Uganda Off-Grid Lighting Market Assessment
Transcript of Uganda Off-Grid Lighting Market Assessment
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TRAINING MODULE: WORKING SERVICES
Final Report MARKET ASSESSMENT OF MODERN OFF GRID LIGHTING SYSTEMS
IN UGANDA
ProducedforLightingAfrica
December2014
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+1 (202) 822-9100
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+31 0 30 693 37 66
Authors:EncludeBV,TheNetherlands
LisanneHeemskerk,GeertEenhoorn,BobbyNamitiDate:December2014Disclaimer: ThisreportwascommissionedbyWorldBankGroupandtheUgandanRuralElectrificationAgency,aspartoftheLighting Africa programm (a joint IFC andWorld Bank program). The findings, interpretations, and conclusionsexpressedinthispaperareentirelythoseoftheauthors.TheydonotnecessarilyrepresenttheviewoftheLightingAfricaProgram,itsaffiliatedorganizations,orthegovernmentstheyrepresent.This report has been developed with the utmost care and based on primary research conducted in Uganda.Nevertheless,EncludeBVcannotguaranteeorwarranttheaccuracy,reliability,completenessoftheinformationinthispublicationnoritsusefulnessinachievinganypurpose.Readersareresponsibleforassessingtherelevanceandaccuracyofthecontentofthispublication.EncludeBVwillnotbeliableforanyloss,damage,costorexpenseincurredorarisingbyreasonofanypersonusingorrelyingoninformationinthispublication.
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TABLEOFCONTENTS TABLEOFCONTENTS.............................................................................................................................3
LISTOFABBREVIATIONS.......................................................................................................................5
LISTOFFIGURES...................................................................................................................................6
LISTOFTABLES.....................................................................................................................................9
SUMMARY..........................................................................................................................................10
1 INTRODUCTION..........................................................................................................................13
1.1 OBJECTIVEOFTHESTUDY.............................................................................................................131.2 RESEARCHMETHODOLOGY...........................................................................................................131.3 RESEARCHCHALLENGESANDLIMITATIONS..................................................................................171.4 STRUCTUREOFTHEREPORT.........................................................................................................17
2 LIGHTINGMARKETINUGANDA..................................................................................................18
2.1 BACKGROUNDONENERGYACCESSANDOFF-GRIDLIGHTINGINUGANDA.................................18
3 DEMANDASSESSMENTOFTHEMODERNOFF-GRIDLIGHTINGMARKET.....................................20
3.1 CONSUMPTIONANDPURCHASEPATTERNSOFOFF-GRIDLIGHTING...........................................203.2 CONSUMPTIONANDPURCHASEPATTERNSOFMOBILEPHONES................................................333.3 SOLARBRANDS..............................................................................................................................343.4 HOUSEHOLDSPENDING................................................................................................................363.5 CURRENTDEMANDANDCONSUMERSPENDINGTRENDS............................................................393.6 CONSUMERSEGMENTATION........................................................................................................483.7 CONCLUSIONSFROMTHEDEMANDANALYSIS.............................................................................50
4 SUPPLYANALYSISOFF-GRIDLIGHTING.......................................................................................52
4.1 SUPPLYCHAINACTORSANDPRODUCTSONTHEMARKET...........................................................524.2 DISTRIBUTIONCHANNELS.............................................................................................................604.3 BARRIERSTOGROWTH.................................................................................................................64
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4.4 FINANCE........................................................................................................................................674.5 MARKETSIZEANDGROWTH.........................................................................................................684.6 FACTORSINFLUENCINGDECISIONMAKERS..................................................................................714.7 CONCLUSIONSFROMTHESUPPLYANALYSIS................................................................................72
5 INSTITUTIONANALYSIS..............................................................................................................75
5.1 GOVERNMENTPOLICIESANDINSTITUTIONS................................................................................755.2 FINANCIALINSTITUTIONS..............................................................................................................785.3 DONOR/NGOPROGRAMMES......................................................................................................805.4 PRVATESECTOR.............................................................................................................................825.5 POTENTIALACTORS.......................................................................................................................825.6 CONCLUSIONSFROMTHEINSTITUTIONALANALYSIS...................................................................84
6 CONCLUSIONS............................................................................................................................85
7 RECOMMENDATIONS.................................................................................................................89
ANNEXES
ANNEX1:DEMANDSURVEY
ANNEX2:SUPPLYSURVEY
ANNEX3:DEMANDSURVEYSAMPLE
ANNEX4:SUPPLYSURVEYSAMPLE
ANNEX5:INCOMEDISTRIBUTIONPERMAINSOURCEOFINCOMEOFEACHHOUSEHOLD
ANNEX6:DETAILSOFINTERVIEWEDIMPORTERSANDDISTRIBUTORS
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LISTOFABBREVIATIONSARSO AfricaRegionalOrganizationfor
StandardizationBMZ GermanFederalMinistryfor
EconomicCooperationandDevelopment
BoP BaseofthePyramidCAPI computerassistedpersonal
interviewsCREEC CentreforResearchandEnergy
ConservationEAC EastAfricanCommunityEEP EnergyandEnvironmental
PartnershipERA ElectricityRegulatoryAuthorityERTP EnergyforRuralTransformation
ProgramFESL FerdsultEngineeringServices
LimitedFIs FinancialInstitutesGIZ GesellschaftfürInternationale
ZusammenarbeitGVEP GlobalVillageEnergyPartnership
InternationalGVEP GlobalVillageEnergyPartnershipIFC InternationalFinanceCooperationIFC InternationalFinanceCorporationIRENA InternationalRenewableEnergy
AgencyISO InternationalOrganizationfor
StandardizationKfW GermanDevelopmentBankkWh Kilowatts-hourLED LightEmittingDiodeMDI MicroFinanceDepositTaking
InstitutionMEMD MinistryofEnergyandMineral
DevelopmentMFI MicrofinanceInstitutionMoU MemorandumofUnderstanding
PREEEP PromotionofRenewableEnergyandEnergyEfficiencyProgramme
PV PhotovoltaicPV PhotovoltaicRE RenewableEnergyREA (Uganda)RuralElectrification
Agency(sometimestheacronymUREAisused)
REB RuralElectrificationBoardRESP ruralelectrificationstrategyand
planRETs RenewableEnergyTechnologiesSACCO SavingsandCreditCooperative
SocietiesSEMA SustainableEnergyMarket
Acceleration(project)SHS SolarHomeSystemSME smallandmedium-sizedenterpriseTA TechnicalAssistanceTP TechnicalProvidersUECCC UgandaEnergyandCredit
CapitalizationCompanyUETCL UgandaElectricityTransmission
CompanyLimitedUGX UgandanShillingUNAAC UgandaNationalAlliancefor
CleaningCookingUNBS UgandaNationalBureauof
StandardsUNREA UgandaNationalRenewable
EnergyAssociationVSLA VillagesavingandloanassociationW,Wh,Wp Watts,Wattshour,WattspeakWB WorldBankWENRECO WestNileRuralElectrification
CompanyLimitedWWF WorldWildlifeFundWWF-ESARP WWF-EasternandSouthernAfrica
RegionalProgrammeWWF-UCO WWFUgandaCountryOffice
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LISTOFFIGURESFigure 1. Overview of actual locations where demand surveys were taken (see also Annex 3). Insert:
populationdensity................................................................................................................................15Figure2:Answerstothequestion9:‘Whatsourcesofenergydoesyourhouseholduse?’........................20Figure3:Question10:‘Howreliableareyourcurrentsourcesofenergy?’.................................................21Figure 4: Question 10: ‘How reliable are your current sources of energy?’ as perceived by Ugandan
households(n=1249;multipleresponsesperhouseholdwerepossible)...........................................21Figure5:Question11:‘Whichofthefollowingappliancesdoesyourhouseholdhave?’.............................22Figure6.ExamplesoftheKerosenelamps(tadoobas)used.........................................................................22Figure7:Question13:‘Whatarethecurrentlightingsource(s)usedbyyourhousehold?’........................23Figure8:Left:Questions15:‘Howmanyroomsinyourhousearecurrentlylighted?’Right:Questions16:
‘Howmanyroomswouldyouliketohavelighted?’.............................................................................23Figure9:Question21:‘Onaverage,howmuchtimedoesittaketotraveltopayforelectricityorpurchase
lightingproductsperweek?’.................................................................................................................24Figure10:Question17:‘Howsatisfiedareyouwithyourcurrentlightingsource?’asperceivedbyRural/Peri-
Urban/UrbanUgandanhouseholds.....................................................................................................24Figure11:Question17:‘Howsatisfiedareyouwithyourcurrentlightingsource?’....................................24Figure12:Question9:‘What[other]sourcesofenergydoesyourhouseholduse?’Complementarityoff-grid
productsandelectricity(n=194)...........................................................................................................25Figure13.ExamplesofsolarPVinstallations................................................................................................25Figure14:Question35:‘Whatkindofsolarproduct(s)doyouhave?’SolarHomeSystemownersonly.Left:
perlocation;Right:perregion..............................................................................................................26Figure15:Question35: ‘Whatkindofsolarproduct(s)doyouhave?’mobilesolarsystemsonly.Left:by
location;Right:byregion......................................................................................................................26Figure16:Question36:‘Whatarethemainusesofyoursolarproduct(s)?’byareatype..........................27Figure17:Question36:‘Whatarethemainusesofyoursolarproduct(s)?’byproducttype....................27Figure18:Question38:‘Wheredidyoubuyyoursolarproduct?’top:fixedsolarsystems,bottom:mobile
systems..................................................................................................................................................28Figure19:Question38:‘Wheredidyoubuyyoursolarproduct?’SolarHomeSystemowners(topgraph)and
mobilesystemowners(bottomgraph).................................................................................................28Figure20:Question39:‘Whendidyoubuythesolarproduct?’..................................................................29Figure21:Question40:‘Isyoursolarproductstillworking?’.......................................................................29Figure22:Questions38combinedwithQuestion40:‘Fromwhomdidyoubuyyoursolarproductandisit
stillworking?’........................................................................................................................................30Figure23:Question47:‘Howsatisfiedareyouwithyourcurrentsolarproduct?’......................................30Figure24.Left:Question30:‘Doyouthinksolarpoweredproductscanbetrusted?’Right:Question31:‘In
youropinionishavingasolarproductanindicationofamodernhousehold?’...................................31Figure25:Question27:‘’Whichofthefollowingbenefitsofmodernlightingaremostappealing?”(n=568)
...............................................................................................................................................................31Figure26:Question55:‘Reasonsfornotpurchasingasolarproducttillnow’(n=568)...............................32Figure27:Question29:‘Whatconvincesyouofthequalityofasolarproduct?’(n=568).........................32Figure28:Question29:‘Wouldyoubewillingto[promotesolarproducts]ifyouwereofferedanincentive?’
(n=213)................................................................................................................................................33Figure29:Left:Question11:‘Whichofthefollowingappliancesdoesyourhouseholdhave?’(Answersfor
cell-phones only) (n=845), Right: Question 12: ‘Howmany cell phones does your household havetogether?’..............................................................................................................................................33
Figure30Question22:‘Whatis(are)thecurrentcellphonechargingsource(s)usedbythehousehold?’ 34Figure31:Distributionofmobilephonechargecosts(basedonQuestion19:‘Howmuchdoyouspendon
averageforeach,perweek?’)...............................................................................................................34Figure32:Question28:‘Whichsolarbrandshaveyouheardof?’Nationaltotalandbyregion.................35Figure33:Question37:‘Whatbrandis(are)yoursolarproduct(s)?’Nationaltotalandbysystemtype....35Figure34:Question37:‘Whatbrandis(are)yoursolarproduct(s)?’byarea..Error!Bookmarknotdefined.
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Figure35:Question63:“Howmuchofyourhouseholdincomedoyouspendonthefollowingitemsonamonthlybasis?”.....................................................................................................................................36
Figure36:Distributioncurveformonthlyhousehold’senergyexpendituresQuestion63:“Howmuchofyourhouseholdincomedoyouspendontheenergyonamonthlybasis?”................................................37
Figure37:Question19:‘Howmuchdoyouspendonaverageforeachlightingsource,perweek?(Recurringcosts).....................................................................................................................................................37
Figure38:Question19:‘Howmuchdoyouspendonaverageforeachlightingsource,perweek?(Recurringcosts)perregionanddistrict.................................................................................................................37
Figure39:Distributionofoff-gridlighting(includingphonecharging)weeklyexpenditure(basedonquestion19:‘Howmuchdoyouspendonaverageforeach,perweek?)...........................................................38
Figure40:Question20:‘Doyoufeelthatasignificantshareofthehouseholdincomeisspentonlightingandphonecharging?’...................................................................................................................................38
Figure41:CorrelationbetweenQuestion32andQuestion34showsthatwhenaschoolorclinicusessolarpower,45%morehouseholdshavepowertoo(32%vs22%non-solarowners).................................39
Figure 42: Correlation between Question 32 and Question 33 shows that when neighbours, friend orrelativesownsolarpower,45%morerespondentsalsousesolarpower(32%vs22%non-solarowners)................................................................................................................................................................39
Figure43:Left:Question25: ‘Doyouknowwhatsolarpower is?’andRight:Question26: ‘Doyouknowwheretobuysolarproducts?’..............................................................................................................40
Figure44:Question54:Willingnesstopayforasolarproduct,inUGX.......................................................40Figure45:Question51andQuestion54:‘Howmuchwouldyoubewillingtopayforthechosenproduct?
(non-solar-owners)................................................................................................................................41Figure46:Left:Question56:‘Wouldyoube(more)interestedinbuyingsolarproductsifyouwereableto
takeoutaloantofinancethepurchase?’Right:Question57:‘Wouldyoube(more)interestedinsolarproductsifyouwereabletorentorleasethem?’................................................................................41
Figure47:Left:Breakdownsourceofincome(Q58)byprofession,andRight:district/region...................42Figure48.Monthlyincomebyincomesource.Bluetriangle=averageincomeofsolarpowerownersand
non-solarpowerowners.(DatabasedonQuestion55and56sortedpermainsourceofincome)...42Figure49:Left:Question60:‘Doesyourhouseholdincomehavestrongseasonalfluctuations?’,andRight:
Question62:‘Aretheremultipleincomeearnersinyourhousehold?’................................................43Figure50:Question61:‘Inwhichmonth(s)doyouhavemostincome?’.....................................................43Figure51:Left:Question64:‘Doesanyoneinthehouseholdhaveabankingrelationship?’Right:Question
65:‘Withwhichkind(s)oforganizationsisthisaccount?’....................................................................44Figure52:Question66:‘Doyoucurrentlyhaveanoutstandingloan?’(left),Question67:‘Withwhichkindor
organizationwasyourloanwith?’........................................................................................................45Figure53:Willingnessversusability(averagemonthlyhouseholdincome)topay.....................................45Figure54:Question24:‘Ifyouhadgreateraccesstoenergy,whatotheractivitieswouldyouusethenew
energyfor?’...........................................................................................................................................46Figure55:Question53:‘Whichtype(s)ofsolarproduct(s)wouldyoubewillingtobuy?bydistrict..........47Figure56:Question53:‘Whichtype(s)ofsolarproduct(s)wouldyoubewillingtobuy?’bylocation........47Figure57:Question50:‘Whatwouldyoubuy?’...........................................................................................48Figure58.GeneralrepresentationofUgandanoff-gridlightingproductsupplychain................................52Figure59:Question4:‘Whichorganizationbestdescribesthebusiness?’..................................................56Figure60.QuestionS7:‘Howmanyyearshaveyoubeeninbusiness?’.......................................................56Figure61:QuestionS33:‘Whoareyourmaincustomers?’..........................................................................57Figure62:QuestionS34:‘Wheredoesyouraveragesolarcustomerlive?’bydistrictandregion...............57Figure63:QuestionS35:‘Whatisthegenderofyouraveragesolarclient?’bydistrictandregion............57Figure64:QuestionS10:‘Whattypesofoff-gridlightingproductsdoyousell?’.........................................58Figure65:QuestionS20:‘Whichproduct(s)soldbestlastmonth?’ProductsthatsoldbestinApril2014by
district...................................................................................................................................................58Figure66:QuestionS8:‘Fromwhichsuppliersdoyoucurrentlygetyourproducts?’.................................59Figure67:QuestionS21:‘Whichofthebelowservicesdoyouoffer?’.........................................................59Figure68:Question29:‘Whatconvincesyouofthequalityofasolarproduct?’........................................60
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Figure 69. Direct Sales model. Direct contact between seller and customer, sometimes through (local)branchoffices.......................................................................................................................................60
Figure70.Traditionaldistributionmodel.Onlyindirectcontactbetweenimporterandendcustomer......61Figure71:Franchise/agentdistributionmodel.............................................................................................61Figure72.MFI/SACCOmodel.ImportersellseitherviaMFI/SACCOordirectlytoend-usersbasedonjoint
promotionschemeswithMFIs/SACCOs...............................................................................................62Figure73.Combinationofmodels................................................................................................................62Figure74:QuestionS22:‘Whattypeofdistributionchannelsdoesthebusinessuse?’...............................62Figure75:QuestionS27:‘Whatkindsofmarketingstrategiesdoesthebusinessuse?’..............................63Figure76:QuestionS28:‘Whatkindsofmarketingworksbestforthebusiness?’......................................63Figure80:Question45:‘Whichofthebelowfactorsarethemostimportantobstaclestogrowingsalesof
solarproducts?’.....................................................................................................................................66Figure81:Question45:‘Whichofthebelowfactoraremostimportantobstaclestogrowingsalesofsolar
products?’byproducttype...................................................................................................................66Figure82:QuestionS40:‘Howisyourbusinessfinanced?’Multipleanswerspossible..............................67Figure83:QuestionS41:‘Doyoucurrentlyhaveanoutstandingloanforyourbusiness?’Multipleanswers
possible.................................................................................................................................................67Figure84:QuestionS42:‘Whyhaveyouneverhadaloan?’Multipleanswerspossible...........................68Figure85.QuestionS18andS19:‘Howmanyfixed/mobilesolarunitsdidyouselloveralllastmonth?..69Figure86.QuestionS12:‘Atwhatpricedoyouselltheproducts?’Aggregatedintomobilesolarunitsand
SHSsandsplitretailersperregion(andaggregatedfornationalaverages).........................................69Figure87.TotalAnnualTurnoverofInterviewedRetailers..........................................................................70Figure88.AverageTurnoverperRetailer.....................................................................................................70Figure89.MarketSizeforSolarHomeProductsinUganda.........................................................................71Figure90.Identifiedviciouscyclehamperinggrowthofthesolarmarket...................................................88
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LISTOFTABLESTable1:Randomstratifiedsampledemandsurvey(households)................................................................14Table2:Interviewedimporters.....................................................................................................................16Table3.Interviewedinfluencers...................................................................................................................16Table4.Averagefixedcostsoftraditionallightingproducts........................................................................38Table5.Expenditureontraditionallightsourcesandtheaveragepaybacktimeifhouseholdswouldinvest
inasolarpoweredalternative(exchangerate:US$1=UGX2500).......................................................44Table6.Summaryofhousehold’sabilityandwillingnesstopayforsolarproducts*..................................46Table7:Maincharacteristicsoftheidentifiedcustomersegments.............................................................48Table8:Marketsegmentcharacteristics......................................................................................................49Table9.Mainchallengeidentifiedfromdemandanalysis............................................................................51Table10.MaincharacteristicsoftheinterviewedMobilesystemimporters/distributors..........................54Table11.MaincharacteristicsofSHSimporters/distributorsinterviewed..................................................55Table12.MaincharacteristicsoftheinterviewedSHSandmobileimporters/distributors........................55Table13:AverageEstimatedSalesperYear,byProductType,fromImportersandRetailers...................71Table14:Potentialmarketsizeforsolarsystems(fixedandmobile)andcorrespondingpaymentplanError!
