Solar Energy in the Developing World

Solar Energy in the Developing World

This is a journal about the practice and theory of microfinance, and, more broadly, international economic development and poverty alleviation globally.  If you’d like to get new posts sent to your inbox, please sign up, or subscribe to to my RSS feed.  Thanks.


In an earlier post, I talked about green products and the concept of the triple bottom line.  Environmental cookstoves save money, save lives, and produce less carbon emissions.  Believe it or not, black carbon, or soot from cookstoves in developing countries, is the number-two contributor to global warming.  These more efficient stoves pay dividends.  But this is not the only green product serving the developing world.  Solar products – lanterns, cell-phone charging stations, DVD players, and even micro-utilities – offer a cheap, alternative means of energy delivery in the third world.

Much of the Philippines - the areas in red - is less than 75% electrified.

One major problem for the poor is a lack of electricity.  Across the globe, 1.5 billion people – a quarter of the world population – do not have access to electricity.  In the Philippines, where I live, the electric grid fails to reach many rural communities, where the bulk of the poor reside.  The major utilities divide the territories and control the delivery of electricity in the country.  When a community is too remote to be economically viable, the utility may choose not to electrify to the area, leaving the job to the government.  Rural Electric Cooperatives (RECs) assume the responsibility, but do not reach everyone.  Just looking at the map shown above you see the vast area of the Philippines that are less than 75% electrified.  The vast areas of red – the island of Palawan to the west and Mindanao to the south –  represent the regions where population density is sufficiently low or the areas are too poor to justify access to the energy grid.  Here, the cost of building the infrastructure – wires, electricity poles, transformers, etc. – makes the process cost-prohibitive.  So, you need to develop another strategy.

One solution to this problem is something called distributed generation, better known as an “off the grid” solution.  Here is a brief description:

Distributed energy resource (DER) systems are small-scale power generation technologies (typically in the range of 3 kW to 10,000 kW) used to provide an alternative to or an enhancement of the traditional electric power system.

Distributed energy takes many forms – hydroelectric, solar, wind (excluding large power plants).  These DER systems tend to be large enough to power at least a home (via a generator) or sometimes a community.  Then there are even smaller applications, which light the home or serve as a single outlet for charging a phone.   Negros Women for Tomorrow Foundation (NWTF) is in the process of rolling out a pilot program to distribute solar lanterns to its clients.  The purchase is funded through an asset acquisition loan.  It costs about $70 USD and the loan cycle is either one or two years.  How do solar lanterns serve the triple bottom line?  I’m glad you asked.

SunTransfer solar lantern.

When a rural community has no electricity, it does not mean that nighttime means total darkness.  Traditional lanterns run on kerosene, which needs to be purchased in large amounts to light a community.  In contrast, solar lanterns use the free energy offered by the sun, eliminating the need to purchase kerosene.  This saves the user big dollars in the long-run, particularly when the battery for a solar lantern lasts up to 3-4 years.  The lanterns distributed by NWTF have three settings: high (2 hours), medium (8 hours), and low (200 hours).  Reducing kerosene expenses means lights can be kept on longer.  This means the store can stay open longer,  the kids can study at night, and businesses are more profitable.  The impact on a household and the community at-large is dramatic.

By chance, we came across a client charging her solar lantern.

There are hundreds of organizations serving this market, trying to scale it up to a level that will reach the billions without electricity.  Grameen Bank, Muhammad Yunus’ flagship microfinance organization, has a subsidiary called Grameen Shakti that focuses delivering solar energy (among other green things) to the poor in Bangladesh.  The description of the program also offers a nice summary of the benefits:

Rural electrification through solar PV technology is becoming more popular, day by day in Bangladesh. Solar Home Systems (SHSs) are highly decentralized and particularly suitable for remote, inaccessible areas. GS’s solar program mainly targets those areas, which have no access to conventional electricity and little chance of getting connected to the grid within 5 to 10 years. It is one of its most successful programs. Currently, GS is one of the largest and fastest growing rural based renewable energy companies in the world. GS is also promoting Small Solar Home System to reach low income rural households.

SHSs can be used to light up homes, shops, fishing boats etc. It can also be used to charge cellular phones, run televisions, radios and cassette players. SHSs have become increasingly popular among users because they present an attractive alternative to conventional electricity such as no monthly bills, no fuel cost, very little repair, maintenance costs, easy to install any where etc.

