Summary of models for the implementation of solar home systems in developing countries

Summary of models for the implementation of solar home systems in developing countries
Part 1: Summary and Part 2: Practical experience

Authors: Part 1: Schulte, B.; Hermert, B.H. van; Sluijs, Q.
Part 2: Reinmuller, D.; Adib, D.
Editors: Gunning, R; Syngellakis, K. IEA-PVPS Task 9 report: Summary of models for the implementation of solar home systems in developing countries. Part 1: Summary

Organization: Part 1: Ecofys
Part 2: ISES and Fraunhofer Institute

Reference: IEA PVPS T9-02:2003

Date of issue: March 2003

Details: Part 1: 27 pages: figures, photos, tables; with references

Type: Report IEA PVPS Task 9

Download: Part 1 - Summary: Open or download report as PDF document (390 kB)
Part 2 - Practical experience: Open or download report as PDF document (421 kB)

Abstract: PV has considerable potential to contribute to meeting the energy needs of rural and remote communities in developing countries. However, the high capital cost of photovoltaic (PV) systems means that new and innovative implementation models are needed in order to encourage widespread use of the technology. This guide gives an overview of the options and describes various models for the implementation of small domestic PV systems (Solar Home Systems or SHS) in developing countries.
Three different approaches are considered, from direct sales, credit sales and hire purchase to a fee-for-service model. The typical characteristics of the models are described, including the mechanisms, advantages, disadvantages, and associated risks. The following three typical models are detailed in Part I of the guide:

Model 1, Cash Sales: A PV system is sold directly or via a dealer to the end-user. The end-user immediately becomes owner of the system.
Model 2, Credit Sales: The end-user acquires the PV system on credit. Credit sales are divided into three categories:

2A Dealer Credit, the PV supplier/dealer sells the PV system to the end-user, who enters into a credit arrangement with the PV dealer. Depending on the arrangements, the end-user immediately becomes the owner of the system, or becomes the owner when all payments are made.
2B End-user Credit, the PV supplier/dealer sells the PV system to the end-user, who obtains consumer credit from a third party credit institution. Usually the end-user becomes the owner of the system immediately, but this can be delayed until all payments are made. The PV system can be used as collateral against the loan.
2C Lease / Hire purchase, the PV supplier/dealer or a financial intermediary leases the PV system to the end-user: At the end of the lease period, ownership may or may not be transferred to the end-user, depending on the arrangements. During the lease period, the lessor remains owner of the system and is responsible for its maintenance and repair.

Model 3, Fee for service: An energy service company (ESCO) owns the system, and provides an energy service to the end-user, who pays a periodic fee (e.g., monthly) to the ESCO. The end-user is not responsible for the maintenance of the system and never becomes the owner.
Examples of each implementation model are described in Part 2 of the guide.

When developing a new market for solar home systems (SHS), it is vital that an informed choice on the implementation model is made. An inappropriate approach to the deployment of solar home systems will result in a failure to develop a sustainable market for PV. It is important to recognise that local conditions will demand tailored solutions and approaches, or combinations of the models described. To understand the country and its energy market, the following questions should be answered:

What is the status of the energy sector in the country, and what are the policies relating to non-electrified areas and to electrification and development?
Who are the end-users? What are their electricity (and energy service) needs and expectations? What is their economic activity and source of income (farming, livestock, services, craft)?
What are the competing/conventional practices to cover domestic energy needs and what is the household expenditure for it?
How can the end-users be reached? Who are the stakeholders?
What is the potential for productive use of electricity?
Which is the most suitable model or combination of implementation models to use?
Through answering these questions, the most suitable implementation model can be identified or designed. It cannot be stressed enough that flexibility and pragmatism are crucial in developing a successful implementation strategy. The models presented are generalised and must be adapted or combined to suit the local circumstances. Changes in approach may also be required as the scale of the project expands and the target area is widened. Therefore continual monitoring and evaluation is necessary.

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Authors:	Part 1: Schulte, B.; Hermert, B.H. van; Sluijs, Q. Part 2: Reinmuller, D.; Adib, D. Editors: Gunning, R; Syngellakis, K.
Organization:	Part 1: Ecofys Part 2: ISES and Fraunhofer Institute
Reference:	IEA PVPS T9-02:2003
Date of issue:	March 2003
Details:	Part 1: 27 pages: figures, photos, tables; with references
Type:	Report IEA PVPS Task 9
Download:	Part 1 - Summary: Open or download report as PDF document (390 kB) Part 2 - Practical experience: Open or download report as PDF document (421 kB)
Abstract:	PV has considerable potential to contribute to meeting the energy needs of rural and remote communities in developing countries. However, the high capital cost of photovoltaic (PV) systems means that new and innovative implementation models are needed in order to encourage widespread use of the technology. This guide gives an overview of the options and describes various models for the implementation of small domestic PV systems (Solar Home Systems or SHS) in developing countries. Three different approaches are considered, from direct sales, credit sales and hire purchase to a fee-for-service model. The typical characteristics of the models are described, including the mechanisms, advantages, disadvantages, and associated risks. The following three typical models are detailed in Part I of the guide: Model 1, Cash Sales: A PV system is sold directly or via a dealer to the end-user. The end-user immediately becomes owner of the system. Model 2, Credit Sales: The end-user acquires the PV system on credit. Credit sales are divided into three categories: 2A Dealer Credit, the PV supplier/dealer sells the PV system to the end-user, who enters into a credit arrangement with the PV dealer. Depending on the arrangements, the end-user immediately becomes the owner of the system, or becomes the owner when all payments are made. 2B End-user Credit, the PV supplier/dealer sells the PV system to the end-user, who obtains consumer credit from a third party credit institution. Usually the end-user becomes the owner of the system immediately, but this can be delayed until all payments are made. The PV system can be used as collateral against the loan. 2C Lease / Hire purchase, the PV supplier/dealer or a financial intermediary leases the PV system to the end-user: At the end of the lease period, ownership may or may not be transferred to the end-user, depending on the arrangements. During the lease period, the lessor remains owner of the system and is responsible for its maintenance and repair. Model 3, Fee for service: An energy service company (ESCO) owns the system, and provides an energy service to the end-user, who pays a periodic fee (e.g., monthly) to the ESCO. The end-user is not responsible for the maintenance of the system and never becomes the owner. Examples of each implementation model are described in Part 2 of the guide.
	When developing a new market for solar home systems (SHS), it is vital that an informed choice on the implementation model is made. An inappropriate approach to the deployment of solar home systems will result in a failure to develop a sustainable market for PV. It is important to recognise that local conditions will demand tailored solutions and approaches, or combinations of the models described. To understand the country and its energy market, the following questions should be answered: What is the status of the energy sector in the country, and what are the policies relating to non-electrified areas and to electrification and development? Who are the end-users? What are their electricity (and energy service) needs and expectations? What is their economic activity and source of income (farming, livestock, services, craft)? What are the competing/conventional practices to cover domestic energy needs and what is the household expenditure for it? How can the end-users be reached? Who are the stakeholders? What is the potential for productive use of electricity? Which is the most suitable model or combination of implementation models to use? Through answering these questions, the most suitable implementation model can be identified or designed. It cannot be stressed enough that flexibility and pragmatism are crucial in developing a successful implementation strategy. The models presented are generalised and must be adapted or combined to suit the local circumstances. Changes in approach may also be required as the scale of the project expands and the target area is widened. Therefore continual monitoring and evaluation is necessary.