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Renewable and Sustainable Energy Reviews 25 (2013) 596–629 Contents lists available at SciVerse ScienceDirect Renewable and Sustainable Energy Reviews journal homepage: www.elsevier.com/locate/rser Financing LED solar home systems in developing countries Ramchandra Pode n Kyung Hee University, Department of Physics, Dongdaemoon-gu, Seoul 130-701, Republic of Korea article info abstract Article history: About 1.4 billion people around the world still do not have access to the regular electricity. It is estimated Received 20 September 2012 that roughly 85% of the people without electricity live in rural, semi-urban or remote rural areas of the Accepted 21 April 2013 sub-Saharan Africa and South Asia. Although grid expansion is a vital objective of several developing Available online 7 June 2013 countries and could be a long-term solution, the remoteness, isolation, low electricity demand of many Keywords: rural communities, high investment cost of grid expansion make them very unlikely to be reached by the Solar Home Systems (SHSs) extension of the power grid. Consequently, the off-grid generation systems seem to be the most suited Financing alternative to provide the electricity services to these isolated rural communities. Fee for service Solar home systems (SHSs) with Light Emitting Diode (LED) lamps are considered to be cost effective Micro-credit system and robust decentralized option for rural electrification. Two financing schemes, fee for service and One-Stop-Shop Model micro-credit system (ownership), are primarily important for acquiring the SHSs by the rural population. However, high upfront cost of SHSs and absence of payment flexibility is deterring the penetration into larger market of lower-income group rural population. Non-availability of facile finance to rural population at the grass-root level is the major barrier inhibiting the widespread adoption of solar- powered lighting systems. Micro-Finance Institutions (MFIs) can be useful to address the gap between the high initial upfront cost of SHS and low paying capacity of rural households by providing flexible and affordable credit. The One-Stop-Shop Model based on a single micro-energy provider who provides the services of finances, supply of standardized SHSs, and after sale energy services is crucial. The success of the SHS program depends on the satisfactory technical performance, an adequate financing infrastructure, responsive after sales support, and the extent to which it can fulfill the needs of the end users of having grid quality energy. & 2013 Elsevier Ltd. All rights reserved. Contents 1. Introduction........................................................................................................597 2. Solar home system (SHS) and LED lighting . 598 2.1. 20 W Simple SHS for very low income group . 598 2.2. 150 W SHS for higher income group . 599 2.2.1. Size of the PV panel. 599 2.2.2. Battery sizing . 599 2.2.3. Solar charge controller sizing . 600 2.3. Concerns of off-grid SHSs users . 600 3. International financial aid and financing SHS . 601 3.1. Asia......................................................................................................... 603 3.1.1. Bangladesh . 603 3.1.2. India.................................................................................................606 3.1.3. Indonesia . 609 3.1.4. LaoPDR..............................................................................................611 3.1.5. Cambodia . ...612 3.2. Sub-Saharan Africa . 614 3.2.1. Kenya................................................................................................615 3.2.2. Ghana................................................................................................616 n Tel.: +82 10 5169 3510; fax: +82 2 957 8408. E-mail addresses: [email protected], [email protected] 1364-0321/$ - see front matter & 2013 Elsevier Ltd. All rights reserved. http://dx.doi.org/10.1016/j.rser.2013.04.004 R. Pode / Renewable and Sustainable Energy Reviews 25 (2013) 596–629 597 3.2.3. Tanzania . 618 3.2.4. Ethiopia . 621 4. Best practices of financing SHSs . 623 4.1. Asia......................................................................................................... 623 4.2. Africa....................................................................................................... 624 5. Conclusions . 625 Acknowledgments. 626 References.............................................................................................................626 1. Introduction Kids can go to school all day, but are unable to study, read or do home work if they do not have proper light to work with in the About 1.4 billion people (or roughly 22% of the world's popula- evenings. For the literacy development program and nonformal tion) around the world, most of whom lived in remote areas, still do education classes for adults community in the evening time, not have access to the regular electricity [1,2]. The International modern lighting will be useful to provide clean and smoke free Energy Agency (IEA) estimates that roughly 85% of the people light to enable people to read. However due to the slow growth of without electricity live in rural areas in developing countries, mostly electrification, a substantial proportion of the world's population is in semi-urban or remote rural areas [3]. Fig. 1 shows the population further leaving behind from those with reliable lighting. Without without access to electricity in different regions of the world [4]. access to modern and sustainable energy services, the poor in Most of these people are found in sub-Saharan Africa and South Asia developing countries are deprived of opportunities to improve regions. Africa has the lowest electrification rate of all the regions at their living standards. Therefore, several Governments, especially 26% of households, resulting 585 million people having no access to in the poorest countries, are at the forefront of providing access of electricity [5]. South Asia currently accounts for 42% of the total electricity to rural communities. number of people in the world without access to electricity. The IEA Indeed, the grid expansion is a vital objective of several predicts that if no new policy to alleviate energy poverty is developing countries and could be a long-term solution. However, introduced, 1.3 billion people (some 16% of the total world popula- the remoteness, isolation, and low electricity demand of many tion) will be denied electricity most of whom in South Asia and rural communities make them very unlikely to be reached by the Africa in 2030 [2]. Energy poverty is one of the serious issues that extension of the power grid. Since the grid growth will take world is facing today as it poses threats to economies, national decades, many of the benefits of better lighting can and should security, the environment, and public health throughout the world. be captured today through renewable solar light products. Conse- The social and economic impacts of providing clean, safe quently, off-grid generation systems seem to be the most suited to lighting have been well recognized. A lack of reliable lighting provide electricity services to these isolated rural communities. access has many fold negative impacts such as: Several developing countries are implementing various policies for promoting research, development, demonstration, deployment (i) limiting the productivity of nearly a quarter of the world's and commercialization of new and renewable sources of energy. population, hindering their ability to carry out basic activities Most of these efforts are coordinated only at national levels. at night or in the early morning. Access to proper lighting has Organizations of the United Nations system continue to support significant positive impact on the productivity and income- the promotion and expansion of new and renewable sources of generating activity, energy in developing countries [6]. International financial institu- (ii) contributing heavily to global carbon emissions and endan- tions such as World Bank with the assistance from Global gering the environment, and Environment Facility (GEF) are playing an important role in (iii) causing chronic illness due to indoor air pollution by using mobilizing resources for the promotion of new and renewable fuel based lighting and also risk of injury due to the flam- energy. Regional development banks such as Inter-American mable nature of the fuels used [3,4]. Development Bank, African Development Bank (AfDB), Asian Development Bank (ADB), the Islamic Development Bank, and the German development Bank KfW are also playing a crucial role in promoting new and renewable sources of energy. With the absence of grid connectivity, kerosene is the most widely used source of lighting, consumed disproportionately particularly by the poor [7]. The percentage of rural households using kerosene as a primary energy source for lighting in devel- oping countries is displayed in Table 1. In fact, earlier World Bank report shows that the average monthly expenditure in rural households of developing countries for kerosene lamp and lead acid battery alone ranges between US$2.30 for low income families, and US$17.60 for upper income families [8]. Furthermore, the recent study shows that the rural households in India Table 1 Kerosene as an energy source for lighting used by rural households in developing countries. Country India Pakistan Uganda Vietnam Cambodia Kenya Rural Households (%) 45 22 91 3.3 60 86 Fig. 1. Population without access to electricity