Best Practices for Developing a Solar Home Lighting System Market

Abstract

Access to electricity and home lighting are considered essential for a higher quality of life. Approximately 1.4 billion people rely on fuel-based lighting for home illumination. Thus, it has been argued, a substantial market exists for affordable home lighting products. Solid state lighting is a technology that can be employed for sustainable home lighting. In this article the authors present experiences and lessons learned from projects that “Light Up The World” has supported to deliver solid state home lighting products to rural households in developing countries. Best practices for business developments to serve the home lighting market in Africa are also proposed.

KEYWORDS:

• best practices
• home lighting
• solar
• solid state lighting

Notes

In their seminal paper, it is suggested that the market potential at the “Bottom of the Pyramid” is significant across many sectors and that it may be tapped into with innovative business approaches. The notion of considerable profit potential from serving the low-income markets has prompted many multinational corporations to explore methods of serving and profiting from a myriad of new clients in untapped markets. Many manufacturers responded to this call to action by developing solar home lighting products.

Martinot et al. (2002) notes that many renewable energy projects fell out of favor in the late 1980s due to the low impact of programs. The technology developed the reputation of being a “second-class technology.”

LUTW is a Canadian-based nonprofit organization that focuses on the dissemination of efficient lighting system technologies such as the system described above. LUTW's approach is to respond to requests for technology transfer by evaluating existing energy needs and to design modular systems that are based on existing needs but have some capacity for growth.

This article examines opportunities and approaches for companies interested in serving the electricity market with a focus on home lighting. This article does not comment specifically on business opportunities for electricity to power larger household devices such as refrigerators, stereos, computers, televisions, etc.

Approximately 99.7% of those live in Sub-Saharan Africa, where electrification rates are about 28.5%. It is largely a rural issue, with 88% of households in Sub-Saharan Africa being without access to electricity located in small towns and villages.

Financially, the cost of kerosene represents a significant portion of household consumed goods. Expanding electricity access to eliminate the use of kerosene for lighting and to promote socioeconomic development objectives such as the Millennium Development Goals has been the focus of many government and international donor initiatives. Governments and donors spend between US$0.2 to US$1 billion globally per year on traditional rural electrification (Andrews & Crain, 2009). This equates to approximately 100 million households in spending on average of US$170 per year on fossil fuel sources of lighting (IFC, 2010).

This type of intervention is described as being carried out by Market Facilitating Organizations (MFOs) (Martinot et al., 2002). In essence, LUTW's mandate matches that of a market facilitating organization (MFO) although it does so independently of any particular supplier.

For example a typical SSHLS use by LUTW has two to three WLED lamps that are rated at approximately 1.3 W, a 5- to 10-W PV panel, a 12 V/7 Ah battery, and a dedicated charge controller. Each lamp emits approximately 100 lm of light and the system is capable of providing 4 to 5 hours of lighting (8 to 10 lamp hours in total).

Improvements in the product efficiency of manufacturing solar photovoltaic modules have been increasing significantly since the 1990s (Ahmed, 2004).

Course curricula cover a number of themes including appropriate technology (AT) and AT project implementation. Projects are implemented by a network of staff, all of whom are native to the region, who implement the education programs.

Cell phone towers were installed in the region in December 2009.

As of January 31, 2011, 33% of beneficiaries had completed their payments for the systems in full and 66% of the total balance outstanding for the SSHLS has been repaid.

A clear notion of the product or service that will be offered to the targeted population segment will help to frame the location and partner selection process.

The sequencing of identifying a strategic partner and identifying a location of market potential may be reversed and involve various steps of engagement and disengagement.

Partnership is seen to be a sensible option if the cost of establishing the organizational infrastructure and establishing the “goodwill” necessary to work in a community exceeds the cost of providing compensation for an already established organization to serve this role.

It is also important to consider annual solar insolation data and variation in lighting use by season.

A task specific portable light and general use portable light were tested in parallel in 25 homes for a 3-month period. A solar home lighting system was introduced in all 50 homes to assess the value perceptions of all three products and potential marketability.

Companies should research new products on the market and their supply network penetration. Originally, many donor programs for solar home systems began by offering large systems that often exceeded 100 W. They soon learned that large systems were too costly for rural households and lowered system sizes to more manageable sizes (20 to 50 W). Thus far, the market has responded with a focus on small systems (10 to 20 W), with households upgrading to systems with greater capacity when they are the financial position to do so (Martinot et al., 2002). The LUTW experience has been to focus on small-scale and more affordable lighting systems that meet existing energy needs.

Formal financial services are considered as those that are provided by a regulated financial entity.

Sustainability is achieved if equipment and services can be supplied to households in a manner that is both profitable to the business owner and affordable and of value to the purchaser.