Bookmarknotdefined.Table15.Mainchallengesidentifiedfromretailersurveyandinterviewswithsuppliers............................74
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SUMMARYLightingAfrica,ajointIFCandWorldBankprogram,catalysesandacceleratesdevelopmentofcommercialoff-gridlightingmarketsinSub-SaharanAfricaaspartoftheWorldBankGroup'swidereffortstoimproveaccesstoenergy.LightingAfricaismobilizingtheprivatesectortobuildmarketsthatprovideaffordable,modernoff-gridlightingproductstocommunitiesacrossAfricathatarenotconnectedtogridelectricity.Enclude was contracted to conduct an off-grid lightingmarket assessment in Uganda, with the overallobjectivesto:(i) offerinsightonhowtheLightingAfricaprogramcanaddvalueandsupportmarketplayersinorder
togrowthemarketformodernoff-gridproductsthatmeettheLightingGlobalQualityStandards;(ii) offerinsightthatcanbeusedbycurrentandpotentialmarketplayerstogrowtheirbusiness.Toachievethisobjectivethemarketassessmentaddressesdemand,supplyandkeyinstitutionsinvolvedintheoff-gridlightingmarketinUganda.ApproachThemarketassessmentconsistsofademandsurveyof845households;asupplysurveyof103retailers;and interviewswithmain importers/distributors andwith institutions andmarket influencers in all fourregions inUganda.For thedemandsurvey,quotasamplingwasusedtoensure thatat least20%of thehouseholdsinterviewedweregridconnectedand20%ownedsolarproductstoassesssatisfactionlevels.Inaddition, a balanced split wasmade to ensure sufficient representation of urban, peri-urban and ruralhouseholdsintwopreselecteddistrictsineachofthefourregionsofUganda.Forthesupplysurvey,quotasamplingwasalsousedtoensurethattheretailersinterviewedinthesupplysurveywereevenlydistributedovertheeightselecteddistricts.The10interviewedimportersandthe10interviewedmarketinfluencerswereselectedinconsultationwiththeUgandanRuralElectrificationAgency(REA).KeyfindingsThe solar market in Uganda is immature and dispersed, consisting of a multitude of relatively smallcompanies,withhardlyanylarge(multinational)corporationsactiveinthesector.Findings indicate that thesolarproductendusersaregenerallymoreawareandmoreconvincedof thequalityofsolarenergythanthemarketplayers, institutionsandNGOs/donorsrealise.Endusersarealsoquiteconvincedofthebenefitsthatsolarproductscanbringthem.Theneedtochargecellphonesseemstobeincreasinglyprevalent.Eightythreepercent(83%)ofthehouseholdssurveyedownoneormorecellphones.Eightypercentofhouseholdsthatownasolarproductwouldliketohavealargersystem(morethan20watts peak). Thedemandof thehouseholds that donot owna solar product ismorediverse, but theypredominantlydemandlargesolarhomesystems(SHS)andmobilesolarsystemswithaphonechargerandwithmorethanonelight.Theoff-gridlightingmarketinUgandafacesthefollowingkeychallenges:• Limitedsolarpurchasingpointsandbrandawareness;householdsneedsupporttomakeaninformed
decisionAlthough86%ofthesurveyedhouseholdsareawareofwhatsolaris,and90%alsotrustsolarproducts,only65%ofthehouseholds(especiallyintheCentralandEasternregions)actuallyknowwheretobuysolarproducts.Inaddition,85%ofthehouseholdscouldnotmentionanytypeofsolarbrand.Ofthosethatdid,mostmentionedSolarNow,D-lightandBarefoot.SolarNowwasalsothemostownedbrand,with33%ofthehouseholdsowningsuchasystem.Evenforhouseholdsowningasolarproduct,20%didn’tknowthebrandoftheirproduct;thiswasparticularlyevidentintheCentralregion.
• Retailers&solarcompaniesfearsolarproductshaveabadname
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Institutions,importersandsolarcompaniesbelievethatconsumershavedoubtsonthequalityofsolarproducts–mainlyduetoimportsoflowgrade,cheapChineseproductssoldthrough“dubioushardwareshops”.Thisassumptionaboutconsumerperceptionsisnotconfirmedbythisresearch.Solarproductsareboughtpredominantlyatelectronic/hardwareshops(55%ofSHSsand38%ofmobilesystems).About65%ofthesolarownerswereverysatisfiedwiththeirsolardevice,and80%wanttopurchaseothersolarproducts.Currentlightingsourcesused–mainlycandles,kerosenelampsandtorches–areconsideredtobeunreliableby56%ofthesurveyedhouseholds,especiallyinruralareas(68%).Ninetypercentof solarequipmentownersconsider it tobe reliable. In termsof satisfaction levels,60%ofhouseholdsarenotsatisfiedwiththeirkerosenelightingsource,and95%offixedsolarhomesystemownersaresatisfied.
• Limitedavailabilityofmaintenance&aftersalesservices–‘deeper’distributionnetworksrequiredOnly15%ofretailersinUgandaofferwarrantiesandonly6%offeraftersalesservicestotheircustomers,forbothmobileandfixedsolarsystems.Fourmaindistributionmodelsareprevalent:thedirectsalesmodel;thetraditionaldistributionmodel(throughindependent3rdparties);the(branded)franchise/agentmodel;andtherelativelynewMFI/SACCOmodel.Mostsuppliers,however,useamixoftwoorevenallfourdistributionmodelsinanefforttogettheproducttothe‘lastmile’consumer.Morethan45%ofsolarproductsaresoldthroughmultiplepartiesinthesupplychain,eachearningamargin,andthus driving up costs of the products. Nonetheless, end-users value direct contact andwarranties.Correlationsbetweenownershipandpresenceofsolarinthecommunity(neighbours,schools,clinics)suggestthatlocalpresence–andhence‘deeper’distributionnetworks–increasesolarproductuptake.
• Highinvestmentsrequiredtoobtainsolarproducts;workingcapital&affordablelendingareneededLackofmoneyandotherfinancialprioritieswerethemainreasonsthathouseholdscitedfornothavingpurchased a solar product yet. Since, on average, over 38% of the sample households’ disposableincomeisspentonschoolfees,thereislittleroomforotherexpenditures,includingenergy.Currently,lessthan5%ofthehousehold income isspentonenergy,andonaverageUGX1,910(US$0.70)perweekisspentonkerosene.However,householdinvestmentsinsolarproductscouldbeearnedbackwithin6-12monthsforsmallsystemsand2.5-3yearsforlargesystems,basedoncurrentenergyusage.DistributionisfurtherlimitedbythefactthatImporters,suppliers,franchiseesandagentsareoftennotabletopre-financestock,whichlimitstheirgrowth.Interviewedimporters indicatedloanconditionsareunfavourableandinterestratestoohigh.
• Importersandretailershavehighmargins,whichbanksandotherstakeholdersfeelarenotjustifiedRetailers,onaverage,adda40%marginontothewholesalepriceofsolarproducts(bothforfixedandmobilesystems).However,theygenerallycoveralldistributioncosts,includingthetransportneededandcorrespondingcostsofgettingtheproductsfromthesuppliertothe‘lastmile’consumer.
• Highperceiveddefaultrisk,whenpre-financingproductsAlthoughhighdefaultratesonpre-financedproductshavebeenevidentinthepast,severalcompaniescurrentlyhavea90%paybackrateafterthefirsttwoyearsofpre-financingsolarproductstoend-users.However,highdefaultriskaccompaniedbypre-financingisstillaprevailingperceptionamongmarketplayers(bothprivateandpublic).
The challenges above cannotbe considered independently fromeachother and seem tobe linked in aviciouscycle:financialinstitutionsarereluctanttoprovideloans(tosuppliers,retailersand/ortoend-users)→therefore,cash-poorsuppliers&retailerscanonlysellonacashbasisandcanonlyprovidelimitedservice&maintenanceinfrastructure→therefore,customersdonotbuy,resultinginalimited,highriskmarketthatfinancialinstitutionsarereluctanttofinance.A number of initiatives have acknowledged these interrelated issues and are working to solve them.Programs working to address the problems include the Promotion of Renewable Energy and EnergyEfficiencyProgramme(PREEEP)byGIZandENdev;FINCAPlusbyFINCA,REAandMEMD;SustainableEnergyMarketAcceleration(SEMA)byEnclude;andtheChampionDistrictInitiativebyWWF,MEMD,REA,GIZandCREEC.Inadditiontothechallenges,thisstudyidentifiedanumberofkeyopportunitiesforincreasedsolarproductuptakeinUganda.
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• Householdsneedworkingsolutionsforchargingtheirmobilephones:Nearlyeveryruralhousehold(73%)owns amobile phone. Seventypercentof thesehouseholds charges their phoneoutside thehome,usuallyatakioskofsomesort,andspendsonaverageUGX1,000(US$0.40)perweektodoso.
• Households spend valuable time accessing energy: Rural households spend 26 minutes per weektravellingtocollectandpurchaselightingproducts.Peri-urbanresidentsspend21minutes,andurbandwellersspendanaverageof15minutesperweekoncollectingandpurchasinglightingproducts.
• Increaseretailerawarenessonfinancingoptions:Seventyfivepercentofsolarretailersdon’thavealoan,and30%ofthemnevereventhoughtofcreditasanoption.Increasinguptakeoffinancingoptionswouldincreasecapitalinthesupplychain.
• Thesolarmarketisyoungbutgrowingquickly:Ofthesolar-owninghouseholdsinterviewed,60%ownaSHSand40%ownamobilesystem.However,50%ofthesemobilesystemswereboughtwithinthelast12months,whereasover60%oftheSHSwereboughtmorethanayearago.ThetotalmarketsizeforsolarproductsisestimatedtobebetweenUGX32and37billion(US$115K–130K)annually,andgrowsatarateof10-50%peryear.
InterventionrecommendationsTo improve access to energy in the Sub-Saharan region, Lighting Africa can consider the followinginterventionstoacceleratethedevelopmentofcommercialoff-gridlightingmarketsinUganda.TobreaktheviciouscyclehamperingsolarmarketplayersinUganda,thereisaneedtosupport,createandfundfee-for-serviceorpay-as-you-gobusinessmodels(withfinancialinstitutions,suppliersandretailers).Wesuggestthefollowingmarketinterventions:• SolarCompanies:Set-upandstrengthendistributionandaftersalesnetworks;Increasecustomercare
and services (including after-sales); Increase informal marketing; and provide/facilitate warranties.Thesetypesofinterventionsarecapitalintensiveforsolarcompanies,hencestrengtheningtheworkingcapitalpositionofthesecompaniesiskey.
• Financial Institutions (FIs): Provide technical assistance (TA) to FIs, by training loan officers anddeveloping specificmarketingprograms;providea loanguarantee fund toparticipatingFIs;providepartialriskguaranteestoallowFIstofinancesolarcompanies;providetechnicalassistanceondefaultand bad debt management; and provide TA, seed money and/or guarantees to standardised andsimplified loan appraisal systems. These measures will add more capital to the supply chain, thusacceleratinggrowth.
• Government and development institutions: Government institutions: Radio awareness campaignspromotingsolarversuskerosenetostrengthenthesolarmarket,withafocusonwheretobuysolarproducts;MEMD(supportedbyLightingAfrica):Enforcestandards,strengthenUNBS(UgandaNationalBureauofStandards)tofurtherincreasemarkettrust;LightingAfrica(supportedbyUECCCandMEMD):Createaguaranteefundtoincreaseworkingcapitalthroughoutthesupplychain;MEMD(supportedbyLighting Africa): Create warranty legislation tomature themarket; extendworking capital to solarcompanies;promotesolar throughschoolprograms;andsubsidiseawarenesscampaignstosupportsolar companies and retailers. These measures will strengthen the solar market and build furtherproducttrust.
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1 INTRODUCTION
1.1 OBJECTIVEOFTHESTUDY
ThismarketassessmentisconductedaspartoftheLightingAfricaprogram.LightingAfrica,ajointIFCandWorldBankprogram,catalysesandacceleratesdevelopmentofcommercialoff-gridlightingmarketsinSub-SaharanAfricaaspartoftheWorldBankGroup'swidereffortstoimproveaccesstoenergy.LightingAfricaismobilizingtheprivatesectortobuildmarketsthatprovideaffordable,modernoff-gridlightingproductstocommunitiesacrossAfricathatarenotconnectedtogridelectricity.Improvedlightingprovidessignificantsocio-economic,healthandenvironmentalbenefits,suchasnewincomegenerationopportunitiesforsmallbusinesses.LightingAfricacarriesoutongoingdiscussionswiththeGovernmentofUgandaandpreliminarybackgroundwork in preparation for a possible integration of its activities into the Uganda Energy for RuralTransformationPhaseIIIproject,anupcomingprojectundersupervisionofUganda’sRuralElectrificationAgency(REA).LightingAfricacontractedEncludetoconductthismarketassessmentinUganda.EncludewassupportedbyFriendsConsultLtd.Ugandaforsurveyimplementationandcoordination,andtheUgandanenergyexpert,BobbyNamiti.Theoverallobjectivesofthisassignmentareto:
(i) offerinsightastohowtheLightingAfricaprogramcanaddvalueandsupportmarketplayersinordertogrowthemarketformodernoff-gridproductsthatmeettheLightingGlobalQualityStandards;and
(ii) offerinsightthatcanbeusedbycurrentandpotentialmarketplayerstogrowtheirbusinesses.
Toachievethisobjectivethemarketassessmentaddressesthedemand,supplyandkeyinstitutionsinvolvedin the off-grid lightingmarket. These off-grid lighting products include both fixed systems (solar homesystems,orSHS)andmobileorportablesystems(lanternsandplugandplaysystems).Morespecifically,thisstudyhasthreespecificobjectives:
1. Onthedemandside:Analyseconsumptionandpurchasepatternsrelatedtohousehold lightinganddetermineurbanandruralconsumers’willingness/abilitytopayformodernoff-gridproductsthatmeettheLightingGlobalQualityStandards;
2. Onthesupplyside:Analysethemodernoff-gridlightingmarketincludingmarketsize,distributionmodelsandgrowthonnationalaswellasregionallevels,etc.,andmaptheactorsinthesupplychain.
3. Ontheinstitutionalside:Identifyinstitutions,bothinthepublicandprivatesectorandfromthepolicy to retail levels which can influence the sub-sector and prospective actors entering themodernoff-gridlightingmarket.Analysetheircurrentandprospectiverolesinthesub-sector.
1.2 RESEARCHMETHODOLOGY
1.2.1 ApproachThismarketassessmentexamineswhichLightingAfricainterventionsandactivitiescanbestaddvalueandsupport both existing market players (operating for 5-20 years) and newmarket entrants. This reportincludessuggestedactivitiesforLightingAfricatofurthergrowthemarket,andspurinvestmentinscalingupsuccessfulapproachesandinnovationsintheoff-gridlightingmarketinUganda.
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Thesectionbelowelaboratesthemethodologiesemployedtodevelopconclusionsandexecuteresearchactivities.
1.2.2 DataCollectionThedatacollectionconsistedof:
• aquantitativedemandsurveyof845households;• aquantitativesupplysurveyof103retailersofoff-gridlightingproducts• qualitativeinterviewsof10importersordistributorsofmodernoff-gridlightingproducts;and• qualitativeinterviewsof10keymarketstakeholders,includingpublicandprivateinstitutions.
DemandsurveyTogetawell-balancedperspectiveoftheeffectivedemandforhighqualitysolar lanternsinurban,peri-urbanandruralareas,thesurveycoveredallfourregionsofUganda,andtwodistrictsperregion.Quotasamplingwasusedtocometothesampleofgridconnectedandnon-gridconnectedhouseholdsinUganda.Aquotawasalsosettoincludeapproximately20%grid-connectedhouseholds,toassesstheextenttowhichoff-gridlightingproductscomplementgrid-connectedelectricityservices.Anotherquotawassettoincludeapproximately20%solar-owninghouseholds,togaininsightintocurrentproductuseandusersatisfaction.Thetablebelowhighlightsthemake-upofthestratifiedhouseholdsampleinmoredetail(seeAnnex4fortheactualsurveysample).Figure1providesanoverviewofthesurveylocations.Table1:Randomstratifiedsampledemandsurvey(households)
Regions Samplesizeperregion Urban/ruralsplit Energysource Districtsproposed
Northernregion 17535urban70peri-urban70rural
Min.35grid-connectedMin.35solar-owning Nebbi,Gulu
Westernregion 17535urban70peri-urban70rural
Min.35grid-connectedMin.35solar-owning Mbarara,Kabarole
Easternregion 17535urban70peri-urban70rural
Min.35grid-connectedMin.35solar-owning Soroti,Mbale
Centralregion 17535urban70peri-urban70rural
Min.35grid-connectedMin.35solar-owning Mubende,Masaka
Total 700140urban280peri-urban280rural
Min.140grid-connectedMin.140solar-owning
Indicativetargetfordistributionofgenderofrespondents 70%male30%female
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Figure1.Overviewofactuallocationswheredemandsurveysweretaken(seealsoAnnex3).Insert:populationdensity.
