http://www.gvepinternational.org/sites/default/files/deep_cookstoves_report_lq_for_web.pdf.

Micro-Hydropower

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Biogas

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Income of Actors in the Value Chain of Different Technologies

 

Income generation through SHS

There has been a lot of governmental subsidisation of the SHS market (https://energypedia.info/wiki/Market_for_Solar_Home_Systems_(SHS) ) especially in countries where the targeted end consumer is not able to afford the high upfront cost of these systems. However, this attempt to facilitate the market can then backfire once subsidies are taken away and lead to severe misallocations. In these scenarios especially the small and medium sized enterprises (SMEs) at the end of the chain suffer great losses in revenues.

Reiche, K. et al, 2010. What difference can a PicoPV system make? Early findings on small Photovoltaic systems - an emerging lowcost energy technology for developing countries. https://energypedia.info/images/3/3b/Gtz_picopv_booklet.pdf

However, new business models such as PAYGO https://energypedia.info/wiki/Pay-as-you-go_Approaches_(PAYGO) have helped to push the SHS market https://energypedia.info/wiki/Market_for_Solar_Home_Systems_(SHS) and increase revenue. Yet, these capital-intensive innovations have mostly benefitted the larger players in the market. In addition, SMEs struggle even more with the number of defaulting customers.

As can be seen in Figure 4 although the end-user price increases the longer the contract is the average profit margin before overheads of $ 63 for the SHS company remains the same. This results from higher financing and risk costs that need to be taken into account.