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Promotion of Renewable Energy and Energy Efficiency Programme's (PREEEP) main objective is to improve access to and use of modern energy services mainly for people living in rural and remote areas of Uganda.
In order to reach this objective, the programme is supporting the development of rural market structures for solar photovoltaic products with co-financing from the Dutch-German Energy Partnership Energising Development (EnDev) and the EU since 2007. It is working with Kampala-based solar companies with branches in rural settings as well as local solar dealers and micro-finance institutions in the target regions, namely West Nile (surrounding Arua) and Lango (surrounding Lira) regions as well as South-Western and Western Uganda (Masaka, Rakai, Ibanda, Bushenyi among others).
The practical implementation is sub-contracted to a consortium of East African consultancy firms under the leadership of Kampala-based Konserve Consult Ltd. Konserve has field staff based in Arua and Lira to have a continuous presence on the ground and for monitoring purposes as well as Kampala-based staff regularly travelling to the respective project areas. The strategic approach and activities in the South-western and Western regions were developed and piloted with support of ETC Netherlands in the period 2006-2008 as part of the Rural Electrification with Renewabl Energy project.
The project partners receive support in terms of technical assistance as well as small grants for marketing and promotions. PREEEP does not directly subsidize solar products but rather supports the creation of sustainable market structures. However, the programme does coordinate its activities with other stakeholders in the sector such as the Rural Electrification Agency (REA). REA implements a component of the World Bank’s Energy for Rural Transformation (ERT) programme, which comprises a subsidy for private/business (5.5 USD/Wp) for solar PV systems up to 50 Wp and institutional (4 USD/Wp) for solar PV systems up to 500 Wp. Some but not all of the solar systems sold by the project partners are subsidised by REA.
PREEEP supports Kampala-based solar companies with branches or agents in rural areas, local solar dealers and micro-finance institutions (MFIs) incl. Savings and Credit Cooperatives (SACCOs). A key activity is to establish linkages between solar companies/dealers and financial institutions interested in giving solar loans and to strengthen the structures of those that have already been disbursing solar loans as part of their current operations. Support to solar dealers is mainly in terms of technical assistance (technical training, business training and mentoring etc.) as well as small grants for marketing and shop improvement. In addition, PREEEP supports awareness activities such as radio spots.
Selection of Project Partners
In order to identify Kampala-based solar companies willing to engage in solar market development in the project’s target areas in Northern Uganda, PREEEP organised a kick-off workshop during which potential project partners were invited to participate in the project. These companies were encouraged to present their plans to PREEEP and formally apply for support in the form of PPP projects. GIZ and PREEEP then met with the respective companies to refine their concepts and agree on the approach and the PPP budget. Typical activities supported with GIZ funds are trainings, shop improvement, demo systems and marketing expenses (fuel, brochures demo systems etc.). In addition, the consultants approached existing solar dealers and financial institutions in the target area and signed MoUs with them.
Establish Linkages between Solar Companies and Financial Institutions
PREEEP works both with bigger financial institutions who are participating in the government’s PVTMA programme (e.g. Postbank, FINCA) and small micro-finance institutions (SACCOs). The programme introduces solar dealers to these financial institutions and encourages them to sign MoUs with them.
Support is given in forms of different types of training:
- Technical training: this is given to technicians already employed by solar companies as well as local technicians with a suitable background (e.g. people repairing radios) who subsequently work as freelance technicians for solar dealers.
- Business integration training (BIT). BITs are held to strengthen linkages between solar companies, their marketing personnel and the staff of the participating financial institutions (esp. loans officers). The main objective is to agree on the concrete modalities how these parties work together.
- Sales and Marketing Trainings – These trainings focus on passing on sales and marketing skills to the field staff of the solar dealers, Loans Officers and technicians in making solar PV sales while in the field. The training focuses on passing on skills on how to make solar PV sales, pass on correct supplier information, pass on correct individual MFI Loan procedures and processes, entrepreneurship and closing of sales. This training is augmented with mentoring and coaching for the skills that are acquired in the training to be put to use.
- Training for Finance Managers: This training was focused on gathering additional data on the financial partners in the creation of an assessment profile of the financing institutions performance and explaining in detail the role of financial partners in the project.
- Entrepreneurs’ Workshops: The workshops targeted solar PV business owners or managers and consumer financing institutions; however, a number of PV sales and technical staff also attended the workshops. This workshop was conducted to ensure that the energy entrepreneurs in the region could be nurtured to grow and build their businesses and to give them sufficient leverage to take advantage of the business opportunities that where created through partnerships with financial institutions.
