Financing Models for Solar Home Systems - Revision history

John Gregg: /* Advantages, Disadvantages and Risks */

2019-04-11T00:36:38Z

‎Advantages, Disadvantages and Risks

Ranisha: /* Further Information */

2017-01-23T12:47:49Z

‎Further Information

Johanna von Behaim at 14:20, 5 July 2016

2016-07-05T14:20:35Z

Ranisha at 12:44, 15 August 2014

2014-08-15T12:44:58Z

Ranisha at 12:42, 15 August 2014

2014-08-15T12:42:16Z

Ranisha: /* References */

2014-08-04T08:42:38Z

‎References

Ranisha: /* Further Information */

2014-08-04T08:42:05Z

‎Further Information

Ranisha at 08:40, 4 August 2014

2014-08-04T08:40:32Z

Wiki Gardener at 11:15, 18 June 2014

2014-06-18T11:15:43Z

Fungai Cecilia Sandamu at 18:49, 14 May 2013

2013-05-14T18:49:14Z

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 <br/>
 = Advantages, Disadvantages and Risks =
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 <br/>
 = Further Information =

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 *[[:file:Financing Mechanisms for Solar Home Systems in Developing Countries.pdf|Financing Mechanisms for Solar Home Systems in Developing Countries]]: by IEA PVPS
 Experiences with sales models and service models, examples of micro-finance programmes, case studies
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 <br/>
 = References =

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 = Overview<br/> =
-'''[[Photovoltaic (PV)|Photovoltaic]] (PV)''' has considerable potential to contribute to meeting the energy needs of rural and remote communities in developing countries. '''[[Solar_Home_Systems_(SHS)|Solar home systems]] (SHS)''' have been implemented both in donor supported programmes and projects as well as through market initiatives world-wide. However, in many cases a sustainable PV market has not developed.
+'''[[Photovoltaic (PV)|Photovoltaic]] (PV)''' has considerable potential to contribute to meeting the energy needs of rural and remote communities in developing countries. '''[[Solar Home Systems (SHS)|Solar home systems]] (SHS)''' have been implemented both in donor supported programmes and projects as well as through market initiatives world-wide. However, in many cases a sustainable PV market has not developed.
 <br/>
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 '''Model 2:''' Credit Sales: The end-user acquires the PV system on credit. Credit sales are divided into three categories:
 *'''2A Dealer Credit (One hand model):''' The PV supplier/dealer sells the PV system to the end-user, who enters into a credit arrangement with the PV dealer. Depending on the arrangements, the end-user immediately becomes the owner of the system, or becomes the owner when all payments are made.
 *'''2B End-user Credit (Two hand model): '''The PV supplier/dealer sells the PV system to the end-user, who obtains consumer credit from a third party credit institution. Usually the end-user becomes the owner of the system immediately, but this can be delayed until all payments are made. The PV system can be used as collateral against the loan.
@@ Line 47: / Line 48: @@
 == Dealer Credit (One hand model) ==
-To reduce the high initial investment barrier for the end-user - the main disadvantage of the cash sales model - a company selling PV systems may consider starting a consumer credit or installment payment facility. The PV company still supplies hardware to the rural clients, via a dealer network or directly, but the client is able to pay in installments. The payments can be monthly or adapted to income cycles. Usually these kinds of end-user credit are characterized by relatively short terms (mostly between 6 months and one year), high down payments (up to 50 %) and high interest rates (rates of 20 % to 25 % are not uncommon). However, these credit systems can be popular because the extra amount spent on the credit facility is relatively low.
+To reduce the high initial investment barrier for the end-user - the main disadvantage of the cash sales model - a company selling PV systems may consider starting a consumer credit or installment payment facility. The PV company still supplies hardware to the rural clients, via a dealer network or directly, but the client is able to pay in installments. The payments can be monthly or adapted to income cycles. Usually these kinds of end-user credit are characterized by relatively short terms (mostly between 6 months and one year), high down payments (up to 50&nbsp;%) and high interest rates (rates of 20&nbsp;% to 25&nbsp;% are not uncommon). However, these credit systems can be popular because the extra amount spent on the credit facility is relatively low.
 Generally the PV supplier / dealer does not have the working capital required to offer credit to the end-user. Therefore, they must approach a funding source or credit provider to access credit (dealer re-finance). This results in the high interest rates common with the dealer credit model.
@@ Line 208: / Line 209: @@
 The purpose of this Handbook is to introduce financial and development professionals to clean energy technologies, enterprises and the issues involved in assisting or evaluating such enterprises.
 *[[:file:Financing Mechanisms for Solar Home Systems in Developing Countries.pdf|Financing Mechanisms for Solar Home Systems in Developing Countries]]: by IEA PVPS
 Experiences with sales models and service models, examples of micro-finance programmes, case studies
 *[[Portal:Solar|Solar portal on energypedia]]<br/>
 <br/>
@@ Line 223: / Line 227: @@
 <references />
 [[Category:Solar]]

