Value chain development feeds industrial and commercial advancement and thus leads to economic growth and increase in incomes. However, it should be guaranteed that also the low-income groups profit from this advancement.
To determine imbalances, define problems and to ultimately generate win-win outcomes the entire value chain and its linkages and actors must be examined. Thus, enabling stronger chain links and improving the overall chain performance.
Each product has its own value chain. Different types of distribution channels make value chains vary and they range from very complex interlinkages to simple straightforward strings of players.
The Product Value Chain
A value chain comprises all supply chain steps of a product or service that add value to the product or service. The value-adding activities are separated into primary and secondary activities. The primary activities include the production, marketing, delivery and support of the product or service. Whereby, the secondary activities are those that provide inputs and integral factors in order to enable the primary activities (Figure 1). Here the value chain is looked at from a functional and individual view point.
However, it can also be defined as several operators (companies) involved in the production, distributing and selling of a specific product. Bringing the product from the primary producer to the end consumer through business transactions and thus constituting a value chain or value system, also referred to as market chain.
Figure 1. The Value Chain and Value System (Porter 1991).
Value chain vs. supply chain
Value and supply chain are often falsely used as synonyms. However, there is a substantial difference between these two models. The supply chain refers to production and logistics and less to market development. Thus, describing the concept of the process of transferring a commodity from one link to the next in the chain. On the other hand, a value chain illustrates the value-adding steps throughout the whole life cycle of a product. In the value chain concept, the chain and its links are examined from a different angle and it follows a more bottom-up approach. The intention is to provide the maximum value to the end-consumer at minimal total cost. Value is increased on each step by different stakeholders ultimately creating the end-value of the product. The value chain extends even further than the supply chain and includes all stages from material sourcing and production up to consumption, disposal and recycling of the product making the supply chain a subgroup of the value chain.
Figure 2. Value Chain and Supply Chain (Reddy Amarender 2013).
Different Renewable Energy Technology Value Chains
Value Chains of Different Solar Systems
PicoPV Value Chain
The different distribution models found in the PicoPV market differ in the number of actors taking part in the entire manufacturing-distribution-retail process.
On the one hand, there can be a very straightforward and short distribution channel that is referred to as the “integrated supply chain model” where one solar lantern company is in charge of all steps from manufacturing through to retail of the solar PV lantern. The (1) company develops the product design, imports it (if international company) and uses its own distribution and retail infrastructure to bring the product to the (2) end user. (e.g. Barefoot Power, d.light)
On the other hand, a more subdivided market chain (distribution dealer model) is found when several actors are involved in the distribution channel. (1) Mostly an international solar lantern company doing the product development and selling it on to (2) national importers which distribute the product to (3) commercial retailers and/or FBOs/CO-OPs/SACCOs. Lastly, the product is sold to (4) households, enterprises or the public sector. (e.g. SolarAid, Solarsisters)
However, in markets that have been existent for some years and have evolved you can find several different distribution models in parallel ranging from one extreme (limited number of actors along the value chain) to the other (high number of actors along the value chain).
Figure 3. Integrated supply chain model (EUEI PDF 2015).
Figure 4. Distribution dealer model (EUEI PDF 2015).
SHS Value Chain
In the production and sales of Solar Home Systems (SHS) there are three different types of distribution models. The first two are identical to the distribution dealer model and the integrated supply chain model for PicoPV systems.
The distribution dealer model has several companies taking part in manufacturing, distributing and retailing of the SHS. The integrated supply chain model only has one company producing and distributing the product up to selling it to the end user.
However, for Solar Homes Systems (SHS) there is also a third business model called the “fee-for-service model”. Here the systems are not owned by the end consumer, but remain property of the company. This means the SHS are “lent” to the end consumers and similar to the mini-grid electricity model they only buy the produced electricity from the company.
Figure 5. Fee-for-service business model (EUEI PDF 2015).