SupplysurveyThesupplysurveywasconductedamong100retailersofoff-gridlightingproducts,spreadevenlyoverthefourregionsand8districtschoseninUganda(seeAnnex5forthesampledistributionbyregion).Thesurveyincludes a range of different suppliers and retailers: general shops, electronic/hardware shops, solarspecialistshops,andagentsandruralfinancialinstitutionsthatretailoff-gridlightingproducts.PilotsurveysApilotsurveywasconductedtotestandimprovethedemandandsupplysurveys.FriendsConsultprovidedfeedbackonlocalparameters.Thefollowingpre-identifiedstakeholderswereinvitedtocommentonthedraftdemandandsupplysurveys:Barefootpower,SolarNow,IncafexandREA.Commentswerereceivedfromthelattertwo(seeAnnex1).Enclude and Friends Consult ltd. used the pilot survey as field training for the two supervisors and 10enumerators on using the CAPI (computer assisted personal interviews) survey software for both thedemandandsupplysurvey.ThepilottookplaceintheareasofSeetaandMukono(incentralUganda).Forthedemandsurvey,40pilotsurveyswereconducted,including20%gridconnected,20%solarowners,andamixofurban(20%),peri-urban(40%)andruralinhabitants(40%).Duringthetraining,thedefinitions
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of urban, peri-urban and rural were presented and discussed in detail1. Data from both surveys wasevaluatedandthesurveyswereimprovedwherenecessary.ThefinalsurveyscanbefoundinAnnexes2and3.ImporterInterviewsThefollowing10importersofoff-gridlightingproductsinUgandawereinterviewed:Table2:Interviewedimporters
Importers BarefootPowerUgandaLTD*SolarNowFRESUltraTec*TASS
BBoxABMatraAzuri/Indigo*GiraSolar*SmallSolutions*
*Pico-PVproductsthathavemettheLightingGlobalMinimumQualityStandards
MarketinfluencerInterviewsThefollowinginstitutionswereidentifiedwhoareeitheractiveinorinfluencetheoff-gridlightingmarketinUganda.Publicandprivateinstitutionsareincludedbecauseofcurrentandfuturerolesinthesector,andhigh potential new market entrants were also interviewed. The following market influencers wereinterviewed:Table3.Interviewedinfluencers
MarketinfluencersGovernment
- UgandaEnergyCreditandCapitalizationCompany- MinistryofEnergyandMineralDevelopment- UgandaNationalBureauofStandards- REA
FinancialInstitutions- CentenaryBank- RwanyamahembeSACCO
Donor/NGOprogrammes- GIZ/ENdev- SEMAproject- WWF
Privatesector- KilembeInvestmentsLimited
DeskResearchThefollowingservedasresourcematerialstoinformresearchdesignandanalysis:
• GTZ–TargetMarketAnalysis,Uganda’sSolarEnergyMarket(November2009);• Enclude-InternalreportproducedforDGIS/PhillipsfundedSESAproject(SustainableEnergy
SolutionsAfrica)–SolarmarketassessmentUganda(2013);• UNCDF/UNDP–UgandaCountryAssessment:CleanStartUganda,MicrofinanceOpportunitiesfor
aCleanEnergyFuture(October2012);• Enclude–Internalreport:MarketSurveyonPossibleCo-operationwithFinanceInstitutionsfor
EnergyFinancinginKenya,UgandaandTanzania(2011);• USAID-ImprovingAccesstofinancialServicesinRuralUganda(November2007);• UNEPRisøCentre-ReviewofSolarPVmarketdevelopmentinEastAfrica(March2014).
Inaddition,Encludeconsulteditsregionalnetworktoobtainlocalinsightsintothecurrentmarketforoff-gridlightingproducts,includinginformationonvendorsanddistributorsalreadyactiveinUganda.1Rural:settlementsoflowdensity(about5-10,000personstotal);aspacewherehumansettlementandinfrastructureoccupyonlyasmallshareofthelandscape;naturalenvironmentdominatedbypastures,forests,mountainsanddeserts;Peri-urban:settlementsofmediumdensity(about10,000-50,000persons);Urban:settlementsofhighdensity(morethan50,000persons);highdensityofinfrastructure(occupyingalargeshareofthelandscape);landscapedominatedbybuildings.
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1.3 RESEARCHCHALLENGESANDLIMITATIONS
Therearesomelimitationstohowtheresultspresentedinthisreportcanbeinterpreted.First,althoughweaimedtointerviewallactorsfacetoface,afewstakeholderswereinterviewedbyphoneduetotheirremotelocationsandtraveltime.Althoughquestionsinphoneinterviewswerethesameaswhenconductingaface-to-faceinterview,theremightbeslightinterpretationdifferenceswhenusingthismethod.Second, the results show an overrepresentation of solar owners and grid-connected households. Asexplainedintheresearchmethodology,thisisdeliberatetoensurecomparisonscouldbemadebetweengrid connected and off-grid households and between solar-owning and non-solar-owning households.Therefore,notallresultscanbedirectlygeneralizedtorepresentallhouseholdsinUganda.
1.4 STRUCTUREOFTHEREPORT
Followingtheintroductionandbackgroundmaterial,Chapter2providesanoverviewofthecurrentmarketsituationofoff-gridlightinginUganda,includingthemainplayersactiveinthemarket.Chapter3highlightsthemainfindingsofthedemandsurveyinrespecttoproductsusedandhouseholds’expendituresforsolarproductsinUganda.Chapter4providesanoverviewofthekeyfindingsofthesupplysurveyandinterviewsregarding the main distribution and business models of Ugandan retailers and importers. Chapter 5highlightsthekeycharacteristicsandactivitiesofmarketplayersthatwereinterviewed.InChapters6and7,thekeyconclusionsandmainrecommendationsofthestudyarepresented.
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2 LIGHTINGMARKETINUGANDA
2.1 BACKGROUNDONENERGYACCESSANDOFF-GRIDLIGHTINGINUGANDA
2.1.1 EnergyAccessChallengesinUgandaHistorically,Uganda’selectrificationratehasbeenquitelow.Grid-connectedhouseholdshavegrownfrom5.6%in1991to9%in2006and10%in2010.Presentlyonlyaboutfivemillionhouseholdsareconnectedtothenationalgrid.Thisisjustunder14%ofthecountry’sentirepopulationof36millionpeople.Thegridisalmostentirelyfocusedinurbanareasandprovincialtowns,oftenonlyconnectingafewthousandpeopleper district2. At the same, only about 16% of the population is urbanized. Of the rural population,approximately4%isgrid-connected.Hydro-generatedpoweristheprimarysourceofpowertothenationalgridandaccountsforjustover70%ofthe595MWinstalledgenerationcapacity(20103).Renewableenergysources,e.g.solarPVandbiogasproduce,contributeanegligible0.1%ofthetotalnationalenergysupply.Thatapproximately31millionpeopleinUgandalivewithoutelectricityhassignificantramificationsfortheeconomyandqualityoflife.Lackofaccesstoreliablelightinglimitstheproductivityofabout85%ofthecountry,hinderingpeoples’ability tocarryoutbasicactivitiesatnightor intheearlymorning, includinghousehold chores, reading, schoolwork, and business activities. Fuel-based lighting also has health andsafetyimplications:chronicillnessduetoindoorairpollution,andriskofinjuryduetotheflammablenatureof the fuels used. Kerosene lamps emit fine particles that are a major source of air pollution. Theseimplicationsalsohaveanegativeimpactontheeconomy(lowerproductivity,higherhealthcarecosts)andreducedqualityoflife(lowerlifeexpectancy,respiratoryissues).
2.1.2 TheUgandanSolarMarketThesolarPVmarket inUgandahas steadilygrownover the last15yearswithnewplayersentering themarket, includingforeigninvestors.WhiletenyearsagotherewereahandfulofsolarcompaniesmainlyengagedininstitutionalsolarPVinstallations,currentlyanumberofcompaniesareinvolvedinthesolarPVandevensolarthermalbusinesses.Themarketisintransition,however,anddifferentplayersarestrugglingtofindtheiroptimumservicinglevels,particularlyregardinglastmiledistribution.ThehistoricalgrowthofsolarintheUgandanmarketisaccountedforbyfivekeyfactors:4
• Conduciveregulatorypolicies,includingtheUgandanenergyandrenewableenergypoliciesthatencourageinvestmentandtradeinthesolarsectorbyprovidingfinancing(credit)mechanismsandbyaimingtodiversifytheenergysupplysourcesandtechnologies;
• Governmentprojectsthatspecificallypromotetheuseofsolarinruralelectrification;• Thedemandforreliableelectricityandmodernenergyservicesbyanexpandingmiddle-income
society;• Thegrowthinthetelecommunicationsector;• Nationalawarenessprogramsfacilitatedbydonorsupport.
Ugandahasanaveragesolarinsolationof5-6kWhpersquaremeterperday.Throughouttheyear,ithasanaverageof8sunshinehoursperday.Thisprovidesanexcellentpotentialforsolarenergyuse.Solarenergy
2IRENA–CountryprofileUganda2011(http://www.irena.org/REmaps/countryprofiles/africa/Uganda.pdf#zoom=75);Reegle–CountryprofileUganda2011(http://www.reegle.info/countries/uganda-energy-profile/UG).3Enclude-InternalreportproducedforDGIS/PhillipsfundedSESAproject(SustainableEnergySolutionsAfrica)–SolarmarketassessmentUganda (2013);UgandaBureauof statistics, statistical abstract2013;www.era.or.ug;REA - TheRenewableEnergyPolicyforUganda2007.4GTZ–TargetMarketAnalysis,Uganda’sSolarEnergyMarket(November2009)
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iscurrentlyusedprimarilyforoff-gridelectrificationforruralcommunities,aswellasforwaterheatingandpoweringpublicbuildings,includinghospitals.In2009anestimated1.1MWofsolarPVpowerwasinstallednationwide5, including both institutional and home systems. The SHSmarket is regarded as one of thebiggestareasinUgandaforcommerciallydrivensolarPVbusiness,andconsideredtohavehighpotential.Despite its growth and promising potential, according to previous research themarket for solar is stillnascentandhampered6bythefollowingmainchallenges:• Cost of solar PV systems: Solar systems are expensive to buy both from an upfront investment
perspectiveandinabsolutecostterms.Evenwhereacreditschemeisprovided,theultimatecostofasolarsystemisstillhigh,mainlyduetothehighmarginsofmiddle-menandinterestrateschargedbyfinancialinstitutionsinUganda(typically2.5-4%permonthflatrate).
• Quality of solar PV products, systems and system components: Quality control is low both atimportationandlocalproductionlevels(forlocalcomponents),aswellasininstallationsofthesystems.Thehighmarketpotentialhasresultedinaninfluxofdealerssellinglowqualityproductsorinstallingsystemsincorrectly,especiallyinthecaseofsolarlanterns.Ruralcustomersaremoreconcernedwiththepriceofsystemswhilerelativelyuninformedabouthowtodeterminethequalityofsystems.
• Last mile distribution: Rural commercial marketing and distribution networks for solar are largelyabsent.ThesolarcompaniesinUgandaarestuckatalowlevelequilibriumoflowsalesvolumesandhighpriceswithlargeunitmargins.Thecompaniesaresmallandentrepreneurial,withlimitedfinancialcapabilities.Theyhaveneithertheresourcesnortheriskappetiteformajorinvestmentsontheirowninruralmarketingandlastmiledistribution.
• Financialrisks:Becauseofthehighcapitaloutlay,solarisconsideredbybothcashandcreditbuyerstobe a risky asset. Financial Institutions, including micro finance institutions and Savings and CreditCooperatives(SACCOs)oftenassumethatfinancingsolarproductscarriesahighcreditrisk,particularlybecauseitisanewproductofwhichthetechnicalaspectsaregenerallyunknown.
• Service and after-sales service: There is inadequate rural presence of solar equipment and serviceproviders and thus service and maintenance is often out of reach. As a result, solar consumersexperiencealackoftechnicalsupportontheground.
Theabovechallengesweretakenashypothesesandfurtherassessedinthisstudy.
5Reegle–CountryprofileUganda2011 (http://www.reegle.info/countries/uganda-energy-profile/UG);GTZ–TargetMarketAnalysis,Uganda’sSolarEnergyMarket(November2009).6Enclude-InternalreportproducedforDGIS/PhillipsfundedSESAproject(SustainableEnergySolutionsAfrica)–SolarmarketassessmentUganda(2013);GTZ–TargetMarketAnalysis,Uganda’sSolarEnergyMarket(November2009).
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3 DEMAND ASSESSMENT OF THE MODERN OFF-GRIDLIGHTINGMARKET
Theenumeratorsconducted845demandsurveyswithhouseholdsinallfourregions,andeightdistrictsinUganda.Thesurveysconsistedof70questionsonoff-gridlightinguse,awareness,satisfactionanddemand.SeeAnnex2forthefullsurvey.Themainresultsaresummarizedbelow.
3.1 CONSUMPTIONANDPURCHASEPATTERNSOFOFF-GRIDLIGHTING
3.1.1 CurrentaccesstoanduseofenergysourcesThemainenergysourceusedbysurveyedhouseholdsiskerosene,particularlyintheruralareas.Onaverage,40%ofhouseholdsuse kerosene, and18%use candles. In the rural areas, over 56%ofhouseholdsusekerosene,whereasinurbanareasthefigureis21%.Figure2:Answerstothequestion9:‘Whatsourcesofenergydoesyourhouseholduse?’
Note:Becauseof thestratified/quotasamplingmethodused,grid-connectedhouseholdsandhouseholdsusingsolarenergyareoverrepresented.TheUgandanhouseholdssurveyedconsidertheenergysourcesusedtobeveryunreliable.Particularlyinruralandperi-urbanareas,almost70%and55%ofrespondentssaidtheirenergysourcewas‘extremelyunreliable’to‘notsoreliable’.Thisisprimarilythecaseforhouseholdsusingbasicenergysourcesincludingkerosene, candlesandnon-rechargeablebatteries, and far lessprevalent forgrid-connectedhouseholds(either national or local) and solar-using households. Urban households find their energy source mostreliable(67%sayitis‘very’or‘moderately’reliable).
6%
56%
17%
5%
15%
12%
12%
0%
42%
12%
7%
14%29%
3%
15%21%
9%
7%
16% Nationalgrid
Localmini-grid
Biogas
Candles
Diesel/petrolgenerator
Kerosene
Non-rechargeablebatteries
Rechargeablebatteries
Solarenergy
Urban
Rural
Peri-Urban
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Figure3:Question10:‘Howreliableareyourcurrentsourcesofenergy?’
Whencomparingthereliabilityofthedifferentenergysources(seeFigure4below),itbecomesclearthatsolarenergyisperceivedasquitereliable,whereaskeroseneandnon-rechargeablebatteriesareseenasunreliable.About90%ofthehouseholds indicatedthattheytrustsolarproductsandthreequartersseesolarastheintroductiontoamodernhousehold.Figure4:Question10:‘Howreliableareyourcurrentsourcesofenergy?’asperceivedbyUgandanhouseholds(n=1249;multipleresponsesperhouseholdwerepossible)
Figure5showswhichappliancesareusedbythesurveyedhouseholds.Themajorityofthehouseholdsowna cell phone, radio and flashlight/torch (using dry cell batteries), particularly in the rural areas. ThehouseholdsinurbanareasalsotypicallyownTVs,refrigeratorsandelectriccookstoves.
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Rural
Peri-Urban
Urban
GrandTotal
Extremelyunreliable Notsoreliable Moderatelyreliable Veryreliable
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Other(6)
Solarenergy(203)
Nationalgrid(179)
Localmini-grid(15)
Rechargeablebatteries(85)
Non-rechargeablebatteries(168)
Candles(79)
Kerosene(514)
Extremelyunreliable Notsoreliable Moderatelyreliable Veryreliable
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Figure5:Question11:‘Whichofthefollowingappliancesdoesyourhouseholdhave?’
3.1.2 CurrentAccesstoandUseofOff-gridLightingProductsKerosenelamps(alsoknownastadooba)areusedby28%ofthesurveyedhouseholdsasthemainsourceoflightinginthehome.Inaddition,thelightfromfirefuelledbycharcoalorwood(23%)andfromflashlightsusingdrycellbatteries(15%)arealsowidelyused,particularlyintheruralandperi-urbanareas.Figure6.ExamplesoftheKerosenelamps(tadoobas)used
Figure7demonstratesthatthemoreremote(orrural)thehousehold,themoreitreliesonbasicenergysources such as kerosene, wood and charcoal fire, and candles. Notably, although nearly 24% of thehouseholds in urban areas are grid-connected (either national or local grid), almost 50% still use basicsourcesforlightingthehome,generallyasaback-upduringpowercuts.Themajority(about57%)ofsurveyedhouseholdsusethese lightingsourcesfor lessthan2hoursaday.Othersusethelightingsourcebetween2to4hoursaday.
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Cellphone(696)
Radio(675)
Flashlight/torch(rechargeable)(100)
TV(244)
Refrigerator(76)
Computer(32)
Electricstove(11)
Otherelectricalpoweredappliances(101)
None(48)
Cellphone(696) Radio(675)
Flashlight/torch
(rechargeable)(100)
TV(244) Refrigerator(76)
Computer(32)
Electricstove(11)
Otherelectricalpoweredappliances
(101)
None(48)
Urban 96% 85% 18% 72% 28% 10% 4% 28% 1%
Peri-Urban 84% 78% 14% 24% 6% 4% 1% 11% 4%
Rural 73% 78% 6% 9% 1% 1% 1% 4% 10%
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Figure7:Question13:‘Whatarethecurrentlightingsource(s)usedbyyourhousehold?’
Note:Becauseofthestratifiedsamplingmethodused,grid-connectedhouseholdsandhouseholdsusingsolarenergyareoverrepresented.Thefigurebelowindicatesthecurrentlightinguse,byroomscurrentlylighted,andthedemandedlighting.Inruralareas,73%ofthehouseholdshave1or2roomslitwhiletheywouldwant3ormoreroomslighted(74%). Inperi-urbanareas,63%ofthehouseholdshave1or2rooms lightedbutwouldwant4ormoreroomslighted(56%).Inurbanareasthenumberofroomscurrentlylightedshowsadiffusepicture,however38%indicatestodesiretohave5ormoreroomslighted.Figure8:Left:Questions15:‘Howmanyroomsinyourhousearecurrentlylighted?’Right:Questions16:‘Howmanyroomswouldyouliketohavelighted?’
Aruralhouseholdfromoursamplespendsonaverage26minutesperweektravellingtopurchasetheirlightingsource.Inperi-urbanandurbanareasthisisrespectively21and15minutesperweek.
30%
3%
18%2%
35%
1%7% 3%1% 22%
8%
15%
6%
32%
1%
7%3%
6%17%
12%
11%
7%18%
1%
9%
2%
23%
Firefuelledbycharcoal/firewoodCandles
Flashlight/torch(drybatteries)
Flashlight/torch(rechargeable)
Kerosenelamp
Lightpoweredbyhomebattery/automotivebatterySolarpoweredlightsource(fixedsystem)Solarpoweredlightsource(mobilesystem)Electricitypoweredlightingfixture(gridpowered)
0%10%20%30%40%50%60%70%80%90%
100%
5ormore
4
3
2
10%10%20%30%40%50%60%70%80%90%
100%
5ormore
4
3
2
1
Rural
Urban
Peri-urban
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Figure9:Question21:‘Onaverage,howmuchtimedoesittaketotraveltopayforelectricityorpurchaselightingproductsperweek?’
3.1.3 DegreeofSatisfactionwithOff-gridLightingProductsRuralandperi-urbanhouseholdsshowedhigh levelsofdissatisfaction towards thebasicoff-grid lightingsourcesused,67%and55%respectively(seefigurebelow).Dissatisfactionisfarlessprevalentintheurbanareaswherealargerpartofthehouseholdsaregrid-connected(24%)andownsolarhomesystems(8%).About96%ofsolarusersaresatisfiedversus35%ofkeroseneusers.Figure10:Question17:‘Howsatisfiedareyouwithyourcurrentlightingsource?’asperceivedbyRural/Peri-Urban/UrbanUgandanhouseholds
Figure11:Question17:‘Howsatisfiedareyouwithyourcurrentlightingsource?’
