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ISO 9001

Swiss Contribution to IEA PVPS-Program Task 9

PHOTOVOLTAIC SERVICES FOR

DEVELOPING COUNTRIES (PVSDC)

Phase Report, Working Period 2013/2014

Report prepared by Alex Arter and Dr. Thomas Meier

submitted to REPIC, February 4, 2015

Report Phase 1 - IEA PVPS Task 9 Working Period 2013/2014

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Contents

1 Background to IEA PVPS and Task 9 3

1.1 Important Publications by Task 9 prepared under the Workplan 2010-2014 5

1.2 Important Dissemination Events by Task 9 under the Workplan 2010-2014 7

2 Swiss Contribution to the Task 9 Work Plan in The

Reporting Period 10

2.1 Objectives according the Contract with REPIC 10

2.2 Subtask 5B - Innovative Business Models and Financing Mechanisms 11

2.3 Subtask 6 – Deployment and Outreach 16

3 Outlook 18

Attachment 1: Presentation 'Swiss Contribution to Task 9 2013 – 2015 19

Attachment 2: Task 9 Publication - Innovative Business Models 20

and Financing Mechanisms for PV Deployment in Emerging Regions


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1 BACKGROUND TO IEA PVPS AND TASK 9

The IEA PVPS programme is one of the collaborative R&D agreements established within the IEA and, since 1993, its participants have been conducting a variety of joint projects in the application of photovoltaic conversion of solar energy into electricity.

The overall programme is headed by an Executive Committee (ExCo) composed of one representative from each participating country, while the management of individual research themes (Tasks) is the responsibility of Operating Agents.

Task 9 ‘Photovoltaic Services for Developing Countries’ (PVSDC) commenced in late 1999, with the objective “To increase the overall rate of successful deployment of PV systems in developing countries.” Under its new workplan for the period 2010 to 2014, Task 9 is now going forward with a broader focus on the deployment of PV services for regional development centered on two main activities:

- Implementation of key partnerships with carefully chosen relays or « international megaphones » able to foster the deployment of PV solutions. These partnerships would enable the sharing of PVPS’ knowledge acquired over the past 10 years with key decision makers in emerging regions: policy makers, funders, and the industry.

- In close cooperation with other concerned PVPS tasks: disseminate conclusions, lessons learnt and recommendations on highly relevant topics like penetration of PV in the urban environment, PV hybrids, very large scale PV plants and high penetration in grids, as well as work on PV applications for rural services. This dissemination process, implemented in cooperation with the « megaphones » consists of participation in conferences, the organization of workshops, awareness and training seminars.

The work has been structured into eight sub-tasks:

SUBTASK 1: PV for Water Pumping

The purpose of this subtask is to foster an interdisciplinary expert dialog in the field of PV and drinking water supply. The objective is to provide guidelines to decision makers, to ensure that PV powered drinking water supply systems are implemented where they are the most sustainable option, building on past experience.

SUBTASK 2: PV and Health Centers

The goal of this subtask is to publish a compilation of good practice regarding PV for rural health facilities, and to facilitate the integration of the same into the work program of the Megaphones.

SUBTASK 3: Pico PV Services

The aim of this subtask is to produce dissemination material on pico PV issues in developing countries, based on experiences from Germany and Australia. A comprehensive brochure had been produced by GTZ and will be used in dissemination activities.


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SUBTASK 4: PV and Hybrid Mini Grids for Rural Loads

Given the specific context of developing areas where grids are often weak and unstable, where in remote areas, there is basically no better option than diesel based generation, PV now offers potential solutions, both technically reliable and economically viable. This sub-task will concentrate on producing adapted materials needed and on working with the megaphones in order to prepare the future markets in developing regions.

SUBTASK 5: PV in Urban Settings in Developing Regions

Developing the urban infrastructure in line with extremely fast population growth has become a huge challenge for city planners in developing regions. Today, building integrated PV has a relatively modest incremental cost and could mitigate the problem. Subtask 5 concentrates on the promotion of available technical solutions (Subtask 5A) as well as business models and innovative financing mechanism (Subtask 5B).

SUBTASK 6&7: Deployment and Outreach to “Megaphones”

This subtask is the operating arm to establish partnerships with “megaphones” and develop common work. Subtask 6 focuses on Asia and Subtask 7 on Africa.

SUBTASK 8: Operating Agent

The role of the operating agent is to coordinate Task activities and to provide administrative services.

Table 1 Subtask Overview

Subtask Topic Lead Country Contributing Countries

1 PV Water Pumping Switzerland Japan, France, Germany

2 PV and Health Germany Denmark

3 Pico PV Services Switzerland Netherlands

4 PV and Hybrid Mini Grids for Rural Loads

France Germany, Sweden, Austria, Greece

5 PV in urban settings in Developing Regions

Subtask 5A: Technical Innovations for PV in the Urban Environment

Subtask 5B: Innovative business models and financing mechanisms

Denmark (by interim)

Switzerland

Switzerland, Netherlands, Denmark, Japan

Sweden, Netherlands, Denmark

6/7 Deployment and Outreach France / Switzerland

Japan, Switzerland, Sweden, Denmark

8 Operating agent France Switzerland (Secretariat)

2010-2012

2013-2014


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1.1 Important Publications by Task 9 prepared under the Workplan 2010-2014

The various research results developed within subtask 1 to 5 in the period 2010-2014, were compiled in seven key publications. These publications contain valuable information and data which are relevant and useful to a range of different audiences and beneficiary groups. The publications contain, on the one hand, recommendations about the design of regulations and programs which are relevant for policy makers and donor organizations. On the other hand, they provide practical advice for development experts, entrepreneurs and system operators regarding the implementation of programs and the application of technologies in the field. The table below provides an overview of these publications.

Year Titel / Abstract Contributors Target Audience

2012 Policy Recommendations to Improve the Sustainability of Rural Water Supply Systems

This paper introduces the link between water and energy and its importance for sustainable development. Examples of different set ups and applications of PV pumping systems are given. An overview of recent technology developments in the field of PV pumping is provided and the economics and experiences made with diesel fuel and PV operated water supply systems are compared. Based on these experiences, policy recommendations are made to improve the sustainability of water supply systems in off-grid areas.

The paper demonstrates that there are various common problems experienced in rural water supply projects implemented by experts form the water and sanitation sector and those implemented by experts from the field of photovoltaic energy. A closer collaboration with and information exchange between the water and renewable energy sectors are called for.

Main Author:

Dr. Thomas Meier, Switzerland

With substantial contributions from Japan, France, Australia and Germany

Report IEA-PVPS T9-11:2012

⋅ Policy Makers

⋅ Donor Agencies

⋅ Rural electrification and rural water supply organizations

2013 Pico Solar PV Systems for Remote Homes

Solar pico PV systems have experienced significant development in the last few years, combining the use of very efficient lights (mostly LEDs) with sophisticated charge controllers and efficient batteries. Noting that some 1.5 billion people have no electricity grid connection, this Task 9 report demonstrates that solar pico PV systems can help in providing a few essential energy services. The concept of pico PV systems and their application in real-world circumstances are explained and the market dynamics elaborated.

However, the provision of this initial level of service with pico solar PV systems does not imply that these populations should be considered electrified. Governments should take a facilitating role in the area of pico PV services, focusing on quality assurance, reliable information and education. Donor bodies can also play an indirect but important role.

Main Author:

Erik H. Lysen, Netherlands


⋅ Policy Makers

⋅ Donor Agencies

⋅ Development Practitioners


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2013 Rural Electrification with PV Hybrid Systems

With decreasing PV prices, PV/diesel hybrid minigrids attract significant attention from institutions in charge of rural electrification and donor agencies - to mitigate fuel price increases, deliver operating cost reductions, and offer higher service quality than traditional single-source generation systems. The combining of technologies provides interesting opportunities to overcome certain technical limitations. This publication aims to present the state of the art situation of PV/diesel hybrid systems for rural electrification and to highlight the main remaining issues – from the design, technical and implementation perspectives. (Publication available in English and French).

Main Author:

Gregoire Lena, France


⋅ Policy Makers

⋅ Donor Agencies

⋅ Rural Electrification practitioners

2014 Innovative Business Models and Financing Mechanisms for PV Deployment in Emerging Regions

Like other renewable energy technologies, photovoltaic (PV) systems face the problem of high upfront costs. This problem is particularly pronounced in emerging economies where limited purchasing power and a lack of suitable financial products constitute additional obstacles for a broader dissemination of PV technology. The publication presents a collection of case studies of business models and financing mechanisms which show possible ways how such obstacles can be addressed and overcome in innovative ways. The case studies underline that the development of a business model is not a simple task but often requires long preparation time and a lot of devotion to details. Business models evolve over time and there is a lot of creativity required from entrepreneurs to develop suitable packages for PV products.

Main Author:

Dr. Thomas Meier, Switzerland


⋅ development practitioners

⋅ energy entrepreneurs

⋅ donor agencies

Models and mechanisms are also applicable in the field of other renewable energy technologies

2014 PV Systems for Rural Health Facilities in Developing Areas

This publication presents technical guidelines and recommendations on PV systems design and standards for rural health facilities. The demand and supply of energy in health facilities is analyzed, and international standards are presented. Technical and economic aspects of different power generation options are discussed. International experiences from past and existing projects are analyzed, the main conducive factors of PV supply are outlined and lessons learned from the field are highlighted, with the aim to enhance the sustainable operation of PV systems for rural health facilities.

Main Author:

Adnan Al-Akori, Jemen supported by Germany


⋅ Decision makers

⋅ Development organizations

⋅ Engineers

⋅ Renewable energy practitioners

2015 A user guide to simple monitoring and sustainable operation of PV-diesel hybrid systems

This paper provides a simple monitoring and evaluation guideline for PV-diesel hybrid systems. It offers system operators a better understanding of the key factors for sustainable system. It also gives suggestions to how to act if there are signs of unfavourable use or failures. The application of the guide requires little technical equipment, but daily manual measurements. For the most part, it can be managed by pen and paper even by people without prior experience with power generation systems.

Caroline Bastholm, Sweden


⋅ System Operators

⋅ Development practitioners

⋅ Donor agencies


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2015 Trends in the market for PV diesel mini grids

This publication has been written in response to the growing need for information on the worldwide trends in adding PV systems to existing or new diesel-powered mini-grids, including possibilities and limitations. The publication builds on the experience with PV hybrid systems gained over the last twenty years by various programmes and organisations active in this field. The application of PV hybrid systems in remote mini-grids has excellent potential, but should be done with care through planning, design, implementation, operation and support. This publication has been developed to be a useful guide in this process.

Main Authors:

Erik Lyssen, Netherlands

Anjali Shanker, France

Report IEA-PVPS T9-17:2015 (expected in March 2015)

⋅ Design engineers

⋅ Deployment oriented decision makers

1.2 Important Dissemination Events by Task 9 under the Workplan 2010-2014

Outreach activities, targeting a wide range of key stakeholders have played an important role since the beginning of Task 9. Successful deployment of PV technology requires paying specific attention to non-technical issues, which clearly are a major barrier to the dissemination of renewable energy. Task 9 is developing institutional partnerships with regional organizations highlighting the crucial importance of experience sharing and networking. The following table shows in which dissemination events Task 9 experts have participated, which topics were addressed, and which audiences were reached over the period of the past workplan.