@@ Line 1: / Line 1: @@
 = Overview<br/> =
-'''[[Photovoltaic (PV)|Photovoltaic]](PV)''' has considerable potential to contribute to meeting the energy needs of rural and remote communities in developing countries. '''[[Solar Home Systems (SHS)|Solar home systems]] (SHS)''' have been implemented both in donor supported programmes and projects as well as through market initiatives world-wide. However, in many cases a sustainable PV market has not developed.
+'''[[Photovoltaic (PV)|Photovoltaic]] (PV)''' has considerable potential to contribute to meeting the energy needs of rural and remote communities in developing countries. '''[[Solar_Home_Systems_(SHS)|Solar home systems]] (SHS)''' have been implemented both in donor supported programmes and projects as well as through market initiatives world-wide. However, in many cases a sustainable PV market has not developed.
 <br/>
@@ Line 72: / Line 73: @@
 = Fee-for-service =
-In the fee-for-service or fee-for-energy model, an energy company invests in PV hardware - usually decentralised individual systems on individual houses ([[Solar Home Systems|solar home systems]]) - and starts selling an energy service for a fee. The '''energy service company (ESCO)''' remains the owner of the hardware and is responsible for installation, maintenance, repair, and replacement of the PV system and, in some cases, its components (controllers, batteries) at the end of their lifetime. The end-user pays a connection fee and a regular fee - usually monthly, though a fee per kWh is also possible. The end-user pays as long as the energy service is delivered and never becomes the owner of the system. However, the end-user usually owns the wiring, lamps, and appliances, which are covered by the connection fee. In some cases the end-user will also own the battery and charge controller.
+In the fee-for-service or fee-for-energy model, an energy company invests in PV hardware - usually decentralised individual systems on individual houses ([[Solar Home Systems (SHS)|solar home systems]]) - and starts selling an energy service for a fee. The '''energy service company (ESCO)''' remains the owner of the hardware and is responsible for installation, maintenance, repair, and replacement of the PV system and, in some cases, its components (controllers, batteries) at the end of their lifetime. The end-user pays a connection fee and a regular fee - usually monthly, though a fee per kWh is also possible. The end-user pays as long as the energy service is delivered and never becomes the owner of the system. However, the end-user usually owns the wiring, lamps, and appliances, which are covered by the connection fee. In some cases the end-user will also own the battery and charge controller.
 Financing requirements to establish such a model are substantial. By selling energy for a reasonable price, it takes between 5 years and 10 years before the initial investment is recovered by the ESCO. This means that the ESCO must be creditworthy and willing to take such investment risks. A financial institution (bank, credit provider) can be involved to share the risk.
@@ Line 199: / Line 200: @@
 <br/>
 = Further Information =
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 <br/>
+<br/>
 = References =
@@ Line 221: / Line 223: @@
 <references />
 [[Category:Financing_Solar]]

