Solar Home Systems and PAYG models

Over 1.1 billion people have no access to electricity worldwide. Instead, they rely on kerosene lamps, candles, and inefficient cookstoves, which by themselves cause health and environmental problems. Most of these people are poor and are held back from their potential for human development and from the improved quality of life that can be enabled by access to electricity services. In Sub-Saharan Africa alone there are over 600 million people without access, and this figure may rise to 935 million in 2030 if the population grows as projected and the pace of new electricity connections remains at the average annual rate of the last 10 years (IEG 2015).

Illustrative Image | Photo by teresa cotrim from Pixabay

Off-grid solutions, particularly solar lamps and solar home systems (SHS) are seen as a route to electrification in developing world. A solar home system includes different components and essentially it is composed by:

  • PV module: made from semiconductor and converts sunlight to DC electricity. The most common PV modules include single and polycrystalline silicon and amorphous silicon with other technologies entering the market.

  • Battery: stores energy for supplying to electrical appliances when there is a demand. Battery bank, which is involved in the system to make the energy available at night (or at days when the sun is not providing enough radiation).

  • Solar charge controller: Regulates the voltage and current coming from the PV panels going to battery and prevents battery overcharging.

  • Inverter: Converts DC output of PV panels into a clean AC current for AC appliances or fed back into grid line. It is one of the solar energy system's main elements, as the solar panels generate DC voltage. Inverters are different by the output wave format, output power and installation type.

  • Load: electrical appliances connected to solar PV system such as lights, radio, TV, computer, refrigerator, etc

Pico Solar Systems, the designation for solar some systems and solar lanterns, can be divided into three different market segments comprising:

  1. Solar Portable Lights (SPL): lighting and mobile phone charging applications;

  2. Solar Home Systems (SHS): used by households to power multi-light sources and smaller appliances;

  3. Larger SHS: are able to service higher electricity demands, including fans, televisions, freezers and other household appliances.

Figure: categories of solar off-grid lighting products; Source: Hagan et al. (2015) based on A.T. Kearney and GOGLA (2014)

The dominant products sold to date to rural and non-electrified populations have been products that have just one LED light bulb powered by a small solar panel of less than 10 W. “Larger” products are also common, and feature a 10–20 W solar panel that powers a longer-lasting and brighter light, as well as limited phone charging functionality; these products can charge 1–2 basic mobile phones per day. Beyond that, household-sized SHS are increasingly common, although they are estimated to represent less than 5% of the off-grid solar market by number of products sold (GOGLA and Lighting Global, 2016). They typically have a larger solar panel installed on a building's roof that charges an external battery which, in turn, powers several electric bulbs and can charge multiple phones each day.

Higher rungs on the solar PV “energy ladder” involve the use of still larger SHS that can power radios, TVs, and even energy-efficient refrigerators for the largest models. The market for SHS is experiencing a movement towards larger systems that can accommodate these multiple devices such as televisions, fans and small refrigerators. The International Renewable Energy Agency (IRENA) estimates that some 133 million people accessed lighting and other electricity services using off-grid renewable energy solutions in 2016. This includes about 100 million using solar lights and at least 9 million connected to a mini-grid. The demand of these products is coming mainly from East Africa, in particular Kenya, Ethiopia and Tanzania.

Approximately 65% of all SHS are sold through Pay-As-You-Go (PAYG) financing. The term PAYG refers to a variety of technologies, payment rules and financing that allow the end-user to play for solar kits in affordable installments and incorporating a technology-enable mechanism to disable the system if a payment is overdue. This is possible because PAYG solar systems are often sold through mobile money platforms. In order to have access to the SHS families pay a small deposit fee and repay slowly in small installments on a pay-as-you-use model.

PAYG SHS providers have developed different payment models. Some offer small systems for ownership that are sufficient for light, mobile charging and small radios. These are priced in the region of $150 to $250 and are paid in small installments over 12-18 months. Other companies have larger systems for ownership that will power also small business needs like a TV, a small fridge, or commercial mobile charging. These are more expensive and are priced $450-$1000. These are paid over 24-36 months.

Through this model, companies can minimize the cost of collections by automating the receipt of payments, while remote rural customers get immediate access to basic electricity without having to take out a loan. PAYG offerings are most common in Kenya, Tanzania, Rwanda and Uganda, where market leaders such as M-KOPA, Bboxx, Mobisol, Off-Grid Electric and Fenix International operate.

Overall, this emerging business model has a significant potential to change the lives of poor people in rural areas of developing countries. A grid expansion project, while it may provide power to bigger appliances, can take years and significant investment to reach a rural or low-income community. PAYG technology lowers the threshold for poor households, allowing them to benefit from cheaper and more useful energy in their home. This has a positive impact on family finances, prevents health dangers associated with kerosene lamps and makes the environment feel more secure. The prices for accessing daily electricity are set equal or lower than the equivalent price for kerosene and this brings down the cost of using new technology immediately. It also makes it risk free for the households, a major obstacle for effecting change in a rural setting in Africa.

For more information about SHS systems and PAYG models in developing world please visit:

#solar #outdoor #solarenergy #payg #energy #renewables #cleanenergy

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