Year Dissemination Event Dissemination Focus

Audience reached

2011 Forum of Rural Water Supply Network, Uganda

Task 9, led by Switzerland, has participated at the RWSN Forum in Uganda in Nov. 2011. Besides operating an exhibition booth during four days, a half-day seminar on PV pumping was conducted. The successful seminar was attended by 40 people plus 10 presenters reflecting the big interest in PV water solutions by water experts.

A Swiss PV contact group was established prior to the event consisting: Wirz Solar GmbH, Trunz Water Systems AG, Bern University of Applied Sciences (Dr. Andrea Vezzini) and Entec AG. The exhibition booth provided ample opportunities for these companies to promote their products and services.

Photovoltaic Pumping Systems

⋅ Rural Water supply Experts

⋅ Donor Agencies

⋅ Development organizations

2012 International Off-grid Renewable Energy Conference and Exhibition (IOREC), Ghana

IOREC is an annual conference organized by the International Renewable Energy Agency (IRENA). Thomas Meier participated in the 1

st conference in Ghana and

presented the paper ‘Policy Recommendations to Improve the Sustainability of Rural Water Supply Systems’.

Photovoltaic Pumping Systems

⋅ Policy Makers

⋅ Donor Agencies

⋅ Rural electrification organizations


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2013 Rural Electrification Workshop: “ International Best Practices and Options for Policy Makers”, Myanmar

The workshop was jointly organized by Asean Center for Energy (ACE), the Central Research and Development Center (CRDC, Ministry of Industry, Myanmar), GIZ, EUEI-PDF, and Task 9. The workshop was attended by participants from various governmental organizations, NGOs and private sector. The presentations covered a broad spectrum of rural electrification topics. PV was at the center of attention in three sessions where Task 9 experts were responsible for presenting and moderating. Switzerland, represented by Alex Arter, gave a key note address on Rural Electrification Policy and Planning. Further Task 9 presentations were given by Anjali Shanker (F), Erik Lysen (NL), and Brisa Oritz (D). Peter Ahm (DK) and Erik Lysen acted as moderators.

⋅ PV for Rural Electrification

⋅ PICO PV Systems

⋅ Regional Decision Makers

⋅ NGOs

⋅ Private Sector

2013 PVPS Task 9 Open Event, Bangkok, Thailand

Switzerland coordinated the organization of an open Task 9 Event in Bangkok, Thailand on April 6, 2013. The event was a collaboration between IEA-PVPS, and the Department of Alternative Energy Development and Efficiency of Thailand (DEDE).

During the event, Alex Arter presented about PV Pumping and the results of the position paper prepared under Subtask 1. Erik Lysen presented the publication about Pico solar PV Systems prepared under Subtask 3.

⋅ Photovoltaic Pumping Systems

⋅ Pico PV Systems

⋅ Policy makers

⋅ Private Sector

⋅ Universities

2014 Sustainable Energy for All (SE4all)

One of the primary ways in which SE4all drives action is through the formation of High Impact Opportunities (HIOs). HIOs provide a platform for stakeholders from the private sector, public sector, and civil society to work together on specific actions. Around 50 HIOs have been identified to date. Task 9 became a member of HIO on “Clean Energy Mini Grids". The contribution of Task 9 has focused so far on the sharing of its work results and the reviewing of documents.

⋅ PV and Hybrid Mini Grids

⋅ Business Models

⋅ International and National Development Organizations

⋅ Development Banks

⋅ Large NGOs

2014 2nd International Sustainable Energy Summit (ISES) in Malaysia

Anjali Shanker represented Task 9 in the biennial event ISES in Kuala Lumpur in March 2014. She presented the results of subtask 4 under the title : ”Empowering Rural Autonomy with Mini Grids and PV Hybrids”.

⋅ PV and Hybrid Mini Grids

⋅ PV Industry

⋅ Regional decision makers

2014 Joint Workshops with Club ER in Africa

Throughout 2014, France organized two workshops in cooperation with CLUB-ER, in Sudan and Senegal. The topic of the workshops was "Financing renewable energy for rural electrification". The workshops capitalized on the materials developed by Task 9 and in particular on the publication "Innovative Business Models and Financing Mechanisms for PV Deployment in Emerging Regions.”

⋅ Business Models and Financing Mechanisms

⋅ Rural Electrification Authorities

⋅ Development Organizations


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2014 6th World Conference on Photovoltaic Energy Conversion (WCPEC-6), Japan

The IEA PVPS program conducted a joint workshop titled “Challenges and Promises to Large Scale PV Development” at WCPEC-6 in Kyoto, Japan on Nov. 25. 2014. The workshop was structured into 5 sessions during which around 20 presentations were made by members of different PVPS Tasks. Task 9 was represented by two speakers. Thomas Meier and Anjali Shanker participated in session 2 – “PV Market Development Trends: The Expected Rise of New Business Models”. Thomas Meier presented the results of his research about Innovative Business Models and Financing Mechanisms. Anjali Shanker presented macro-economic trends and their impact on business models.

⋅ Business Models and Financing Mechanisms

⋅ Private Sector

⋅ Universities

⋅ Individual researchers

⋅ PVPS members from all tasks

The above table of dissemination events is not exhaustive. Besides the official Task 9 dissemination events, Alex Arter and Anjali Shanker (Operating Agent Task 9, France) have also shared their experience during the REPIC Workshop in Bern, on Sept. 24, 2013. Other group members such as Peter Ahm (Denmark) and Jean Christian Marcel (France) participated in various meetings and conferences where they presented the results of Task 9 to policy makers and representatives from the PV industry.


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2 SWISS CONTRIBUTION TO THE TASK 9 WORK PLAN IN

THE REPORTING PERIOD

2.1 Objectives according the Contract with REPIC

According to the contract with REPIC, the current working phase is covering a 12 month period from August 1, 2013 to July 31, 2014. Due to some delays in project implementation and to have the possibility to participate in important meetings, a cost-neutral extension was granted until December 31, 2014.

This project was carried out in accordance with Objective 2 of the REPIC platform, i.e. ‘Networks, Information and Communication’.

The specific objectives and deliverables have been defined in the project proposal "Swiss Contribution to IEA PVPS Task 9 Program, Photovoltaic, Services for Developing Countries (PVSDC)” from June 17, 2013. The work was performed in accordance with the work plan formulated in that proposal with major contributions to two Subasks:

• Subtask 5B ‘Innovative Business Models and Financing Mechanisms’

Switzerland took over the leadership of that Subtask in 2013 with the objective to identify and analyze innovative business models and financing mechanisms for PV deployment in developing regions. The final result should be an official IEA-PVPS publication.

• Subtask 6 Deployment and Outreach

Switzerland has been a main contributing country in Subtask 6 focusing on establishing partnerships in Asia. The objective was to organize joint events with these partners as platforms to disseminate the results produced in the other Subtasks.

The above mentioned proposal was prepared for a two-years period from July 2013 to June 2015. As mentioned earlier, the contract provided by REPIC covered only a one-year period. Naturally, the shorter time frame limited the scope of results that could be achieved.

The next two sections provide details about the work progress and results achieve in the two Subtasks with Swiss contribution.


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2.2 Subtask 5B - Innovative Business Models and Financing Mechanisms

In 2013, Switzerland has taken over the lead of Subtask 5B ‘Innovative Business Models and Financing Mechanisms’. Subtask 5B was originally led by the Netherlands, but their contribution was withdrawn in 2012. Subtask 5B does not aim to develop new business models on its own but to systematically collect and analyze information about existing business models. The objective of Subtask 5B has been defined as:

Activity 5.1 General Analysis Framework

The first activity conducted was the preparation of a general framework for the gathering, analysis and synthesis of information from cases studies of business models. A literature research was conducted with the purpose of identifying existing tools for that purpose. The analysis framework selected was the Business Model Canvas as it was recently developed at EPFL Lausanne by Alexander Osterwalder and Yves Pigneur.1 Figure 1 shows the Business Model Canvas. The tool resembles a painter’s canvas – preformatted with nine blocks – which can be used to draw new or existing business models. It is a hands-on tool that fosters understanding, discussion, creativity, and analysis. Presentation at 29th Expert Meeting in Paris Thomas Meier participated at the Task 9 Expert Meeting in Paris on Sept. 26/27, 2013. The planned Swiss contribution to Task 9 in the period 2013 to 2015 was presented and the proposed business model canvas explained. Participants in the meeting were delighted about the presentation and approved the business model canvas approach. It was expected that the proposed activities will create synergies with the other subtasks, particularly subtask 5A. Considering these expectations, it was therefore decided that Subtask 5B should initially focus in business models suitable for the urban environment in emerging countries. Peter Ahm, Denmark, obtained the presentation with the purpose of presenting it at the Task 1 Meeting in Korea im Dez. 2013. A copy of the presentation can be found in Attachment 1.

1 Osterwalder A., Pigneur Y, Clark T. (2010): Business Model Generation : a handbook for visionaries,

game changers, and challengers. Hoboken : Wiley.

SUBTASK 5B: Innovative business models and financing mechanisms

The objective is to evaluate and disseminate information on new and innovative business models as economically sustainable alternatives for PV deployment in developing countries.


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Figure 1 The Business Model Canvas (Source: Osterwalder et. al, 2010:44)

Activity 5.2 Repository of Case Studies

After the analysis framework had been defined, the next step was to collect information about existing business models. However, obtaining case studies from PVPS members proved more difficult than anticipated. The reason for this situation lies in the fact that the different Tasks of the PVPS program are very strong in technical research and the analysis and assessment of data at the macro level. The members of Task 9, in addition, have broad experience in dealing with national governments and the practical implementation of development programs and projects. Dealing with specific business models, however, means to deal with the micro-level of individual companies, which is new territory for many members. In the course of the work it was found that there is a lot of interest in this subject within PVPS and Task 9. However, due to their previous orientation, only a couple of members were in a position to contribute information on specific case studies on concrete business models.

To overcome the information gap, Thomas Meier researched the internet for innovative business models and financing mechanisms. The challenge was that there is a lot of information about approaches to PV deployment in rural areas of emerging regions, but less about the urban environment. For this reason, the original focus on urban areas was loosened to some extent by also looking at case studies from rural areas as well as industrialized countries. However, this relaxation did not detract from the quality of work. Rather, it was found in the course of the work that the categories of system size and grid integration status are more relevant than the division between rural and urban areas. The following twelve cases were identified and researched in more detail:


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1. SELCO – India – Solar lighting for vulnerable, poor and remote populations through joint liability groups, restructuring crop loans, and solar light agents.

