The International Energy Agency (IEA) has today published a report that examines best practice when financing solar PV deployment in regions where interest in the technology is emerging.
The report, Innovative Business Models and Financing Mechanisms for PV Deployment in Emerging Regions, focuses on six case studies that each take a different approach to delivering affordable PV to areas that may typically struggle to overcome the initial problem of high upfront costs.
The IEA states that this problem is particularly pronounced in "emerging regions" where there is very little access to commercial financing and purchasing power among the populace is low. According to the report, PV technology can only spread under these conditions when innovative financing mechanisms and business models are employed that are specific to each region.
Rather than analyze the success and outcome of selected approaches, the IEA report instead simply publicizes six different case studies in an attempt to demonstrate the types of funding options and mechanisms available.
Pay-as-you-go and leasing models
The IEA bills its report as "the first step in an attempt to systematically collect and analyze a range of experiences with business models and financing mechanisms that are addressing todays challenges".
The first case study it looks at is a pay-as-you-go business model by the U.K.s Azuri Technologies that has been rolled out in some African countries. Azuri offers customers a 2.5 Wp PV module and long-life 3.3 Ah Lithium Iron Phosphate battery kit called the Indigo Duo solar home system, which powers two LED lights.
The Indigo has a pay-as-you-go controller that works when a valid code is entered into its keypad. System owners can send a request for a top-up via SMS to the system provider, which then sends a code for power. Payment is via physical top-up cards bought in local stores (much like pay-as-you-go SIM cards for cell phones), or via a mobile money system. All data is stored on the cloud and Azuri uses a network of local distributors to deliver its Indigo light system.
Another case study examined by the IEA report is that of Denmarks Grundfos Lifelink, which develops solar-powered submersible water pumps for rural areas in Africa and Asia.
The unique thing about these pumps is the automatic water dispenser unit, which has an integrated system for revenue collection and water management. PV panels power the pump and the dispenser unit, which enables consumers to tap water using a water card filled with water credits that can be pre-paid via their cell phone.
Any revenue collected from the Grundfos Lifelink system can then be used to cover the costs of the pumps maintenance and online monitoring of each pumps performance. Grundfos has installed 40 projects across Kenya under a public private partnership approach.
Peer-to-peer financing also known as crowdfunding is a model that has been used in many parts of the U.S. and Europe with great success, particularly in relation to solar and PV installations.
Oakland, California-based Mosaic has developed a business model that can offer $100 million in solar power investments, acting like a virtual renewable energy bank that solicits investments for solar power projects and offers 10-year loan payback terms. Funding is garnered via all accredited investors who simply sign up to the scheme and participate.
The Mosaic model is ideal for areas of the U.S. and Europe where residents do not own their own homes but wish to invest in solar energy somehow. In the U.K., such peer-to-peer projects are often grouped under community solar schemes, which have recently gained government backing.
Another interesting case study explored in the IEA report is an urban hybrid PV microgrid model developed by Gham Power in Nepal and designed to tackle load-shedding problems.
Nepals grid is prone to suffer load shedding hours in excess of 12 hours a day, inspiring Gham Power to develop business-sized microgrids built upon a diesel-PV hybrid. PV is integrated into the existing diesel grid, either with or without battery storage to provide reliable and clean power for companies in Nepal.
Gham Powers business model revolves around a holding company that received funds from local and international investors, and then acts as the investor to become the legal owner of all installed PV systems.
Consumers of the power are offered a lease-to-own model with the option to purchase the system for a nominal amount at the end of the lease term, which usually runs for 10 year. Nepals Clean Energy Development Bank (CEBD) finances up to 70% of the project costs, with the remaing 30% provided by the holding company, which also receives the lease payments and pays interest on the loan to the bank.
Further models from SunEdison and Chloride Exide are also explored, and the IEA paper presents a short analysis looking into which approach best suits off-grid, grid-connected, rural, urban, large and small-scale installations.
The papers conclusion states: "The generation of successful business models is not an easy task that can be done in a couple of days. The specific regulatory, economic, social and cultural situation in a region has to be well understood and addressed when generating new business models."
The IEA continues: "Business models must appear to be clear and simple, even if sophisticated processes run below the surface the importance of a simple financing component for business models is also reflected in the success of third-party ownership models in the residential PV sector in western countries. Such lease models may not be the most attractive option in financial terms, but they are definitely the most comfortable option for the customer in administrative terms."