Innovative Energy Access for Remote Areas - The LUAV Light Up a Village Project

Innovative Energy Access for Remote Areas - The LUAV Light Up a Village Project

Presenter: Izael P. Da Silva, (Strathmore Energy Research Centre, Barefoot Power Pty Ltd)

Rapporteurs: Sherry Wu and Austin Cappon

Overview

The Light-up a village (LUAV) program is a rural development initiative designed to improve access to modern energy solutions in remote areas of developing countries. The initiative addresses the challenge of Pico PV market penetration by empowering rural communities to actively participate in lighting up their own villages using micro-solar systems. The LUAV business model was designed by an energy company, Barefoot Power (BFP), which began the LUAV field in 2012 in Uganda. The program incorporates local SACCOs and Community Based Organizations (CBO) as well as local governmental bodies in the identification and recruitment of participants. A LUAV program is designed to involve at least 100 households per community by providing each home with its own power generation solar system to run lighting and mobile device charging services. The participating households are given the option to either pay for the micro solar power system upfront or to pay for it in 3 to 12 monthly installments. For this pilot program, BFP sourced for funding from private investors to operate a revolving fund which is managed the SACCOs and CBOs who have the mandate to manage debt recovery and keep the revolving fund active. Through this business model, 18 LUAV projects were implemented in Uganda during the 18 month trial period providing lighting and mobile charging services to 3,000 plus households. The program’s success has a growing interest and plans are underway to replicate it in South Sudan, Rwanda and Kenya in 2014.

Min Issues Discussed

o Mr. Da Silva has lived in Africa for 17 years. After spending some time in Uganda, he moved to Kenya in 2010. He is an engineer by background and currently works with Strathmore University’s Energy Research Centre.
o Introduction
 The sun belt is located 5 degrees above and below the equator; this is where there will be the highest yield for a solar system. Paradoxically, 95% of installations of solar systems are located outside the sun belt, mostly in Europe and North America.
 The challenges of Modern Energy Technologies (METs) include:
• Access to finance: Installing solar systems means you need to be able to pay for your electricity bill for next 5 years all at once. Individuals do not have access to large amounts of capital; the key to unlocking sub-saharan Africa market and southeast Asia is finance.
• Awareness: There are currently 6 million households in Kenya without grid connection. At dusk, they light paraffin lamps. They are not educated about available technologies (PV, batteries, etc.), nor are they educated about how to use these technologies.
• Access to technical support services. Users cannot bring their systems to a centralized place for support services, due to the cost of transportation and the cost of income lost by not working. Additionally, they need to have support provided by somebody they trust.
• Enabling environment. Kenya’s 2016-2031 rural electrification plan does not consider solar technology, because the plan was drafted in 2009 and based the cost of solar on prices from 2008. In 2013, the price of solar has dropped by 70%. At the time of writing, the government sought to account for lowest-cost technology, so solar was eliminated.
o Approach
 Mr. Da Silva’s study sought to identify major technology diffusion and highlight some factors driving technology adoption (e.g. mobile technology). The telecommunications industry is quite significant in Africa; about 45% of mobile phones in Kenya are smartphones.
 The study compared diffusion patterns of mobile telephony tech (MTT) and METs. In Africa, there are 1 billion gadgets for mobile telephony, but only a few million METs.
 The study identified success factors and made recommendations
o Findings
 In Kenya, over 95% of the population has access to mobile technology, while only 16% have access to electricity. There is an opportunity for solar to piggyback on this vast mobile penetration.
 MTTs were able to be successful with minimal government intervention because that industry has great entrepreneurial capacity; the industry for METs does not (yet)
 Light Up A Village (LUAV) used a system devised by Barefoot Power (from Australia) and piloted programs in Uganda and Kenya. Barefoot Power sells micro systems and hypothesizes that ownership incentivizes people to take better care of systems.
• The energy company in this arrangement has to address financing. The system is not a simple solar home system; it’s a solar system with 4 lamps and USB charging. The cost of 100 systems needed to be available at once; a financing body was brought on board to provide seed capital.
• The energy company invested in technology and training, then approached community based organizations (CBOs), who were given the power to vet the individuals who were provided with solar home systems. The energy company provided a local technical team, whose members were selected from people who had previously repaired mobile phones. This training diversified their skill set. The energy company guaranteed that there would be at least 100 households per project, which ensured that there would be a sustainable market for these technicians.
• The CBOs were able to do something energy company could not – provide awareness of products and create trust with community.
• Users paid back the cost of systems in monthly installments.
 The LUAV program has been replicated 18 times and has reached 3000 individuals. There is almost 0% delinquency; people are happy with products and they trust the CBO distributors.
o Recommendations/Conclusion
 Conduct a frequent review of national policies to make sure they’re in line with the decreasing cost of solar PV modules
 Proximity to operational solar technology solutions increases uptake; i.e. if your neighbor has one, you’ll want to get the same thing
 Leveraging the collaborative efforts of energy companies and local CBOs increases trust and reduces delinquency
 Local collaboration improves the effectiveness of awareness campaigns.

