Solar Lantern Dissemination Models and Their Economic Viability

Overview

In the past few years the dissemination of solar lanterns has increased crucially. However, the majority of people living in developing countries is still using kerosene lanterns due to various reasons, such as lacking awareness among potential users, missing opportunities for procurement, limited assortment that does not comply with users' wishes, high prices and poor performance. Moreover, replacement costs of kerosene lanterns are low, since only the glass chimney and the cotton wick are possible replaceable items in contrast to high-cost items such as the battery and CFL in the case of solar lanterns. Also, the user of kerosene lanterns is able to reduce illumination, whereas this is only possible in the case of LED-based lanterns, but not in the one of CFL-based lanterns.

Nevertheless, good reasons for the use of solar lanterns exist. Besides the classical arguments against kerosene lanterns such as indoor air pollution and incidents of fire due to the use of kerosene lamps, further valid arguments can be brought in. First, solar lanterns are independent of (increasing) fuel costs. Second, the lumen output of solar lanterns is 4-5 times higher than of kerosene lanterns. Finally, if subsidies are granted for kerosene, a single capital subsidy for a solar lantern is preferable.

First, this article describes three different dissemination models and their respective advantages or rather their disadvantages. Second, it addresses the issue of how to calculate the financial viability of both the user and the entrepreneur. The findings used in this article were identified by two initiatives conducted lately in India, the Lighting Africa and the Lighting a Billion Lives initiative.

Dissemination Models and Their Respective (Dis-)Advantages

Ownership Versus Rental / Fee-for-service Model

Most solar lanterns are disseminated through the ownership model. In this model, the lantern is sold in combination with the PV module directly to the end user at full or at subsidised cost. Besides, rental and fee-for-service models exist, which are quite uncommon so far. In the case of the rental model, the user is not the owner of the solar lantern, but rents the charged lantern from the CCS. In contrast, the user owns the lantern in the fee-for-service model, but pays a fee for recharging the lantern at the CSS.

All three models have their advantages and disadvantages. This article compares the ownership model with the fee-for-service and rental model, before the fee-for-service and rental model will be contrasted.

First, the owner has to pay full cost of the lantern in the ownership model, which has proven to be a high burden especially to poor households, even if subsidy models exist. However, also the rental/fee-for-service model can provide crucial problems due to long repayment periods. Second, owners have to pay for Operation and Maintenance costs, whereby carefulness in the use of the lantern and consequently its longevity are ensured. In contrast, users who only rent a lantern or pay a fee for recharging are normally not responsible for O&M at all. Accordingly, in this model the misuse or mishandling of the lantern is a problem, which often causes reduced life time of the lanterns' components. Third, if the user owns the lantern he is able to use the lantern anywhere and anytime, whereas in the rental/fee model the user depends on the availability of lanterns at the respective point of time and from the rented duration and location. Forth, a possible problem arising in the ownership model is the correct recharging, since the user himself needs to recharge the lantern by keeping the lantern outside in the proper orientation. In the rental and fee-for-service case, the user is only responsible for delivering the lantern to the charging station, where the CCS entrepreneur is accountable for proper sun orientation. Due to the size of the solar modules on a CSS theft is a rather small problem. A further advantage of the rental and fee-for-service model is the user's flexibility, since he only rents or recharges the lanterns if required. Moreover, the modules normally used in CSSs (Centralised Charging Station) are large capacity PV modules (37-100Wp) which have better unit costs and higher efficiencies than small capacity modules (3-10 Wp) used for recharging individual lanterns. The CCS additionally offers the opportunity to use excess energy from the PV modules for recharging other items, such as batteries or cell phones. Monitoring of performance and usage of solar lanterns is simplified due to the centrality of the CSS. However, this model needs an institutional set-up as well as an infrastructural facility in the form of a CSS.

	Ownership Model	Rental / Fee-for-service Model
Financing	high initial financial strains	long repayment periods
O&M	owner is responsible: ensures carefulness and longevity	user is normally not responsible at all
Availability	lantern is always available	user is dependent on availability of lanterns at respective point of time and rented duration and location
Flexibility	lantern can be recharged when and where needed (e.g. panel can be taken to field work and recharged there)	user only rents or charges the lantern if needed (time and money saving)
Handling	owner is maybe not instructed correctly or has not sufficient time to take care (e.g. for proper orientation towards the sun)	CSS owner who should be instructed carefully takes care of technical aspects
Risk of theft	higher, but experience has shown that normally always at least one family member stays at home so that panel is watched	due to big size very small
Efficiency	lower efficiency performance	due to the use of large capacity PV modules, better unit costs and higher efficiencies are reached
Connection of supplementary items	not possible	normally possible
Monitoring	is more time-consuming	easy because of centrality of CSS

An example for a rental model and its advantages is the OSRAM Off-grid project in Kenya.

Rental Versus Fee-for-service Model

In addition, one has to compare the rental and the fee-for-service model. In the rental model, the CCS entrepreneur owns the complete CCS and lanterns, whereas in the fee-for-service model he only owns the CCS , but not the lanterns. Consequently, he is responsible for the O&M of all his properties (inclusive the lanterns) in the rental case, but only for the CCS in the fee-for-service module (exclusive the lanterns). In the rental case, the entrepreneur earns all revenues from renting the lanterns, in contrast to the fee-for-service case in which the entrepreneur only earns the revenues from recharging the lanterns.

Congruously, the lantern user does not own the lantern in the rental case, but rents a charged one from the CSS if needed. He is not responsible for O&M at all. By contrast, the user owns the lantern in the fee-for-service model and is able to get it recharged if required. He is responsible for the maintenance of the lantern.