Mini-Grid Value Chain
In the value chain there can be wide range of actors also depending on the organisational structure behind the implementation and operation of the grid. The actors providing operational services are importers, producers and assemblers, retailers, supplier and installers. Supporting actors of this value chain are project developers, power companies and financial institutions. Furthermore, companies tasked with operation and maintenance of the system as well as consultants contribute to the value added.
In the different types of operator models different value chain actors can be found.
In this operator model a private company plans, constructs, manages and operates the system. However, in most of cases the government must provide financial support.
Here the authorities develop the programmes which are then implemented by utilities. The implementing utility are either private or public. The funding is provided by the government whilst the utility holds the responsibility for all operations of the.
In this case the system is property of the local community which is also responsible for its operation and management. Since local communities seldom have financial management know-how and technical skills they rely on private companies for the development and implementation of the. Furthermore, funding is granted by private and/or public entities.
In the Hybrid Operator Model several features of the three preceding models are integrated. Different entities can carry out financing, ownership and operation.
Figure 6. Public-private mini-gird electricity model (EUEI PDF 2015).
ICS Value Chain
There are three different forms of the Improved Cookstoves (ICS) market or value chain.
ICS are either produced internationally or in the country itself. Further, if nationally manufactured they can either be manufactured in one place and distributed countrywide or they can be produced in several locations of the country.
Thus, the three possible distribution channels are:
Local centralised manufacturing
ICS are designed and manufactured according to local household needs. They are distributed and sold directly to the end customer by the manufacturing company. However, in some cases the producer leaves retail to CBOs/NGOs or local wholesalers who then sell it to households, private companies or public sector (Figure 7).
Figure 7. Local centralised manufacturing (EUEI PDF 2015).
- Local decentralised manufacturing
In local decentralised production the stove manufacturer provides one or several stove distributers with ICS who then sells them on to NGOs/CBOs or local wholesalers. Through the wholesalers or the organisations, the product then gets to the end user (Figure 8).
Figure 8. Local decentralised manufacturing (EUEI PDF 2015).
- International manufacturing
Here the ICS is produced in large numbers in other countries and imported. It is either assembled already or imported in pieces and ready to be put together locally. Commonly several value chain actors are involved in the distribution. From national retail chains (e.g. supermarkets or MFIs) to local vendors and shops (Figure 9).
Figure 9. International manufacturing (EUEI PDF 2015).
Micro-Hydro-Power Value Chain
If you have current information on Micro-Hydro-Power Value Chains, please feel free to add here.
Biogas Value Chain
If you have current information on Biogas Value Chains, please feel free to add here.
Value chain promotion: economic development from a value chain perspective
Income of actors in the value chain of different technologies
- ↑ 1.0 1.1 GTZ, n.d.. ValueLinks Manual – The Methodology of Value Chain Promotion – First Edition. http://www2.giz.de/wbf/4tDx9kw63gma/ValueLinks_Manual.pdf
- ↑ Donavan, J. et al, 2013. Guides for value chain development - A comparative review. https://publications.cta.int/media/publications/downloads/1746_PDF.pdf
- ↑ Porter, M.E., 1991. Towards a dynamic theory of strategy. Strategic management journal, 12(S2), pp.95-117. http://onlinelibrary.wiley.com/doi/10.1002/smj.4250121008/pdf
- ↑ Reddy Amarender A., 2013. Training Manual on Value Chain Analysis of Dryland Agricultural Commodities. Patancheru 502 324, Andhra Pradesh, India: International Crops Research Institute for the Semi-Arid Tropics (ICRISAT). 88 pp. http://oar.icrisat.org/6888/1/Reddy_a_Train_Manual_2013.pdf
- ↑ 5.0 5.1 5.2 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
- ↑ 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
- ↑ EUEI PDF, 2014. Mini-grid Policy Toolkit – Policy and Business Frameworks for Successful Mini-grid Roll-outs. http://www.minigridpolicytoolkit.euei-pdf.org/policy-toolkit