Navigant Research Blog

In Bangladesh, Solar Boom Benefits All

— August 18, 2014

More solar PV systems are installed in Bangladesh than in Germany and the United States combined.  At the end of 2013, Bangladesh had an estimated 2.9 million solar PV systems installed compared to 1.4 million in Germany and 445,000 in the United States.

This is despite the fact that Bangladesh is one of the poorest countries on the planet, with per-capita income of less than $3,000 per year.  In Bangladesh, solar home systems (SHSs) range from 10W to 200W.  Approximately 50% of all systems sold in Bangladesh are between 20W and 30W – roughly 1% of the capacity of a medium-sized residential system in the United States, but enough to power a few compact fluorescent or LED lights, charge a cell phone, or power a radio.  At an average cost of about $230 for a 20W SHS in Bangladesh, an upfront cash payment is out of reach for people who make less than $9 per day.  But thanks to the success of micro-credit programs that made Mohamad Yunus and Grameen Bank household names, SHSs are affordable to all.

Home Systems Multiply

Grameen Shakti, based in Dhaka, is the solar power arm of the Grameen Bank and is the leading SHS installer in Bangladesh, with an estimated 1.3 million installations to date.  These installations represent more than 30 MW of installed capacity.   The model relies on an extensive network of sales agents who can reach remote areas, low interest loans, and numerous grants that provide seed funding.  Grameen Shakti provides free operation and maintenance services for 3 years after installation, with low-cost service options thereafter.

With a strong emphasis on grassroots education, Grameen Shakti has contributed to the industry’s high visibility in Bangladesh, where there are now around 40 providers of SHSs.   The company sells approximately 1000 SHSs per day and is targeting 2 million SHS sales by the end of 2016.

The government of Bangladesh – whose low-lying topography makes it especially vulnerable to the effects of climate change – has set a target of generating 5% of its power from renewable energy sources by 2015 and 10% by 2020.  The pipeline of projects started small, but is now growing considerably.  The country has approximately 10 GW installed capacity, with only 75% of that power actually available at any given time due to grid reliability issues.  That relates to roughly 136 kWh available per capita each year – one of the lowest rates in the world.  Compare that to an average household consumption of 1000 kWh per month here in Portland, Oregon.

Changing the Model

Rahimafrooz Renewable Energy Ltd. (RREL) represents the growing number of hybrid companies with a foot in the SHS market and many others, including agriculture, healthcare, education, telecommunications, rural street lighting, and marketplaces, as well as government and private institutions.  RREL has installed 300 solar water and irrigation pumps, 2 MW of solar rooftop solutions, and more than 100 solar-powered telecom base stations in Bangladesh.

Meanwhile, the company’s not-for-profit venture, Rural Services Foundation (RSF), has disseminated nearly 426,000 SHSs under the Infrastructure Development Co. Ltd. (IDCOL) program, representing more than an estimated 12 MW at the end of 2013.  This makes it the second-largest SHS installer in Bangladesh, behind Grameen Shakti.

As I’ve covered previously in blogs and Navigant Research’s report, Solar PV Consumer Products, countries such as Bangladesh, Kenya, Tanzania, and others are challenging traditional Western perceptions of developing countries and approaches for tackling poverty.   Investors have also taken notice.  Solar’s very favorable current market forces (low cost) and unique advantages in economic development (health benefits and cost savings) can be leveraged to enable the continued expansion of solar PV to even the most remote regions – and the poorest countries.

 

In Africa, ‘Solar-as-a-Service’ Attracts US Dollars

— August 5, 2014

Long the domain of non-profits, church groups, and government programs, off-grid solar in so-called base of the pyramid (BOP) markets has shifted from an aspirational service to big business.  SolarCity, Vulcan Capital, Omidyar Network, and others recently invested $7 million in Off-Grid:Electric, one of Tanzania’s leading residential solar providers, which plans to reach 10 million homes in 10 years.  The investment follows a wave of funding for many similar companies operating in Sub-Saharan Africa and South Asia, which are the biggest markets for pico solar (or solar lanterns) and solar home systems.

Significant reductions in solar PV technology costs have opened up several new markets for solar as a service companies that provide 1 watt to 200 watt solar systems to people who live on as little as $2 per day.  The vast majority of the market is focused on providing lighting, cell phone charging, and power for small direct current (DC) appliances.  Navigant Research’s recently report, Solar PV Consumer Products, provides a comprehensive global look at the three primary segments of the solar off-grid lighting and portable power market: pico solar, solar home systems,  and solar PV generators and kits.  While the technologies behind these innovative products are all very similar, the applications, target markets, business models, and pricing are diverse.  We forecast that the annual market for solar PV consumer products will grow from $551 million in 2014 to $2.4 billion in 2024.

Less Than Kerosene

Up to 1.4 billion people worldwide, including nearly 600 million in Sub-Saharan Africa and 800 million in Asia, are without access to electricity, according to the International Energy Agency.  These populations previously had no choice but to pay high prices for low-quality and polluting fuel-based lighting, such as kerosene lamps.  Due to transportation challenges, kerosene costs as much as 50% more in remote areas than in cities, further contributing to the cycle of poverty.  In addition to providing inadequate illumination, kerosene lamps pose significant health risks.  New advancements in lighting technology have enabled the development of pico solar systems, which are compact, clean, and affordable off-grid lighting and energy products.  Many of these products use solar charging (<10 watt) and light-emitting diode (LED) lighting technology.  As with most renewable energy technologies, solar lighting is typically more affordable compared to conventional lighting primarily from kerosene, but upfront capital costs (even if only $10) can be a challenge to last-mile customers.

