SHS have become increasingly attractive
Under the Multi-Tier Framework (MTF) of measuring energy access, solar home systems (SHS) are capable of providing Tier 1, 2, and 3 energy access, in line with typical consumption patterns of households in Sub-Saharan Africa. Specially-designed PV systems for commercial and institutional use can provide even higher level of access. Off-grid solar can meet consumer energy needs more readily than the grid and as such, modern off-grid solar home systems have become an increasingly attractive electrification solution.
Standalone solar solutions appeal, in particular, for their ability to be deployed rapidly and with limited government financial support. There are a number of private companies operating in Madagascar that already offer solar lanterns and solar home system products to customers on a cash sale, lease-to-own, or rental basis. While these companies are relatively nascent, over 50,000 households already benefit from their activities, and this number could grow exponentially with appropriate support from the government and other actors.
Preventing market spoilage to promote growth
At present, the government of Madagascar doesn’t require imported standalone systems to meet any quality standards and, as a result, the market is experiencing an increasing influx of low-quality products. Recent experience in many sub-Saharan African countries has demonstrated that market spoilage can significantly hamper PV market growth as end users, distributors, and financial service providers rapidly lose trust in PV products that don’t work properly or are prone to breakage. Through this, demand for high-quality products is diminished due to negative perceptions of off-grid solar products in general. At the same time, unfair price competition from providers of cheaper non-branded and counterfeit products spoils the pricing structure of the market.
A third-party quality verification system provides a credible and transparent way of establishing minimum performance criteria that products must satisfy to be eligible for inclusion in government off-grid initiatives or for receiving other forms of incentives such as import tax and/or duty breaks, etc. To support the development of the standalone solar system industry and to protect consumers from low-quality products we have developed global standards through our Lighting Global program that set a baseline level of quality, durability, and truth in advertising to protect consumers.
Lighting Africa is providing support to GoM in its efforts to boost access via off-grid solar as part of a large new World Bank-financed electricity access project, which will mobilize up to $50 million to support the Malagasy off-grid solar industry.
Our team is working to improve the overall enabling environment by supporting key government agencies of Madagascar—particularly the Bureau of Standards (BNM)—in developing and adopting national quality standards for off-grid solar products up to 350Wp that are appropriate for the Malagasy context. Tying import duty and VATexemptions to these standards is expected to level the playing field for distributors of high-quality off-grid solar products and help avoid further market spoilage through poor quality products. A consumer awareness campaign focusing on the value of high-quality off-grid solar products will also be launched.
A variety of additional financial interventions are being conceived under the project—including a results-based financing scheme, credit lines to enterprises, and a risk-sharing mechanism—each with the goal of encouraging an expansion of sales of off-grid products in order to reach more end-users.
Page created June 2018