But there are challenges in distributing these products to clients.  For one thing, microfinance institutions are, above all else, lenders.  MFIs are in the business of extending credit loans to the unbanked and are often ill-equipped to deal with the technical aspects of distributing solar lanterns.  Fortunately, the manufacturers take this into account and place a premium on building durable products with minimal maintenance required.  But some organizations are specialists, like Grameen Shakti.  It is a wholly-owned subsidiary of Grameen Bank that focuses exclusively on solar.  GS technicians install the product and service the warranty.  At institutions without the same depth of expertise, that task is left to a loan officer with some training.  There are different ways of solving this problem, usually involving some sort of partnership between the MFI, the manufacturer, and the distributor.  In the case of the Philippines, there are partner companies that re responsible for distributing and servicing the products.

This is a good solution to an overlooked problem – the dismal electrification rate in some parts of the developing world.  It is an example of the good work that MFIs can do beyond just providing credit.

Update:

April 23 – Today I have the pleasure of announcing that Negros Women for Tomorrow Foundation has begun posting loans for renewable energy products on Kiva.

13 thoughts on “Solar Energy in the Developing World

  1. Too bad I just saw this today… would love to lend to projects like tis one. I always look for loans uunder the “green” category but unfortunately, always has nothing. Hopefully, there will more next time. Thanks for your posts!

  2. I am so glad I found your blog. I just started blogging for Michelle rafters every day in May ‘Blogathon’. On the 10th she wants us all to list the ten blog sites we like and I’m going to list yours!

  3. Hi Josh,

    I think this is a great initiative. There is definitely not a business case for utilities to connect remote areas in the developing world, particularly in Africa.

    But as you point out distributed off-grid solutions are numerous, they just need to become accessible to low-income families. And MFIs are ideally positioned to play that role since they have weekly contacts with millions of households. The harder part is convincing them to enter the micro-energy field and that is what we’ve been working on for the past two years with the Energy Links program, at the Center for Financial Inclusion at ACCION International.

    I hope you can join a discussion hosted by microlinks next week on Microfinance and energy and that we can talk soon.
    http://microlinks.kdid.org/events/speakers-corner-37-microfinance-and-energy-scaling-energy-access-through-enterprise-based-app

  4. Thanks Shel. I appreciate you reading the blog and sharing your thoughts. It’s always nice to see it reaching a wider audience. I will be interested in reading what you have to write as ewll.

  5. Hi David,

    Thanks for checking this out and for your work at the Center for Financial Inclusion. NWTF concerns itself strongly with the social mission, so the decision to offer non-financial services, like solar energy and cookstoves, was not difficult. The keys are designing a good loan product, having technical support in place in the country for servicing warranties and fixing the products, and having a clientele that needs the product.

    Also, are you David Levai? If so, it looks like you will be speaking with Ellen Morris, who is the head of Arc Finance, which is the organization that partnered with NWTF to launch this pilot. Small world.

  6. Are there any solar companies giving a donation for installation to grameen shakti or similar 3rd world providers on a large scale?

  7. Josh Weinstein,
    I am writing you from Houston Texas USA, the Energy Capital of the World.
    The Irony is in USA there are several natural and man made disasters which leave common and hard working Americans helpless and desperate and I am in such a situation.
    I need a small loan ($10,000) to market,distribute and sell Solar Lamps Globally that I have successfully identified and contracted from an Indian Manufacturer. These are unique 100% Solar LED lamps great designs, I have a very good marketing plan.
    Anyone from Kiva can help me and my family of six (four college going hardworking,intelligent children of mine) to get back on our feet.
    Regards
    Syed A.Hashimi
    Founder/ Chairman
    Global Solar Lamps (DBA Registered in Harris County Texas)
    15103 Lucky Star Dr
    Houston Texas, 77082
    Phone: 281-870-1011
    Cell: 713-447-5022
    Cell (son) 832-322-5789
    email:syedhashimi@gmail.com
    syedhashimi1@gmail.com

  8. Great post Josh. I’m excited to make a green loan on Kiva. I’ve been checking and nothing has been posted all month. How are things going for you now? How was Burma?!

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