0%10%20%30%40%50%60%70%80%90%
100%
Rural Peri-Urban Urban Overall
Morethan2hours
Between1- 2hours
Between30- 60minutes
Between10- 30minutes
0to10minutes
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Rural
Peri-Urban
Urban
Extremelyunsatisfied Notsatisfied Moderatelysatisfied Verysatisfied
0% 20% 40% 60% 80% 100%
Candles(136)
Electricitypoweredlightingfixture(gridpowered)…
Firefuelledbycharcoal/firewood(432)
Flashlight/torch(drybatteries)(278)
Flashlight/torch(rechargeable)(95)
Kerosenelamp(533)
Lightpoweredbyhomebattery/automotive…
Solarpoweredlightsource(fixedsystem)(134)
Solarpoweredlightsource(mobilesystem)(48)
Extremelyunsatisfied Notsatisfied Moderatelysatisfied Verysatisfied
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3.1.4 ComplementaryOff-gridLightingProductsandElectricityServicesSeventypercentofthegrid-connectedhouseholdsmakeuseofcomplementarylightingsources,ofwhichthemaincomplementarysourceiskerosene(23%)andtoalesserextentsolarenergy(16%).Householdsconnectedtoalocalmini-gridmakeuseofacomplementarylightingsourcemoreoftenthanhouseholdsconnectedtothenationalgrid(seeFigure12).Thiscouldindicatethattheunreliabilityofthelocalmini-gridrequireshouseholdstousecomplementaryproducts.Figure12:Question9:‘What[other]sourcesofenergydoesyourhouseholduse?’Complementarityoff-gridproductsandelectricity(n=194)
3.1.5 TypesofSolarSystemsIngeneral,householdsusefixedsolarsystemsmorethanmobilesolarsystems,particularlythefixedsolarhomesystemsofmorethan20watts(seeFigure14).Aprobablereasonforhighfixedsystemuseisthegovernmentsubsidiesprovidedforfixedsolarsystemsonly,providedthroughthePVTMA(SolarPVTargetedMarketing Approach) as part of the World Bank financed Energy for Rural Transformation (Phase II)programme,andthestrongmarketingeffortsofSolarNow(offeringfixedsystems),usingagentsalloverUganda.Figure13.ExamplesofsolarPVinstallations.
IntheCentralregion,thesmallersolarhomesystems(of0-10and10-20wattscapacities)arealsoownedin largenumbers,while in theEasternandNorthern regions,mobile systems (more thanone lightwithphonecharger)ranksecond(seeFigure15).
0% 20% 40% 60% 80% 100%
Localmini-grid
Nationalgrid
None
Biogas
Candles
Kerosene
Non-rechargeablebatteries
Rechargeablebatteries
Solarenergy
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Figure14:Question35:‘Whatkindofsolarproduct(s)doyouhave?’SolarHomeSystemownersonly.Left:perlocation;Right:perregion.
Note:Thepercentageontherightaxisisthepercentageofthetotalsample(e.g.14%ofUrbanhouseholdsinterviewedownaSHSsystem).Figure15:Question35:‘Whatkindofsolarproduct(s)doyouhave?’mobilesolarsystemsonly.Left:bylocation;Right:byregion.
3.1.6 WhichSolarSystemsareUsedforWhatSolarproductsaremainlyusedtolightthehome(32%)orchargephonesathome(26%).Alsostudyingforchildrenisoftenmentioned(20%).TVwatchingisparticularlymentionedforSHSsystemusers.
0%
5%
10%
15%
20%
0%
20%
40%
60%
80%
100%
%-ageoftotalHH(line
)
%-ageofH
Hw/s
olarprodu
cts
FixedSolarhomesystem(0-10watt)
FixedSolarhomesystem(10-20watt)
FixedSolarhomesystem(morethan20watt)
TotalofHHs(rightaxis)
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
%-ageoftotalHHs
(line)
%-ageofH
Hw/s
olarprodu
cts
0%
5%
10%
15%
20%
0%
20%
40%
60%
80%
100%
%-ageoftotalHHs
(line)
%-ageofH
Hw/s
olarprodu
cts
SinglelightwithphonechargerMorethanonelightwithphonechargerMorethanonelightwithoutphonechargerSinglelightwithoutphonechargerTotalofHHs(rightaxis)
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
%-ageoftotalHHs
(line)
%-ageofH
Hw/s
olarprodu
cts
Final report WB PO7170868 ‘ Enclude 27
Figure16:Question36:‘Whatarethemainusesofyoursolarproduct(s)?’byareatype.
Figure17:Question36:‘Whatarethemainusesofyoursolarproduct(s)?’byproducttype.
Note: Difference between “Charge phone business” and “Phone charging business”: “Charge phone business”:Respondentchargeshis/herphoneathis/herwork;“Phonechargingbusiness”:Therespondentusestheproducttoearnanincomechargingmobilephonesasabusiness.
3.1.7 SourceofPurchaseandProductSatisfactionSolarproductsweremainlyboughtatelectric/hardwareshops(55%).Onlyaround1.5%ofthehouseholdspurchasedtheirsolarproductthroughaSACCOorMFI.
0% 20% 40% 60% 80% 100%
Rural
Peri-Urban
Urban
Total
Childrenstudying Chargephonebusiness Chargephonehome
Light/powerbusiness Light/powerhome Phonechargingbusiness
TVwatching Cookordryfood Other
0% 20% 40% 60% 80% 100%
FixedSHS
MobileSolarSystem
Childrenstudying Chargephonebusiness Chargephonehome
Light/powerbusiness Light/powerhome Phonechargingbusiness
TVwatching Other
Final report WB PO7170868 ‘ Enclude 28
Figure18:Question38:‘Wheredidyoubuyyoursolarproduct?’top:fixedsolarsystems,bottom:mobilesystems
Whenlookingatregionalpurchasingpatterns,itisclearthatparticularlyhouseholdsintheCentral,NorthernandWesternregionsbuytheirsolarproductsathardwareshops.Onlyhouseholds in theEasternregionfrequentlyboughttheirsolarproductsatasolarspecialist(34%)orafieldagent(29%).Figure19:Question38:‘Wheredidyoubuyyoursolarproduct?’SolarHomeSystemowners(topgraph)andmobilesystemowners(bottomgraph)
0% 20% 40% 60% 80% 100%
FixedSHS(0- 10W)
FixedSHS(10- 20W)
FixedSHS(morethan20W)
AverageElectronic/hardwareshop
Fieldagent
Mobilephonecompany
NGO
SACCO/MFI
Solarspecialist
Other
0% 20% 40% 60% 80% 100%
Morethanonelightwithphonecharger(mobilesystem)
Morethanonelightwithoutphonecharger(mobile…
Singlelightwithphonecharger(mobilesystem)
Singlelightwithoutphonecharger(mobilesystem)
Average
0% 20% 40% 60% 80% 100%
Centralregion
Easternregion
Northernregion
Westernregion
AverageElectronic/hardwareshop
Fieldagent
Mobilephonecompany
NGO
SACCO/MFI
Solarspecialist
Other
0% 20% 40% 60% 80% 100%
Centralregion
Easternregion
Northernregion
Westernregion
AverageElectronic/hardwareshop
Fieldagent
Mobilephonecompany
NGO
SACCO/MFI
Solarspecialist
Other
Final report WB PO7170868 ‘ Enclude 29
Between24%and29%ofthehouseholdsboughttheirproductsbetween1and2yearsago,particularlyintheruralareas.Themajorityofthesolarproductsownedstillworkwell.Figure20:Question39:‘Whendidyoubuythesolarproduct?’
Figure21:Question40:‘Isyoursolarproductstillworking?’
Householdsdonot seemtoexperiencequality issueswith their solarproducts,which is contrary to theperception of other stakeholders such as suppliers, financial institutions (Banks) and donors/NGOs. Thesmallnumberofhouseholdsthat indicatedtheywerenotsatisfied,primarilyciteddifficulty inuse(forasingle lightwithout phone charger system), power unsuitable for lighting (formore thanone lightwithphonecharger&fixedSHSofmorethan20watts),orpowerunsuitableforotherappliances(singlelightwithphonecharger&fixedSHSofmorethan20watts).
0% 20% 40% 60% 80% 100%
Rural
Peri-Urban
Urban
Lessthan3monthsago
Between3and6monthsago
Between6monthsand1yearago
Between1and2yearsago
Between2and4yearsago
Between4and6yearsago
Between6and8yearsago
Between8to10yearsago
Morethan10yearsago
0% 20% 40% 60% 80% 100%
Rural
Peri-Urban
Urban
GrandTotal
No,itneverworks.
Yesitworkssometimes,butnotwell.
Yes,itworkswellsometimes.
Yes,italwaysworkswell. 0% 20% 40% 60% 80% 100%
FixedSolarhomesystem(<10watt)
FixedSolarhomesystem(10-20watt)
FixedSolarhomesystem(morethan20watt)
Morethanonelightwithphonecharger(mobilesystem)
Morethanonelightwithoutphonecharger(mobilesystem)
Singlelightwithphonecharger(mobilesystem)
Singlelightwithoutphonecharger(mobilesystem)
GrandTotal
Final report WB PO7170868 ‘ Enclude 30
Figure22:Questions38combinedwithQuestion40:‘Fromwhomdidyoubuyyoursolarproductandisitstillworking?’
Ofthetworespondentswhosesolarsystemswerebroken,onegotitfixedbyasolarspecialistandtheotherdidnot.Figure23:Question47:‘Howsatisfiedareyouwithyourcurrentsolarproduct?’
Therespondentsthatgaveareasonfornotbeingsatisfiedwiththeirsolarsystemsmentionedthefollowing:
• Thelightwastoodifficulttouse(solarlanternowner);• Itdidn'tworkanymore(a>20WSHSowner);• Thepowerwas not reliable for lighting (amobile systemwith charger owner and a >20WSHS
owner);and• Thepowerwasnotreliableforotherappliances(aSHS>20Wownerandasolarlanternowner).
Between78%and82%ofallsolar-owninghouseholdswouldwanttoownmoresolarproducts,particularlyintheruralareasandparticularlyforhouseholdsowningasinglelightsystemwithaphonecharger(mobilesystem);morethanonelightsystemwithphonecharger(mobilesystem);orafixedSHSof10to20watts.In termsof trust in solarproductsandwhethersolar is seenasan indicationof themodernhousehold,responsesareextremelypositive.Over90%ofthehouseholdsinallregionsinUgandatrustsolarproducts,andbetween76%and94%feelitisanindicationofamodernhousehold.
0% 20% 40% 60% 80% 100%
Mobilephonecompany(3)
SACCO/MFI(3)
NGO(7)
Other(12)
Fieldagent(32)
Solarspecialist(54)
Electronic/hardwareshop…
GrandTotal(211)No,itneverworks.
Yesitworkssometimes,butnotwell.
Yes,itworkswellsometimes.
Yes,italwaysworkswell.
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
FixedSolarhomesystem(0-10watt)
FixedSolarhomesystem(10-20watt)
FixedSolarhomesystem(morethan20watt)
Morethanonelightwithphonecharger(mobile…
Morethanonelightwithoutphonecharger(mobile…
Singlelightwithphonecharger(mobilesystem)
Singlelightwithoutphonecharger(mobilesystem)
Notsatisfied Moderatelysatisfied Verysatisfied
Final report WB PO7170868 ‘ Enclude 31
Figure24.Left:Question30:‘Doyouthinksolarpoweredproductscanbetrusted?’Right:Question31:‘Inyouropinionishavingasolarproductanindicationofamodernhousehold?’
3.1.8 DemandDriversofOff-gridLightingProductsThemostappealingbenefitofoff-gridlightingproductsforUgandanhouseholdswithoutasolarproductiscostsavings,followedbyimprovementinhealth,modernlifestyleandsafetyfromfirehazard(seefigure25).Figure25:Question27:‘’Whichofthefollowingbenefitsofmodernlightingaremostappealing?”(n=568)
Surveyed rural households spend, on average, 26minutes per week travelling to collect and purchaselighting products. Peri-urban residents spend 21 minutes, and urban dwellers spend an average of 15minutesperweekoncollectingandpurchasinglightingproducts.Non-solarownersindicatedthemainreasonfornothavingpurchasedasolarproducthastodowithnothavingthemoney(51%),followedby‘otherfinancialpriorities’(26%)(Figure26).Interestingly,about12%ofthehouseholdsinurbanareaswerenotconvincedofthequalityofsolarproducts,whichdoesnotseemtobeanissueinruralandperi-urbanareas.Thislackoffinancingamongthesehouseholdspointstoaclearneedtoexplorethepotentialforend-userfinancingsolutions.Forty-fivepercentofthenon-solarowninghouseholdsindicatedtheywouldbemoreinterestedinbuyingsolarifprovidedaloan,particularlyintheurbanareas.
0%10%20%30%40%50%60%70%80%90%100%
Centralregion
Easternregion
Northernregion
Westernregion
Yes No
0%10%20%30%40%50%60%70%80%90%100%
Centralregion
Easternregion
Northernregion
Westernregion
Yes No Idon'tknow
27%
13%
12%12%
10%
9%
6%
6%5%
Costsavings
Improvementinhealth
Modernlifestyle
Safety(firehazard)
Timesavings
Reliablepowerforotherelectricitybasesolarappliances(TV,radio,electricstove,etc.)Reliablepowerforphone
Security(outsidesecuritylight)
Morereliableandbetterqualitylightindoors
Final report WB PO7170868 ‘ Enclude 32
Figure26:Question55:‘Reasonsfornotpurchasingasolarproducttillnow’(n=568).
Non-solarowninghouseholdsgenerallyconsiderthesolarproductwarrantyasanindicatorofthequalityoftheproduct(21%).However,alargepartofthehouseholdsdonotknowhowtoassessthequalityofasolarproduct,especiallyintheCentralandWesternregionsinUganda(45%and50%)(seefigurebelow).Onlyasmallpercentageindicatesthelackofqualitymightbeanissue.Figure27:Question29:‘Whatconvincesyouofthequalityofasolarproduct?’(n=568)
Inall regions,morethan90%ofhouseholds indicatethatsolarproductscanbetrusted(Northern:95%,Eastern:94%Western:96%,Central:90%).Theconfidenceinsolarproductsisstronglydrivenbyawarranty,the Uganda Bureau of Standards (UNBS) mark or by Government recommendation. This is particularlyevidentintheNorthernandEasternregions.
3.1.9 DemandDriversofSolarOwnersAlthoughthemajorityofthesolarownerswerenotofferedanincentivewhenbuyingtheirsolarproduct(71%),thelargemajorityindicatedthattheywouldbewillingtopromotesolarproducts(bywordofmouth,forinstancetoneighboursandrelatives)whenofferedanincentivetodoso(81%onaverage).Ninety-fivepercent of the households that had been offered an incentive in the pastwerewilling to promote theproductagainwhenofferedanincentive.
0% 20% 40% 60% 80% 100%
Rural
Peri-Urban
UrbanAfraidtopaytoomuch
Donothavemoney
Donotknowwheretobuy
Notconvincedofthequality
Otherfinancialpriorities
Savingforalargesolarsystem
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Centralregion
Easternregion
Northernregion
Westernregion
Buyingatthesource Governmentrecommendation Judgebythepackaging
Prizewinningproduct Salesrepresentative UgandaBureauofStandardssign
Warrantycertificate Idon'tknow
Final report WB PO7170868 ‘ Enclude 33
Figure28:Question29:‘Wouldyoubewillingto[promotesolarproducts]ifyouwereofferedanincentive?’(n=213)
3.2 CONSUMPTIONANDPURCHASEPATTERNSOFMOBILEPHONES
3.2.1 CurrentUseofMobilePhonesThemajorityofthesurveyedhouseholdsownatleastonemobilephone,rangingfrom73%inruralareasto96% in urban areas. A large part of the households in peri-urban and urban areas generally own 2 orsometimeseven3mobilephones.Figure29:Left:Question11:‘Whichofthefollowingappliancesdoesyourhouseholdhave?’(Answersforcell-phonesonly)(n=845),Right:Question12:‘Howmanycellphonesdoesyourhouseholdhavetogether?’
Asfigure30indicates,mobilephonechargingisdonebyalmost70%ofthehouseholdsbypurchasingtimeoutsidethehome.Themajority(60%)ofthehouseholdsspendlessthan1000UGX(US$0.40)7onmobilephonechargingperweek.About11%ofthehouseholdsareabletochargetheirphoneseitherthroughthegridtheyareconnectedtoand17%throughthesolarproducttheyown.
7Exchangeratewasusedthroughoutthereport(1US$=2,500UGX)istheaverageofUGX2,500perUSDollarexchangerateforthefirsthalfyearof2014.Thisistherateassumedinthisreport.
0%
20%
40%
60%
80%
100%
No,Iwasn'tofferedanincentive Yes,IwasofferedanincentiveWereyouofferedanincentivetopromoteasolarproduct?
No,Iwouldn't
Idon'tknow
Yes,Iwould
0%10%20%30%40%50%60%70%80%90%100%
Cellphone
Rural Peri-Urban Urban
0%10%20%30%40%50%60%70%80%90%100%
Rural Peri-Urban Urban
1 2 3 4ormore
Final report WB PO7170868 ‘ Enclude 34
Figure30Question22:‘Whatis(are)thecurrentcellphonechargingsource(s)usedbythehousehold?’
Averagephonechargingcosts UGX/week
US$/week
Centralregion 1,083 0.43Easternregion 964 0.39Northernregion 920 0.37Westernregion 1,025 0.41 Rural 1,098 0.44Peri-urban 857 0.34Urban 1,071 0.43Average 1,000 0.40
Figure31:Distributionofmobilephonechargecosts(basedonQuestion19:‘Howmuchdoyouspendonaverageforeach,perweek?’)
AsisseeninFigure16(page27),themainuseofsolarproductsisforchargingmobilephones,particularlythesmallermobileandfixedsolarsystemsareusedforchargingmobilephones.
3.3 SOLARBRANDS
3.3.1 BrandAwarenessAmongstHouseholdsBrand awareness is lowest in the Central andWestern regions,where 89% and 83%of the householdscouldn’tmentionanybrand.SolarNowisthemostwell-knownbrand,especiallyintheNorthernandEasternregionswhererespectively34%and38%ofthehouseholdsknewthebrand.
0%
8%
34%
5%
39%
0%
8%
0%3%
1% 1% 0% 0% 0% 1%0%5%10%15%20%25%30%35%40%45%
UGX250
UGX500
UGX750
UGX1,000
UGX1,250
UGX1,500
UGX1,750
UGX2,000
UGX2,500
UGX3,000
UGX3,500
UGX4,000
UGX4,500
UGX5,000
UGX6,000
72%
17%
11%
56%
40%
4%
60%20%
20%
PurchasesolarchargingtimeoutsidehomeChargeathomeOther
Rural
Peri-urban
Urban
Final report WB PO7170868 ‘ Enclude 35
Figure32:Question28:‘Whichsolarbrandshaveyouheardof?’Nationaltotalandbyregion.
3.3.2 BrandAwarenessAmongstSolarSystemOwnersThemostcommonbrandsofsolarproductsthatrespondentsownareSolarNow(closeto33%),AseSolar(10%)andBarefoot(7%).About24%ofthehouseholdsthatownaSHSproductdidnotknoworrememberthebrandthattheywereusingversus14%ofthemobilesolarsystemowners.Figure33:Question37:‘Whatbrandis(are)yoursolarproduct(s)?’Nationaltotalandbysystemtype.
