Without access to quality-verified off-grid lighting and energy products, these unconnected families are likely to continue to rely on hazardous lighting options such as kerosene lamps, firewood, and candles. A 2013 Lighting Africa Market Intelligence report found that over 85% of rural households rely on fuel-based light sources, predominantly kerosene, the fumes of which can cause serious health problems and damage to the environment.
Mapping the Market & Supporting Businesses
To support alternative lighting and energy sources for the off-grid population, the Lighting Africa program began working in Ethiopia in September 2015 to mobilize the private sector to create markets for clean and affordable lighting products.
The Ethiopia market has the potential to quickly ramp up access, particularly if the public and private sectors can work together to support off-grid solutions in the market. The Lighting Africa/Ethiopia program is working closely with the government and the private sector to create sustainable off-grid energy supply.Aster Mihret Zwedie, Program Manager, Lighting Africa – Ethiopia
The Lighting Africa/Ethiopia program is funded by various donors including the Scaling-Up Renewable Energy Program (SREP) of the Climate Investment Funds, the Energy Sector Management Assistance Program (ESMAP), Canada, Italia and others, and was developed in conjunction with Ethiopia’s government through its Ministry of Water, Irrigation and Electricity (MoWIE), and other partners. Key target groups include low-income, rural households and micro-businesses. To date, the program has provided valuable insights through market intelligence reports, supporting both existing players and new market entrants.
Two Agencies – One Goal
Our program team in Ethiopia comprises members from both the World Bank and IFC, who’s different areas of expertise complement each other. The overall joint goal of the Lighting Africa/ Ethiopia program is to accelerate the development of off-grid solar lighting and energy markets by:
- Improving the enabling environment for the off-grid sector by adopting national quality standards and implementing the quality assurance market infrastructure to mitigate market spoilage from inferior solar products. In January 2016 a mandatory Ethiopian standard (CES 140), based on the Lighting Global quality assurance framework, was adopted covering off-grid solar lighting products. We are currently working with a number of government agencies to support the implementation of CES 140.
- Supporting the scale-up and replication of high potential businesses by providing targeted business development services and facilitating access to finance for local solar energy distributors to support their growth. Our program has provided business support to a range of private sector companies entering the sector, including basic business and technical training to retailers and MFIs entering the solar energy lending space.
- Increasing demand and addressing market development bottlenecks through a dedicated consumer awareness and education campaign. Consumer awareness of solar lighting products is relatively high in Ethiopia – knowledge on how to identify quality-products, however, lags behind. To address the issue, we launched a two-year consumer education campaign in 2015 targeting over 12 million Ethiopians, with a focus on those in rural areas. The campaign highlights the benefits provided by purchasing quality off-grid lighting, and helps consumers identify products meeting Lighting Global standards. Activities include mass media and door-to-door campaigns, which are tailored to address the specific needs of low-income households across the country.
- Addressing policy barriers that impede the development of the off-grid lighting market that undermine the competitiveness of off-grid lighting and energy products.
Access to Finance for Quality Products
One key obstacle in the market is access to foreign exchange (FOREX) – this is a major bottleneck, impeding the import of off-grid lighting products. To address this issue, in collaboration with the Government of Ethiopia, the World Bank with Lighting Africa’s support is helping households, private sector enterprises and small business to access financing through the Market Development for Renewable Energy & Energy Efficient Products Credit Line. This financing facility was established in 2013 with US$20 million from the World Bank. This has since been doubled to US$40 million due to the great success of this initiative.
The funding facility, which is administered by the Development Bank of Ethiopia (DBE), provides private sector companies with the foreign exchange working capital to import qualifying solar products that meet Lighting Global Quality Standards, while MFIs can access this line of credit aimed at household-level loans for qualifying products. An additional component, the Collateral Support Facility, was created to support companies in being able to meet the collateral requirements for accessing funding from the DBE credit facility.
To date, default rates on loans lie at a remarkable zero percent. These loans resulted in the import of over 850,000 quality-verified solar lighting products during the first 18 months this facility was in operation, providing roughly 1 million Ethiopians with access to modern energy services (number of products sold x estimated average household size of 5 people). As of June 30, 2017, eight private sector enterprises and 11 MFIs had been approved for loans from the second round of the facility, promising further expansion of these initial impacts.
As an additional vote of confidence, the facility was confirmed as eligible for carbon credits. If the DBE achieves its targets – import and distribution of 2.8 million solar lanterns and 214,000 SHS – they will receive US$11.2 million in revenue from carbon finance.
The revenue from the Certified Emission Reduction (CER) generated will be used to discount the per battery replacement cost for solar home systems (40%), for the administration of warranty tracking and customer information systems, and operational and maintenance payments to certified solar home system technicians.
The joint IFC-WB Lighting Africa program will continue to support the development of the market for off-grid solar lighting in Ethiopia. The primary focus will be on improving the regulatory environment and finding a longer term solution to FOREX constraints. The Government of Ethiopia will also undertake consumer education and awareness campaigns in emerging regions to continue to grow the market for solar products.
- The program is also in the process of developing a new technology to better track where products are distributed. This will add further insight into where products are being used, and which parts are being replaced during warranty – allowing us to better hone our project activities to deliver the greatest possible impact to users;
- Business Development Support. SMEs are seen as being the key drivers of retail businesses to address the poor availability and penetration of quality products at the last mile. Providing training to adequately equip business owners to tackle the challenges they encounter is paramount to the scale-up of these companies;
- Accesses to Finance. Consumers with low disposable income who cannot afford the upfront payments required for quality-verified solar products pose a huge challenge when it comes to increasing the uptake of quality products. Developing creative ways to assist these consumers is critically important. The program will engage with various MFIs and Savings and Credit Cooperatives (SACCOs) on providing solar PV financing solutions to consumers and businesses;
- Targeted Consumer Awareness Campaigns to reduce the influx of low-quality solar products coming into the Ethiopian market. The first round of consumer awareness campaigns took a blanket approach to create awareness about solar benefits. The second round of campaigns will be targeted towards educating both consumers and retailers about the importance of quality and how to identify quality-verified products. Campaigns will also be customized to each target region.
Page last updated January 2018