Solar Energy Foundation technicians test a system in Ethiopia.

Building Local Economies with Solar

Jenny Binstock
Friday, August 24, 2012

Innovative Models Help Poor Communities Light Homes, Grow Businesses

Solar is the ultimate community-owned energy source. It’s widely available for purchase, and is relatively easy to install and maintain. Many of the many millions of people who lack access to electricity live in places where the sun shines steadily.“Solar is so important because the grid is never going to reach many remote communities because of expense, location, and so many other reasons,” says Laurie Guevara-Stone, a solar expert with decades of experience bringing solar to rural communities throughout Latin America. “Giving people who have never had it access to electricity is huge. Education levels and health care go up, microenterprise rises, and so on.”

The price of solar panels has dropped dramatically in recent years, and while affordability remains an issue for the poorest, solar is the most cost-effective way to electrify huge swaths of the world’s off-grid regions. Solar infrastructure is fairly easy to install, operate and maintain, and creates jobs at higher rates than many other energy systems. “Even though the upfront costs of solar might be expensive, once the infrastructure is in place there is really not much to do – it’s such a readily available resource,” says Guevara-Stone.

According to The Guardian, it would cost US$10 billion to purchase and finance solar power for the world’s 1.2 billion unelectrified people. Compare this with the $80 billion spent annually to subsidize fossil fuels in the 11 countries with the largest number of unelectrified households. Clearly, financing priorities must evolve. According to Guevara-Stone there are also significant financial barriers for rural low-income communities who want access to solar: ”Many rural communities are miles away from the nearest bank, and low literacy rates make loan applications difficult.” Additionally, Guevara-Stone says that despite the growing popularity of solar, there are still many communities where solar is not really known or trusted.

While bringing solar energy to rural and low-income communities has many challenges, a new wave of small businesses, social entrepreneurs, investors and charitable groups are taking the lead in bringing the technology to the world’s poor. Here we profile two groups with unique approaches to spreading solar enlightenment.

Solar Energy Foundation, Ethiopia: Electrifying Rural Villages

Ethiopia barely sips electricity compared to the rest of the world. According to the World Bank, Ethiopians use on average just 200 kWh of electricity per year (the average for Sub-Saharan Africa is 510 kWh; the global baseline is considered to be around 13,000 kWh/year). The main energy source for most Ethiopians is wood or charcoal, which has resulted in a serious deforestation problem across the country. The Solar Energy Foundation (SEF), a German-based network of organizations and companies working to bring socially and financially sustainable solar projects to rural and marginalized areas throughout the world, is working to change this. SEF has distributed over 19,000 different sized home solar systems to rural communities throughout Ethiopia, established “solar centers” across the country, and is training technicians and installers.

The group uses a revolving fund model – an increasingly popular mechanism for financing distributed solar projects, which helps the group fund future projects. The fund is replenished from monthly payments from SEF customers, and is used to pay for installation and maintenance of new systems and technicians that are trained and supported by SEF.

Because Ethiopia has a virtually nonexistent solar industry, SEF has had to build one from the ground up. The group developed a comprehensive 6-month technical training program that has so far produced 62 solar technicians. These technicians serve in SEF’s 17 solar centers to provide technical expertise, products, and information to customers in areas where SEF has installed solar infrastructure. SEF’s solar technicians are equipped with the skills and know-how to eventually start their own businesses to further spread the benefits of solar throughout Ethiopia. “Creating private business for our technicians is one of our most important plans,” says Samson Tsegaye, SEF’s Ethiopia Country Director. “Our technicians are really committed to doing difficult work in the really rural areas, and our promise for them was that they can have their own business in the future.”

While SEF relies substantially on donations, the organization is working to challenge the mindset of short-term charity projects that traditionally provided infrastructure to the rural poor for free, but rarely do the needed follow-up work to ensure their systems are still working years down the road. Tsegaye says this is an unsustainable model, which is why SEF asks their customers to pay for material costs, save money for upgrades or next steps like batteries, and contribute to infrastructure such as building reservoirs for solar water pumps. According to Tsegaye, people are motivated. “Our customers understand the advantage of solar technology,” he says. “They even prefer to have solar over the conventional power, as they are the manager of their own system.”

Having light on demand has huge ripple effects on people’s lives. “The changes are uncountable,” says Tsegaye. “In the areas we are working, mothers get more time to do their home chores, kids can do their studies in the evening, shop owners can close late in the evening, people no longer have to travel to fetch water, clinics can provide service in evenings – it goes on and on.”

