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SUSTAINABLE ENERGY REGULATION AND POLICYMAKING TRAINING MANUALpage 9.28In Chipata, CHESCO has 150 systems, out of which 140 systems are currentlyworking. CHESCO has faced a lot of difficulties with the tokens of a SIEMENS prepaymentsystem. Every time the charged tokens were not recognized, the clienthad to return to CHESCO’s office in Chipata from sometimes as far as 60 km andCHESCO had to give them extra days of electricity as compensation.In Nyimba, NESCO has 100 systems, 94 systems are currently working. NESCOwas the first ESCO established, and now seems to have a good knowledge of thesystems.To establish comparisons, the cost of connection to the grid with ZESCO is300,000 ZMK (US$ 91) in the capital Lusaka, 500,000 ZMK (152 US$) in Nyimbaand 800,000 ZMK (US$ 244) in Lundazi. The monthly payment for grid electricitydepends of course on the level of consumption, but is on average far less thanthe monthly service fee charged by ESCOs for solar energy, especially for thekind of appliances used. The low residential consumer monthly tariff of ZESCOis 18,000 ZMK (US$ 5). This is due notably to the fact that electricity from thegrid is highly subsidized in Zambia.A positive commercial relationship with clients400 clients are now paying a monthly fee to the ESCOs for solar photovoltaicelectricity. Each ESCO has a waiting list of 400-500 clients. Solar systems enablesmall businesses to extend their hours of work and therefore to improve theirincome generation. For households, solar systems improve the quality of life bysupplying basic needs such as light, TV and radio. The impact of a basic servicesuch as light seems to be tremendous, especially for pupils who can study duringthe night. According to the latest available data, there has been a good paymentrecord, no acts of vandalism and very few solar panels have been stolen,this being due to strong social control. Nevertheless, due to default of payment,a limited number of solar systems have been repossessed.Technicians of ESCOs have to go every month to visit the clients and collect fees(except for prepaid systems). It means therefore that an inspection of the installationis conducted monthly. This also enables ESCOs to have regular feedbackfrom their customers.Persistent technical problems that are or can be solvedThe main technical problem comes as usual from the batteries and the regulators.For various reasons, very few batteries from the first installations are stillworking. The initial design of the different systems and the quality of some
MODULE 9: RENEWABLE ENERGY: REGULATORY AND POLICY OPTIONSpage 9.29batteries seems the issue. At the start, the ESCOs lacked the capacity and thenecessary qualifications to maintain the systems. There could be also a tendencyto overuse the systems, especially in businesses. Now, it seems that with achange of the kind of batteries used, the training of ESCO technicians in orderto enable them to design the systems, and the dissemination of information toclients who are now more aware of the possibilities and limits of their solar system,these initial technical difficulties are about to be solved.Financial uncertainty for ESCOsESCOs get a long-term loan that has to be refunded. ESCOs charge an installationfee that represents less than 10 per cent of the cost of the system (which isabout US$ 900). The monthly fee is currently around US$ 10-13, which seems tobe the maximum that clients are willing to pay. This covers the running costs (servicing,maintenance) of the ESCOs, but cannot cover all the capital costs. In fact,now that the ownership of the installations is progressively and officially transferredto the ESCOs, it has been agreed that 50 per cent of the capital cost willfinally have to be subsidized for the first installations and 25 per cent for the newinstallations that the ESCOs will buy from now on (Swedpower, 2005, p. 5). Someuncertainty seems to remain on the future of the exemption of VAT for ESCOs.Moreover, the inflation rate in Zambia is still around 20 per cent per year (comparedto 400 per cent at the beginning of the 1990s). 7 ESCOs are importing allthe components of solar systems that are paid for in US dollars while they arebeing paid in local currency by customers who cannot easily absorb successiveincrease of the monthly fee. This creates considerable distortion for ESCOs. 8Important points for replicationEven if ESCOs in Zambia are just starting to be fully operational, some lessonscan already be drawn from this case.The choice of locationIn the Eastern Province of Zambia, the rural population is wealthier than in otherparts of Zambia. The initial survey showed that 75 per cent of the respondents7As the money invested in local currency is quickly devalued, some ESCOS have launched a small business(of soft drinks) to make money and keep the capital. The battery fund is deposited in US dollars.8The current fee charged by ESCOs even after successive increases, is around 40-45,000 Kwacha. Itshould be at 52,000 Kwacha to match the initial fee value charged by the ESCOs the year they startedto be operational based on exchange rate changes.
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