@@ Line 1: / Line 1: @@
 = Overview<br/> =
-'''[[Photovoltaic (PV)|Photovoltaic]](PV)''' has considerable potential to contribute to meeting the energy needs of rural and remote communities in developing countries. '''[[Solar Home Systems|Solar home systems]] (SHS)''' have been implemented both in donor supported programmes and projects as well as through market initiatives world-wide. However, in many cases a sustainable PV market has not developed.
+'''[[Photovoltaic (PV)|Photovoltaic]](PV)''' has considerable potential to contribute to meeting the energy needs of rural and remote communities in developing countries. '''[[Solar Home Systems (SHS)|Solar home systems]] (SHS)''' have been implemented both in donor supported programmes and projects as well as through market initiatives world-wide. However, in many cases a sustainable PV market has not developed.
 <br/>
@@ Line 22: / Line 21: @@
 For the dissemination of SHS three different approaches are considered, from direct sales, credit sales and hire purchase to a fee-for-service model.
-'''Model 1:''' Cash Sales: A PV system is sold directly or via a dealer to the end-user. The enduser immediately becomes owner of the system.
+'''Model 1:''' Cash Sales: A PV system is sold directly or via a dealer to the end-user. The end user immediately becomes owner of the system.
 '''Model 2:''' Credit Sales: The end-user acquires the PV system on credit. Credit sales are divided into three categories:
 *'''2A Dealer Credit (One hand model):''' The PV supplier/dealer sells the PV system to the end-user, who enters into a credit arrangement with the PV dealer. Depending on the arrangements, the end-user immediately becomes the owner of the system, or becomes the owner when all payments are made.
 *'''2B End-user Credit (Two hand model): '''The PV supplier/dealer sells the PV system to the end-user, who obtains consumer credit from a third party credit institution. Usually the end-user becomes the owner of the system immediately, but this can be delayed until all payments are made. The PV system can be used as collateral against the loan.
-*'''2C Lease / Hire purchase (either One hand model or Two hand model):''' The PV supplier/dealer or a financial intermediary leases the PV system to the end-user: At the end of the lease period, ownership may or may not be transferred to the end-user, depending on the arrangements. During the lease period, the lessor remains owner of the system and is responsible for its maintenance and repair -- beides.
+*'''2C Lease / Hire purchase (either One hand model or Two hand model):''' The PV supplier/dealer or a financial intermediary leases the PV system to the end-user: At the end of the lease period, ownership may or may not be transferred to the end-user, depending on the arrangements. During the lease period, the lessor remains owner of the system and is responsible for its maintenance and repair -- besides.
 '''Model 3: Fee for service:''' An energy service company (ESCO) owns the system, and provides an energy service to the end-user, who pays a periodic fee (e.g., monthly) to the ESCO. The end-user is not responsible for the maintenance of the system and never becomes the owner.
@@ Line 47: / Line 46: @@
 == Dealer Credit (One hand model) ==
-To reduce the high initial investment barrier for the end-user - the main disadvantage of the cash sales model - a company selling PV systems may consider starting a consumer credit or instalment payment facility. The PV company still supplies hardware to the rural clients, via a dealer network or directly, but the client is able to pay in instalments. The payments can be monthly or adapted to income cycles. Usually these kinds of end-user credit are characterized by relatively short terms (mostly between 6 months and one year), high down payments (up to 50 %) and high interest rates (rates of 20 % to 25 % are not uncommon). However, these credit systems can be popular because the extra amount spent on the credit facility is relatively low.
+To reduce the high initial investment barrier for the end-user - the main disadvantage of the cash sales model - a company selling PV systems may consider starting a consumer credit or installment payment facility. The PV company still supplies hardware to the rural clients, via a dealer network or directly, but the client is able to pay in installments. The payments can be monthly or adapted to income cycles. Usually these kinds of end-user credit are characterized by relatively short terms (mostly between 6 months and one year), high down payments (up to 50 %) and high interest rates (rates of 20 % to 25 % are not uncommon). However, these credit systems can be popular because the extra amount spent on the credit facility is relatively low.
 Generally the PV supplier / dealer does not have the working capital required to offer credit to the end-user. Therefore, they must approach a funding source or credit provider to access credit (dealer re-finance). This results in the high interest rates common with the dealer credit model.
-The ownership of the system is transferred either when the down payment is paid or when the credit is repaid. Normally, the end-user is responsible for the maintenance of the system, although in some cases it can be carried out by the dealer. The PV module(s) acts as collateral during the credit / instalment period as the balance-of-system (BOS) components are usually covered by the down payment.
+The ownership of the system is transferred either when the down payment is paid or when the credit is repaid. Normally, the end-user is responsible for the maintenance of the system, although in some cases it can be carried out by the dealer. The PV module(s) acts as collateral during the credit / installment period as the balance-of-system (BOS) components are usually covered by the down payment.
 <br/>
@@ Line 103: / Line 102: @@
 *Low quality components and installation standards
 *Often minimal end-user training and therefore lack of on-going maintenance
-*Competition with cheap, low qualityproducts is a problem
+*Competition with cheap, low quality products is a problem
 *The market may be geographically limited by the installer infrastructure if the dealer installs the system
@@ Line 122: / Line 121: @@
 *High interest rates due to expensive capital through dealer re-finance
 *Lack of knowledge of consumer credit with the end-users in some countries
-*Excludes the poorest households due to high down payments and instalments, and a credit track record is often required
+*Excludes the poorest households due to high down payments and installments, and a credit track record is often required
 *PV companies are usually not experienced / equipped / capable of administering a credit scheme, as this requires extra skills and is time consuming
 *Depending on the credit provider, this model may be geographically restricted because of the extensive infrastructure needed for the collection of the payments and possible retrieval of the collateral
@@ Line 222: / Line 221: @@
 <references />
 [[Category:Solar]]