2. Chloride Exide – Kenya – Achieving PV Sales by using an Existing Distribution Network.

3. Grundfos Lifelink – Denmark – Innovative PV water supply system in off-grid areas.

4. Sundaya – Indonesia – Modular Pico PV Systems.

5. Grameen Shakti – Bangladesh – 700 Technical Centres Sell, Install and Maintain Small PV systems.

6. SunEdison – India – Medium-scale PV Investments as a Hedge Against Raising Electricity Tariffs.

7. Mera Gao Power – India – Microgrids as a business opportunity for rural entrepreneurs.

8. AZURI Technologies – United Kindom – Pay-As-You-Go Model to Make PV Affordable for Low Income Households in Africa.

9. Greenleads – Kenya – Green electricity services with low risk for clients.

10. Gham Power – Nepal – Urban Hybrid PV Microgrids as an Answer to Load-Shedding.

11. OneRoof Energy – United States – PV leases as part of new roofing or re-roofing projects.

12. MOSAIC – United States – Crowdfunding model to solar energy installations.

Comments and explanations for selecting the case studies:

Based on the initial literature research, the six business models, printed in bold, were selected for further analysis. The selection of these six business models was not made with the intention that they are the only recommended models, nor that they are exclusive for all available models. The selection was made primarily on the basis of the following criteria:

• The models had to be innovative and market-oriented (not solely oriented on the market for donor financing).

• They were suitable to cope with frequently encountered energy supply and access issues in developing regions.

• They had to contain interesting mechanisms that can be transferred as elements into other business models (and other renewable energies).

• They may have an invigorating effect on start-up energy companies and provide them with approaches to design their own business models. (It is not intended that entrepreneurs adopt the models one to one.)

• They enable companies to develop a reasonably large market allowing them to generate profits.

In this sense, the selected models represent a range of options that may be considered by entrepreneurs and assist them in designing their own business models. Business models


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should never be taken as fixed constructs. They are subject to constant change. They are always reflecting the current political and socio-economic setting, as well as market trends and need to keep pace with change. Keeping this in mind, the selected models show how individual entrepreneurs have responded to the actual conditions in their environment at the time of analysis and how they designed their business models accordingly.

The number of business models examined was essentially limited by the time available. It would have been possible to identify and analyze a range of additional models, if resources had been available. Other more technical factors which limited the selection of the business models was the reachability of company managers and their willingness to give interviews. The publicly available literature is never sufficient for a good description and analysis of cases studies. A clear picture of a business model and the current state of a company can only be obtained when directly talking to an entrepreneur. Four business models (of the original list of twelve) had to be dropped for reasons of non-reachability of managers. Two more models were not included because of doubts regarding their replicability by other parties. For the remaining six business models, detailed questionnaires were developed and telephone interviews conducted. The interviews were transcribed and subsequently compiled into individual case studies together with the information from the literature review.

Working Session Business Model Canvas

During the 30th Task 9 Expert Meeting in Lyon on 1/2. April, 2014, Thomas Meier conducted a working session base on the Business Model Canvas Methods. All participants were given a printout of the repository of case studies. After a brief introduction on the subject, the members were divided into four groups. Each group had to choose a business model and then map this model in the Business Model Canvas. For this purpose pre-printed formats of A1-size were distributed. After 45 minutes, the groups came together again and presented and explained the business model they worked on.

The participants appreciated the business model canvas method and the business models selected and thanked Thomas Meier for the effort made. It was found that these business


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models should also be presented in other committees that are more rooted in the technical or regulatory fields. Anjali Shanker said: "That would be science fiction for them".

The colorful results of the canvas should not be regarded as results to be published anywhere. Much more important is the process and the discussions that come up when working with the canvas. It becomes clear quite quickly which Business Models are already well-elaborated and which still need to be further developed. In particular, it became also clear that there are a multitude of detailed questions to be answered in order to develop a business model, and that this requires a fairly large amount of work. In some cases where PV investment opportunities are offered, the process of defining the business model and fine-tuning it to the requirements of the regulators can easily take two years until approval is given.

Presentation at joint Task 1 and Task 9 meeting in Kyoto, Japan, Nov. 2014.

Thomas Meier presented the case studies and business model canvas methodology during the joint Task 1 and Task 9 meeting in Kyoto, Japan on Nov. 22, 2014. The objective was to inform Task 1 members about our activities and to identify possible joint operations for the future. The feedback from Task 1 members was positive. People found the methodology and case studies very interesting. However, since Task 1 used to work more on the macro level of PV development in the past they seemed to have difficulties to imagine dealing with more down-to-earth approaches in the future. It was agreed that Task 9 would continue working on the micro level with concrete business models and share the working results in the future with Task 1 during joint meetings approx. once a year.

Activity 5.3 Publication: Innovative Business Models and Financing Mechanisms

Initially it was planned to write a comprehensive publication about innovative business models and financing mechanisms based on a variety of case studies. The publication should furthermore include recommendations for decision makers and entrepreneurs regarding the design of support programs and the shaping of concrete business models.

Since it was not possible to mobilize the required resources for a comprehensive publication, the Task 9 experts decided during their meeting in Utrecht in Sept. 2014 to prepare a less comprehensive publication based on the existing repository of case studies. In addition to the purely descriptive case studies, the publication should describe the Business Model Canvas method which was used to prepare the case studies. Furthermore, it should provide an approach to categorize the different business models.

Thomas Meier has written this publication in the course of October 2014. The peer reviewing process within Task 9 and PVPS was completed at the end of 2014. The official publication is expected to take place in early 2015 under the title: "Innovative Business Models and Financing Mechanisms for PV Deployment in Emerging Regions."

The final draft of the publication can be found in Attachment 2 of this document.


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2.3 Subtask 6 – Deployment and Outreach

Activity 6.1 Coordination with Megaphones and Dissemination of Results

Coordination with Megaphones:

Alex Arter had intensive discussion with ACE and GIZ Jakarta about a continuation of the cooperation ACE-Task 9 and the harmonization of the work programs of Task 9 and GIZ Jakarta. GIZ Jakarta runs a project focusing on technical standards for mini grids. They are interested to narrow down their focus on PV hybrid mini grids in the future and would like to cooperate with Task 9 in this field. The ongoing discussions about joint activities focus on workshops and publications with a regional focus on South and South-East Asia.

As a result of the Key note speech in Myanmar on the occasion of the GIZ-ACE-Task 9 conference and the follow-up event in Bangkok, organized by Switzerland on behalf of Task 9 in 2013, Alex Arter was invited as a guest speaker for the EEP annual conference, with the effect that Task 9 has gained the reputation of a reliable partner in South-East Asia. The participation in particular raised the interest of two countries in PVPS and Task 9 – (1) Thailand and (2) Finland:

(1) A new cooperation opportunity emerged in Thailand where the Government strongly supports the increase of PV power in the country's energy mix. Thailand, represented by the Department of Alternative Energy Development and Efficiency (DEDE), has officially become a member of the IEA-PVPS program in March 2014. After the EEP conference, Alex Arter and Peter Ahm (Danish Task 9 representative) have entered talks with DEDE to identify cooperation possibilities with Task 9. Three coordination meetings were held in Bangkok regarding this matter.

The rapid growth of Thailand's PV sector means that the country sooner than later will face the technical problems related to high penetration of PV in distribution grids. Similar issues will emerge in many other south and south-east Asian countries over the coming years. It was therefore proposed to conduct a regional workshop of integration of PV in public grids in emerging markets in Asia. Such a workshop could take place in the second semester of 2014 or first semester of 2015 with Bangkok as a possible venue and DEDE as a co-organizer. A concept for such an event is going to be developed. Switzerland would have the lead within Task 9.

(2) Finland has expressed interest to re-join IEA-PVPS and Task 9 which is also the merit of Alex Arter and Peter Ahm who promoted IEA-PVPS and Task 9 during several meetings with the Finnish representative of the EEP program for the Mekong region. Finland expressed its appreciation of the IEA-PVPS program, in particular due to the chance for a worldwide exchange with colleagues in solar PV. They are expecting to benefit from lessons learnt and by joining forces with other participating countries.

Dissemination of results:

As mentioned above, Alex Arter has participated as guest speaker in the 4th EEP Mekong Annual Regional Forum “Solar Power – An Abundant Energy Resource in the Mekong Region” on October 24, 2013 in Siem Reap, Kingdom of Cambodia. The forum was attended


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by around 150 participants mainly from the Mekong Region. The Forum was organised by EEP together with its partner in Cambodia, the Ministry of Industry, Mines and Energy.

During the one-day event, seventeen presentations were given by senior government officials from Lao PDR, Cambodia, Myanmar, Thailand and Vietnam (highlighting their countries' solar energy outlook) and international experts. The presentation by Alex Arter was titled 'Advances in making solar energy affordable' and addressed the activities of Task 9, the Swiss contribution, the business model canvas approach, and selected innovative business models.

Thomas Meier was invited to speak at the 6th World Conference on Photovoltaic Energy Conversion (WCPEC-6) on November 25, 2014 in Kyoto Japan. The IEA PVPS program conducted a joint workshop titled “Challenges and Promises to Large Scale PV Development”. The workshop was structured into 5 sessions during which around 20 presentations were made by members of different PVPS Tasks. Thomas Meier participated in session 2 – “PV Market Development Trends: The Expected Rise of New Business Models”. He presented the results of his research about Innovative Business Models and Financing Mechanisms.


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3 OUTLOOK

In 2013, about 99% of the globally installed PV capacity of 135 GW were grid-connected systems. Off-grid systems which once dominated a small market, now account for 1% at most. Nearly 1.3 billion people did not have access to electricity in 2011, mostly in sub-Saharan Africa and remote regions in Asia. Given the current speed of development and available financing, the IEA (2012) projects that close to 1 billion people will still be without electricity in 2030. IEA further expects that several hundred million people will continue to live in sparsely populated rural areas where off-grid solar PV systems would likely be the most suitable solution for basic electrification.

Task 9 was the first initiative within an implementing agreement of the IEA which concentrated on energy related issues in non-OECD countries. This step-motherly existence has ever been problem for the Task to raise sufficient funds for its useful work. The importance of developing countries was too small to gain much interest by the member countries. However, this situation is due to change dramatically over the next 30 years. It is forecasted that to limit the global mean temperature increase to 2°C in the long run, 83% of the required emission reductions by 2050 will have to be achieved outside the OECD in emerging regions.

The above two key aspects underline the importance and relevance of Task 9. The current member countries of Task 9 have therefore decided to continue their work under a new workplan from 2015 to 2019.

Given the speed of developments taking place, the new Task 9 will have to shift focus from doing its own independent research to transforming and adjusting the mass of experience and knowledge available within PVPS and present it to non-member countries. Task 9 is the only Task within PVPS that has the required background and network to act as the interface between IEA member countries and non-member countries.

Attachment 3 contains an outline of the new workplan, which provides details about the future activities and expected results.


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ISO 9001

Attachment 1: Presentation 'Swiss Contribution to Task 9 2013 – 2015

Swiss Contribution to Task 9

Period 8/2013 - 7/2015

Dr. Thomas Meier / Alex Arter 29th PVPS Task 9 Expert Meeting, Friday, Sept. 27, 2013, Paris

Consulting & Engineering

Focus Areas of Swiss Contribution 2010-2012

Focus Areas of Swiss Contribution 2013-2014 (2015)

Subtask 5B: Innovative Business Models and Financing Mechanisms

Objective: The objective is to evaluate and disseminate information on new and innovative business models as economically sustainable alternatives for PV deployment in developing countries.