Froma regionalperspective,mosthouseholds in theCentral regiondon’tknowthebrandof their solarsystem (57%). In the Eastern region, 54%of the solar owners surveyedmentioned theyhave SolarNowsystems.AseSolarsystemsareownedby20%ofthehouseholdsintheNorthernregion.
0% 20% 40% 60% 80% 100%
Centralregion(192)
Easternregion(200)
Northernregion(209)
Westernregion(179)
Total(780)
SolarNow
Barefoot
D-Light
AseSolar
GreenLightPlanet
Sunshine
Phoenix
Trony
Marathoner
Kirchner
Kopak
SunAfrica
Other
0% 20% 40% 60% 80% 100%
MobileSystems(97)
SHS(123)
Totalaverage(220)
SolarNow
AseSolar
Barefoot
D-Light
Phoenix
Marathoner
GreenLightPlanet
Trony
SunAfrica
Pulsee
Other
Final report WB PO7170868 ‘ Enclude 36
3.4 HOUSEHOLDSPENDING
Onaverage, aUgandanhousehold (fromour sample) spends4.8%of itsdisposablemonthly incomeonenergyand fuel, or aboutUGX25,000 (US$10).Mainhouseholdexpendituresareon food (18.5%)andschoolfees(38%).Expendituresonenergyandfuelareclearlylow,whileexpendituresonschoolfees,foodandrentmakeup60-75%ofdisposableincome.Thisexplainswhyover50%ofthehouseholdsdonotfeelthatasignificantshareoftheirhouseholdincomeisspentonlightingandphonecharging.Thefigurebelowprovidesabreakdownofhouseholdexpendituresbyregiontype(rural,peri-urbanandurban).Figure34:Question63:“Howmuchofyourhouseholdincomedoyouspendonthefollowingitemsonamonthlybasis?”
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Rural Peri-Urban Urban Total
Other
Healthcare
Transport
Clothes
Energy/fuel
Schoolfees
Food
Housing/rent
Final report WB PO7170868 ‘ Enclude 37
Figure35:Distributioncurveformonthlyhousehold’senergyexpendituresQuestion63:“Howmuchofyourhouseholdincomedoyouspendontheenergyonamonthlybasis?”
Almost40%ofsurveyedhouseholds’weeklylightingexpenditureisonkerosene,amountingonaveragetoUGX1,910(US$0.76)aweek8.Averageexpendituresonoff-gridlightingproductsarehigherinurbanareas.ThedistrictsKabaroleandSoroti,intheWesternandEasternregionshowhighestexpenditurelevels,whileNebbiandGuluintheNorthernregionshowlowestlevels(seefigure38).Figure36:Question19:‘Howmuchdoyouspendonaverageforeachlightingsource,perweek?(Recurringcosts)
Figure37:Question19:‘Howmuchdoyouspendonaverageforeachlightingsource,perweek?(Recurringcosts)perregionanddistrict.
8 In spring 2014 the tax on kerosene was increased by UGX 200 (~ 11% price increase) per liter. This, this is notrepresentedinthenumberabove.
0%
6%
18%20% 21%
13%
8%
4% 3% 2%0% 0% 1% 1%
0%
5%
10%
15%
20%
25%
30%
UGX0
UGX1,000
UGX2,000
UGX3,000
UGX4,000
UGX5,000
UGX6,000
UGX7,000
Rural Peri-Urban Urban Average
Candles
DryCellBattery
PhoneCharge
Kerosene
0
1000
2000
3000
4000
5000
6000
7000
8000
Candles
DryCellBattery
PhoneCharge
Kerosene
Final report WB PO7170868 ‘ Enclude 38
Theaveragespendingonrecurrentcostsmightindicatehowmuchhouseholdscouldpayunderpay-as-you-goschemes.TheseexpendituresindicatethattheaveragesurveyedhouseholdcouldaffordtospendUGX6,000(US$2.40)onsolarservicesformobilephonechargingandlightingperweek.Figure38:Distributionofoff-gridlighting(includingphonecharging)weeklyexpenditure(basedonquestion19:‘Howmuchdoyouspendonaverageforeach,perweek?)
Table4.Averagefixedcostsoftraditionallightingproducts.
Item AverageFixedCost(inUGX)
AverageFixedCosts(inUS$)
Recurringcostspermonth(inUGX)
Recurringcostspermonth(inUS$)
Candles - - 7,843 3.14KeroseneLamp-large 12,000 4.80 8,279 3.31KeroseneLamp-medium 8,000 3.20 8,279 3.31KeroseneLamp-small 5,000 2.00 8,279 3.31Torch-rechargeable 4,000 1.60 7,669 3.06Torch-drycell 3,000 1.20 7,669 3.06Torch-smalldrycell 1,000 0.40 7,669 3.06Tadoobawithwick 1,000 0.40 8,279 3.31Tadoobawithoutwick 600 0.24 8,279 3.31
Mostsurveyedhouseholdsfeltthatexpendituresonoff-grid lightingandphonechargingrepresentedaninsignificanttomoderatelysignificantshareofthetotalhouseholdincome.However,inruralareasoverhalfofthehouseholdsfeelthattheseexpenditurestakeupasignificantshareoftheirtotalexpenditures.Figure39:Question20:‘Doyoufeelthatasignificantshareofthehouseholdincomeisspentonlightingandphonecharging?’
Inruralareastherelativeexpendituresonkeroseneanddry-cellbatteriesarehighest,whileinurbanareastheexpendituresondieselandpetrolareamongthehighest.
UGX30,021
UGX17,429
UGX11,939UGX9,891
UGX8,191 UGX6,754 UGX6,013 UGX5,229
USD0
USD2
USD4
USD6
USD8
USD10
USD12
USD14
UGX0
UGX5,000
UGX10,000
UGX15,000
UGX20,000
UGX25,000
UGX30,000
UGX35,000
1% 5% 20% 30% 50% 70% 80% 90%
0% 20% 40% 60% 80% 100%
Rural
Peri-Urban
Urban
Extremelyinsignificant
Notsignificant
Moderatelysignificant
Verysignificant
Final report WB PO7170868 ‘ Enclude 39
Figure40:CorrelationbetweenQuestion32andQuestion34showsthatwhenaschoolorclinicusessolarpower,45%morehouseholdshavepowertoo(32%vs22%non-solarowners).
A positive correlation exists between schools and clinics using solar power and the proportion of solarownersinthearea.Thereisalsoapositivecorrelationbetweensolarownerswhohaveneighbours,friendsand/orrelativesthatalsoownasolarproduct.Acausaleffecthowevercannotbedeterminedbasedonthissurvey.Figure41:CorrelationbetweenQuestion32andQuestion33showsthatwhenneighbours,friendorrelativesownsolarpower,45%morerespondentsalsousesolarpower(32%vs22%non-solarowners).
3.5 CURRENTDEMANDANDCONSUMERSPENDINGTRENDS
3.5.1 AwarenessofOff-gridLightingProductsThe awareness on solar power among households in Uganda is generally high, as 86% of surveyedhouseholdsknowaboutsolarpower.IntheEasternandNorthernregions,however,awarenessislower;intheseareas,12-14%ofthesurveyedhouseholdsdidn’tknowwhatsolarpoweris.
0% 20% 40% 60% 80% 100%
Idon'tknow
Notheydon'tusesolar
Yes,theyusesolarDo
you
rlocalclinicsa
nd/o
rscho
olsu
seso
larp
ower?
No,Idon'thaveasolarproduct
Yes,Ihaveasolarproduct
0% 50% 100%
No,friends/neighboursdon'thavesolar
Yes,friends/neighbourshavesolar
Doanyofy
ourn
eighbo
urs,friend
sorre
lativ
eshavesolarp
ower?
No,Idon'thaveasolarproduct
Yes,Ihaveasolarproduct
Final report WB PO7170868 ‘ Enclude 40
Figure42:Left:Question25:‘Doyouknowwhatsolarpoweris?’andRight:Question26:‘Doyouknowwheretobuysolarproducts?’
Althoughover86%oftheUgandanhouseholdsareawareofsolar,awarenessofwheretobuysolarproductsislessevident.ParticularlyintheCentralandWesternregions,alargepartofhouseholdssurveyed(between36-50%)didnotknowwhere tobuysolarproducts.Awarenesswasgenerally low in ruralareasaswell,whereonly52%knewwheretobuysolarproducts.
3.5.2 WillingnesstoPayIngeneral,solarownersarewillingtopay28%moreforasolarproductthanhouseholdswhichdonotownasolarproduct(seefigurebelow). Interestingly,bothtypesofhouseholdsarewillingtopaysignificantlymorethantheactualaverageretailprice,withtheexceptionofasinglelightwithoutphonechargersystem.ThebiggestdifferencebetweentheretailpriceandpricehouseholdsarepreparedtopayisforlargerSHSs(<20W).Figure43:Question54:Willingnesstopayforasolarproduct,inUGX
0%10%20%30%40%50%60%70%80%90%100%
Rural Peri-Urban Urban
Yes
No
Ihaveheardofit,butIamnotsurewhatitis
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Rural Peri-Urban Urban Total
UGX0UGX100,000UGX200,000UGX300,000UGX400,000UGX500,000UGX600,000UGX700,000UGX800,000UGX900,000
UGX1,000,000
Fixedsolarhomesystem(0-10
watt)
Fixedsolarhomesystem(10-20
watt)
Fixedsolarhomesystem(morethan20watt)
Singlelightwithoutphonecharger(mobile
system)
Singlelightwithphonecharger(mobilesystem)
Solarowners
Non-Solarowners
Averageretailprice(supplysurvey)
Final report WB PO7170868 ‘ Enclude 41
Figure44:Question51andQuestion54:‘Howmuchwouldyoubewillingtopayforthechosenproduct?(non-solar-owners)
Forty-fivepercentofthenon-solar-owninghouseholdsindicatedtheywouldbemoreinterestedinbuyingsolarifofferedaloan,particularlyintheurbanareas.Whenaskedthesamequestionforalease,only30%showedinterest.Figure45:Left:Question56:‘Wouldyoube(more)interestedinbuyingsolarproductsifyouwereabletotakeoutaloantofinancethepurchase?’Right:Question57:‘Wouldyoube(more)interestedinsolarproductsifyouwereabletorentorleasethem?’
3.5.3 AbilitytoPayTo determine the ability of households to pay for solar systems, the income levels and sources wereexaminedinmoredetail.InAnnex6,theincomedistributionbymainincomesourceispresented.Thereisa clear breakdown within these market segments based on how households obtain their income andwhethertheydosothroughformalorinformalemployment.
UGX0
UGX200,000
UGX400,000
UGX600,000
UGX800,000
UGX1,000,000
UGX1,200,000
Fixedsolarhomesystem(0-10watt)
Fixedsolarhomesystem(10-20watt)
Fixedsolarhomesystem(morethan20
watt)
Singlelightwithoutphonecharger(mobile
system)
Singlelightwithphonecharger(mobilesystem)
Morethanonelightwith
phonecharger(mobilesystem)
Non-solarownersRural SolarownersRural Non-solarownersPeri-Urban
SolarownersPeri-Urban Non-solarownersUrban SolarownersUrban
0% 20% 40% 60% 80% 100%
Rural
Peri-Urban
Urban
Idon'tknow No Yes
0% 20% 40% 60% 80% 100%
Rural
Peri-Urban
Urban
Idon'tknow No Yes
Final report WB PO7170868 ‘ Enclude 42
Figure46:Left:Breakdownsourceofincome(Q58)byprofession,andRight:district/region.
Figure47.Monthlyincomebyincomesource.Bluetriangle=averageincomeofsolarpowerownersandnon-solarpowerowners.(DatabasedonQuestion55and56sortedpermainsourceofincome)
Foroff-gridruralhouseholds,agriculturalcashcropsareakeysourceofincome.Respondentsindicatedthathousehold incomes often fluctuate due to the seasonal nature of these livelihoods. In rural areas themajorityofthehouseholdsrelyononesourceofincome,whileinurbanareashouseholdsgenerallyhavemultipleincomeearners.
0%
20%
40%
60%
80%
100%
Rural Peri-Urban Urban
Trade
Ownerofasmallbusiness
Casuallabourer
Agriculture/Farmer
Help(guard,maid,driver)
Salariedofficeemployee
0%10%20%30%40%50%60%70%80%90%
100%
Masaka
Mub
ende
Mbale
Soroti
Gulu
Neb
bi
Kabarole
Mbarara
Centralregion
Easternregion
Northernregion
Westernregion
Salariedofficeemployee Help(guard,maid,driver)
Agriculture/Farmer Casuallabourer
Ownerofasmallbusiness Trade
UGX0UGX200,000UGX400,000UGX600,000UGX800,000
UGX1,000,000UGX1,200,000
DonotownSolarPower Doownsolarpower Averageincome
Final report WB PO7170868 ‘ Enclude 43
Figure48:Left:Question60:‘Doesyourhouseholdincomehavestrongseasonalfluctuations?’,andRight:Question62:‘Aretheremultipleincomeearnersinyourhousehold?’
ThemonthsinwhichruralhouseholdshavemostincomeareJuly/AugustandNovember/December,whileurbanhouseholdsgenerallyhaverelativelystableincomeinallmonthsoftheyear.Figure49:Question61:‘Inwhichmonth(s)doyouhavemostincome?’
Ifhouseholdswouldinvestinsolarenergy,thepaybacktimewouldbebetween6-12months,dependingonthesizeoftheproduct(Table5).Thispaybackperiodisbasedontheexpectedcostsavingsresultingfromcurrentenergysource,orfuel,beingreplacedbythesolarproduct.
0% 20% 40% 60% 80% 100%
Rural
Peri-Urban
Urban
Stronglyfluctuating Somewhatfluctuating
Neutral Somewhatstable
Verystable
0% 20% 40% 60% 80% 100%
Rural
Peri-Urban
Urban
No Yes
0% 20% 40% 60% 80% 100%
Rural
Peri-Urban
Urban
Allmonthsareequallylikely.
January
February
March
April
May
June
July
August
September
October
November
December
Final report WB PO7170868 ‘ Enclude 44
Table5.Expenditureontraditionallightsourcesandtheaveragepaybacktimeifhouseholdswouldinvestinasolarpoweredalternative(exchangerate:US$1=UGX2500)HHEnergy(electricity)source
Purchasecosts Lifetime
Recurringcosts(perweek)
Yearlyexpenditure
Solarpoweredalternative
Averagepriceofthealternative
Paybacktime
Candles UGX550(US$0.22) 3hours UGX1,800
(US$0.72)UGX94,000(US$37.44) Solarlight UGX41,500
(US$16.60) ½year
Tadooba UGX1000(US$0.40) 6months UGX1,900
(US$0.76)UGX100,000(US$39.52)
Solarlight,SHS
UGX41,500(US$16.60) ½year
Device/torchpoweredbydrycellbatteries
varying varying UGX1,760(US$0.71)
UGX91,500(US$36.92)
Solarlight,solarpowereddevices(radios),solarcharger/powerbank
UGX41,500–UGX64,500(US$16.60-25.80)
½-1year
PhoneCharging varying 1xperday–
1xperweekUGX1,000(US$0.40)
UGX52,000(US$20.80) solarcharger UGX64,500
(US$25.80)½-1year
NationalGrid - - UGX15,400(US$6.16)
UGX800,000(US$320.32) SHS
LocalGrid UGX17,250(US$6.90)
UGX900,000(US$358.80) SHS
Note:Candlesyearlyexpenditurecalculation:UGX500purchasecostsxaverageof3.25purchasesperweekx52weeks=UGX94,000(rounded),Tadoobacalculation:UGX1900perweekonkerosenex52weeksx2tadooba’speryearaverage=UGX100,000(rounded).BankingRelationships&LoansAlargenumberofhouseholdsalreadyhaveabankingrelationship,eveninruralareas.Inruralareas,themost households have an account ormembershipwith a Village Saving and LoanAssociation (VSLA) orSavingsandCreditCooperative(SACCO)whileintheurbanareas,MFIsandSACCOsweremostcommon.Figure50:Left:Question64:‘Doesanyoneinthehouseholdhaveabankingrelationship?’Right:Question65:‘Withwhichkind(s)oforganizationsisthisaccount?’
Atthesametime,alimitednumberofhouseholdscurrentlyhaveanoutstandingloan,particularlyintheruralareas.The12%to34%ofhouseholds thathada loanmostoftenreceivedthemfromSACCOsandVSLAsinruralareas,andfromMFIsandSACCOsinurbanareas.
0% 20% 40% 60% 80% 100%
Rural
Peri-Urban
Urban
Idon'tknow
No
Notatthemoment,butyesinthepast
Yes
Idon'twanttosay
0% 20% 40% 60% 80% 100%
Rural
Peri-Urban
Urban
Bank MFI
ROSCA SACCO
VSLA Cooperative(farmer)
Final report WB PO7170868 ‘ Enclude 45
Figure51:Question66:‘Doyoucurrentlyhaveanoutstandingloan?’(left),Question67:‘Withwhichkindororganizationwasyourloanwith?’
3.5.4 AbilityVersusWillingnesstoPayRural households said they arewilling to paymuchmore for the solar product (up to 70% ofmonthlyhouseholdincome),andarecurrentlypayingonly7.5%ofwhattheyarewillingtopaypermonthonlightingcosts.Inperi-urbanandurbanareasthevarianceislessextreme,astheamountrespondentswerewillingtopayrangedfrom37%to46%ofthehouseholdbudget.Figure52:Willingnessversusability(averagemonthlyhouseholdincome)topay.
Householdsindicatetheyarewillingtopayasubstantialamountoftheirmonthlyincomeonasolarsystem.Asseeninparagraph3.4mostoftheirincomeisalreadyspentonschoolfees,foodandhousingandinmostcasestheywouldnotbeabletospendtheindicatedamountallatonce.To study ability to pay, a comparisonwasmade between howmuch people are currently spending onlightingandphonecharging,andwhatthecalculatedpaybacktimewouldbefortheirpreferredsystem.Theaveragepaybacktimeforthepreferredsystem(inallcasesa‘LargeSHS’)is2.7,3.6and3.2yearsforurban,peri-urbanandruralhouseholds,respectively.Notethatbecauseruralhouseholdsspendmoreonphonechargingthanperi-urban,theirpaybacktimeisshorter.
