Access to Energy for the Base of the - Ashoka

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got dirty or the batteries were not replaced regularly, the
systems would fail. This caused general disillusionment
with the potential of SHS. All of the SHS enterprises
profiled for this study explicitly include maintenance in
the price of their systems and in the ongoing operating
model.
Profitable businesses, vulnerable to
price of components
SHS businesses have demonstrated profitability and
attracted financing. This financing has mainly been from
agencies that will accept a modest return, such as E+Co
or other social investors. The industry is moving away
from subsidies, as these relationships can hinder growth
by reducing flexibility to adjust fees, re-install systems,
or expand to new regions or customer segments.
SELCO was one of the first SHS providers to become
profitable. It broke even in 2000 and remained profitable
until 2005. At that point SELCO started to experience
losses due to a 45% increase in the price of panels.
Regardless, SELCO made a $100k loss for $3.1m of
revenue in 2008 and received financing in January 2009
from E+Co, Good Energies and other investors,
indicating the viability of the model. Grameen Shakti,
another established SHS company, has a gross margin
of 4-5%. It benefits from a relationship with the
Infrastructure Development Corporation (IDCOL), which
provides a €34 subsidy per system of 20W and above,
loans at an interest rate of 6%, and small grants. Newer
entrants such as Sun Transfer, run by SEF, expect a
positive net income from 2010 onwards. Payment
systems such as SEF’s RFID cards may make loan
recovery even easier and more secure.
Profitability is threatened by high variability in the
price of components. This means that the cost of the
installed system or the replacement batteries and
converters can change dramatically over time. This
vulnerability is compounded by the fact that most BOP
SHS companies are small players on the world stage,
unable to lock in long-term contracts with suppliers.
No SHS entity has become profitable and remained
so without any subsidies whatsoever. However, these
subsidies are increasingly confined to the market
development stage of the project. SEF used grants to
test products, develop the curriculum for the training
programs, and pilot the first solar centers. SELCO and
Grameen enjoy low-cost financing from the government
and social investors. However, ongoing operations can
be independent; SEF expects that the €10m revolving
microfinance fund and the solar service centers will pay
for themselves. Going forward the profitability of SHS
will depend on the existence of a supporting ecosystem
including microfinance for customers, investor finance
for the enterprises themselves, and favorable
regulations from governments.
Pioneers ready to scale and help
others to replicate
Solar home system enterprises are posed for aggressive
growth. SELCO plans to triple its customer base in 4
years. Grameen Shakti is installing over 6k SHS a month
and aims to reach 1m households by 2012. The
companies profiled expect to scale up within their
existing regions. The potential for replication, driven by
entrepreneurs and supported by finance and shared
learning, is immense.
The main threat to scale is grid extensions.
Entrepreneurs tend to select areas where this is unlikely
to happen. However, even in grid connected areas,
SELCO sees urban households purchasing SHS to make
up for inconsistent grid electricity. In Ethiopia SEF
Figure 15 Farmer with silk worms and SELCO light