@@ Line 73: / Line 73: @@
 = Fee-for-service =
-In the fee-for-service or fee-for-energy model, an energy company invests in PV hardware - usually decentralised individual systems on individual houses ([[Solar_Home_Systems|solar home systems]]) - and starts selling an energy service for a fee. The '''energy service company (ESCO)''' remains the owner of the hardware and is responsible for installation, maintenance, repair, and replacement of the PV system and, in some cases, its components (controllers, batteries) at the end of their lifetime. The end-user pays a connection fee and a regular fee - usually monthly, though a fee per kWh is also possible. The end-user pays as long as the energy service is delivered and never becomes the owner of the system. However, the end-user usually owns the wiring, lamps, and appliances, which are covered by the connection fee. In some cases the end-user will also own the battery and charge controller.
+In the fee-for-service or fee-for-energy model, an energy company invests in PV hardware - usually decentralised individual systems on individual houses ([[Solar Home Systems|solar home systems]]) - and starts selling an energy service for a fee. The '''energy service company (ESCO)''' remains the owner of the hardware and is responsible for installation, maintenance, repair, and replacement of the PV system and, in some cases, its components (controllers, batteries) at the end of their lifetime. The end-user pays a connection fee and a regular fee - usually monthly, though a fee per kWh is also possible. The end-user pays as long as the energy service is delivered and never becomes the owner of the system. However, the end-user usually owns the wiring, lamps, and appliances, which are covered by the connection fee. In some cases the end-user will also own the battery and charge controller.
 Financing requirements to establish such a model are substantial. By selling energy for a reasonable price, it takes between 5 years and 10 years before the initial investment is recovered by the ESCO. This means that the ESCO must be creditworthy and willing to take such investment risks. A financial institution (bank, credit provider) can be involved to share the risk.
@@ Line 85: / Line 85: @@
 {| border="1" align="center" cellspacing="1" cellpadding="1" style="width: 100%"
 |-
-| style="width: 95px;  background-color: rgb(204, 204, 204)" | '''Model'''
+| style="width: 95px; background-color: rgb(204, 204, 204)" | '''Model'''
-| style="width: 95px;  background-color: rgb(204, 204, 204)" | '''Advantages'''
+| style="width: 95px; background-color: rgb(204, 204, 204)" | '''Advantages'''
-| style="width: 95px;  background-color: rgb(204, 204, 204)" | '''Disadvantages'''
+| style="width: 95px; background-color: rgb(204, 204, 204)" | '''Disadvantages'''
-| style="width: 95px;  background-color: rgb(204, 204, 204)" | '''Risks'''
+| style="width: 95px; background-color: rgb(204, 204, 204)" | '''Risks'''
 |-
 | style="width: 95px" | '''Cash Sales'''
@@ Line 196: / Line 196: @@
 <br/>
-'''For more information about SHS subsidies click [[Subsidies#Subsidies_for_Solar_Home_System_Promotion|here.]]'''
+'''For more information about SHS subsidies click [[Subsidies#Subsidies for Solar Home System Promotion|here.]]'''
 <br/>
@@ Line 203: / Line 203: @@
 *[http://www.ifc.org/ifcext/sme.nsf/AttachmentsByTitle/monitor_issue13/$FILE/Monitor_issue13.pdf Report]: Solar Development Capital: Lessons Learned in Financing Solar Home Systems IFC 2007<br/>
-*[[:file:Areed handbook for financial and development professionals draft.pdf|Handbook for Financial and Development Professionals]] by AREED UNEP 2001
+*[[:file:Handbook for Financial and Development Professionals Draft.pdf|Handbook for Financial and Development Professionals]] by AREED UNEP 2001
 The purpose of this Handbook is to introduce financial and development professionals to clean energy technologies, enterprises and the issues involved in assisting or evaluating such enterprises.
@@ Line 218: / Line 218: @@
 <references />
 [[Category:Solar]]