- Furthermore, project partners receive individual support in the form of coaching and technical advice. This concerns among others the selection of suitable products and suppliers, preparation of loan applications and the development of effective marketing strategies. Market opportunities for solar PV have been identified through the following ways:
- Cooperation with CBOs and NGOs
- Participating in annual general meetings of SACCOs and other financing institutions
- Fostering partnerships between financial institutions and solar dealers
- Carrying out joint promotional campaigns between financing institutions and solar dealerships
- Financing institutions and solar dealers agreeing on the provision of incentives to any of their staff selling solar PV Systems and loans
- Developing and printing promotional material
- Developing and implementing radio promotional campaigns
- Encouraging and supporting solar dealers and financing institutions to set up demonstration systems at their premises
- Conducting out door solar promotions with the aid of road shows and promotion during market days
- Participating in trade fairs and other fairs organized by others for example World Food Day
One of the partners in the project; Solar Energy Uganda Ltd (SEUL) has a unique project model. In this project model, the SEUL supplies and finances the end-users to acquire systems on credit. For this to remain effective and easy to follow-up, Solar Energy Uganda (SEUL) designed and put on offer a generic 10wpk solar PV system powering 1 light and a single phone charge. SEUL targeted a much lower income bracket hence the basic benefit of one point lighting and single mobile phone charging every day.
Beneficiaries form groups of 50 – 100 members. These are referred to as home owners’ associations. It is through these home owners’ associations that one can acquire and pay for a solar PV system.
In the financing role, an interested user applies for a system by opening an account with Solar Energy Uganda Limited through a locally selected SEUL mobiliser in what has been referred to as the “Solar Bank.” End-users open up accounts by depositing UGX 7,000 (Seven thousand Uganda Shillings). Thereafter, the end-user is required to pay an initial UGX 30,000 before a solar PV system is installed. Subsequent to completing the installation, the beneficiary would have to pay a monthly UGX 30,000 for nine months before becoming owner of the system.
At the start of the project, SEUL set up seven solar bank centres at sub county level in remote areas of Rakai district as part of a strategy to as many end-users as possible.
Where the project has no PPP contract with the solar dealer or its Kampala-based mother company, Konserve Consult signs ‘support contracts’ with the dealer and gives out small amounts for expenses such as shop improvement (painting, shelves etc.), radio spots, printing of brochures and fliers etc. for which the dealers have to account to the consultants.
Together with Konserve Consult the programme is establishing a network of dealers with a unique branding and concurrent promotional activities through posters, fliers and radio adverts. All marketing materials carry the Access to Solar logo. The Access to Solar campaign is described in a separate document.
All participating companies and dealers are required to fill-in an installation form for each system installed. This form is signed by the technician who has installed the system as well as the client and includes the installation date, the contact details of the client as well as information on the size of system components etc. This enables GIZ to trace the client and make spot-checks.
Results and Impacts
From early 2007 until end of January 2011 approx. 1,664 households, 397 small enterprises and 38 institutions purchased a solar home system (SHS) from the dealers supported by PREEEP. In addition 397 solar systems below 5 Watt peak (solar task lights and lanterns) were sold during this period through the programme partners. On average, the solar PV systems disseminated have a capacity of 39 Watt peak. The most frequent business systems are used for phone charging and hair cutting. Others use them to light their shop for pro-longed working hours and to attract customers.
Small and Medium Enterprises (SMEs)
Solar PV power requires high upfront investments and is consequently only affordable for the wealthier enterprises. This major obstacle towards a widespread uptake of solar PV systems for entrepreneurial or private usage can be observed in rural settings in many developing countries and is not Uganda-specific. For the particular case of Uganda, calculations show that, on average, a solar system amortizes only after four to five years with a monthly savings ratio of 2%.
PREEEP has observed that the main use of solar PV in small and medium enterprises is lighting. Solar photovoltaic power is not taken up for production processes, but rather in the service sector. According to an impact assessment conducted by the programme in 2009, 7 % of the service sector takes up solar photovoltaic power, i.e. shops and bars for lighting, refrigeration and entertainment (radio/music), hair saloons for lighting and hair cutting and phone charging businesses. On the contrary, none of the manufacturers (carpenters, welders, tailors, mechanics) invested in solar PV power. This can be explained firstly, because investment costs would be much higher for solar systems to power heavy machinery and secondly because manufacturing enterprises are mostly open during the day and hence do not depend as much on lighting as enterprises in the service sector, which open until after sunset.