Subtask 5B: Innovative Business Models and Financing

Mechanisms

Activities: Activity 5.1 - General Analysis Framework (2013/2014)

Proposed framework: Business Model Canvas.

Activity 5.2 - Repository of Case Studies (2013/2014)

Collecting case studies from Task 9 members and literature,

Mapping of business models according to business model canvas,

Evaluating and comparing business models, extracting success factors and weaknesses.

Activity 5.3 - Publication: Innovative Business Models and Financing Mechanisms (2014/2015)

Sharing results and develop recommendations for potential new business models.


The Business Model Canvas


Value Cost More info

(Source: Osterwalder et. al, 2010:44)

D:/Entec/PVSDC/Business Models/The Canvas/Business Model Canvas Explained.flv

www.innocarus.com


The Business Model Environment


Mechanisms

Example: SunEdison – Solar PV as a Service • PV system installed on roof of customer’s premises at no upfront

cost.

• Customer is not becoming owner of PV system but agrees to purchase the power generated at a savings over other power sources (PPA).

• SunEdison installs and maintains the system at no cost to the customer.

• SunEdison repackages PPAs and sells them to investors who become the legal owners of the PV system (enjoying the benefits from tax incentives, subsidies, renewable energy certificates, etc.)

• The investors get the electricity payment from the customers and pay the PV service company a fee for developing, monitoring and servicing PPAs.

Source: www.sunedison.com/

www.innocarus.com


Mechanisms

Example: Grundfos Lifelink - PV water supply system in off-grid areas A business model addressing three key sustainability problems in rural water supply:

Technical sustainability

Remote monitoring of plant operation via the internet by service company.

Financial sustainability

Cash free pre-paid system via mobile phones prevents mismanagement of funds.

Financial Affordability

Financing models available to cover the upfront cost of a water plant.

Kenya example: customers pay in average US$ 0.35 for 20 liter of safe drinking water.

Source: http://www.grundfoslifelink.com/


Mechanisms

Next Steps: 1. Collect interesting business models in different fields:

• PV in urban environment, incl. BIPV • PV in rural areas – MDG related

Active support from T9 members needed! (who is contributing?) 2. Circulate short descriptions of business models collected among

members from contributing countries, for shortlisting most promising models to follow up.

3. Detailed Analysis of selected BMs based on analysis framework.

Discussion of results at next T9 expert meeting (1/2 day workshop?) 4. Preparation of analysis report to be circulated among T9 members (until July, 2014).

Contacts

Alex Arter – [email protected]

Thomas Meier – [email protected]


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ISO 9001

Attachment 2: Task 9 Publication – Innovative Business Models and Financing Mechanisms for PV Deployment in Emerging Regions


I ovative Busi ess Models a d Fi a ci g Mecha is s for PV Deploy e t i E ergi g Regio s

INTERNATIONAL ENERGY AGENCY

PHOTOVOLTAIC POWER SYSTEMS PROGRAMME

Innovative Business Models and Financing Mechanisms for

PV Deployment in Emerging Regions

IEA PVPS Task 9, Subtask 5 Report IEA-PVPS T9-14: 2014

December 2014

ISBN 978-3-906042-27-5

Author: Dr. Thomas Meier, Switzerland, [email protected]

mailto:[email protected]

1

Contents

Contents ............................................................................................................................................. 1

Foreword ............................................................................................................................................ 2

Acknowledgements ............................................................................................................................ 3

Abstract .............................................................................................................................................. 4

Executive Summary ............................................................................................................................ 5

1 Introduction ................................................................................................................................ 6

1.1 Current State of Research .................................................................................................... 6

1.2 Methods of Preparation and Analysis of Case Studies ........................................................ 7

2 Pay-As-You-Go Business Model to make PV Affordable for Low-Income Households............. 10

2.1 Case Study Azuri Technologies ..........................................................................................10

3 Increasing PV sales by supporting innovative solutions for water supply ................................ 13

3.1 Case Study – Grundfos Lifelink ..........................................................................................13

4 Achieving PV Sales by Using Existing Distribution Networks .................................................... 16

4.1 Case Study Chloride Exide ..................................................................................................16

5 Peer-to-Peer Financing of Renewable Energy through Crowdfunding ..................................... 17

5.1 Case Study Mosaic, United States .....................................................................................17

6 Urban hybrid PV business microgrids as an answer to load-shedding ..................................... 20

6.1 Case Study Gham Power, Nepal ........................................................................................20

7 Medium-scale PV investments as a hedge against raising electricity tariffs ............................ 22

7.1 Case Study SunEdison, India ..............................................................................................22

8 Analysis ..................................................................................................................................... 24

8.1 Characteristics of medium to large systems ......................................................................25

8.2 Characteristics of small systems ........................................................................................26

8.3 Conclusions ........................................................................................................................27

9 References ................................................................................................................................ 28

2

Foreword

The International Energy Agency (IEA), founded in November 1974, is an autonomous body within

the framework of the Organization for Economic Co-operation and Development (OECD) that

carries out a comprehensive programme of energy co-operation among its 23 member countries.

The European Commission also participates in the work of the Agency.

The IEA Photovoltaic Power Systems Programme (IEA-PVPS) is one of the collaborative R & D

agreements established within the IEA and, since 1993, its participants have been conducting a

variety of joint projects in the applications of photovoltaic conversion of solar energy into

electricity.

The 23 participating countries are Australia (AUS), Austria (AUT), Belgium (BEL), Canada (CAN),

China (CHN), Denmark (DNK), France (FRA), Germany (DEU), Israel (ISR), Italy (ITA), Japan (JPN),

Korea (KOR), Malaysia (MYS), Mexico (MEX), the Netherlands (NLD), Norway (NOR), Portugal

(PRT), Spain (ESP), Sweden (SWE), Switzerland (CHE), Turkey (TUR), the United Kingdom (GBR) and

the United States of America (USA). The European Commission, the European Photovoltaic

Industry Association, the US Solar Electric Power Association and the US Solar Energy Industries

Association are also members. An Executive Committee composed of one representative from

each participating country or organization heads the overall programme. The management of

individual Tasks (research projects / activity areas) is the responsibility of Operating Agents.

Information about the active and completed tasks can be found on the IEA-PVPS website

www.iea-pvps.org .

Task 9, Deploying PV services for regional development, addresses the use of PV as a means to

enhance regional development – both for rural electrification applications and more broadly in

the urban environment. The Task achieves this by developing partnerships with appropriate

regional and national organizations plus funding agencies, and carrying out work on specific

applications of interest and relevant business models.

This paper, developed by Task 9, addresses the problem of high upfront costs of PV technology

which remains one of the key challenges that needs to be overcome to achieve a faster and

greater deployment of PV technology, particularly in emerging regions. A number of selected case

studies of innovative business models and financing mechanisms are presented, with the

intention to provide the reader with ideas about how the issue could be addressed.

http://www.iea-pvps.org/

3

Acknowledgements

This paper received valuable contributions from IEA-PVPS Task 9 members and other

international experts. Many thanks to:

Anjali Shanker, Silvia Puddu, Taric de Villers, Grégoire Lena (IED France), Peter Ahm (PA

Energy, Denmark), Alex Arter (Entec AG, Switzerland), Erik Lysen (LYSEN Consulting Engineer

Netherlands), Jean-Christian Marcel (MJC PV Consulting, France), Caroline Bastholm (Dalarna

University, Sweden), Masanori Ishimura (NEDO, Japan), Friedemar Schreiber, Adnan Al-Akori,

Georg Bopp (Fraunhofer Institute, Germany), Vicente Salas (Universidad Carlos III de Madrid,

Spain), Bozhil Kondev (GIZ, Germany) for sharing their valuable practical experience with

business models, for reviewing this paper, and for participating without grumbling in an

unannounced work session on business models.

A very special thanks is due to the representatives of the case study companies for their

readiness to share details about business models in interviews, and for reviewing and editing

case studies:

Kieran Reynolds, VP Operations, Azuri Technologies Ltd., United Kingdom

R. Mikkhelsen, Director Global Partnerships, Bettina Brynaa Nielsen, Marketing

Manager – Lifelink, Grundfos LIFELINK, Denmark

Sammy Waite: Business Development Manager, Chloride Exide Kenya Ldt., Kenya

Sandeep Giri, CEO Gham Power, Nepal

Mr. Manu, Site Manager at Tirunelveli Solar Park, SunEdison, India

4

Abstract

Like other renewable energy technologies, photovoltaic (PV) systems face the problem of high

upfront costs. This problem is particularly pronounced in emerging economies where limited

purchasing power and a lack of suitable financial products constitute additional obstacles for a

broader dissemination of PV technology. The present publication is a collection of case studies of

business models and financing mechanisms which show possible ways how such obstacles can be

addressed and overcome in innovative ways.

Different business models are presented, both, from grid-connected as well as off-grid areas

ranging from large scale systems to pico-sized systems being installed in urban as well as rural

areas. Despite the striking differences between the presented PV systems, it is shown that

business models play an important role in all cases. The case studies underline that the

development of a business model is not a simple task but often requires long preparation time

and a lot of devotion to details. Business models evolve over time and there is a lot of creativity

required from entrepreneurs to develop suitable packages for PV products. Six interesting

packages are presented as case studies.

5

Executive Summary

Like most renewable energies PV technology faces the problem of

high upfront cost. This problem is particularly pronounced in

emerging regions where purchasing power is low and most people do

not have access to commercial financing. Under such conditions, PV

technology can only spread when innovative business models and

financing mechanisms are available, which are adapted to the specific

conditions in these regions.

The paper intends to provide the reader with ideas about how the

issue could be addressed. Six case studies of innovative business

models and financing mechanisms are presented, ranging from pico-

sized systems to large-scale PV plants including grid-connected as

well as off-grid PV systems:

1) A pay-as-you-go business model, developed by Azuri Techologies,

UK, shows how thousands of low-income households in Africa can get

access to affordable lighting and phone charging systems.

Two examples of large manufacturing companies, (2) Grundfos,

Denmark, and (3) Chloride Exide, Kenya, show different ways to

spread PV technology and services to new application areas using

existing distribution networks and service partners.

4) A business model developed by Mosaic, United States, shows how

crowdfunding can be used to offer individual people investment

opportunities in PV installations.

5) Gham Power, Nepal, has developed a business model for urban

hybrid micro-grids as an answer to unreliable electricity supplies from

the public grid.

6) A business model from SunEdison, India, offers individuals the

possibility to own a power plant in the MWp range, allowing them to

hedge against raising electricity tariffs.

The case studies illustrate that the generation of successful business

models is not an easy task that can be done in just a couple of days.

The specific regulatory, economic, social and cultural situation in a

region has to be well understood and addressed in business models.

Successful business models usually include a financing component.