0% 20% 40% 60% 80% 100%
Rural
Peri-Urban
Urban
No,butIhavehadaloaninthepast
No,Ihaveneverhadaloan
Yes
Idon'twanttosay
0% 20% 40% 60% 80% 100%
Rural
Peri-Urban
Urban
Bank MFI
ROSCA SACCO
VSLA Cooperative(farmer)
UGX0
UGX100,000
UGX200,000
UGX300,000
UGX400,000
UGX500,000
UGX600,000
UGX700,000
Rural Peri-Urban Urban
hhincome lightingcosts(recurrent) willingnesstopay
Final report WB PO7170868 ‘ Enclude 46
Table6.Summaryofhousehold’sabilityandwillingnesstopayforsolarproducts*
AreaMonthlyhouseholdincome
Incometype
Monthswithmostincome
Monthlylightingspending
Monthlyphonechargingspending
Preferredsystemandaverageprice
Avg.paybacktimeforpreferredsystem(basedonlighting&mobilechargespending)*
Urban
UGX664,308(US$265.72)
Salariedofficer/smallbusinessowner/trade
Yearround UGX4.870(US$1.95)
UGX4.380(US$1.75)
LargeSHSUGX300,000(US$120)
2.7years
Peri-urban
UGX392,148(US$156.86)
Agriculture/farmer/smallbusinessowner
Partlyyearround(26%)PartlyNov-Dec(16%)
UGX3,550(US$1.42)
UGX3.425(US$1.37) 3.6years
Rural
UGX290,150(US$116.06)
Agriculture/farmer
Partlyyearround(15%)PartlyNov-Dec(17%)
UGX3.420(US$1.37)
UGX4.400(US$1.76) 3.2years
*These results are basedonquantitative analysis.However, it isworthnoting that consumers often actdifferentlyfromwhatcouldbeexpectedfromsuchachartasthisanalysisdoesnottakeaspirationalvalueintoconsideration.Aspirationoftendrivesconsumerstospendconsiderablymorethattheirincomewouldsuggest.
3.5.5 WillingnessandDemandofNon-solar-ownersAccordingtorespondents,ifhouseholds’accesstoenergysourcesweretoincreaseinthefuture,themainusesofthisadditionalpowerwouldbeforchargingmobilephonesandlightingthehome,particularlyinruralandperi-urbanareas. Inurbanareas,additionalenergysourceswould largelybeused inpoweringotherapplianceslikearadio,refrigeratorandwashingmachine.Figure53:Question24:‘Ifyouhadgreateraccesstoenergy,whatotheractivitieswouldyouusethenewenergyfor?’
ThepotentialdemandofhouseholdsnotowningasolarproductisparticularlyhighforthelargerSHS(20wattsormore)andforthelargermobilesystems(morethanonelightandphonecharger),asillustratedinfigure55.
0% 20% 40% 60% 80% 100%
Rural
Peri-Urban
Urban
Business
Cellphonecharging
Computerusage
Lighting
Poweringotherappliances(likeradio,fridge,washingmachine)TV
Final report WB PO7170868 ‘ Enclude 47
Figure54:Question53:‘Whichtype(s)ofsolarproduct(s)wouldyoubewillingtobuy?bydistrict.
Therearesomedifferencesbydistrictwhenitcomestodemandforsolarproductsbynon-solar-owninghouseholds.InMbalethereisacleardemandforSHSof10-20wattscapacity,whileinthedistrictsSoroti,GuluandNebbithedemandismuchhigherforSHSofmorethan20watts.HouseholdsinMasaka,MbararaandNebbishowahighdemandformobilesystemswithmorethan1lightandaphonecharger.Thedemandforthesmallermobilesystemsandsmallerfixedsystemsisratherlow(comparedtotheothersystems)inalldistricts.Thedemandformobilesystems(withmorethanonelightandaphonecharger)ishighestintheruralareas,whilethedemandforfixedSHS(ofmorethan20watts)ishighestintheurbanareas.Forallregions,thereseemstobeatendencytowantlargersolarproducts,whetheritisformobileorfixedsystems.Figure55:Question53:‘Whichtype(s)ofsolarproduct(s)wouldyoubewillingtobuy?’bylocation.
0% 20% 40% 60% 80% 100%
Masaka
Mubende
Mbale
Soroti
Gulu
Nebbi
Kabarole
Mbarara
Centralregion
Easternregion
Northernregion
Westernregion
National
Average
Fixedsolarhomesystem(0-10watt)
Fixedsolarhomesystem(10-20watt)
Fixedsolarhomesystem(morethan20watt)
Morethanonelightwithphonecharger(mobilesystem)
Singlelightwithphonecharger(mobilesystem)
Singlelightwithoutphonecharger(mobilesystem)
Other
0% 20% 40% 60% 80% 100%
Rural
Peri-Urban
Urban
Fixedsolarhomesystem(morethan20watt)Fixedsolarhomesystem(10-20watt)
Fixedsolarhomesystem(0-10watt)
Morethanonelightwithphonecharger(mobilesystem)Singlelightwithphonecharger(mobilesystem)Singlelightwithoutphonecharger(mobilesystem)Other
Final report WB PO7170868 ‘ Enclude 48
3.5.6 WillingnessandDemandofSolarOwnersOfthehouseholdsalreadyowningasolarproduct,about80%wouldbeinterestedinbuyinganothersolarproduct. This is less relevant for households in the Western region, where between 28 – 36% of thehouseholds indicated no interest in owning another solar product, even though satisfaction levelswithexistingproductsintheWesternregionarenotparticularlylow.Mosthouseholdsthatownasolarproductindicatedesireforlargersystems.Thedemandforsmallermobilesystemsisalmostnon-existentinalldistricts.Figure56:Question50:‘Whatwouldyoubuy?’
3.6 CONSUMERSEGMENTATION
3.6.1 ConsumerSegmentationforOff-gridLightingProductsThesurveyshowedthatdemandforoff-gridlightingproductscanbesegmentedinto4distinctconsumertypes: urban grid-connected, urban underserved, off-grid non-remote (peri-urban) and off-grid remote(rural). The main characteristics are based on the current lighting sources used and their costs, howhouseholdsobtaintheirincome,andwhethertheydosothroughformalorinformalemployment.Inthetablebelow,theurbansegmenthasbeensplitintogrid-connectedandunderservedbecauseoftheirclearlydifferentcharacteristics(energyexpenditure,income,dwellingtype).Table7:Maincharacteristicsoftheidentifiedcustomersegments
ConsumerSegment Description Dwelling
Type
AverageMonthlyEnergySpending(UGX)
Monthswithmostincome
UrbanBased:Grid
Connected
• Gridconnected,• Citybased,• Formalemployment
Brick,Wood,Fibro
UGX36,862(US$14.74)
Yearround
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Masaka
Mubende
Mbale
Soroti
Gulu
Nebbi
Kabarole
Mbarara
Fixedsolarhomesystem(morethan20watt)
Fixedsolarhomesystem(10-20watt)
Fixedsolarhomesystem(0-10watt)
Morethanonelightwithphonecharger(mobilesystem)
Singlelightwithphonecharger(mobilesystem)
Singlelightwithoutphonecharger(mobilesystem)
Final report WB PO7170868 ‘ Enclude 49
UrbanBased:Underserved(Off-Grid)
• Usingbasic lighting sources (likekerosene,fireandcandles),
• Settlementbased,• Informalurbanemployment
MetalSheets,Tin
UGX12,806(US$5.12)
Partlyyearround(26%)PartlyNov-Dec(16%)
Off-Grid:Non-remote(peri-urban)
• Peri-urban,within10kmofprovincialcentres,
• Farmers,• Formalemployment&
transportation
Wood,traditionalbamboo
UGX14,222(US$5.69)
Partlyyearround(15%)PartlyNov-Dec(17%)
Off-Grid:Remote(rural)
• Remoterurallocations,• Subsistencefarmers
Traditionalbamboo,mud
UGX18,431(US$7.37)
July-Aug(12%)andNov-Dec(15%)
Sources of lighting currently used differ substantially among the differentmarket segments. Themoreremoteandpoorerahouseholdis,themorelikelyitistorelyonbasicsourcesofenergysuchaskerosene,fireandcandlesforlightingthehome.Foroff-gridhouseholds,agriculturalcashcropsareakeysourceofincome. Because of the seasonal nature of these incomes, household incomes fluctuate. Urban grid-connectedhouseholdsspendmorethantwiceasmuchonenergythanothersegments.MarketCharacteristicsbyCustomerSegmentAll fourmarketsegmentsoffergoodprospects tomanufacturers,distributorsandretailers for increaseduptakeofoff-gridlightingproducts,andspecificallysolarproducts.Thetablebelowhighlightsthetypeofproductsdemanded,mostappealingbenefitsandtheirusesbyconsumersegment.Thisinformationcouldguideatargetedapproachtoeachconsumersegment.
Table8:Marketsegmentcharacteristics
ConsumerSegment
Unawareofsolar/Unawareofwheretobuy
ProductofLikelyInterest
Ownmobilephone(per
hh)
PurchasingPoint
Needforfinancing(loan)
Mostappealingbenefitsofoff-gridlightingproducts
Likelyuseofproduct
UrbanBased:gridConnected
21% /9% LargerSHS
40%owns1,60%owns2mobilephones
Electricalgoodsretailers,employerschemes
MediumCostsavings(28%)&safety(14%)
Lighting&otherappliances(e.g.fridge)&TV
UrbanBased:Underserved(off-grid)
21% /9%
SHS(20watts)
40%owns1,60%owns2mobilephones
Urbanbasedwholesalersandretailoutlets
MediumCostsavings(28%)&safety(14%)
Lighting&otherappliances(e.g.fridge)&TV
Off-Grid:Non-remote
31% /36%
SHS(20watts),Mobilesystemswithmorethan1light&phonecharger
60%owns1,32%owns2mobilephones
Urbanbasedretailoutlets,agriculturalinputretailers,tradestores
Medium
Costsavings(29%)&modernlifestyle/timesavings(13%)
Lighting&phonecharging
Off-Grid:Remote
45% /53%
Mobilesystemswithmorethan1light&phonecharger
83%owns1mobilephone
Agriculturesupplychains,CSRinitiativesandtradestores.
High
Costsavings(28%)&modernlifestyle/improvementhealth(15%)
Lighting&phonecharging
Final report WB PO7170868 ‘ Enclude 50
3.7 CONCLUSIONSFROMTHEDEMANDANALYSISOff-gridLightingProducts
• Amongthesurveyedoff-gridruralhouseholds,56%usekeroseneastheirprimaryenergysourceforcookingandlighting.Kerosenelampsareusedby28%oftheUgandanhouseholdssurveyedasthemainhomelightingsource,followedbycharcoalorwoodfire(23%)andflashlightsusingdrycellbatteries(15%).Nonetheless,75%ofhouseholdsfindkerosenelampsunreliablewhile90%ofhouseholdsthatownsolarpowerconsideritreliable.
• Theaveragemonthlycostofenergyandfuelarenothighatabout4.6%ofhouseholdbudget.Ofthis,40%isspentonkerosene,withasmallersharegoingtodieselandpetrolinurbanareas.Traveltimestopurchaselightingproductsarenomorethan30minutes.
SolarProducts
• CurrentinstalledbaseshowsahighershareoffixedSHSs,whichconstitute50%ofallsystemssold.• Solarproductsaremainlyusedforlightingthehouse(33%),chargingthephoneathome(26%-
particularly smallermobile and fixed systems) and for children studying (20%). TV watching isparticularlymentionedinconnectionwithSHSs(12%).
• Fifty-fivepercent(55%)oftheSHSsand38%ofthemobilesystemsareboughtatelectric/hardwareshops.Especially in theEastern regiona significantnumberofhouseholds (29%) indicated theyboughtfromafieldagent.
MobilePhones
• ThemajorityoftheUgandanhouseholdsownatleastonemobilephone(86%),andchargetheirmobile phone by purchasing charging timeoutside the home (68%), spending on averageUGX1,000(US$0.40)perweek.
QualityPerception:SatisfactionandWorkingSystems
• Ruralandperi-urbanhouseholdsexpressedhighlevelsofdissatisfactiontowardsthebasicoff-gridlighting sources currently used, 67 and 55%, respectively. Solar energy, on the other hand, isperceivedasveryreliableandtrustworthy.Over92%ofsolarpowerownersstatethattheirproductworkswell.Between78-and82%ofsolarownerswouldwanttoownmoresolarproducts,and90%of all households interviewed say that solarpower canbe trusted.Hence, contrary to theperceptionofsuppliersandotherstakeholdersinthemarket,householdsgenerallydonotseemtoexperiencesolarqualityissues.
Awareness,WillingnessandAbilitytoPay
• Althoughover86%ofthesurveyedUgandanhouseholdsareawareofsolar,35%don’tknowwheretheycanbuytheseproducts.Brandawarenessisverylow,especiallyintheCentralandWesternRegions. SolarNow was most often mentioned (23%), especially in the Eastern Region and inNorthernregion,where38%and34%ofhouseholds,respectively,haveheardofthatbrand.Thenextmostwell-known brand, Ase Solar,wasmentioned only by 7%. Approximately eighty-fivepercentofrespondentscouldn’tnameanybrandatall.
• Households on average spend only 4.8% of their monthly income on energy/fuel. Mainexpendituresarefood(18.5%)andschoolfees(38%).Themainreasonsindicatedwhyhouseholdsdonotconsiderpurchasingsolarpowerarelackofmoney(51%)andotherpriorities(26%).
• Althoughhouseholdsareverywillingtopayforsolarproducts,theirabilitytopayfortheamountsmentioned is very limited. Rural households rely on income from agriculture which fluctuatessignificantly,andincomeishighestinJuly/AugustandNovember/December.Householdsinperi-urbanandurbanareasareinafarbetterpositiontopayforasolarproduct.Solarownersarewillingtopay28%moreforasolarproductthanhouseholdsthatdonotownasolarproduct.Forty-fivepercent(45%)ofthenon-solarowninghouseholdsindicatedtheywouldbe(more)interestedinbuyingsolarifprovidedaloan.
• HouseholdscurrentlyspendonaverageUGX6,000(US$2.40)perweekonlightingproductsandmobilephonecharging.ThisexpenditurecanbeareferencepricepointforSolarpay-as-yougo/
Final report WB PO7170868 ‘ Enclude 51
paymentsand/orfeeforserviceschemes.Ifhouseholdswouldinvestinsolarenergy,thepaybacktime(basedonsavedexpensesfromthereplacedfuel)wouldbebetween6and12monthsforasmallsystemthatcomplieswiththeirneed.ForalargeSHSsystemthepaybackwouldbebetween2.7–3.6years.
DemandDrivers
• Themostappealingbenefitofoff-gridlightingproductsforUgandanhouseholds(withoutasolarproduct)isprimarilycostsavings,followedbyimprovementinhealth,modernlifestyleandgreatersafety/reducedfirehazard.Atthesametime,lackoffundsareanobstacletopurchasingasolarproduct.
• Householdsgenerallydonotknowhowtodeterminethequalityofasolarproduct.Thosethatdoconsidertheproductwarrantyasakeyindicator.
• Confidence in solar products is strongly driven by warranty, UNBS mark or governmentrecommendation.ThisisparticularlysointheNorthernandEasternregions.
• Offering incentives to promote solar products promote solar products (promotion by word ofmouth, for instance toneighboursand relatives) is seenasa largedemanddriver tobuy solar.Eighty-onepercentofthehouseholdswouldbewillingtopromotesolarwhenofferedanincentive.
EffectiveDemand
• Theaveragepaybacktimeforthepreferredsystem(inallcasesa‘LargeSHS’)is2.7,3.6and3.2yearsforurban,peri-urban,andruralhouseholds,respectively.Ifthehousehold’saccesstooff-gridlightingsourcesweretoincreaseinthefuture,themainuseswouldbeforchargingmobilephonesandlightingthehome,particularlyinruralandperi-urbanareas.
• Inurbanareas,additionalenergysourceswouldalsobeusedtopowerotherapplianceslikeradio,refrigeratorandwashingmachines.
• Thepotentialdemandofhouseholdscurrentlynotowningasolarproduct isparticularlyforthelargerSHS(20wattsormore)andthelargermobilesystems(morethan1lightandphonecharger).
Table9.Mainchallengeidentifiedfromdemandanalysis
Mainchallengesidentified Findings
Product,Quality,marketing–challengeslimitingthemarketpull
(Lackof)Productawareness;abilitytomakeaninformeddecision;marketing.
Mainlysuppliersanddonors/NGOsmentionedlackofawarenessasachallenge.However,thedemandsurveyshowsthatover85%ofhouseholdsknowwhatsolarIs,awarenessintheNorthernandEasternregionsandinruralareasisonaveragelower.Retailersperceiveawarenesstobelower.Overhalfoftheruralpopulationdoesn’tknowwheretobuysolarproducts.Solarawarenessmightnotbethemajorchallengeasperceivedbythosementioningit.
Qualityissues;reputationofsolarproducts;havingabadname;lackofconfidenceinsolarproducts
Householdsusingsolar findtheirproductreliableandarepredominantlyextremelysatisfiedwithit(74%),incontracttokerosene,drybatterytorch,andcandleuserswhoaregenerallyunsatisfiedwiththeircurrentlightingsource.Ninetypercenttrustsolarproductsandthreequartersseesolarastheintroductiontoamodernhousehold.People are receptive to warranty certificates, and also governmentrecommendationandtheUNBSsignwhenbuyingproducts.
Perceivedhighcostofsolarsystems,andhighexpenditureoncostsotherthanenergy(includingschooltuitions);otherpriorities
Householdsspend lessonenergy thanexpected.Theaveragehouseholdspends less than 2% of their disposable income on kerosene, thereforeenergycostdoesn'tseemtobetheirmainconcern.Householdsspendonaverage38%oftheirdisposableincomeonschoolfees.Hence,energycostsarenotperceivedasbeinghigh,soinvestinginsolarsystemsdoesn’thaveaclearfinancialreturnandare,thus,achallengefortheindustry.
Final report WB PO7170868 ‘ Enclude 52
4 SUPPLYANALYSISOFF-GRIDLIGHTINGInformation in thissectionwasgatheredthrough interviewsconductedwith importers,andthroughthesupplysurveyof101retailersinthewholeofUganda.
4.1 SUPPLYCHAINACTORSANDPRODUCTSONTHEMARKET
Uganda,likeotherEastAfricancountries,isstrugglingtomeetexistingenergydemandwith80%-90%ofthepopulationnotconnectedtothegrid.Whilesignificanteffortsareunderwaytoaddadditionalgenerationcapacityandtoextendthegrid,themajorityofthelow-incomehouseholdswillstillneedalternativesourcesofenergyduetothecostofgridpowerortherespectivegovernmentsfindingittoocostlytoextendthegrid. The current supply chain of off-grid products in Uganda can be visually mapped in the followingmanner:Figure57.GeneralrepresentationofUgandanoff-gridlightingproductsupplychain.
• International/localmanufacturer:Themanufacturerdevelopstheproducts,andcanbeeitheralocal
manufacturer (for instancefortadoobaandcandles)oran internationalmanufacturer,which is thecaseforsolarproductsandgenerators.
• Importer/distributor: Ifproductsaremanufacturedabroad, the importer imports theproductsandfurtherdistributes them in-country.Whenproductsaremanufactured in-country, this supply chainactormerelyservesasaproductdistributor.
• System Integrator: System integratorsare theexpertswhoassemble thesolar systemcomponentsbeforeinstalling.Thisactorisnotalwayspartofthesupplychain,dependingonthetechnicalexpertiseoftheimporter/distributers.
• Kampala-based dealer/technical/agent: The Kampala-based retailers are shops that buy theirproductsfromtheimporters/distributors(orsometimesimportthemselves)andselltheseproductstoruralbasedretailers.TheseKampala-basedretailersarenotalwayspartofthesupplychain,asthereareinstanceswheretheimporter/distributorsuppliesdirectlytotheruralbasedretailers.
