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Fee-for-service Photovoltaic Systems
establishment of a network of local entrepreneurs. The main advantage
Table 1: Example of Costs (US$) in a South African Concession in
of fee-for-service companies is that maintenance is carried out by
Kwazulu Natal for a 50Wp Solar Home System Compared with
Grid Connection
qualified technicians from the small companies: as private enterprises,
fee-for-service companies monitor their customers closely because they
Solar Grid
have a direct interest in the running of the system – the satisfaction of Capital cost per household 500 1,250–1,875
the user enables them to continue to collect fees.
Subsidy from the government per household 437.5 500
Cost per household remaining for the utility 62.5 750–1,375
Another benefit of the fee-for-service scheme is to link financial
Source: Niemand FR, Banks D, NuRa: a Success Story for Rural Energy Service Delivery, 2006.
and commercial interests within one single organisation. Therefore, The creation of energy service companies for rural electrification with
fee-for-service companies can centralise subsidies from public solar home systems relies on the acknowledgement that programmes
authorities that otherwise, given individually to each customer, would to implement solar home systems have been unsuccessful in the past
probably be monitored more loosely by a public administration or a due to a lack of system maintenance. This fee-for-service scheme
bank. When fee-for-service companies manage the systems, local seems quite simple, but it took a long series of failures in the
authorities can trust them to recover the cost of the systems, unlike if implementation of projects for the solar energy sector to (re)invent it
the systems were given directly to individuals. and dispel the idea that solar energy was free and that people in rural
areas could manage relatively complex solar systems by themselves.
Nevertheless, one possible drawback of the fee-for-service scheme is Maintenance does imply the existence of a network of local
that with energy service companies, solar systems are the property organisations with the relevant expertise; it is only when this network
of either the government or energy service companies, not of the exists that solar systems can deliver a real energy service for the
final user, while in other schemes such as micro-credit the ownership 20–30-year life-time of the solar panels.
remains with the purchasers of the systems. In the fee-for-service
scheme, end-users could therefore be less interested in the good The first place where small-scale photovoltaic energy service utilities
running of their system. Often with solar systems, technical were introduced seems to be in the Pacific region, where small
problems can quickly appear linked to overuse of the system – co-operatives were launched in the 1980s, notably in Kiribati in 1986.
mainly discharging of the batteries. However, this also happens In Latin America, Argentina has an ambitious programme of rural
concessions with renewable energies, notably with solar systems: the
Proyecto de Energía Renovable en el Mercado Eléctrico Rural (PERMER)
The majority of rural inhabitants
programme funded by the World Bank/Global Environment Facility
of sub-Saharan Africa, remote
(GEF) has been operational since 1999.
parts of Asia and Latin America
In African countries such as Benin, Togo, Cape Verde and Zambia,
will struggle to pay for the full
small-scale projects (from several hundred to several thousand solar
cost of solar home systems.
systems) have been carried out. Large-scale dissemination has been
carried out in South Africa since 1999 within five rural concessions,
with more than 35,000 solar home systems implemented. Several
when clients own their systems as a result of a lack of understanding African countries have implemented or are now in the process of
of the limits of the system. Fee-for-service companies facilitate the implementing off-grid fee-for-service concessions, generally promoting
learning process of their customers through regular visits by a mix of solar and diesel systems covering very large rural areas
technicians and therefore can help to mitigate this problem. Another (e.g. Namibia, Sénégal and Morocco).
possible drawback is that as energy services companies often
operate in an exclusive concession, and therefore benefit from a Following some basic rules for successful implementation, it seems
monopoly, they need to be regulated, which can imply costs for the energy service companies have strong potential to deliver an energy
organisation in charge of the regulation of off-grid areas (when service throughout remote rural areas while creating jobs. They offer
there is one). However, monitoring of few energy service companies an interesting perspective in terms of improving the living conditions
is easier to organise than monitoring a large number of installers or of rural inhabitants of developing countries, and could help in the
even systems scattered across remote areas. creation of small networks of sustainable enterprises in remote rural
areas. This scheme seems to provide a cost-efficient way of making
The main difficulty seems to be reaching a high enough density in a progress in rural electrification, especially in areas where individual
given area so energy service companies can curb their operating costs load is, and will remain in the medium term, very low. Therefore, as
and reach a critical mass of systems, thus reducing their capital costs we know that the majority of rural inhabitants of sub-Saharan Africa
(ideally with the possibility of locally manufacturing an increasing or some remote parts of Asia and Latin America will struggle to pay
number of components of the systems). for the full cost of solar home systems in the same way as they are
not able to pay for the full cost of grid connection, the key question
Conclusion is as follows: should inhabitants of off-grid rural areas be entitled to
In the context of developed countries, energy service companies are a level of subsidies similar to the inhabitants who can
concerned with maximising efficient end use of energy for their be connected? If the answer is yes, fee-for-service companies
customers. In the case of a developing country, they include small seem to be one of the appropriate ways of delivering a reliable
enterprises that provide solar electricity to their customers. energy service. ■
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