	Rental Case	Fee-for-Service-Case
	CCS entrepreneur	Lantern user	CCS entrepreneur	Lantern user
Ownership	owns complete CCS and lanterns	does not own the lanterns, only rents a recharged lantern if needed	owns complete CCS, but not the lanterns	owns the lantern
O&M	is responsible for O&M of all parts, including lanterns	is not reponsible at all	is responsible for the parts of the CCS	is responsible for the lantern
Revenues	earns all revenues collected from renting the lanterns		earns all revenues collected from recharging the lanterns brought to the CCS

Case Study on the Viability of Solar Lanterns

The case study is adapted from a publication by TERI based on studies and the experience of Lighting Africa and Lighting a Billion Lives.

The TERI study took into account two popular solar lanterns, having 7W CFL (Rs.3.300= 53€) and 2.5W LED (Rs.1.600=26€).

Both the financial viability for the user and for the entrepreneur was analysed. The difference in annual costs of the various models seems to be crucial for the user, whereas the entrepreneur will take the net revenue of selling the service into account.

Viability From the User's Perspective

For the user's decision the effective daily costs (E_ffDC) based on the Annualised Life Cycle Cost (ALCC) is used as index for comparison.

One can calculate the ALCC by adding up costs of all components of a lantern such as the PV module, battery, CFL and PCB multiplied by their respective Capital Recovery Factors (CRF):

ALCC=C_0pv x CRF_pv + C_0battx CRF_batt + C_0cflx CRF_cfl +C_0pcbx CRF_pcb. The EffDC is calculated by: ALCC/(365 x CUF).

For a comparison of the viability of the ownership model with the rental and the fee-for-service models it is assumed that the maximum acceptable daily rental that the user is willing to pay should be equal to the effective daily cost of owning the lantern for the same quality and quantity of service.Consequently, the upper limit of acceptable daily rental (UADR) of the rental case would be: UADR=E_ffDC. For the fee-for-service model the calculation would be: UADR=E_ffDC- (ALCClantern/365 x CUF).

The viability calculation from the user's perspective gave the following results:

	Lantern 1 (7W CFL)	Lantern 2 (2.5W LED)
Costs per Lantern	Rs.3.300		Rs.1.600
ALCC	Rs. 548.43		Rs. 277.54
EffDC	Rs.1.88		Rs. 0.95
	Rental Case	Fee-for-Service Case	Rental Case	Fee-for-Service Case
UADR	Rs. 1.88	Rs. 1.32	Rs. 0.95	Rs.0.56

As shown by the calculation, in comparison solar lantern users are willing to pay more money in the rental case than in the fee-for-service model.

Viability From the Entrepreneur's Perspective

The calculation of viability for the entrepreneur considers the estimated total annual costs needed for operation and maintenance of a CCS including a certain number and type of lantern. Viability of a CCS is assumed at the lower limit of acceptable daily rental (LADR) or at the minimum value of daily rental that the entrepreneur needs to cover the costs of the CCS and to make an adequate profit.

The study calculated with 50 lanterns for both the 7W CFL and the 2.5W LED.

In the rental case, one has to budget the upfront costs including the CCS equipement and installation consisting of the PV modules, the integrated charge controller-cum-junction box (ICCJB), and the lanterns. Second, operation and maintenance costs inclusive salary for the operator, replacement costs of batteries and CFL/LED and O&M for the ICCJB need to be included. Furthermore, a margin needs to be included in the calculation in order to provide the entrepreneur an attractive livelihood option.

In the case of the rental model LADR = (1+f_m) x (ALCC_CCS + ASO)/ N₁ x 365 x CUF.

In the fee-for-service both the upfront costs for lanterns and the replacement costs for batteries and CFL/LED need to be excluded; consequently, the calculation is LADR=(1+f_m) x (ALCC_CCS - ALCC_lantern + ASO)/ N₁ x 365 x CUF; meaning ALCC_CCS=annualised life cycle costs of teh complete CCS including PV module, ICCJB as well as lanterns, ASO=annual salary of the operator, f_m=fraction of livelihood margin, N₁=number of lanterns in the CCS, CUF=annual averae capacity utilisation factor of the CCS.

The viability calculation from the entrepreneur's perspective gave the following results:

	Lantern 1 (7W CFL)		Lantern 2 (2.5W LED)
	Rental Case	Fee-for-Service Case	Rental Case	Fee-for-Service Case
LADR	Rs. 4.06	Rs. 3.02	Rs. 3.33	Rs. 2.60

Limits of This Case Study

The case study has its limitations because the costs for PV modules show a large variation in small capacity range. Moreover, premature degradation in PV modules has been reported whereby their effective life is reduced.Furthermore, the life span of a battery depends on the depth of discharge which can lead to a loss.

Conclusion

This article has shown various aspects of solar lanterns and existing dissemination models. The study provides a model for calculating both the viability for the user and for the entrepreneur.

According to the numbers given a significant gap exists between the user's UADR and the entrepreneur's LADR.

	Lantern 1 (7W CFL)		Lantern 2 (2.5W LED)
	Rental Case	Fee-for-Service	Rental Case	Fee-for-Service Case
LADR	Rs. 4.06	Rs.3.02	Rs. 3.33	Rs. 2.60
UADR	Rs. 1.88	Rs. 1.32	Rs. 0.95	Rs. 0.56
Difference	Rs. 2.18	Rs. 2.70	Rs. 2.38	Rs. 2.04

Consequently, a CCS can not even be run viably with 100 % capital subsidy support as long as households are comparing renting versus owning the solar lantern and are not willing to pay a daily rental that is more than the effective daily cost of owning the solar lantern.

Further Information

• Inclusive Energy Distribution Strategies for Energy Access Programmes and Companies