• (Rural based) dealer/technician/franchise agent: This rural retailer is generally the last link in thesupplychainandsuppliestheoff-gridlightingproductdirectlytotheendconsumer.
Thecompaniesdiscussedinthefollowingsectionareeitherimporters/distributors,systemintegratorsorrural-basedretailers.
International/
local
Manufacturer
Importer/
distributor
(Ruralbased)
dealer/
technician/
(Rural)Consumer
Households
(Small)Business
SystemIntegrator
Kampalabased
dealer/technician/
agent
Final report WB PO7170868 ‘ Enclude 53
4.1.1 Importers&DistributorsTherearequiteanumberof(anestimated25companies)importersanddistributorsactiveintheUgandanoff-gridlightingmarket.Theseimportersanddistributorsaregenerallysmallandmediumsizedenterprises(SMEs)thathavebeenactiveintheUgandanoff-gridlightingmarketsince2008(acouplebefore2008).ThemajorityoftheseSMEsarebasedinKampalaandgenerallyoperatefromhere.Somehavebranches(1or2)inotherareasinthecountry,andaremainlyrepresentedinthoseareaswherepopulationdensityishighest(includingMbarara,Mbale,Masaka,Arua,Lira).TheEasternRegionisslightlyunderrepresented.Thecompaniesimportanddistributeavarietyofdifferenttypesandsizesofsolarproducts,rangingfromsmallplugandplaysystems(withasinglelight)tolargesolarhomesystems(ofmorethan20watt).Theseproductsaregenerallysoldtoretailers,agents/dealersandhouseholds.Onaverage,thetotalsalesofeachcompany is5,000unitspermonth(includingbothmobileandfixedsystems)atanaveragepriceofUGX152,000(US$60.80)perunit.Avariationofapproachesisusedinpromoting,marketinganddistributingtheirproductstotheirtargetmarket,generallyinvolvingadditionaldistributors(agents,retailers,financialinstitutions)beforereachingtheendusers.Interviewswereconductedwithapreselectednumberofimporters/distributorsthattradeinmobilesolarsystems, SHS, or both. A selection of key importers in the Ugandanmarket was made based on theirlongevity in the industry (includingbothamixofnewentrantsandestablishedcompanies) andcurrentactivitiesinthedevelopmentofthesolarmarket.Thissectionprovidesanoverviewofsomeofthemainimporter’scharacteristicsandtheirproductsintheUgandanmarket.
• BarefootPowerUgandaLtd.:BarefootPowerUgandaLtdisasubsidiaryofBarefootPowerGlobalandregisteredinUgandain2008.Thecompanyworkstoimprovecommunitylivelihoodthroughthedistributionofaffordablesmallsolarlightingandphonechargingsolutionsforpeopleatthebottomoftheeconomicpyramid(BOP)alloverUganda.
• SolarNow:SolarNowevolvedfrombeinganNGOintheearly2000’stoafully-fledgedcommercialbusinessin2009.Animportanttrendrecognizedbythecompany’sagentsisthatBoPcustomersaremovingawayfrompurchasinglanternstofullywiredsystemstoimprovetheirqualityoflife.Thecompanycurrentlyoffers21solarPVproductsfromverysmall(StartPack)uptomuchlargersystemsthataresoldtoavarietyofcustomersincludinghouseholdsandSMEs.
• GirasolarEastAfricaLtd:Girasolarwasfoundedin2009.ThecompanyisanimporterandsystemintegratorofsolarPVsystems.ThecompanyimportsvarioussolarPVsystemcomponentsincludingsolarmodules;batteries;chargecontrollers;invertersandlights.ItalsoimportsafewpicosolarPVsystems(Fosera)fromGermany.
• Small Solutions Ltd: Small Solutions Ltd started in 2009 as an NGO that provided businessdevelopment technical support to solar PV entrepreneurs but transformed slowly into a socialbusinessin2010.ThecompanystartedoutusingD.lightlanternsbutnowsellstwoGreenPlanetbrands, the Sun King Lamp and the Sun King Pro. These lanterns are designed in theUSA andmanufacturedinChina.
• BBOXX: Bboxx was established in 2010 and designs, manufactures, distributes and financesinnovativeplug&playsolarsystemstoimproveaccesstoenergyacrossAfricaandthedevelopingworld.BBOXXengineersproductsinitsLondonlab,andmanufacturestheminitsfactoryinChina.BBOXXdistributestopartnersin14countriesand30localsubsidiarysalesshopsinKenya,Rwanda,SierraLeoneandUgandawhereseveralkitsaresoldtocustomers.
• ABMatra:ABMatra’ssolardivisionstartedoperationsin2010basedinKampalawithbranchesinJinja, Mbale and Lira. The company trades in quality power generation, agricultural andconstructionmaterials.ABMatraspecializesintheprocurementandsaleofimportedsolarpowersystems,backupinvertersandagriculturalaswellasconstructionmaterials(includingchemicals).
• UltraTec:UltraTecisalocalprivatecompanythatwasestablishedin1999toservetheneedsofthegrowing energy and telecommunications sectors by supplyingproducts and services.UltraTec’sproducts fall into four categories: renewable energy, lightning & power surge protection,telecommunicationsandlightingProducts.UltraTecisthemaindistributorofD.lightsolarproductsinUganda.
Final report WB PO7170868 ‘ Enclude 54
• TransAfrican Supply Services (TASS):Founded in 2002,TASS is a leading solar PV company in
Ugandaoperatinginthefieldsofcommunication,power,renewableenergy&environment,health,education,andscienceaswellasthetransportandindustrialsectors.TASSsellssolarproductsthatrange from core solar products to accessories, i.e. solar panels, inverters, batteries, cables,regulators,bulbs,switches,ducts,rooftopandgroundarrays.
• FRESUganda:FRESUganda,asubsidiaryofFRESInternational,wasofficiallyestablishedinApril2010,andbecamefullyoperationalinJanuary2012.FRESUgandahasitsheadofficeinMbarara,andfocusesontheWesternUgandadistrictsofMbarara,Bushenyi,Mpigi,IsingiroandRukungiri.FRESoffersseveralsystemcategoriesdependentonthenumberoflightsandwatthoursrequired.
• Azuri:Azuriservesoff-gridelectricityconsumersinAfricaandstartedoperationsinUgandain2013.Azuridevelops,manufacturesanddistributesIndigo,a2-lightandmobilephonechargingsystem.Indigocustomerspayasmallamounttogetstarted,andthenpurchaseweeklyscratchcards,whichprovideeighthoursperdayoflightinadditiontomobilephonecharging.ASwiss-basedcompanymanufacturesthesolarunitsundercontractattwoassemblysitesinChina.AlargeportionofthecomponentsarealsosourcedinChina.
Thefollowingtablessummarizethemaincharacteristicsoftheinterviewees.Thetablesaresplitintomobilesolarsuppliers,SHSandmixedsuppliers.Table10.MaincharacteristicsoftheinterviewedMobilesystemimporters/distributors.
Importer Customertype Producttypes(mobile)
SmallsolutionsLtd
• MFIs• SACCOs• NGOs
• SunKingLamp(700mw)• SunKingPro(2,5W,lamp+phone
charging)
Azuri
• SMEs• BoPclients• Promotionthough:
distributors,SACCOs.
• IndigosolarPVsystem(2xlightsystemandphonecharging)
UltraTec
• Dealers• Endusers
• D-light(lamp)• D-light(lampwithphonecharger)
Final report WB PO7170868 ‘ Enclude 55
Table11.MaincharacteristicsofSHSimporters/distributorsinterviewed.
Importer Customertype Producttypes(fixed)
SolarNow
• Households• BoPcustomers• SMEs
• Startpack–25WPowerPack–50WLEDLightPack
• DCLEDTV/DVD• ACPack
ABMantra • Retailers• Installers
• 2xlightkit• 4xlightkit• 2xlightkit+10x
phonecharging• Solarmodules(wpk)
TransAfricanSupplyServices
• Businesses• Government
departments/ministries• Individualclients
Solarmodules
FRESUganda • Households• businesses
• S1A(2xlights)• S1B(1socket25W)• S2A(3xlights)• S2B(2xlightsand1
socket25W)• S3(3xlightsand1
socket62W)
Table12.MaincharacteristicsoftheinterviewedSHSandmobileimporters/distributors.
Importer CustomertypeProducttypes(mobile)
Producttypes(fixed)
BarefootPower • Corporatecustomers• Financialinstitutions• NGOs• BoP
customers/households• Schools/hospitals• Independent
entrepreneurs/technicians
Firefly(portablelamp)
Go(1/2lamp,2wpk-5wpk)Connect
GirasolarEastAfricaLtd
• SMEs(particularlyinnichemarket
Picosolar(Fosera)
SolarPVsystems(VictronEnergyandAsantys)
BBOXX
• Installers
• BB5kit(7W,lamps+phonescharging)nolongeronthemarket
• BB7kit(15W,lamps+phonescharging)
• BB12• BB17
Final report WB PO7170868 ‘ Enclude 56
4.1.2 RetailersThefollowingsectionprovidesanoverviewofthemainfindingsfromthesupplysurveyconductedamong101retailersacrossUganda.MostretailersrunanelectricalshopTheretailerssellingoff-gridlightingproductsinUgandaareprimarilyelectricalshops.Mostaresmallandhave less than 6 employees. In some districts, includingMasaka (Central region) and Nebbi, (Northernregion)therearealargenumberofsolarspecialistssellingsolarproducts.IntheEasternregion,therearealsomanyfieldagentssellingsolarproducts.Figure58:Question4:‘Whichorganizationbestdescribesthebusiness?’
Retailersaregenerallysmallandhaveexistedforlessthan5yearsTheretailersaregenerallysmallbusinesseswithbetween1and5employees.Themajority(57%)haveatleast1to2techniciansoncall.Over50%oftheretailerssurveyedhavebeeninbusinessforjustashorttime,between2and5years.Figure59.QuestionS7:‘Howmanyyearshaveyoubeeninbusiness?’
Themaincustomersoftheretailersareindividualsandhouseholds(66%).Theleastcommoncustomersarefinancialinstitutions,marketsandcommunityheads/chiefs.
0% 20% 40% 60% 80% 100%
Masaka
Mubende
Mbale
Soroti
Gulu
Nebbi
Kabarole
Mbarara
Central
region
Eastern
region
Northern
region
Western
region
Agriculturalinputstrader
Electricalshop
Fieldagent
Franchise
Hardwarestore
NGO
Solarspecialist
0% 20% 40% 60% 80% 100%
Masaka
Mubende
Mbale
Soroti
Gulu
Nebbi
Kabarole
Mbarara
Central
region
Eastern
region
Northern
region
Western
region
Lessthan2
Between2and5years
Between6and10years
Morethan10years
Final report WB PO7170868 ‘ Enclude 57
Figure60:QuestionS33:‘Whoareyourmaincustomers?’
Of thesecustomers,about79%are fromruralareas,and the retailers claimedoverwhelmingly that themajorityoftheirsolarcustomersaremale(95%).Figure61:QuestionS34:‘Wheredoesyouraveragesolarcustomerlive?’bydistrictandregion.
Figure62:QuestionS35:‘Whatisthegenderofyouraveragesolarclient?’bydistrictandregion
44%
20%
17%
9%
4% 4%2% Selldirectlytocustomer
Selltootherbusiness
Selltofamilymemberofcustomer
Selltofieldagent
Selltofinancialinstitutions(likeSACCOs,VSLAs,MFIsetc.)
Selltomarket(farmers',fishers',otherproducts)
Selltocommunityhead/chief
0%10%20%30%40%50%60%70%80%90%100%
Masaka
Mub
ende
Mbale
Soroti
Gulu
Nebb
i
Kabarole
Mbarara
Centralregion Easternregion Northernregion WesternregionGrandTotal
Urban
Peri-urban
Rural
0%10%20%30%40%50%60%70%80%90%100%
Masaka
Mub
ende
Mbale
Soroti
Gulu
Nebb
i
Kabarole
Mbarara
Centralregion Easternregion Northernregion Westernregion GrandTotal
Male
Female
Average
Average
Average
Average
Total
Average
Average
Average
Average
Final report WB PO7170868 ‘ Enclude 58
Retailersinall4regionssellsimilarproductsbutregional‘bestsellers’differRetailersprimarilysellsolarlanterns(23%),0-10Wsolarpanels(22%)and10-20Wsolarpanels(22%).Thefigurebelowshowssomeregionaldifferencesinproductssold;retailersintheWesternregionsellrelativelymoresolarplugandplaysystemsthanintheotherregions(16%vs.9%average).About13%oftheretailersindicatedtheyalsosellsolarchargersandbatteries.Figure63:QuestionS10:‘Whattypesofoff-gridlightingproductsdoyousell?’
When asked which products sold best in the previousmonth, some notable regional differences wereevident:retailersintheNorthernregionindicatedthatSHSofmorethan20wattssoldbest(45%),whilesolarlanternsystemssoldwellintheCentralregion(48%).Figure64:QuestionS20:‘Whichproduct(s)soldbestlastmonth?’ProductsthatsoldbestinApril2014bydistrict
MostretailersobtaintheirstockviatheshoppingarcadesinKampalaClose to44%ofall solarproductswere soldvia theKampala shoppingarcades.Hence the supply chaingenerallyhasnotonebutatleasttworetailers,eachrequiringaprofitmargin.
0% 20% 40% 60% 80% 100%
Centralregion
Easternregion
Northernregion
Westernregion
TotalDry-celltorches
Solarlanterns
Solarpanels,solarhomesystems(0-10watt)
Solarpanels,solarhomesystems(10-20watt)
Solarpanels,solarhomesystems(morethan20watt)
Solarplugandplaysystems
Dynamopoweredlightingproducts
0% 20% 40% 60% 80% 100%
Centralregion(27)
Easternregion(26)
Northernregion(22)
Westernregion(21)
GrandTotal(96)
Dry-celltorches
Solarlanterns
Solarpanels,solarhomesystems(0-10watt)
Solarpanels,solarhomesystems(10-20watt)
Solarpanels,solarhomesystems(morethan20watt)
Solarplugandplaysystems
Final report WB PO7170868 ‘ Enclude 59
Figure65:QuestionS8:‘Fromwhichsuppliersdoyoucurrentlygetyourproducts?’
Retailers’servicesmightbebetteralignedwithwhatcustomersfindimportantMainservicesprovidedbyretailersareinstallationofsystems;provisionofuserinstructions;andinsomecases,awarranty.After-salesservicesdonotseemtobeprovidedveryoften.Figure66:QuestionS21:‘Whichofthebelowservicesdoyouoffer?’
At the same time, respondents to the demand survey said they see warranty, contact with a salesrepresentativeandgovernmentrecommendationsasthemainindicatorsofthequalityofsolarproducts.Retailerscannotinfluencegovernmentrecommendations,buttheycanaddresstheissueofwarrantiesnotbeingprovidedand/orfolloweduponandthedirectcontactthroughsalesrepresentatives.
Othercompanies
44%
56%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Mobilesystems
Fixedsystems
Delivery Installation Userinstruction
Usermanual(printed) Stickerwithbasicinformation Warranty
AfterSalesService Credit/paymentininstallmetns
ShoppingArcadesKampala
Final report WB PO7170868 ‘ Enclude 60
Figure67:Question29:‘Whatconvincesyouofthequalityofasolarproduct?’
4.2 DISTRIBUTIONCHANNELS
Solar companies inUgandause a varietyofmethods topromote,market anddistribute their products.Settingupadistributionnetworkisveryexpensiveandmostofthesolarcompaniesrelyon(i)salesmadeattheheadofficethroughsystemintegrators,or(ii)upcountryentrepreneurswhosellthroughtheirownsmallsolarorelectricalshops.Theseindividualsactasdefactoagentsforamajorityofthesolarcompanies.Theyareindependent,havelittlecapitalandstock,andrelyonthegoodwilloftheclienttopayadepositforsalesandinstallation,sometimeswithoutevenseeingtheequipmenttheyarebuying.
4.2.1 DistributionChannels:ImportersandDistributorsBasedontheinterviewswithimporters,fourdistinctdistributionmodelswereidentified:
• Directsalesmodel• Traditionaldistributionmodel• Franchise/agentmodel• MFI/SACCOmodel
Most suppliers use a combination of distribution models, and sometimes even use all four. The maincharacteristicsandchallengesofeachmodelarediscussedbelow.DirectSalesModelTwenty-ninepercent (29%)of the suppliers intervieweduse thedirect salesmodel. They approachendcustomersdirectly,includingindividuals,corporates,NGOsandfinancialinstitutions.Becauseofthedirectrelationshipwithendusers,payplansandcreditschemesareoftenusedinthismodel.Themainchallengeisthatthismodeliscommunication-andthusresource-intensive,andthereforecostlywithlimitedreach.Figure68.DirectSalesmodel.Directcontactbetweensellerandcustomer,sometimesthrough(local)branchoffices.
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Buyingatthesource Governmentrecommendation JudgebythepackagingPrizewinningproduct Salesrepresentative UgandaBureauofStandardssignWarrantycertificate
Final report WB PO7170868 ‘ Enclude 61
TraditionaldistributionmodelThe traditionaldistributionmodel ismainlyused for larger SHSs.One thirdof the intervieweesuse thismodelforatleastpartoftheiroperations,whereinthesupplier/importersuppliesindependentthirdparties–eitherdealers,tradersorsystemintegrators.Onlythesethirdpartiesareincontactwiththeenduser.Theindependent third party often procures products from other suppliers as well. These can be non-solarproductsrequiredfortheinstallation(e.g.batteries,inverters),orsimilarproductsfromcompetitors.Underthismodel,theimporterhaslimitedcontrolovertheendproductandendpriceandisrequiredtomaintainintensiverelationswithalltheiroff-takersortheyruntheriskoflosingthemtothecompetition.Providingafter-saleservicesandwarrantiescanbeachallengebecausetheimporteroftendoesn’thavealocal presence. Quality control can also be an issue as the importer doesn’t control the work of theindependentthirdparty.Figure69.Traditionaldistributionmodel.Onlyindirectcontactbetweenimporterandendcustomer.
Franchise/agentmodelThe franchise/agent model is mainly used for smaller mobile and plug-and-play systems. Twenty-ninepercent (29%)of importers interviewed said theyuse thismodel.Generally the agents/ franchisees arebrandedandworkexclusivelyfortheimporter’sbrand.Theseagentsareoftenmicro-entrepreneurs.Thismodelisoftenusedincombinationwithafee-for-service/pay-as-you-goscheme.Themainchallengeidentifiedwastherateofattritionoffranchisees.Insomeinstances,theimportercouldonly retain10-15%of trainedmicro-franchisees. Theprobable cause for thehighattrition rates are therelativelylowmarginsof10%onthesalespricethattheagents/franchiseesreceive.Thismodelrequireslargeamountsofworkingcapitalbecausetheagents/franchiseesoftenneedcreditfromtheimportertoholdstockand/orneedtoprovideaformofcredittothecustomer.Anotherseriouschallengeisqualitycontrol.Thepublicperceivestheagentsasrepresentativesofthesolarbrand.Misconductbytheagentthusreflectsonthebrandperception.Figure70:Franchise/agentdistributionmodel
MFI/SACCOmodelUnder this model, the importer sells via anMFI/SACCO or closely cooperates with them through jointpromotionschemes.Thismodelisrelativelynewandonly9%oftheimporterssaidtheyusethismodeltype.The importers using the model claimed limited success, mainly due to the limited knowledge of solarproductsonthepartofSACCOsandMFIs.