This is particularly important for the mass market in rural areas of

emerging regions where most people do not have access to

commercial financing, or are overwhelmed in dealing with loan

applications. Furthermore, to be attractive for potential customers,

business models must appear to be clear and simple, even if

sophisticated processes run below the surface.

PV technology faces

the problem of high

upfront cost. This

problem is

particularly

pronounced in

emerging regions

where purchasing

power is low and

most people do not

have access to

commercial

financing.

Business models

must appear to be

clear and simple,

even if sophisticated

processes run below

the surface.

6

1 Introduction

PV technology requires substantial upfront capital expenditures. Declining prices for PV panels over

the past years have mitigated this problem to some extent but the basic problem remains: Virtually

the whole energy costs for the lifespan of a PV system must be prepaid at the time of an investment

which reaps the benefits only over the next 10-20 years. These high upfront costs are and will remain

one of the main challenges which need to be overcome to achieve a faster and greater deployment

of PV technology, particularly in emerging and developping regions where large-scale subsidy

programs are usually absent.

Task 9 has addressed this problem in a separate Subtask focusing on innovative business models and

financing mechanisms. The rational of this Subtask is based on the insight that the driving forces in

the energy sector are not the technologies but the business models. Innovative business models and

financing mechanisms are therefore needed to achieve a greater deployment of PV technology in

emerging regions. A number of interesting and successful business models, such as leasing, PPA

systems, and solar mortgage, have recently been developed in industrialized countries mainly related

to grid-connected PV systems. While these business models may be replicated in grid-connected

areas of developing regions, different models are needed in off-grid areas.

Task 9 does not aim to develop new business models on its own but to systematically collect

information about successful business models, evaluate the experiences made with these models,

and to disseminate information on new and innovative business models as economically sustainable

alternatives for PV deployment in emerging regions.).

1.1 Curre t State of Research

A variety of reports and papers were published in recent years dealing with new business models for

renewable energies and green growth. The bulk of this literature is focusing on the situation in OECD

countries (FORA, 2010; Nordic Innovation, 2012; OECD, 2013). The findings and recommendations of

these recent papers are also relevant for emerging regions but they cannot simply be transferred to

these regions where considerably different socio-economic and political frameworks exist.

The specific situation of emerging regions is addressed in a publication of the UN Global Compact

: Poli Measu es to “uppo t I lusive a d G ee Busi ess Models . The pape e phasizes the need to include the poor as consumers or producers as well as aspects of green business in

business models. Two of twelve case studies are related to Solar Home Systems. However, their

description is rather general and not sufficient to draw conclusions regarding recommended

practices.

From 2002 to 2004, Task 9 has published valuable recommended practice guides about business

models and financing mechanisms, among others. The guides are mainly related to the

implementation of solar home systems in developing countries. While the key recommendations

from those publications are still relevant today, the scope of PV deployment has considerably

broadened over the past ten years. In the off-grid areas, the focus has shifted from electricity

generation to PV powered services, e.g. in the field of water supply, irrigation, health, and productive

uses. In the urban environment, building integrated PV has become more important.

7

The present paper is a first step in an attempt to systematically collect and analyze a range of

experiences with business models and financing mechanisms whi h a e add essi g toda s challenges. The paper is intended to provide an overview about different business models in the

form of case studies without the aim to express recommendations related to the suitability of these

models. The intention is to convey ideas how such as business models can be designed. It is hoped

that the examples presented will have a stimulating effect on energy entrepreneurs and encourage

them to further develop the models and to adapt them for their own purpose.

1.2 Methods of Preparatio a d A al sis of Case Studies The case studies were identified based on a comprehensive literature/internet research. From a

broad range of documents, twelve business models were identified and studied (see list below). For

six of these business models (printed in bold) a detailed case study was prepared. The six business

models were selected on the grounds of their innovativeness and the readiness of company

representatives to give an interview. For each case a specific questionnaire was developed and a

telephone interview conducted. Based on this information the case studies were formulated.

1. SELCO – India – Solar lighting for vulnerable, poor and remote populations through joint

liability groups, restructuring crop loans, and solar light agents.

2. Chloride Exide – Kenya – Achieving PV Sales by using an Existing Distribution Network.

3. Grundfos Lifelink – Denmark – Innovative PV powered water supply system in off-grid

areas.

4. Sundaya – Indonesia – Modular Pico PV Systems.

5. Grameen Shakti – Bangladesh – 700 Technical Centres Sell, Install and Maintain Small PV

systems.

6. SunEdison – India – Medium-scale PV Investments as a Hedge against Raising Electricity

Tariffs.

7. Mera Gao Power – India – Microgrids as a business opportunity for rural entrepreneurs.

8. AZURI Technologies – United Kingdom – Pay-As-You-Go Model to Make PV Affordable for

Low Income Households in Africa.

9. Greenleads – Kenya – Green electricity services with low risk for clients.

10. Gham Power – Nepal – Urban Hybrid PV Microgrids as an Answer to Load-Shedding.

11. OneRoof Energy – United States – PV leases as part of new roofing or re-roofing projects.

12. MOSAIC – United States – Crowdfunding model to solar energy installations.

The Business Model Canvas was selected as a method to analyze the case studies. This method was

recently developed at EPFL Lausanne by Osterwalder et. al. (2010). Figure 1 shows the Business

Model Ca vas. The tool ese les a pai te s a vas – preformatted with nine blocks – which can be

used to draw new or existing business models.1

1 The easiest way to get familiar with these blocks is by watching a two-minute video under the link:

http://www.youtube.com/watch?v=QoAOzMTLP5s.

8


The analysis of the case studies was done jointly by the Task 9 Experts during a specially designed

working session. After a brief introduction on the subject, the Experts were divided into different

groups. Each group had to choose a business model and then map this model in the Business Model

Canvas. After one hour, the groups came together again and presented and explained the business

model they worked on followed by a plenum discussion.

The colourful results of the BM canvas method should not be regarded as results to be published.

Much more important is the process and the discussions that come up when working with the

canvas. It becomes clear quite quickly which Business Models are already well-elaborated and which

still need to be further developed. In particular, it became also clear that there are a multitude of

detailed questions to be answered in order to develop a business model, and that this requires a

fairly large amount of work.

9

The business model canvas was found a good tool to develop and analyze business models in a

structured way. The method is good to clarify a vision and it forces people to expand their thoughts.

It is a hands-on tool that fosters understanding, discussion, creativity, and analysis. It is important to

mention that the business modal canvas method is a tool to conceptualize a business and does not

replace the other planning steps required to develop a business plan such as market and financial

analysis for example.

In Chapter 2 to 7 the six case studies are presented. Chapter 8 provides a short synthesis of the key

findings made when analyzing the case studies with the business model canvas.

10

2 Pay-As-You-Go Business Model to make PV

Affordable for Low-Income Households

2.1 Case Stud Azuri Tech ologies

Background

More than 1.3 billion people still do not have access to electricity. The situation is worst in rural Sub-

Saharan Africa with a rural electrification rate of only 14% (WEO-2011). The high up-front costs of PV

technology have been the major factor prohibiting the wider uptake of small solar systems in these

regions. Prices of small solar home systems for off-grid homes have fallen rapidly over the past

decade. Good quality two-light systems are now available for under US$70 down from over US$200

some years ago. However, this price is still too high for most off-grid households to pay upfront. To

overcome this, the U.K.-based startup, Azuri, applies an innovative model combining mobile phone

and solar technology to provide solar-as-a-service, enabling users to pay for the usage of the solar

system through the purchasing of weekly scratchcards.

The Technology

The Indigo Duo solar home system is the basic starter kit offered by Azuri. It consists of a 2.5 Wp PV

module and a long-life 3.3 Ah Lithium Iron Phosphate battery and is

supplied with two 60-lumen LED lights. The battery and Indigo

controller are housed in a bright yellow case with a keypad on the

front, along with sockets for the PV module and lights and a USB

socket for phone charging. The system meets Lighting Global quality

standards and Lighting Africa performance targets. Prototypes of

the Indigo Duo products were produced by Azuri. For mass

production, Azuri has partnered with the Swiss-based company

ESCATEC who have helped commercialise the product by manufacturing the units in large volumes in

its own factory in Malaysia.

How does it work?

The Indigo pay-as-you-go controller allows power to the sockets only when the system has been

unlocked by entering a valid code on the keypad. The code is

obtained by sending a top-up number along with the serial number

of the Indigo unit by SMS to an Azuri in-country gateway that relays

the information to the Azuri central server. A return SMS then

provides the code. Top-ups are either physical cards bought for

cash, or codes bought by mobile phone, using a mobile money

system. They can be purchased for one-week or four-week

activation.

How much does it cost?

Users pay an initial fee of about US$10 to have the Indigo Duo system installed in their home, and in

average around US$1.50-$2.00, dependent on the exact territory, for each weekly top-up. In Africa,

11

customers can save up to 50% of the money previously spent to operate kerosene lamps.

Additionally, they can save many hours of walking to the market for mobile phone charging. After

around 80 payments, again dependent on the exact territory, users can pay a fee of about US$10 to

have their system permanently unlocked. The specific economic model depends on the local territory

and is influenced by local taxes, duties and market forces.

The Business Model

Azuri does not sell its products directly to end-users and does not intend to develop its own

distribution channels. Hardware and service – in the form of top up codes – are sold to distribution

partners in developing countries. These distributors are usually locally based businesses that are well

established in the local market and have a distribution network reaching out to remote off-grid

areas. The distributors are responsible for installing systems, selling top ups and providing after-sales

services in their area of coverage. Azuri provides them with detailed specifications on how systems

should be marketed and installed, the level of support to be provided and detailed reporting on the

customer behaviour. Distributors are also provided with distinctive brand guides for shops and

advertising.

The cloud-based Azuri database stores the details of each customer and their Indigo system. Each top

up sold to a distributor is recorded and the date of redemption and the system on which it is used is

automatically added to the database. Thus, both Azuri head office and the local distributor can keep

track of customers, allowing problems (and irregularities) to be rapidly identified. Azuri has spent a

lot of resources in the development of this administrative system, which is a crucial piece of

infrastructure required to manage large numbers of end-users.

The ownership of the hardware remains with Azuri or the distributor, depending on the exact

commercial relationship between Azuri and the distributor, until the systems have been permanently

unlocked. There is no loan agreement requiring customers to pay a certain number of installments,

but if a customer stops buying top ups this will be detected in the database and eventually the unit

will be taken away and redeployed.

From the viewpoint of an end-user, the top up system is similar to a hire purchase. After around

eighty installments they can permanently unlock and own the system without having any further

payment obligation. Azuri, on the other hand, does not consider the business model as a retail of the

hardware but energy service provision, due

to the ongoing customer management. The

hardware is seen as something which

enables the service to be delivered. The

payments made through the purchase of the

top ups do not only cover the costs of the

hardware but also the costs of operating the

system, installation and after-sales services,

as well as taxes and duties. Incomes and

profits are generated through a carefully

designed margin structure on the top up sales allowing Azuri and the distribution channels to make

enough money to make the business worthwhile. Azuri emphasises that the business model is for

profit, not for profiteering. This is also the reason why they included the possibility to unlock the

system because they find it unethical to charge the people forever for energy provision from a

relatively small system.