Contrary to a widespread believe, solar PV power is not maintenance- and re-investment free. The programme has found out that 50 % of solar PV users encounter technical problems. The poor quality of bulbs and consequent replacement of them poses the most common problem among users in Uganda. In the case of DC systems, replacement costs for DC bulbs can even exceed kerosene costs formerly spent by the user. DC bulbs (7-11 W) range at 15-20,000 UGX on the Ugandan market. Similarly, solar PV power does not automatically replace other, traditional sources of energy. Users of solar systems continue to use a mix of energy sources, including dry cell batteries and kerosene. This is due to the stationary nature of solar systems and the need for lighting options outside of the house/shop/store, etc. Also, users of solar photovoltaic power are as much entrenched in their habits as other people and therefore only slowly switch to other more efficient energy sources.
However, it has been proven that the usage of solar PV power does influence the structure of expenditures of small and medium enterprises in Uganda. Although entrepreneurs continue using other sources of energy, energy expenditures decrease generally with the usage of solar PV. In consequence, businesses spend more on merchandise and stock and increase their credit repayments or savings. According to the programme’s findings, solar PV has an impact on the purchasing behaviour. People using solar PV generally spend more on electrical appliances such as hair cutters, cell phones and radios. Among the same group it could be observed that people using solar PV are also more prone to making use of available financing/credit options than others. One of the most interesting findings of an impact assessment conducted in 2009 concerns the impact of PV systems used by small and medium enterprises on a region’s overall economic growth. The programme observed that although electric lighting increases the profit of the particular SME using solar power, it does not automatically result in a net economic growth for the whole region. Due to longer hours of operation and the novelty of solar power, businesses using solar systems initially attract new customers/clients. However, for the general products and services, local markets are saturated. Therefore, customers/clients merely shift from non-users of solar PV power to businesses with solar PV. The table below demonstrates this development:
| Operation hours/ day
| Customers/ day|
| Non users in non access region
| Users in access region
| Non users access region
On a similar note, the size or the light output of a particular solar system has no impact on the profits of the business using solar power. Rather, it is the mere fact of electric light that is attracting customers and clients, not the intensity of the light. Hence, it can be concluded that solar PV power can only lead to real economic growth on a broader level if it is used productively (i.e. phone charging, hair cutting, secretarial services etc.).
If entrepreneurs use solar PV power for such new lines business, it enables them to enter new markets with a suppressed demand and hence tap a new business potential. On the contrary, for existing businesses there is no extra benefit through solar PV as they serve a saturated market. From a gender-perspective the programme’s observations show that no matter whether the man or woman is owner of the enterprise, it is up to the man of the household to make the final investment decision. This leads to the fact that the more male-run enterprises take up solar than female-run ones. Hence, a market-based approach to disseminate solar PV for SMEs favours wealthier male-run enterprises and does neither reach the bottom-of-the-pyramid, nor is particularly useful to level gender imbalances.
The take up rate for solar PV systems among households in Uganda is lower than initially expected. This development can be attributed to the fact that farming is the main occupation of most people in rural areas. Usage for solar PV is limited among farmers, whose main usage of electricity would be lighting. Hence, solar home systems are wider used among households with a salary income and traders/business people. Nonetheless, just like among the SMEs, solar PV is mostly used for lighting in households. Owners of a solar home system generally do not take up income generating activities with the use of solar PV power. Hence, the usage of solar PV in households has no impact on the household income.
Contrary to a popular believe that solar PV can reduce the workload of women in households, PREEEP observed that women using solar PV power work even longer than those without. Solar PV offers better and longer lighting and therefore enables women to conduct their household chores later into the evening. In contrast, men rather use solar PV for entertainment purposes and listen to the radio, read the newspaper or watch TV.
Hence, it is likely that men help even less with household chores than before access to solar PV power. Although solar home systems reduce the use of kerosene lighting, it has an insignificant impact on indoor air pollution. Users of solar home systems continue using traditional biomass as cooking fuel and cook on inefficient three-stone fireplaces. Those are causing much more Indoor Air Pollution (IAP) than kerosene lamps. One could even draw the conclusion that if women using solar PV lighting will work longer they will be exposed to more cooking fumes than before. Therefore, it is important to combine solar PV marketing campaigns with awareness programmes on efficient cooking technologies and other efficient and clean energy options. Along the same line, usage of solar home systems in households has only a negligible effect on carbon emissions, because users continue to use kerosene; and even those that completely stop using kerosene for lighting, would need 10 years to save 1 ton of CO2. Just like among SMEs, private users of solar PV continue to use traditional source of energy alongside their solar home system (e.g. kerosene, dry cells, candles) due to different factors. On the one side, solar home systems are prone to technical failure due to various reasons. On the other side, people are entrenched in their habits and will not give up using a particular energy source only because they have tapped a new. This development leads to the fact that solar PV does not necessarily reduce households’ energy expenditures. Rather, maintenance and repair of the solar home system is more likely to become an additional cost for the household.
