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The initiative to bring solar energy to those who most need it
With the aim to address the lighting needs of rural, urban and suburban consumers, Lighting Africa initiative is facilitating the development of markets for affordable, modern off-grid lighting products in Sub-Saharan Africa.
The Lighting Africa-Ethiopia program being implemented currently targets predominantly low-income households and businesses. It seeks to offer an alternative to fuel-based kerosene lamps and candles, which are currently the most commonly used lighting sources among those without grid electricity.
Capital’s Eskedar Kifle spoke to Alasdair Miller who is a Senior Energy Specialist at the International Finance Corporation (IFC), an international financial institution that is a member of the World Bank Group, about the Lighting Africa initiative, its benefits and its progress so far in Ethiopia.
Capital: What is the Lighting Africa project?
Alasdair Miller: The program goes back to 2009; we stared doing it in Kenya and Ghana. Our approach there was to talk to companies that were already starting to get active in the space. The economic side of it made sense even then because the cost of solar energy was reduced, thus efficiency increased.
Suddenly solar energy started to be cost competitive with kerosene, so we engaged with companies working there and asked ‘What can you not do for yourself?’ and ‘What do you need us to do for you?’, we then set off arranging different things from engaging governments on regulation to developing quality assurance systems and frameworks, consumer education, procuring market intelligence, these sort of things.
The Kenyan program ran up to about 2013 and it was hugely successful. Because of that, we have scaled up and are now working in 12 countries in Africa as well as India, Bangladesh and a few other places.
Capital: Tell us more about your success in Kenya.
Miller: Kenya is one of the most advanced markets in this sort of sector globally. We were working with almost all the leading quality companies in the market and the key component of the program there is very similar to what we are doing here in Ethiopia.
We have done regulatory work, engaging with the government putting in place quality standards because there is a huge issue with differentiating between good quality and counterfeit products. The problem is that you can pick up these two things; one good quality and one poor quality product, and you cannot tell the difference. Even if you play with it a little; turn it on and off, you still would not tell the difference. To actually test these things rigorously takes from three to four months and that is the heart of the quality challenge.
Consumer education campaign was also a big part of the program; we are doing that here as well, through media outlets like TV, radio, newspapers and group forums, to get across a range of messages. The messages basically focus on the benefit of solar energy, the economics of it, the health benefits and environmental sustainability. We also focus on the importance of quality, giving people a method to differentiate from good quality from poor quality. We do these things through different methods of information dissemination, SMS, posters and so on.
Capital: So all of the things you have done in Kenya, you are also doing here?
Miller: In all of the countries we work in, the components are similar but the emphasis can be quite different. Here in Ethiopia, there is a very strong emphasis on the regulatory side, and that is partly because the nature of Ethiopia where the government generally regulates industries heavily and the regulation in this particular sector has not worked very well.
So we are working with six government agencies to first agree on what the problems are,put in place a plan to address them and just start to implement the different measures of the plan. Measures range from mandatory quality standards, which are already in draft, to import procedures that build on those standards so that only quality products enter the country.
You have to accept that borders are often poor and there will always be other products finding their way, so you need other ways to tackle issue of quality; the quality problem in Ethiopia is huge. As the market has thrived over the past couple of years, more and more companies have seen easy money to be made, flooding the market with poor quality products.
There are two reasons why we are interested in quality; one is because the individual consumer is going to suffer if they buy something that fails within a months or less. But also, if this sector is ever going to reach its potential, then we need to get a grip on quality products. If people think that solar energy is no good then the market would be affected. If people are convinced that solar energy is a good quality solution worth spending your money on, then it can reach its potential.
It is worth pointing out that in the GTP II, the government has explicit targets for the sector. They want to disseminate 3.6 million small solar products within the next five years as well as have 400,000 solar home systems installed. Those targets are ambitions but potentially realistic, but they need to address the quality issue.
Capital: What about the financing?
Miller: This program is a joint IFC, World Bank program and the World Bank’s major contribution has been providing a credit facility through the Development Bank of Ethiopia; that was initially USD 20 million primarily for imports, to give them access to dollars. This has really been the lifeline of the market; it has kept it growing.
In my personal opinion, if the government gets a grip on the quality issue and puts in place a regulation with finance available for companies to import and distribute these products, then the market will thrive.
Capital: What about reaching the consumers?
Miller: We do consumer education campaigns, which we launched about a month ago. It is a cross media campaign, we also do below the line marketing through group forums and market day events; these are now up and running and we are getting really good results.
The emphasis here is a little different from what it was in Kenya. It seems that people in Ethiopia are already familiar with what solar energy is and why it is a good thing, so there is less of a need to tell people that. But, given the serious issue with quality, there is need to help people understand what quality means and how you can differentiate between good and poor quality products. We work directly with the private sector active in this space, so long as they are working with quality assured products.
The consumer education campaign is the single largest budget item of the program; it is very expensive to do considering the country’s size; currently it’s just over USD 1 million dollars and that is not in the emerging regions but in Tigray, Amhara, Oromia and SNNP regions. We hope to get additional resources and to do more in these regions as well as expand to the emerging regions.
One of the challenges is also that these products save money in the long ran but there is of course the upfront cost. Micro financing is one way to tackle that; one that has its own challenges and there aren’t many success stories, but we are still trying to provide support so that there are success stories. We are also working on pay-as-you-go systems.
Everything we do is either to scale up the supply side or remove bottlenecks from the supply side such as financing and regulations. We also work on the demand side with micro finances and consumer education. In theory, if we address the barriers on both sides, then the market will thrive.
Capital: Is the point of this program to also promote a cleaner energy source?
Miller: To me that is secondary. From a global point of view, when you add up the figures, it is not insignificant, but there are other things that I think are far more important. Of course it would mean that carbon emissions are reduced, but I think the far more significant thing is that solar energy provides access to energy that is cost effective. So we do not see it as a replacement of or an alternative to grid connections.
The Ethiopian government is proactively expanding the grid and the World Bank is actively supporting it.But that is going to take a long time and a lot of money particularly when you are talking about rural populations with low population density; it is an extremely expensive solution and one that frequently doesn’t really pay for itself.
On the other hand, solar solutions can be done in a way that doesn’t impact government finances and in a short amount of time. Consumers can just go buy it and they don’t have to wait for years until the grid comes; so the two can be done in parallel.
There is also the flexibility; if in a few years the grid comes, it is fine, it is not an issue. The products can have a relatively short payback period and they can also be sold on to other people. There is no risk.
Capital: We are talking about importing these solar solutions but would there be a possibility to also manufacture them here?
Miller: It is happening already in a small scale. It’s actually assembling not manufacturing. When you are talking about manufacturing electronics or particularly solar panels, the idea of competing with China is not a good idea from the business point of view. But, yes, assembly does make a lot of sense and there are some that are already doing it on a small scale.