Crowd-funding Solar for the Poor in California

Innovators and entrepreneurs all over the world are changing how disadvantaged communities are able to access solar power – even in wealthy countries like the US. Solar Mosaic in Oakland, California uses crowd-funding to democratize the financial and environmental benefits of solar by creating opportunities to invest in solar projects that benefit low-income communities. “Our first projects have significantly benefited low-income communities and communities of color,” says Lisa Curtis, Community Builder for Solar Mosaic. “Together, our first five projects created 73 kW of clean solar energy, saved cash-strapped community organizations more than $600,000 on their utility bills, and produced over 2,700 job hours for local workers.”

Innovation and smart economics is helping to create greater access to solar for communities that otherwise could not afford to make the investment in solar. The Asian Resource Center, which serves communities in Oakland, California by addressing issues surrounding affordable housing, health care, youth programs, and environmental justice, is the first community-funded solar project in the city thanks to Solar Mosaic. By going solar the organization expects to save more than $100,000 a year, which will have a tremendous positive impact on their programs.

Solar Sister: Lighting Africa by Creating Female Solar Entrepreneurs

“There is widespread energy poverty in Africa, and women are not integrated in clean technology solutions that can have a transformational impact on this situation,” says Neha Misra, Chief Collaboration Officer of Solar Sister. “Seventy percent of people without electricity are women. Simply from the market perspective, how do you build up a green economy without women’s participation?”

Solar Sister is a social enterprise working to marry green power with women power. Solar Sister uses a direct-sales network that invests in women entrepreneurs to build their own businesses in remote communities in rural Africa. By selling a variety of high-quality solar products through their networks, Solar Sisters are not only spreading solar light throughout the region, they are creating economic opportunities for themselves as entrepreneurs.

Many of the women working with Solar Sister do not have the financial muscle to secure a loan. Through a micro-consignment model, the Solar Sister entrepreneurs are given a “business in a bag,” complete with training materials, marketing support, and a portfolio of clean energy products to sell. The women earn a 10 percent commission on all sales, and the remaining funds are channeled into paying for the cost of inventory and operations, and start-up kits for new Solar Sister entrepreneurs. The kits offer a variety of products, which give customers choice and allow them to keep up with innovations in solar technology, and scale their purchases as needed. “For a lot of people in rural Africa, a lot of great products might as well not exist because people don’t have access to them where they need them,” says Misra. “Solar Sister has come up with this model of woman-to-woman direct selling to fill the gap, because women have immense social capital in their communities.”

Solar Sister has grown from 10 women entrepreneurs in early 2010 to 171 entrepreneurs in Uganda, Rwanda, and South Sudan today. The organization has set up a leadership structure that works to recruit, mentor, and support entrepreneur teams. On average, each Solar Sister sells around 10 systems a month, and to date Solar Sister’s entrepreneurs have sold 6,370 solar lanterns to customers throughout the region.

The group’s funding comes from a combination of private grants, impact investments (those driven by social and environmental goals) and revenues from sales. As the organization is scaling up, the goal is to replace larger and larger parts of organizational funding with revenues from business growth. The organization is also partnering with Kiva, a crowd-funding organization, to scale up their operations. Crowd-funding models are becoming increasingly popular as mechanisms to create opportunities for solar projects where they previously did not exist by pooling together investors for projects. Similar to SEF, Solar Sister customers pay market price for their products. Payments are made up-front, in installments, or through creative mechanisms like “merry-go-round” schemes set up by women’s groups. “We want to change the culture of purely charitable efforts,” says Misra, “because that doesn’t last.”

Misra cites clear communication as key for expanding the market for solar home systems, as it can be difficult for potential customers to envision the long-term savings associated with solar because they are often not aware of how much they spend on kerosene each year. “You have to communicate that women are already spending a lot, and that they would be better to invest their money in a solar product” says Misra, who estimates that for a typical solar light, customers could break-even on their investment in 3 to 4 months.

Most Solar Sister customers start with smaller-scale solar home products such as simple solar lights and mobile phone chargers, and then move to bigger systems such as power-packs for multiple lights. “Once people see the economic value, and see other benefits such as improved business hours, better study time for their children, cleaner indoor environment, they want to invest in more technology,” says Misra.

The group’s approach intertwines market-based solutions, gender inclusivity, and bottom-up distribution. “We looked around and saw very few projects here and there that recognized the importance of women in spreading the use of clean energy. We didn’t see any organized efforts to institutionalize innovative solutions and then scale them up,” says Misra “No one else was doing this with a laser-sharp focus on gender and energy poverty.”

Substantial challenges will persist in the effort to bring light to the world’s poor. The solar industry is still dependent on subsidies, and governments throughout the world are moving too slowly to create a level playing field between renewable energy and fossil fuels. In the meantime, it is reassuring to know that innovators throughout the private and non-profit sectors are finding ways to fan the flames of a burgeoning solar revolution.