Requirement of a large customer base

The business model is designed for a mass market with small margins from each top up sale. To reach

the profit zone, Azuri requires selling tens of thousands of systems to end-users. The fact that end-

users can permanently unlock their systems means that Azuri has to keep on acquiring new

customers all the time. Azuri is optimistic that the market is large enough to continuously expand

12

their customer base since there are still more than 600 million people without access to electricity in

Sub-Saharan Africa.

Those who have reached the point of unlocking their systems, have the possibility to continue their

business relationship with Azuri. Azuri offers the option to upgrade the customers system for a

larger, more powerful unit, for example with more lamps and a radio, and the customer can continue

to use the pay as you go top up payment route. Like everywhere in the world, people in off-grid

Africa do not only want two lights and mobile phone charging in their house but would also like to

have a radio or a TV and so on. As long as Azuri can maintain a high service quality, there is a good

chance that first time customers remain loyal for a long period, taking progressive steps up to larger

systems that provide more functionality. This energy escalator offers a route to not only more power,

but also the devices which can maximize the impact of the increased power.

Financing

From August 2012 to March 2014, Azuri has around 30,000 units in the distribution channel, with

a ou d 5, u its i stalled a d ope atio al i usto e s houses. Azu i is s ali g up ui kl a d plans to distribute tens of thousands of starter kits in the near future. The company funds the

business through a variety of routes including equity, working capital loans and loans from donors. Of

course, the financing of such large amounts of credit sales is the main challenge for Azuri, and this

challenge is increasing with growing sales.

The company

The Indigo technology was originally developed by the Cambridge spin-off company, Eight19. Azuri

Technologies was launched in August 2012 as a spinoff from Eight19 to promote the Indigo

technology at scale in Africa and elsewhere in the developing world. Azuri currently has 15 members

of staff.

The Indigo pay-as-you-go model has won the International Ashden Award 2013 for Innovation. Azuri

was elected among the 'world's top 10 most innovative companies in energy' 2014 by Fast Company.

Competitors

Several African companies compete in the same market. Most notable to mention is Kenya's leading

mobile operator Safaricom. After Safaricom has partnered with the mobile technology company M-

Kopa, their customers can purchase solar home lighting solutions on hire purchase via the mobile

money transfer service M-Pesa. To access the solar home system, supplied by d.light , su s i e s have to make a US$31 deposit and pay daily installments of US$0.50 via M-Pesa for one year.

(http://www.itwebafrica.com).

References:

-Ashden (2013): Case Study Azuri Technologies, Africa, www.ashden.org

-Fast Company webpage: http://www.fastcompany.com/most-innovative-companies/2014/industry/energy

-Phone Interview with Kieran Reynolds, VP Operations, March 25, 2014

-WEO-2011: World Energy Outlook. International Energy Agency (IEA).

http://www.itwebafrica.com/

http://www.ashden.org/

13

3 Increasing PV sales by supporting innovative

solutions for water supply

3.1 Case Stud – Gru dfos Lifeli k

Background

Over the past two decades, a remarkable number of 2.3 billion people have gained access to safe

water. However, there remain around 800 million people who still depend on water from unsafe

sources. Many of these people are living in off-grid areas of sub-Saharan Africa (United Nations,

2014). The notorious unsustainability of rural water supply infrastructure in Africa makes it a kind of

Sisyphus work to further reduce that number. Against this backdrop, Grundfos has developed a

solution which combines proven pump technology, PV panels and an automatic water dispenser with

revenue collection system. The solution termed Grundfos Lifelink addresses the sustainability

problems in water supply for low income communities in the developing countries.

HOW DOES IT WORK?

The Technology

Grundfos Lifelink solutions can be designed to match small or large water schemes in both rural and

urban areas. The foundation of each Lifelink system is the automatic water dispenser unit with an

integrated system for revenue collection and water management.

For the 40 demonstration projects in Kenya, the

Lifelink system consists of a submersible pump

which is operated by PV panels. Safe water is

pumped from a borehole into an overhead tank.

System sizes range from 50Wp to 9.2kWp with

pumping heads up to 200m.

The PV panels also power the dispenser unit

where consumers can tap water using a water

card with water credits.

Professional Service and Support

The water revenues collected from the Lifelink systems can be used to cover the costs of

professional service and maintenance of the water projects. A network of local Grundfos service

partners with the required spare parts in stock will

support the water service providers in keeping the water

systems up and running. Various service options, from

service contracts to training sessions are available to the

water service companies, NGOs, or community-based

associations. The common feature is an online water

management platform which allows the remote

monitoring of each system. Each dispenser unit feeds the

platform with operational data via the GSM network. A

14

system failure can immediately be detected and repaired by a service team. The actual water

consumption at each Lifelink installation can also be followed via the same system.

Revenue collection system

A key challenge to sustainability in water supply is the financial

viability. Lifelink solutions supports continuous revenue streams

thanks to the integrated revenue collection system. Users tap

water from the dispenser by using a WaterCard with pre-paid

credits. In Kenya, the water users transfer water credits to their

WaterCards through M-Pesa. M-Pesa is the successful mobile

phone payment system developed by Safaricom and now available

in various African countries (and recently also in India and Europe).

This cash free pre-paid system eliminates the problem of fund

mismanagement as funds can be directly transferred into a bank account reserved to cover for

operation and maintenance costs.

PPP BASED BUSINESS MODEL IN KENYA

Since 2009, Grundfos has implemented more than 40 demonstration projects in Kenya based on the

Lifelink solution and in collaboration with partners across various sectors. The results demonstrate a

new model for financially, self-sustaining water supply projects where user fees pay for service

contracts with the local service provider.

Under this business model based on a public private partnership approach, the public partner (donor

organization) has funded the initial investment on a grant basis and provided community

development and training where needed. The private partner (Grundfos in Kenya) has installed the

systems and provides monitoring and maintenance services on a commercial basis.

The demonstration projects in Kenya are implemented in the arid and semi-arid regions of Kenya,

where surface water is scarce most of the year. They provide a reliable access to safe water for

app o i atel people.

Water Usage Data as Value Proposition

Each Grundfos Lifelink system is systematically collecting water usage

data which is transferred wireless to a central server accessible to all

partners. This data collection functionality is a key selling point

making the Lifelink system interesting to donor agencies because

reliable water use data are very difficult to obtain in rural Africa.

Outlook

Having proven the concept of the Lifelink solutions, Grundfos is now paving the way for water service

providers in prioritized sub-Saharan African countries to invest in the technology. To lower the

investment cost, Grundfos has developed a new dispenser unit which is competitively priced. The

new dispenser called AQtap will be available from June 2015. The significant cost reduction means

that commercial business models will become increasingly feasible in the future. It also means that

more dispenser units can be installed bringing water closer to the people and thus increasing the

revenues from water sales.

15

Combining multiple dispenser units in mini grids requires the setting up of additional PV generation

capacity either at small single points or larger PV arrays feeding a mini electricity grid. As we say, "the

appetite comes with the eating",

the installation of PV powered

water supplies is triggering

demand for additional electricity

services. In Tanzania, Grundfos is

already involved in a pilot project

where the PV array has been

over-designed to also feed a mini

grid. This will give momentum to

the development of new

innovative business models in

the future.

References:

-United Nations (2014): The Millennium Development Goals Report 2014.

-World Business Council for Sustainable Development (2011): Grundfos Lifelink – Sustainable & transparent drinking water

solutions for the developing world.

-Phone interview with R. Mikkhelsen Director, Global Partnerships Grundfos Lifelink, from Sept. 12, 2014.

-Pictures from: http://www.grundfos.com and http://www.grundfoslifelink.com

http://www.grundfos.com/

http://www.grundfoslifelink.com/

16

4 Achieving PV Sales by Using Existing Distribution

Networks

4.1 Case Stud Chloride E ide

Introduction

Chloride Exide Ltd was first established in Kenya in 1963 as part of the UK-based Chloride Group PLC

to retail and distribute Chloride Exide batteries. In the 1980s the Chloride Group sold its shares and

Chloride Exide became a fully Kenyan-owned company. In the following years, the product range was

diversified. Today, Choride Exide is the largest battery, solar PV, and backup systems operation in

East Africa with three sister companies in Tanzania, Uganda and Rwanda. They have over 20 years of

experience in PV installations which contribute 40% of the company turnover.

The product

The products most often sold are solar home systems for rural households in the pico PV range whith

powers below 30 Wp. A smaller market exists for systems for the 'middle-class' in the range of 50 to

100 Wp. A big customer is the government who is doing a numerous PV projects for schools, hotels,

and other governmental institutions. Some of the largest projects were solar backup systems in hotel

chains and for Telecommunication companies. In 2013, the total capacity of systems installed was in

the range of 700kWp.

Although the grid is not stable, there is little demand for PV backup system in urban areas, according

to Chloride Exide. Residents in urban areas usually opt for a diesel generator or for a battery backup

system which is charged when the grid is available and not via PV panels.

The business model

The business model of Chloride Exide is not revolutionary innovative. Their success is based on the

fact that they are making best use of existing resources and infrastructure from the battery business,

in particular their vast distribution system as well as their reputation for quality products. Chloride

Exide has 13 branches across Kenya, 3 in Tanzania, 1 in Uganda and 1 in Rwanda. Each branch is fully

equipped with spare parts and trained technicians who can install systems. Furthermore, they have

over 500 dealers countrywide who sell their products even in remote areas. Chloride Exide does only

direct sales. Those people who would like to pay in installments are referred to banks or

microfinancing institutions.

Lessons learned, Success factors and outlook

An important problem in the PV market is that end-users are often not well-advised regarding system

design. Many distributors are only trying to sell as much as people can afford without looking at their

power requirements. The results are poorly designed PV systems that frequently fail after short

operation period. This has created a negative image about PV products among some people.

Since a couple of months the PV sector is thriving in Kenya. Most important was a governmental

initiative in 2013 revoking import duties and VAT on PV products.

References

-Phone Interview with Sammy Waite: Business Development Manager, Chloride Exide, 19.3.2014

-http://chlorideexide.com

17

5 Peer-to-Peer Financing of Renewable Energy

through Crowdfunding

5.1 Case Stud Mosaic, U ited States

Introduction

Mosaic is an online solar marketplace connecting investors with solar projects in need of financing.

Mosaic is a US-company based in Oakland. The platform is currently focusing on projects in the

United States. The financing mechanism is discussed here as it has potential to be developed and

may also be considered as a possible solution for project financing in emerging regions.

The Product

Mosaic is one of the first platforms where people can directly invest in tangible projects. Projects are

listed on Mosaic's website 'joinmosaic.com'. Interested people can create an account which allows

them to browse through a list of investment projects. Each project is described in a Prospectus that is

prepared in accordance with the Securities and Exchange Commission's (SEC) disclosure

requirements and contains all of the important details. Once the projects are operational and

generate revenues the investors are

being paid back their capital over a

certain period plus interest. Interests

achieved are in the range of 4.5 to

6.5% annually. The minimum

investment is US$25.The project sizes

range from less than 50kW to more

than 1MW. The information on the

webpage informs about the interest

people can get and the term of investment. According to Billy Parish, Founder and President of

Mosaic, "people enjoy that they can invest in projects that they can see, which is giving them a good

feeling to have invested their money in something useful and environmentally friendly. If they want,

they can even visit the locations. Many investors are excited about the transparency, tangibility and

social and environmental impact."

