Regulatory and policy options to encourage development of ...

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SUSTAINABLE ENERGY REGULATION AND POLICYMAKING TRAINING MANUALpage 9.30in this area were willing to pay US$ 5 per month for electricity (for an averagemonthly income of US$ 42 in 1998). In poorer places, the contribution capacityof households will be lower. Therefore, the possibility of replication seems to belimited for the moment to the relatively wealthier places in Africa.The maintenance scheme also implies that solar systems are not installed intolarge area, so that ESCOs can regularly access all the systems for maintenanceand to collect the fees. They need to have a sufficient number of clients (150-200) to be profitable. Another point to take into account is any planned gridextension that can affect the economics of ESCOs. However, competition fromgrid connected conventional electricity does not mean necessarily the bankruptcyof ESCOs working in the area, as ESCOs will have clients situated in the outskirtsof the main towns who will never be connected (for example, the centres ofLundazi, Chipata and now Nyimba are connected to the grid while householdson the outskirts are not).The commercial schemeInitially, only one kind of basic system chosen by the Department of Energy wasoffered: a 50 Wp panel with a 90-105 Ah battery to enable the connection of fourbulbs and a power point for a small TV/radio. Now ESCOs tend to provide a morediversified range to meet the needs of their clients. It seems that there will bethree standard sets: The current 50-70 Wp with a 100 Ah battery without inverter. 80-120 Wp and a 150 Ah battery with maybe a small inverter. 120-150 Wp for a system with a refrigerator.It is also important to take into account the fact that for some groups of clientssuch as farmers, income can vary considerably during the year. Therefore, paymentof the debt by ESCOs may have to be made on a basis other than monthly,e.g. quarterly or annually.Providing electricity to institutions such as schools, health centres and the armymay be a priority from a social point of view, but that raises the question of thecapacity and the willingness of these institutions to pay the ESCOs on a regularbasis.Training, public awareness and the choice of equipmentAs usual in solar energy, the fact that solar systems need to be sized to the consumptionrequirement of the users implies a good understanding by the clients
MODULE 9: RENEWABLE ENERGY: REGULATORY AND POLICY OPTIONSpage 9.31of the possibilities and the limits of their solar systems. It appears that it is betterto leave the choice of the system to the companies that can then build directrelations with the suppliers. Therefore, competitive tender at a governmental levelfor the purchase of photovoltaic systems, even if it can reduce prices by a bulkpurchase, may have to be avoided. Moreover, competitive tenders tend to excludelocal companies in favour of international companies. Direct purchase may favourthe creation of a local network of solar companies.The training of the technicians is also crucial to enable them to adjust the regulationof solar systems. Most of the problems linked to the batteries are not justlinked to the product itself and could have been solved with correct training. Nowthat technicians are trained in the design of systems, ESCOs in Zambia will purchasetheir equipment directly.Financial uncertainty and capital costsAlthough technical problems are being solved, ESCOs in Zambia are still facingfinancial uncertainty due to macro-economic conditions, which are out of theircontrol. This situation of excessive inflation is not specific to Zambia and provesto be quite damaging for small companies. Furthermore, the capital cost for solarelectricity, as for conventional electricity, still needs to be subsidized as the purchasingpower of inhabitants remains low and there are no local financial institutionsready to give loans to small rural companies.ConclusionThe success of the market-driven concept of ESCOs demonstrates that with asuitable financing scheme, households and businesses can afford solar photovoltaicsystems. Initial funding from the national government (supported byinternational agencies) is essential, but once provided, the concept of ESCOsseems to be capable of solving the eternal problems of up-front costs and maintenance.This example tends to prove that after enabling the establishment ofa network of local entrepreneurs, solar systems can be maintained and candeliver a real service.In a first phase, the initial funding can be worked out as a direct subsidy, a softloan (to be reimbursed over a long period of time), tax exemptions, or a combinationof those. Whilst it is most likely ESCOs will continue to depend at leastpartly on external funding, the aim should be to decrease ESCOs financialdependency towards the mid and longer term. One way to increase their incomecould be the broadening of their client portfolio and the diversification of theservices offered.
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