@@ Line 73: / Line 73: @@
 = Fee-for-service =
-In the fee-for-service or fee-for-energy model, an energy company invests in PV hardware - usually decentralised individual systems on individual houses (solar home systems) - and starts selling an energy service for a fee. The energy service company (ESCO) remains the owner of the hardware and is responsible for installation, maintenance, repair, and replacement of the PV system and, in some cases, its components (controllers, batteries) at the end of their lifetime. The end-user pays a connection fee and a regular fee - usually monthly, though a fee per kWh is also possible. The end-user pays as long as the energy service is delivered and never becomes the owner of the system. However, the end-user usually owns the wiring, lamps, and appliances, which are covered by the connection fee. In some cases the end-user will also own the battery and charge controller.
+In the fee-for-service or fee-for-energy model, an energy company invests in PV hardware - usually decentralised individual systems on individual houses ([[Solar_Home_Systems|solar home systems]]) - and starts selling an energy service for a fee. The '''energy service company (ESCO)''' remains the owner of the hardware and is responsible for installation, maintenance, repair, and replacement of the PV system and, in some cases, its components (controllers, batteries) at the end of their lifetime. The end-user pays a connection fee and a regular fee - usually monthly, though a fee per kWh is also possible. The end-user pays as long as the energy service is delivered and never becomes the owner of the system. However, the end-user usually owns the wiring, lamps, and appliances, which are covered by the connection fee. In some cases the end-user will also own the battery and charge controller.
 Financing requirements to establish such a model are substantial. By selling energy for a reasonable price, it takes between 5 years and 10 years before the initial investment is recovered by the ESCO. This means that the ESCO must be creditworthy and willing to take such investment risks. A financial institution (bank, credit provider) can be involved to share the risk.
@@ Line 83: / Line 83: @@
 = Advantages, Disadvantages and Risks =
-{| border="1" cellpadding="1" cellspacing="1" style="width: 100%;" align="center"
+{| border="1" align="center" cellspacing="1" cellpadding="1" style="width: 100%"
 |-
-| style="width: 95px;" | '''Model'''
+| style="width: 95px;  background-color: rgb(204, 204, 204)" | '''Model'''
-| style="width: 211px;" | '''Advantages'''
+| style="width: 95px;  background-color: rgb(204, 204, 204)" | '''Advantages'''
-| '''Disadvantages'''
+| style="width: 95px;  background-color: rgb(204, 204, 204)" | '''Disadvantages'''
-| '''Risks'''
+| style="width: 95px;  background-color: rgb(204, 204, 204)" | '''Risks'''
 |-
-| style="width: 95px;" | '''Cash Sales'''
+| style="width: 95px" | '''Cash Sales'''
-| style="width: 211px;" |
+| style="width: 211px" |
 *Minimal number of stakeholders
 *Lowest transaction cost
@@ Line 111: / Line 111: @@
 |-
-| style="width: 95px;" | '''Dealer Credit'''
+| style="width: 95px" | '''Dealer Credit'''
-| style="width: 211px;" |
+| style="width: 211px" |
 *For the end-user, the main barrier of the high initial investment is lowered
 *In most cases, one institution handles both the financial and the technical work
@@ Line 132: / Line 132: @@
 |-
-| style="width: 95px;" | '''End-user Credit'''
+| style="width: 95px" | '''End-user Credit'''
-| style="width: 211px;" |
+| style="width: 211px" |
 *The main barrier of the high initial investment is lowered or removed
 *The PV company does not need to allocate budget to run the credit scheme, thereby avoiding financial risks and allowing it to concentrate on sales and after-sales services
@@ Line 152: / Line 152: @@
 |-
-| style="width: 95px;" | '''Lease / Hire purchase'''
+| style="width: 95px" | '''Lease / Hire purchase'''
-| style="width: 211px;" |
+| style="width: 211px" |
 *The main barrier of the high initial investment is removed, more so than with the other credit models, as the initial down payment is further reduced and the repayment period is prolonged. In general, the payment system can also be designed to fit the income cycle of the client.
 *One single structure can handle both the financial and the technical work: the fee collection as well as the maintenance, training, and other after-sales services
@@ Line 170: / Line 170: @@
 |-
-| style="width: 95px;" | '''Fee for service'''
+| style="width: 95px" | '''Fee for service'''
-| style="width: 211px;" |
+| style="width: 211px" |
 *End-user does not have to invest in a solar system (only connection fee), thereby facilitating access to electricity to more people
 *End-user is not responsible for maintenance and repair. By organising this centrally, the costs for maintenance and repair are lowered while high quality maintenance can be provided
@@ Line 196: / Line 196: @@
 <br/>
-'''For more information about SHS subsidies click [[Subsidies#Subsidies for Solar Home System Promotion|here.]]'''
+'''For more information about SHS subsidies click [[Subsidies#Subsidies_for_Solar_Home_System_Promotion|here.]]'''
 <br/>
@@ Line 218: / Line 218: @@
 <references />
 [[Category:Financing_Solar]]