The business model

The Mosaic team spent several years to develop the business model and work with the regulators to

structure the model in the right way until they got the approval to offer US$ 100 million worth of

solar power investments. The company functions like a virtual renewable energy bank, soliciting

investments for solar projects and making loans to be paid back, typically, over about 10 years.

Investments can be made by all 'accredited investors'2 and people of the states of California and New

York above the age of 18. Mosaic is one of the first companies in the US that has designed a model

where not only accredited investors can participate.

2 In the aftermath of the Great Depression, the US Government tightened the regulation of the stock market among others

to protect individual investors from fraudulent practices. Under the Securities Act of 1933, a company that offers or sells its

securities must register the securities with the Securities and Exchange Commission (SEC) or find an exemption from the

registration requirements. Offerings to accredited investors are exempt from the registration requirements on the theory

that accredited investors are sophisticated enough to protect their own interests. Accredited investors are wealthy

individuals as well as certain types of businesses and organizations.

18

Mosaic is taking an upfront fee of 2 to 3% of the loan they are making. And then they charge an

annual fee of 1% on the principal of the investment, meaning if they make a loan for 7%, they are

offering it on the platform for 6% net of fees. So what investors see on their webpage is the real rate

of return.

The solar projects funded typically consist of rooftop or ground-mounted installations that either (a)

generate on-site electric power for small businesses or other organizations or (b) generate power for

sale to an electric utility o othe off-take .

Mosaic is providing the loans to Special Purpose Entities (SPE), controlled by local developers. The

SPE are the formal owners of the of the solar power infrastructure.

The SPE typically repays the loan primarily out of cash flow generated by the sale of electricity to the

solar customer or off-taker and, in many cases, the sale of Solar Renewable Energy Certificates

(SRECs) to local utilities or other purchasers.

The loans are secured by the assets of the project owned by the SPE as well its contractual rights with

respect to the sale of electricity or SRECs.

The 'roof provider' has the option to buy out the SPE at the end of the lease agreement and thus,

own and operate the infrastructure as long as the system lasts.

The website joinmosaic.com provides very detailed descriptions of the projects, the infrastructure,

the expected performance, the financial flows, and the fees obtained by Mosaic.

Although Mosaic is carefully assessing the solar projects and selects those with least risks,

crowdfunding investments include higher risks than standard investments in bond markets. As shown

in the diagram above, investors could suffer losses by, both, a default by the solar customer/SPA as

well as the Mosaic Platform. Their investment is furthermore bound for 25 years and there is no

secondary market where investors can sell their bonds prior to maturity (for more details see Berger,

2014).

Company development

Mosaic was initially launched in 2010. In its seed rounds, the company raised $3.4 million from

venture capitalists. In 2012, Mosaic received a $2 million grant from the Department of Energy.

Lending operations were launched in 2012, Mosaic has crowdfunded around 8 million in investments

for various commercial solar projects.

In addition to the commercial projects, Mosaic has recently launched Ho e “ola Loa s fo residential roof top projects. Mosaic strongly believes that the lease model with third party

ownership will soon be passé and that residential customers prefer a loan model with personal

19

ownership. To make such loans attractive, Mosaic offers zero down payment and a repayment period

of ea s. Mosai s goal is to offer the simplicity of a lease with the benefits of ownership.

References:

-joinmosaic.com

-Offering Memorandum of $246,500 Solar Power Notes from October 1, 2013, https://s3.amazonaws.com/mosaic-

static/pdf/note-series/33/OM+Smotherman+Rule+506+20131001+v.2+FINAL.pdf

-Interview with Billy Parish, Founder and President of Mosaic

http://www.forbes.com/sites/devinthorpe/2013/09/04/mosaic-uses-crowdfunding-to-finance-solar-projects-learn-how-to-

participate/

-Berger, Louis (2014): Understanding the Risks of Crowdsourced Clean Energy Investing.

http://www.greentechmedia.com/articles/read/clean-energy-investing-in-a-crowdfunded-world

https://s3.amazonaws.com/mosaic-static/pdf/note-series/33/OM+Smotherman+Rule+506+20131001+v.2+FINAL.pdf

https://s3.amazonaws.com/mosaic-static/pdf/note-series/33/OM+Smotherman+Rule+506+20131001+v.2+FINAL.pdf

http://www.forbes.com/sites/devinthorpe/2013/09/04/mosaic-uses-crowdfunding-to-finance-solar-projects-learn-how-to-participate/

http://www.forbes.com/sites/devinthorpe/2013/09/04/mosaic-uses-crowdfunding-to-finance-solar-projects-learn-how-to-participate/


20

6 Urban hybrid PV business microgrids as an answer

to load-shedding

6.1 Case Stud Gha Power, Nepal

Introduction

The electrical grid in Nepal reaches out to 76% of the population. However, having access to the grid

does not mean that these people have always access to electricity. The country's installed generation

capacity is in the range of 800 MW but to satisfy the electricity demand it would require 500 MW

more. This is resulting in massive load-shedding for an average of 12 hours per day and more.3 There

are new hydropower projects in the pipeline, but historically they have had a pretty dismal track

record for timely completion. Even the state utility NEA admits that there is likely no end to load-

shedding in next 5 to 10 years.

Many businesses and organizations rely on diesel generators for backup (530 MW of electricity is

generated from diesel), but suffer from increasingly high diesel costs (prices tripled in last 10 years to

US$1/liter which may double again after on site transport) and frequent fuel shortages.

In 2010, when load shedding hours for the first time went beyond 12 hours a day, Gham Power was

established with a vision to provide PV solutions to curb diesel use and reduce the overall cost of

self-generated electricity. The company provides complete solar project development, EPC and O&M

services to businesses, rural communities and residences. As of 2013, Gham Power installed 334 kW

of PV sytems for 438 clients including urban industries, rural communities/organizations, and many

small businesses and households.

The focus of this case study is on products and services related to microgrids which were recently

developed by Gham power for urban as well as rural areas.

The Product

Starting in 2013, Gham Power started

developing larger Business Microgrid projects

that focus more on businesses incurring huge

diesel generator costs. PV is integrated with

the existing diesel grid, with or without battery

storage. The design of the hybrid grid is done

by the engineers of Gham Power in Nepal.

Currently, Gham Power has developed a 4 MW

pipeline of Business Microgrid projects ready

to be funded. This includes about 30

organizations like hospitals, banks, hotels, and

factories that are incurring huge costs in

running their diesel generators.

3 for a load shedding schedule see http://www.myrepublica.com/portal/index.php?action=pages&page_id=8

Rooftop solar array installed by Gham Power at Maiti Nepal.

21

The business model

At the core of the business model developed by Gham Power there is a holding company which

receives funds from local and international investors. The holding company acts as the investor and

becomes the legal owner of the PV systems installed.

Gham power is in charge to identify project, develop the system design, obtain permits, prepare

contracts, construction of systems, and O&M of the system after commissioning.

The electricity consumers (businesses, village communities) are usually offered a lease-to-own model

where they have the option to purchase the system for a nominal amount at the end of the lease

term.

The lease period is usually 10-years and runs parallel to a bank loan from Nepal's Clean Energy

Development Bank (CEDB) which is the financing partner of Gham Power. CEDB finances max. 70% of

project costs, so 30% have to be provided by the holding company. The physical infrastructure is

accepted as collateral.

The lease payments are paid to the holding company which pays the interest of the bank loan, and

pays Gham Power one-time fees for project development, and EPC services.

For O&M, Gham Power is paid recurrent fees on an annual basis. Additional revenues can be created

by selling carbon credits. The holding company envisages a net return in the usual range of Impact

Investment Funds (10 to 15%).

References:

-Phone interview with Sandeep Giri, CEO Gham Power, March 27, 2014

-http://nepalitimes.com/news.php?id=19353#.Uyf7N6SBXCn

-http://ghampower.com

http://nepalitimes.com/news.php?id=19353#.Uyf7N6SBXCn

http://ghampower.com/

22

7 Medium-scale PV investments as a hedge against

raising electricity tariffs

7.1 Case Stud Su Ediso , I dia

Due to rapid economic expansion, India has one of the world's fastest growing energy markets and

suffers from a growing energy deficit. Over the past years, power tariffs have grown on average by

5% per year and the trend is expected to continue. India's energy policy is focusing on developing

alternative sources of energy including solar and wind energy. The government plans to add about

20GW of solar power capacity by 2022. For this purpose, a set of incentives were introduced by the

federal and state governments, consisting of investment subsidies, generation based incentives, tax

incentives, and quota obligations.

Based on selected incentives, SunEdison India has developed a business model which is designed to

help commercial and industrial businesses to hedge against raising electricity tariffs by investing in

their own solar park without having to become solar experts. The model is being applied for the first

time in the 18 MW Tirunelveli solar power plant in Tamil Nadu which started full-time operations in

February 2014. SunEdison India selected the site, obtained permits, designed and built the solar park.

The model is not based on feed-in tariffs but Accelerated Depreciation Benefits (tax incentive) and

India's Open Access program (quota obligations). The Accelerated Depreciation Benefit allows

businesses in India to receive 100% depreciation on solar assets in the first year after purchase. The

Open Access program allows developers to sell Renewable Energy Credits to large energy consumers

with Renewable Purchase Obligations. Businesses that purchase part of the Tirunelveli Solar Park can

typically expect payback of their equity investment as a tax credit within the first year.

The park has a capacity of 18 MWp which is split into 12 blocks @ 0.75MWp and 9 blocks @ 1MWp.

These blocks can be purchased separately by investors. The AC-side of the park consisting of

inverters, meters, transmission lines, compound walls, security, and monitoring stations is already

fully installed and operational. The DC-side of the park is expanded piece-by-piece when investors

have signed up for a block. As of March 20, 2014 2.5MWp have been commissioned.

For the utility, each investor is treated like an individual power producer. SunEdison is managing the

whole park through its Renewable Operation Center (ROC), which provides global 24/7 asset

management, monitoring and reporting services. The model is therefore suitable for investors who

have no expertise in PV plant operation and also do not want to acquire that expertise.

The model is based on a kind of net-metering system. Since consumption and generation is taking

place at different locations it is not possible to use bidirectional meters in this case. For each block in

the power plant there is a meter measuring the electricity fed into the grid. SunEdison and the utility

do a joint meter reading to determine how much has been fed into the grid by each investor. Then

SunEdison raises an invoice to the utility on the investor's behalf and the utility subtracts this amount

from the total consumption in the electricity bill of each investor.

