Solar Energy Perspectives - IEA

Chapter 10: Policies
In the retail model, best adapted to pico PV or solar home systems, the end-user buys
the solar system from a private company. The cash or credit payment gives the buyer
full ownership of the system. Public funds, multilateral or bilateral aid and the private
banking sector can offer loans to support the banking institutions or the entity in
charge of rural electrification. Supporting the purchase of the equipment by the
private retailer and the end user is essential, as is expanding the network of retailers
so they can supply the energy poor with affordable solar systems.
Helping end-users break down their payments into low monthly instalments is of
paramount importance. In some countries, a large network of micro-financial
institutions is present and established (Bangladesh and Grameen Shakti, Kenya and
the Kenyan Women Finance Trust). These financiers can act as an efficient
intermediary between governments, retailers and international institutions to promote
and disseminate solar systems. They know the credit-worthiness of their clients and
can offer efficient end-user finance solutions through micro-credit loans (even if the
interest rates are high, the default on payments is usually very low). In Bangladesh,
Grameen Shakti was successful in offering micro loans to distribute more than
500 000 solar home systems up to 2010.
In the energy as a service model, best adapted to mini-grids, the company provides
the equipment to the end-user who will be paying for the service rendered. The
ownership of the system remains in the hands of the company. The private operating
company will need capital to buy the necessary equipment. It can either buy it using
loans from the public or the private sector or attract equity investors. To support this
intermediary, multilateral and bilateral aid using concessional soft loans and grants
from donor funds can help decrease the high-front investment of the private operating
company and reduce the burden on the end client. If a fee is to be paid by the client,
micro-financial institutions can help spread the first payment.
Policy support could take the form of grants to lower the price of systems to end-users
in the retail model. In the service model, it could take the form of subsidies to
company or to end user to reduce the price of electricity and insure a minimum
return on investment to the investor.
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