Lessons Learned and Recommendations
The solar market in Uganda is far from a mature market. The strategy to build on marketing efforts by lead distributors in Uganda has avoided market distortion, but has at the same time revealed that uptake of solar systems in distant rural areas is limited by the capacity of the supply chain and the level of activity and commitment of Kampala based distributors to further develop their rural supply chain. Rural distribution networks that have been developed in 2006/2007 have proven to be real and sustainable and to have continued to grow throughout the project. The sustainable impact of the project thereby reaches significantly beyond the number of installations realised during the project period.
As solar PV energy requires high up front costs, which pose a prohibitive barrier for low income groups, activities for the development of sustainable market structures for solar PV should always be accompanied with building linkages among solar dealers and micro finance institutions in order to facilitate the development of solar loans. Furthermore, promotions should include low-cost solar systems such as task lights and lanterns to allow for take up among low income groups. In consequence to the observations above, marketing campaigns for solar PV should include awareness modules on quality issues, especially for batteries and bulbs. Those are the weakest part of a solar PV system and can contribute to considerable maintenance costs if not chosen well. Furthermore, dealers, technicians and end-users have to be educated about the limits and risks of over-usage of system capacities. Problems of solar home systems (SHS) are often non-technical, hence sensitization on a proper usage of the systems is very important in order to avoid overload and misusage. Programme experience has shown that for lighting and phone charging, people in rural Uganda are discovering solar PV as a more cost-efficient and reliable energy source. However, for their radios, some continue using dry cell batteries instead of solar power. Additional research on other suitable (productive) uses of solar PV should be conducted and results promoted. Observations have proven that solar PV, albeit offering new opportunities for women, especially in terms of evening activities, does not automatically lead to more gender balance in the target regions. Hence, solar PV promotions should include a component sensitizing about opportunities especially for women and creating awareness about the risks of merely extending household chores into evening hours. High maintenance costs pose a risk of decreasing the motivation of end-users to continue using solar PV power. Hence, the programme should implement a stronger follow-up system to monitor quality of PV systems sold as part of the programme, discover bad practices and target coachings for dealers, technicians and end-users to overcome them. System performance will improve due to improved end-user training. The end-user is a major component of the solar system and should be thought of as such. This is not automatically the case, if it is not emphasized to the technicians that are doing the installations in the field.
Efforts for improved lighting in households and SMEs should be combined with awareness on improved cooking technologies. Kerosene lighting does not pose a health risk nearly as serious as cooking on open fire. Hence, in order to increase real programme impacts, awareness for both technologies should go hand in hand. Staff of financial institutions need incentives for marketing solar loans as selling solar loans is not their core responsibility and is not evaluated separately yet it may initially be much harder to sell solar loans than the normal loans (school fees, commercial etc). The involvement of loans officers needs serious attention and time in order to sell them the vision of the project and get them to adapt to applying new skills in the selling of solar loans. It is difficult to convince hardware dealers about the importance of quality products. Rather than investing in high quality, longer lasting products, they tend to stock less costly, but lower quality equipment, which sells easier due to low prices. Technical and business trainings for solar dealers should therefore focus more on quality issues. The main bottleneck in the development of local SHS markets seems to be the building of a local delivery channel with a good reputation with individual end-users. Stocking of good quality equipment is a major solution to building a business with a good reputation with the end users.
Along the same line, cooperation with solar dealers with access to capital has a higher likelihood of success in terms of sales. Dealers with access to capital potentially have sufficient stock to serve growing market demand and can afford to invest in higher quality products. The focus for the project team is therefore on motivating and mentoring the solar dealer to carry out extensive field promotions in order to grow their market. Having sufficient stock in the field is a pre-requisite for reaching large volumes of PV installations. Kampala-based companies are often motivated by grants and often have no serious, long-term interest in rural markets. Therefore, it is recommendable to look for solar dealers that are already in the target area, strengthen their presence on the local market and link them to stronger companies in Kampala.