Companies such as Off-Grid:Electric are now offering a range of payment options to get around upfront costs, including microcredit, pre-payment options, and innovative pay-as-you-go technologies, which reduce barriers to ownership of solar lighting for rural customers – particularly for larger solar home systems that enable customers to do more than simply recharge mobile phones.

To date, most activity has been in Kenya, but the market in Tanzania has great potential to replicate those early successes, making the Off-Grid:Electric investment a good bet.  The system’s advantages are hard to beat and claim up to 50 times more light service for less than the current daily cost of kerosene. The company’s management team is representative of the growing breed of young, bright, highly skilled social entrepreneurs that are comfortable blurring the lines of traditional private versus non-profit ventures, launching social enterprises that seek to leverage the power of business and profits toward a goal that improves social well-being.

 

Non-Profit Solar Offers Hope for Developing Economies

— July 31, 2014

At the Lungra Health Clinic in the remote western region of Nepal, overhead lights now illuminate the operating room for the first time.  Midwives at this facility are grateful that they no longer have to use flashlights held between their teeth to deliver babies.  The recent installation of an off-grid solar PV system allows the healthcare providers at the Lungra Health Clinic to work through the night and store lifesaving medications and vaccines.

During the coming decades, developing countries will represent some of the most lucrative markets for solar PV.  Many of the largest global solar companies are devoting significant resources to understanding and developing products for these markets.  Moreover, the people who live in these areas will benefit from solar development more than developed world consumers.  In developing countries, solar power is often not a replacement for conventional grid power; it’s the only source of electricity available.

Some of the same factors that make these areas attractive for solar development, though, also create obstacles.  The lack of basic infrastructure, absence of established electricity markets, and spotty government policies to incentivize development make doing business in these areas extremely difficult.

Seeding Solar

A possible path forward to address many of these challenges has emerged from a global solar leader, SunEdison, which has helped launch a non-profit organization called SunFarmer.  The mission of this organization is “to make solar power accessible to the 300,000 hospitals worldwide that lack access to reliable energy.”  Using seed money from SunEdison combined with private donations, SunFarmer has already installed off-grid PV systems at six health clinics in Nepal, including in Lungra.

SunFarmer covers the upfront cost of installing the system and collects rental payments from the local organizations over a set period – until the initial investment has been paid off.  All rental payments are then recycled to install more systems where they are needed most.  SunFarmer uses only high quality components and provides operations, maintenance, and monitoring services throughout the life of the project.

While the obvious benefits of providing clean and reliable electricity to those who need it most is SunFarmer’s primary motivation, these ventures deliver additional value to the parent organization, SunEdison.  Establishing viable businesses in a mountainous and poor country like Nepal requires trial and error.  The SunFarmer program will provide valuable insights and experience for SunEdison with minimal risk as it attempts to expand its international footprint into more challenging, emerging markets.

Extreme Renewables

Once developers have established a viable solar business model, local stakeholders – including electricity users, grid operators, policymakers, and commercial lenders, all of whom are essential to a truly sustainable market – will enter the market.  The risk of lending to the first solar project or signing the first power purchase/lease agreement is much higher than in subsequent deals.  SunFarmer will work with local residents to educate them on the technical aspects of distributed solar generation.  The ultimate goal is to give locally owned solar companies firsthand technical experience with installing and maintaining remote power systems.

It will be interesting to see if this type of program is replicated by other large renewable energy providers looking to establish a presence in emerging markets.  Pioneering non-profit renewable energy ventures can create goodwill for the parent company, as well as an opportunity to put its technical expertise and business model to the test in the most challenging environments.

 

Buy a Car, Get a Solar Array

— July 29, 2014

BMW Canada is betting that electric vehicle (EV) drivers want to further reduce their carbon footprint by going solar.  The company’s new electric i3 comes with an added purchase incentive for Canadians: a 10% discount on a home solar system (only available in Ontario, Quebec, and British Columbia).  BMW partnered with Toronto-based PURE Energies, which will provide the solar home evaluations, panel installation, and relevant paperwork.

BMW Canada’s e-Mobility Specialist, Blair Dinsdale, stated in a press release that the solar energy offer “was designed to cover the exact amount of power you would use in the car, based on sun access in Canada.”  According to PURE Energies, a 6 kW system (24 panels) in Canada produces roughly 7,000 kWh of electricity per year.  The BMW i3 gets an estimated 100 miles of range per 27 kWh of electricity, as per the U.S. Department of Energy.  Thus, with a 6 kW solar system, a homeowner could drive the i3 nearly 26,000 miles per year exclusively on home-produced solar energy.

A Literal Sunroof

A February 2014 survey conducted by the Center for Sustainable Energy in California found that 32% of EV owners in the western United States already have solar panels on their homes.  While parts of Canada do not enjoy abundant sunshine, the province of Ontario does offer a feed-in tariff program to help offset the lack of year-round solar energy.

Although combining solar with EVs is not new, the move by BMW to offer direct discounts on a home solar system is a first for the industry, and a smart one.  According to Navigant Research’s 2013 Energy & Environment Consumer Survey, 79% of Americans have an overall positive impression of solar energy and 61% share the same impressions for EVs.  While not all consumers of EVs purchase the vehicle for environmental reasons, the ones who do place great importance on where the electricity to power the car comes from.  And, as you’d expect, EV owners align very closely with solar buyers from a demographic perspective.

Combining solar with EVs makes so much sense that several automakers are now showing prototype EVs with solar panels directly integrated onto the roof of the vehicle.  The Ford C-Max Solar Energi and the Sunswift eVe have built-in rooftop panels.  If BMW’s approach proves successful, we could see Tesla and SolarCity creating similar offers in the future.  For more information on solar and EV synergy, check out Navigant Research’s research brief, Solar and Electric Vehicle Cross-Marketing Strategies.

 

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