Strathamore group, based in Kenya

· Working in the Sun Belt

o Highest yeild for solar area

· A paradox of sorts, when you comaare it to the PV installed

· “Take away, you don’t need the sun to have PV , seemingly”

· very few PV installed in the sun belt

o simply is not the financial support

· Banks are not willing to give good terms to African Counrties

o 6 million housholds in Kenya without power

· Perafin Lamps are used

· There is little access to tech support

o 150 miles from Nairobi

§ to difficult to make service calls

§ Need spport people on the groud

· Unless the govt gets involved, difficult to have wide reaching impact

o Need an enabling enviroment

· There study aimes to ID major challenges of solar tech diffusion in Africa

· 45% of cell phones in Kenya are smart phones

o This rate of renewable diffusion is not on the same level (order of magnitude)

· 93% Mobile Phone Telefonics in Kenya, 16% penetration of energy tech

· identifying factors that have complicated

· Having technicians on the ground, along with individuals from C.B.O.

· See Slide for Diagram describing succesful carrying out a rural kenya solar project

· Recommendations

o Frequent review of national policies in line with reducing costs of PV

o Neighbors with SHS systems can have a huge influence on purchasing rates in villages.

· Unless the govt gets involved, difficult to have wide reaching impact

Questions Posed

u A lot of financing is enabled by grants or subsidized funding. How much below-market-rate financing is available? How much of that financing can be provided by current supply of microfinance institutions, or do you need something else?

o Mr. Satish answered, “As products become mainstream, financial institutions can take them up in a more regular rate. In one of the group-financing projects, 85% of the project cost was covered by a loan, 5% by users’ own funding, and 10% by grants. The interest rate on the loan was 13%, which is the normal base rate charged by banks for loans in India. When you have a product that benefits the clients, they are willing to pay the market interest rate. Capacity building and social capital investment will require outside institutions.”

u The bundling of users seems to be a strategy to reduce risk from transaction costs. Is this correct? Does bundling users provide credit with lower rates than commercial rates provided by other microfinance institutions (i.e. below 20%)?

o Ms. Realpe answered, “In our first agreements with suppliers, we diminished transportation costs for suppliers after 5 orders. Bundling products did not work, especially since users would have had to wait for other users to sign up before they could get the system. In this project, we had no control over the rates charged to the clients.”

Mr. Satish answered, “The group manages the loan and product. From the eyes of the financing institution, the group methodology guarantees payment and mobilizes people. The group is a good mechanism to use and maintain equipment, and also disseminate information. The group approach does reduce transaction costs of the financing institution, since it can quickly reach 20 borrowers instead of processing applications individually.”

u Big and small micro finance: How to motivate each:

Natalia:

o Fondeserco: For Negotiating with funders for favorable conditions of loans, particularly if able to convince with enviro concerns.

§ Want to be leaders; marketing comes into play

o Caja (larger): More difficult as they received money from govt.

§ In the case it was a “champion” who was willing to come forward and assume the role as the player who was willing to connect players

Satish:

o Local field level organizations are the “superman” or group that was capable of motivating

Silva

Silva:

o Risk mitigation to drive down interests rates; many of the micro finance groups are charging 30% interests rates.

o His university is receiving a large PV installation with good interest rate

u How far can you get to that 1.3 Billion number with subsidized funding offers

o Natalia:

§ How can suppliers are financial institutions partner in a preferable way?

§ It’s a process… organizations have to demonstrate the viability of the model to one another

o Satish

§ In the case with 10% grants, the govt. seems to be willing to pay if it provides ample utility to the poorest of the poor. Interested in the social building.

o Audience Member (Hasna Khan)

§ The subsidies are vital in the early stages, but eventually there have to be profits realized by all groups, takes time

u Bundling of users seems to be a strategy to reduce risk

o Natalia

§ People are not interested in having to wait for other people to have to come on board to get something (like a solar heater)

§ Consequently they end up paying high interest rates (3% monthly!)