Besides tax incentives and the possibility to sell Renewable Energy Certificates (RECs), the model is

interesting for investors because it locks in electricity generation cost over the projects life-span of

around 25 years. The generation costs of the solar park are already close to grid-parity. This means

that during the initial years an investor does neither make nor lose money by selling electricity to the

utility (without considering income from RECs). But the investors' energy cost will remain constant

while public electricity tariffs are expected to increase significantly over the coming years.

23

Sunedison has the role of a renewable energy service provider. Their revenue model in the case of

the Tirunelveli solar park consist of a one-time margin for the design and development of the solar

park and recurring annual payments for asset management and maintenance services.

According to SunEdison, there are many potential investors interested in the model, particular

industrial and commercial entities. Besides the financial incentives, increasing power tariffs is of

major concern and many want to have captive power generation. The Tirunelveli solar park

addresses their needs by offering suitably sized investment packages. It is planned to setup

additional solar parks in India based on this pilot model.

References:

-Phone Interview with Mr. Manu, Site Manager at Tirunelveli Solar Park, March 21,2014.

-The Wall Street Journal, February 25, 2014: Press Release: 18 MW Solar Park From SunEdison India Enables Tamil Nadu

Businesses To Reap Financial Benefits Of Utility-Scale Solar. http://online.wsj.com/article/PR-CO-20140225-907056.html#

-KPMG International (2012): Taxes and incentives for renewable energy. www.kpmg.com

http://online.wsj.com/article/PR-CO-20140225-907056.html

http://www.kpmg.com/

24

8 Analysis

As mentioned earlier, the objective of this paper is to present case studies and not to conduct an in-

depth analysis of business models. For the formulation of conclusions and recommendations, a more

detailed analysis would be needed based on a larger number of case studies. However, in the

workshop where the Task 9 experts mapped the business models using the business models canvas

method some general patterns were recognized which are worth to be presented in this concluding

chapter.

To compare different business models and to identify commonalities and differences it is useful to

categorize the different models. Suitable categories are the size of the PV systems, whether they are

installed in urban or rural areas as well as whether systems are grid-connected or not. Figure 2 shows

the result of the categorization in a pyramid diagram. The PV system sizes decrease from the top to

the bottom of the pyramid. The increasing width of the pyramid symbolizes that with decreasing

system size more systems need to be sold to make the business model economically successful. In

addition to this quantitative feature, the horizontal direction is also used in a qualitative way to

distinguish between applications in rural and urban areas. Furthermore, the PV system sizes

correlate with the feature grid-connected and off-grid which is also relevant for the discussion

below.

Figure 2 Categorization of Business Models Discussed

Small

Large

Rural Urban

Azuri

SunEdison

Mosaic

Chloride

Exide

Gham Power

Grundfos

Grid-

connected

Off-Grid

25

8.1 Characteristics of ediu to large s ste s

The business models of SunEdison and Mosaic focus on the installation of medium to large scale PV

systems. These systems are connected to the public electricity grid which requires specific legislation

to be in place defining the terms and conditions of grid-connection and payment mechanisms.

Business models of grid-connected systems have a major advantage compared to off-grid systems.

The buyer of the electricity is usually a public utility which is obliged by law to purchase the

renewable electricity from independent power producers. Thus, plants can be operated at maximum

load factors and the revenue streams can easily be forecasted.

The companies need to keep the cost of financing and operating expenses within limits to achieve

profitability. While the operating expenses are largely fixed cost related to system size, the challenge

is clearly to obtain financing at reasonable cost. The interest of people to invest in PV-plants varies

between regions and depends on different country specific factors and desires.

Desire for environmentally friendly investments

Where commercial financing or other solar financing mechanisms such as PPA, solar lease, solar

mortgage, home equity loans, etc. are not available, peer-to-peer funding through crowdfunding

platforms may be an option. The business model of crowdfunding is to help potential investors

finding interesting projects be it for ecological or social reasons. There is a growing desire among

individuals in western countries for directly investing in environmentally friendly or socially

responsible projects. Thus, in crowdfunding business models, the clients are the eco-conscious

investors while the PV projects are the means to attract clients. Besides MOSAIC who is only active in

the United States there are a number of other crowdfunding platforms such as Kiva.org that offer

investments in emerging regions, including investments in renewable energy.

Desire for energy security and cost predictability

In countries with high grid availability there are usually no concerns about energy security. However,

in emerging countries where utilities cannot match growing electricity demand energy security is a

major concern, in particular in the manufacturing and service sectors. Lengthy hours of load shedding

and growing electricity tariffs are producing a growing interest in renewable energy investments

from local entrepreneurs and public service organizations. In this case, the potential investors are the

electricity consumers themselves. Besides energy security these wealthy investors are looking for

investment opportunities which allow them to make best use of existing incentive schemes such as

appreciated depreciation, tax credits, renewable energy certificates, among others. SunEdison has

realized this desire and developed a specific business model for India combining financial

predictability and tax incentives.

The commonality of the business models of Mosaic and SunEdison is that they are selling investment

opportunities and not PV Hardware. In both cases the investors are not in charge of operating the

PV-Infrastructure but they can benefit from the revenues generated. Design, construction, operation

and maintenance is done by fully professional third party companies. Generating such business

models requires a profound understanding of the regulatory framework as well as the socio-

economic and cultural setting is a specific country. All legal requirements and available incentives

have to be studied in detail and integrated in the business models. Product guarantees, insurances,

investment laws, etc. have to be considered which often requires the cooperation with lawyers over

a long preparation periods.

The importance of the legal framework can be shown at the example of Gham Power which is also

addressing energy security concerns. Their medium-sized PV installations belong to the same

category as the above business models but are only operated in island mode as back-up during load

shedding hours. Thus, the electricity from the PV installation is not maximally utilized which, of

26

course, is of limited interest to investors. The lack of power generation capacity in Nepal would be a

perfect background to develop business models for grid-connected PV. However, in Nepal there is no

legal framework for grid-connected PV as of today. Chianese, et.al. (2014) estimate the short-term

potential of small rooftop systems across Nepal above 100 MWp, which could significantly contribute

to improve the power supply situation. For Gham Power and many other solar companies in Nepal,

the growth of their businesses will depend on the political will of their legislators to implement a

feed-in regulation for PV power.

8.2 Characteristics of s all s ste s

As shown in Figure 2, the smaller systems presented in the case studies are usually off-grid systems

to be used in non-electrified rural areas. These PV systems are not for general electricity generation

like in the case of large systems but have a specific purpose such as lighting, phone charging,

refrigeration, operating consumer electronics, or water pumping. These systems are usually DC

systems equipped with batteries to allow night operation.4

To allow companies to achieve profits, business models for smaller systems have to be designed for

the mass market. This means that the business models have to pay particular attention to the

distribution channels and marketing activities to reach a large customer base. It also means that the

hardware has to be well designed to allow easy installation by customers or local technicians with

limited technical skills. Ideally systems are easy to operate and largely maintenance free. If

maintenance is required, much attention has to be paid to put in place effective maintenance service

structures to allow sustainable operation. Appropriate financing mechanisms addressing the limited

purchasing power of rural dwellers are equally important to achieve high sales volumes.

Importance of marketing and distribution channels

The Indigo pico-PV systems provided by Azuri fulfil the above criteria. The hardware is designed as a

mass product with plug and play functionality and is virtually maintenance free. Azuri is using a pay-

as-you go business model with a well elaborated payment mechanism and affordable down payment

by customers. The main challenge faced by Azuri is that they cannot count on an existing distribution

system and must develop cooperation with local distributors and traders who are reselling and

installing systems. Establishing such a distribution network is a work intensive process that requires a

lot of time and patience. It is quite possible that the sales figures will be below expectations during

the initial years until the network reaches a certain size. Azu i s o petito , the mobile phone

company Safaricom who is selling similar products, has certainly a comparative advantage in terms of

marketing and distribution since they can rely on an existing distribution network, can directly

promote their product with mobile phone users, and can use their well-established mobile money

services M-Pesa for financial transactions.

The business model of Chloride Exide is selling hardware. Their core products are batteries for which

they have developed a vast distribution network. PV related hardware such as charge controllers,

panels and inverters are simply additional products sold via the stores in their distribution network.

The fact that PV related hardware sales make up 40% of the total sales underlines the importance of

a distribution network for successful business models. However, the installed capacity of 700kWp is

still rather small for a company like Chloride Exide. A limiting factor to achieve higher sales volumes

may be that products are only sold on a cash basis. Offering attractive financial services would allow

them to serve a broader customer segment which could boost PV sales significantly.

4 This does not apply for basic water supply systems where the solar energy is stored as potential energy in overhead water

tanks.

27

To increase outreach, Grundfos Lifelink has chosen a strategy of setting up local sales and service

partners in their focus markets to be able to work through their already existing organizations for

sales, service, spare parts etc. Some of these partners are already well-known partners to Grundfos.

To further support water service providers in developing financially sustainable business models,

Grundfos Lifelink also developed a new more competitively priced water dispenser suitable for

different applications, from grid-connected water kiosks in urban areas to rural community points

with decentralized water supply.

8.3 Co clusio s

The case studies presented and discussed in this publication have shown that the generation of

successful business models is not an easy task that can be done in just 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. Fine-tuning a business model can easily take

several months or even years.

To be attractive for potential customers, business models must appear to be clear and simple, even if

sophisticated processes run below the surface. Of course, customers should be given a guarantee

that the systems function properly.

Successful business models usually include a financing component. This is particularly important for

the mass market in rural areas of developing countries where most people do not have access to

commercial financing, or are overwhelmed in dealing with loan applications. Traditional trading

companies seem to have trouble with this fact. In contrast, younger firms with a concern for

economic and sustainable development seem to be able to manage this.

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.

28

9 References

Berger, Louis (2014): Understanding the Risks of Crowdsourced Clean Energy Investing.

http://www.greentechmedia.com/articles/read/clean-energy-investing-in-a-crowdfunded-

world

Chianese D., Rivola D., Shrestha J.N., Zahnd A. (2014): Impact of Small Decentralized PV Grid-Connected Plants

on Load Shedding In Nepal, 28th European PV Solar Energy Conference.

FORA (2010): Green Business in the Nordic Region: A key to Promote Sustainable Growth. FORA Green Paper.

IFC (2007) Selling Solar. Lessons from more than a decade of IFC's Experience. International Finance

Corporation, Whashington DC.

KPMG International (2012): Taxes and incentives for renewable energy. www.kpmg.com

Nordic Innovation (2012): Green Business Model Innovation – Conceptualisation, Next Practice and Policy.

Nordic Innovation Publication 2012:12, Oslo.

OECD (2013): Why New Business Models Matter for Green Growth. OECD Green Growth Papers 2013-01, OECD

Publishing, Paris.

Osterwalder A., Pigneur Y, Clark T. (2010): Business Model Generation : a handbook for visionaries, game

changers, and challengers. Hoboken : Wiley.

UN Global Compact (2012): Policy Measures to Support Inclusive and Green Business Models.

United Nations (2014): The Millennium Development Goals Report 2014.

WEO-2011: World Energy Outlook. International Energy Agency (IEA).

Note: Case study specific references are listed at the end of each cast study report.



http://www.kpmg.com/

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