Final report WB PO7170868 ‘ Enclude 62
Figure71.MFI/SACCOmodel.ImportersellseitherviaMFI/SACCOordirectlytoend-usersbasedonjointpromotionschemeswithMFIs/SACCOs
SummaryMostimportersuseacombinationofdistributionmodels,whilesomeimportersuseadistributionmodelthatlookslikethefigurebelow.Importerssupplysolarproductsdirectlyorindirectlythrough(aseriesof)dealersand/orasystemintegrator.Financierscanbeinvolvedinallphasesofthesupplychain.Figure72.Combinationofmodels.
4.2.2 RetailerDistributionChannelsThemaindistributionchannelsusedbyretailersinUgandaissellingdirectlytocustomers(51%)andsellingtofamilymembersofcustomers(24%).Thesearealsothechannelsthatareperceivedtoworkbest(figurebelow).Inaddition,sellingtootherbusinesseshasproveneffectiveforretailers.Althoughsellingtootherbusinessesismentionedasthesecondbestdistributionchannel,by20%oftheretailers,only10%oftheretailersactuallydoit.Figure73:QuestionS22:‘Whattypeofdistributionchannelsdoesthebusinessuse?’
51%
25%
5%
3%4%
10% 2%Selldirectlytocustomer
SelltofamilymemberofcustomerSelltofieldagent
Selltofinancialinstitutions(likeSACCOs,VSLAs,MFIsetc.)Selltomarket(farmers',fishers',otherproducts)Selltootherbusiness
Selltocommunityhead/chief
Final report WB PO7170868 ‘ Enclude 63
MainmarketingstrategyThemainmarketingstrategiesusedbyretailersinUgandaarepostersandFMradio(seefigurebelow).Figure74:QuestionS27:‘Whatkindsofmarketingstrategiesdoesthebusinessuse?’
ThelargestnumberofrespondentssaidFMradioisthemarketingstrategythatworksbest.Thoughpostersareoftenused,theyarenotthoughttobeveryeffective.Figure75:QuestionS28:‘Whatkindsofmarketingworksbestforthebusiness?’
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Centralregion Easternregion NorthernregionWesternregion
TV
Promotionthroughlocalnetworks(suchaschurches,communitygroups,associations)Promotionthroughfinancialinstitutions
Newspaper
FMradio
Demonstrationsonsitehomesamples?
Demonstrationsatevents
Communityradio
Brochures
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Centralregion Easternregion NorthernregionWesternregion
PromotionthroughNGOs
TV
Newspaper
Promotionthroughlocalnetworks(suchaschurches,communitygroups,associations)Promotionthroughfinancialinstitutions
Posters
FMradio
Demonstrationsonsitehomesamples
Demonstrationsatevents
Communityradio
Brochures
Final report WB PO7170868 ‘ Enclude 64
4.3 BARRIERSTOGROWTHThissectionprovidesanoverviewofthemainchallengesthatbothimporters/distributorsand(ruralbased)retailersfaceintheoff-gridlightingmarket.
4.3.1 ImportersandDistributorsWhileUganda’ssolarPVmarketshowsgreatdevelopmentpotential,therearestillmassivebarriers,bothstructuralandfundamental,thatneedtobeovercomebeforethispotentialdemandcanbetranslatedintoeffectivedemand.• Lackofaccesstocredit(bothforfixedandmobilesystems):Itisnocoincidencethatbusinessmodels
thatpromoteacreditelementforaccesstosolarsystemshavebeenfoundtobequitesuccessfulinUganda.Thisismainlyduetothecostatwhichsolarsystemshavetobesoldtomakeabusinesscaseforentrepreneurs.However,abusinessmodel incorporatingcreditcomeswithacaveat.The initialcapitalfinancingburdeniswiththesupplierandtheoverallcapitalrequirementincreasesastherateofdeploymentgrows.Somecompaniessellsystemsat95%credit,leavingthecompanyinalargecashdeficit.Companiessoonrunoutofworkingcapitalandareunabletoimportmorestock.Atover20%interest,creditfromfinancialinstitutionsisexpensiveandunsupportableformostcompanies.Instead,theyresorttoacash-basedbusinesswhichlimitsthesales.Generallylowmarginsonsales,coupledwithdifficultiesinaccessingfinancialcredit,makesitdifficultforcompaniestogrow.
• Lowerqualitycompetingproducts:DuetolackofimportcontrolsonsolarPVproducts,amyriadof
lowqualitybrandsareavailableinthemarketandaresoldcheaplytotheunsuspectingpublic.Theselowerqualityproducts,bothfixedandmobile,competefiercelyformarketsharewithgoodqualityproductsandintheend,donotmeetexpectationsanderodethepublic’strustinsolarproducts.
• Lowdisposableincome:About25%ofUgandansarelivingbelowthepovertyline.Thismeansthereisgenerallylowdisposableincomeamongthepopulation.WhileitisafactthatruralpopulationsarethemostinneedofsolarPVsystems,mostruralhouseholdsprioritizefood,educationandhealthoverlightinginordertofittheirneedsintotheirlimitedbudget.
• Poorinfrastructureandthecostofsettingupadistributionnetwork:Settingupadistributionnetwork
isexpensive. Solarcompanieshavefound itdifficult to findreliable franchisees,andthesemustbetrainedon the job,which isquitecostlygiven thepoor infrastructureand transport tomanyareas.Agentsinplaceinalocalareaareakeyrequirementforacontinuouslocalpresencetoprovideafter-salesserviceandcarryoutpromotions.Lackofwidedistributionnetworks,especiallyinruralareas,impacts theability toofferafter-salesservicesand limitscapacity tosupplyproductswhendemandpeaks.
• Lackofinterestoffinancialinstitutionsinsolarloanproducts:SolarPVcompanieshavestruggledto
convincefinancialinstitutionsthattheycanmakecredibletechnicalpartners.AmajorityofMFIsandSACCOsarenotinterestedintheprovisionofasolarloanproductforeitherfixedormobilesystems.Outofthe40thathavebeenapproachedbySolarNowforexample,only2havebeeninterestedenoughtofollowupandmakesomesales.Ontheotherhand,MFIsandSACCOshavealsonotbeenabletoconvince solarPVcompanies theyhave thenumbers thatwouldmeritadditional investment in theregionsservedbythefinancialinstitutions.SACCOsfoundupcountryespeciallylacksadequatedepositsto finance the largeupfront costsof solar systems and loans. This couldbeoneof the reasons thefinancialinstitutionsarereluctanttoengageinprovidingthesolarloanproductaspartoftheirportfolio.In addition, service andmaintenance is out of reach due to inadequate rural presence of solar PVequipmentandserviceproviders.Consumerscontinuetocomplainaboutlackoftechnicalsupportonthe ground, and this provides additional cause for financial institutions to be sceptical about thesustainabilityofasolarPVportfolio.
• Theftofsolarpanels:Theftofpanels,especiallyfixedandSHS,hasbeenreportedonseveraloccasions.
Thishasscaredoffsomepotentialcustomers,whilecausinglossofinvestmentforothers.Thereexistsno standard insurancepackage for solarPV systems, andhence theft is a risk forboth lenders andbuyers.
Final report WB PO7170868 ‘ Enclude 65
4.3.2 RetailersThemain growth barriers perceived by retailers in Uganda are the customers’ lack of money and lowawarenessofthebenefitsofsolarproducts(seefigure80).
Final report WB PO7170868 ‘ Enclude 66
Figure76:Question45:‘Whichofthebelowfactorsarethemostimportantobstaclestogrowingsalesofsolarproducts?’
Figure77:Question45:‘Whichofthebelowfactoraremostimportantobstaclestogrowingsalesofsolarproducts?’byproducttype
Growthbarriers experiencedby retailers liemainlyon the customer sideandhave little todowith theinternaloperationsof thebusiness. Interestingly,maingrowthbarrierscitedby retailersdonotentirelycorrespondwithwhathouseholdsreport.Householdrespondentsbelieveawarenessofsolarproducts isfairlyhigh,retailersbelieveitisoneofthemainbarrierstogrowth.Possibly,householdawarenessofthebenefitsofsolarareinfactrelativelylowonapopulation-widebasis,andthushamperingsales.Inaddition,13%oftheretailersbelievedthecustomers’lackofconfidenceinsolarproductshamperssales.However, fromthehouseholddemandresults,wehaveseenthat94%ofthehouseholds feel thatsolarproducts can be trusted and the reason for not purchasing a solar product is primarily linked to thehouseholds’lackoffinancingorcompetingfinancialpriorities.
0%
20%
40%
60%
80%
100%
Centralregion Easternregion Northernregion Westernregion
Customersarenotaware Customerscannotaccesscredit
Customersdonothaveconfidenceinsolar Customerslackmoney
Ineedmoresalesstaff Ineedcredittogrowthisbusiness
Mystockisinsufficienttokeepupwithdemand
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Mobile
Fixed
Customersarenotaware Customerscannotaccesscredit
Customersdonothaveconfidenceinsolar Customerslackmoney
Ineedmoresalesstaff Ineedcredittogrowthisbusiness
Mystockisinsufficienttokeepupwithdemand
Final report WB PO7170868 ‘ Enclude 67
4.4 FINANCE
Retailers in the central region are predominantly self-financed (93% said ‘There is no external capital’,‘Businessisfinancedthroughprivatecapital’or‘Loanfromfriend/family/localconnection’).Ofretailersinterviewed,68%are self-financed.Thirty-fourpercent (34%)of the retailers inNorthern region receivesuppliercredit.Figure78:QuestionS40:‘Howisyourbusinessfinanced?’Multipleanswerspossible.
Seventy-fivepercent (75%)of the retailersdon’thavea loanoronlyhada loan in thepast.Only in theNorthernregiondidretailershavealoanwithaSACCO.Ninepercent(9%)oftheretailershavealoanwithabank. Figure79:QuestionS41:‘Doyoucurrentlyhaveanoutstandingloanforyourbusiness?’Multipleanswerspossible.
Whenaskedwhytheyneverhadaloan,amajorityofretailersintheNorthernandWesternregions(59%and48%respectively)saidtheyneverthoughtcreditwasanoption.Thirty-twopercent(32%)oftheretailersclaimtheydon’thaveaneedforcredit.
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Centralregion(29)
Easternregion(62)
Northernregion(47)
Westernregion(37)
Overall(175)
Other/Idon'twanttosay
Governmentsupport
Bankloan
MicrocreditfromMFI
SupplierCredit
Cooperativemembershavepaidup(incaseofSACCO)Loanfromfriend/family/localconnectionFinancedthroughprivatecapital
Thebusinessisself-financed
Privatelyfinanced(aggregateofoptions1,2and3)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Centralregion(27)
Easternregion(28)
Northernregion(24)
Westernregion(24)
Overall(103)
Other
Yeswithabank
YeswithinMFI
Yeswithasacco
No,Ihadaloaninthepast
No,Ineverhadaloan
Final report WB PO7170868 ‘ Enclude 68
Figure80:QuestionS42:‘Whyhaveyouneverhadaloan?’Multipleanswerspossible.
4.5 MARKETSIZEANDGROWTH
4.5.1 CurrentHouseholdUseofSolarLightingproductsAsmentionedinChapter3,householdsingeneralusefixedsolarsystemsmorethanmobilesolarsystems,particularlyfixedsolarhomesystemsofmorethan20watts(see14&15).Thehouseholdsurveyshowedthatproductinterest,useandmostappealingbenefitsdiffersomewhatbycustomersegment(seeTable8).Ifthehousehold’saccesstoenergywouldincreaseinthefuture,themainusesofthisenergywouldbeforchargingmobilephonesandlightingthehome,particularly inruralandperi-urbanareas.Inurbanareas,additionalpowerwouldlargelybeusedinpoweringotherapplianceslikeradio, refrigeratorandwashingmachine. This indicatesa clearpotential for growth in salesofproductsprovidingthesetypesofusesandbenefits.Over50%ofthehouseholdspurchasedtheirsolarproductlessthan6monthsago,suggestingadoublingofthemarketinthatsameperiod(seefigure20).Householdsboughtrelativelymoremobilesystemsinthelastyearthansolarsystems(49%vs38%).
4.5.2 EstimatedSalesbyImporters.The10importersinterviewedestimatedtotalsalesof5,000unitspermonth(bothmobileandfixedsystems)atanaveragepriceofUGX152,000(US$60.80)perunit.ThisamountstoanaverageannualturnoverofUGX9,110million(US$3.64k).Weestimatethatoursampleconstitutesroughly40%9oftheentireUgandanmarket (or 50% of the official market, given a rough estimate of 20% illegal imports entering fromneighbouringcountries).Thus,thetotalwholesalemarketsizewouldbeUGX23billion(US$9.2million)peryear,andthetotalretailmarketsizewouldbeUGX32billion(US$12.8million),assumingretailersmakea40%margin.
9The40%estimateisbasedontheinterpretationofquestion8ofthesuppliersurveyandquestion37ofthedemandsurvey.Basedonsuppliersurvey,theestimatedmarketshareofinterviewedsupplierswasapproximately37%(NOTE:Basedonsuppliersurveyquestion37andnottakingintoaccountthatproductssoldthroughtheshoppingarcadesinKampalacouldbebrandedbyoneoftheimporterbrands).Basedonthedemandsurvey,theestimatedmarketshareofinterviewedsuppliersisapproximately48%.(NOTE:Thereisaverybigdifferencebetweeneachsupplier’sshareoflastmonthsalesandinstalledbase)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Centralregion(45)
Easternregion(34)
Northernregion(34)
Westernregion(33)
Overall(146)
Idon'twanttosay
Other
Ihaveneverthoughtaboutcreditasanoption
Idonotqualifyforcredit
Idonothavetheneedforcredit
IdonottrusttheFI
Final report WB PO7170868 ‘ Enclude 69
4.5.3 MarketGrowthBasedonAverageAgeofRetailersMostbusinessesarebetween2and5yearsold(53%).Justover17%oftheretailershavebeeninbusinesslessthantwoyears.Thissuggeststhattheincreaseinretailersislessthan10%peryear(seefigure59).EstimatedSalesbyRetailersThe101retailerssurveyedindicatedtheysold2,050systemspermonth,dividedalmostevenlybetweenmobilesystemsandSHSs.Thisamountstoatotalof25,000unitsperyear.TheweightedaveragepriceofamobilesystemwasUGX55,000(US$22)andtheweightedaveragepriceofaSHSwasUGX230,000(US$92)10. Hencethetotal turnoverofall retailerswasUGX3.8billion(US$1.52million;averageofUGX37millionorUS$14.8kperretailer).Thegraphbelowshowsthattheretailersinthenorthsoldrelativelymoremobilesystems,whiletheretailersintheCentralRegionsoldrelativelymoreSHSsystems.However,theaverageprice of a SHS is higher in theNorthernRegion, hence retailers in this regionhave thehighestaverage turnover. The 101 interviewed retailers are estimated to constitute less than 10% of the totalnumberofrelevantretailersactiveinUganda.Figure81.QuestionS18andS19:‘Howmanyfixed/mobilesolarunitsdidyouselloveralllastmonth?
Notably,despite the fact that solarunitsare relativelymoreexpensive in theNorthernRegion, retailerstherealsosellthemostunits.AveragepricesintheCentralRegionarelowest.Figure82.QuestionS12:‘Atwhatpricedoyouselltheproducts?’AggregatedintomobilesolarunitsandSHSsandsplitretailersperregion(andaggregatedfornationalaverages).
10Todetermineaverageprices,theaveragepriceofeachtypeofsystemwasmultipliedbythequantitysoldpertype.Thisgivesaweightedaveragepriceformobileandfixedsystems.
UGX0
UGX1,000
UGX2,000
UGX3,000
UGX4,000
UGX5,000
UGX6,000
UGX7,000
UGX8,000
Centralregion(27)
Easternregion(28)
Northernregion(24)
Westernregion(24)
TotalSHSsystems(peryear)
Totalmobilesystems(peryear)
UGX0
UGX50,000
UGX100,000
UGX150,000
UGX200,000
UGX250,000
UGX300,000
UGX350,000
UGX400,000
Centralregion(27)
Easternregion(28)
Northernregion(24)
Westernregion(24)
Average(103)
Averagepricemobilesolar
AveragepriceSHSs
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Figure83.TotalAnnualTurnoverofInterviewedRetailers.
Figure84.AverageTurnoverperRetailer.
4.5.4 MarketSizeandAbilitytoPayIngeneral,solarownersarewillingtopay28%moreforasolarproductthanhouseholdsthatdonotownasolarproduct(seeFigure41).Interestingly,bothtypesofhouseholdsarewillingtopaysignificantlymorethantheactualaverageretailprice,except inthecaseofasingle lightwithoutphonechargerforwhichownersarepreparedtopaylessthantheactualprice.Theverybigdifferencebetweentheretailpriceandthepricehouseholds areprepared topay for larger SHSs (<20W) canmean that peoplewish for largersystemsbutendupwithsmallerones.Basedon the input from importers, suppliers and retailers, the total annualmarket size is estimatedatbetween150,000and250,000unitsandbetweenUGX32and37Billion(US$12.8and14.8million)inretailsales,ofwhich74%isattributabletotheSHSmarket.
UGX0
UGX200,000,000
UGX400,000,000
UGX600,000,000
UGX800,000,000
UGX1,000,000,000
UGX1,200,000,000
UGX1,400,000,000
UGX1,600,000,000
Centralregion(27)
Easternregion(28)
Northernregion(24)
Westernregion(24)
TotalrevenueSHS(peryear)
Totalrevenuemobilesystems(peryear)
UGX0
UGX10,000,000
UGX20,000,000
UGX30,000,000
UGX40,000,000
UGX50,000,000
UGX60,000,000
UGX70,000,000
Centralregion(27)
Easternregion(28)
Northernregion(24)
Westernregion(24)
Average(103)
Averagetotalannualturnoverperretailer(UGX)
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Figure85.MarketSizeforSolarHomeProductsinUganda.
Table13:AverageEstimatedSalesperYear,byProductType,fromImportersandRetailers
Marketsizeestimate mobileunits/year
SHSunits/year
totalunits/year UGX/year US$/year
Basedonretailerssurveyandimporterinterviews
120,000 130,000 200,000 34.5billion 13.8million
The salesnumbersof retailers grewnomore than10%per year,butover50%of surveyedhouseholdsindicatedtheyboughttheirproductwithinthelast6months,whichsuggestsadoublingofthemarketinthatsameperiod.
4.6 FACTORSINFLUENCINGDECISIONMAKERS
WhenaskedwhetherornottheywerewillingtoalsosellproductsthatmeettheLightingGlobalQualityStandards,abouthalfofthesuppliersinterviewedconfirmedtheywerewillingtodoso.Theotherseitheralreadyhadproductsthatmetthestandards,saidtheyhadspecialistproducts,orwerewillingtohavetheirproductstestedandcertifiedundertheprogram.Thosethatwerewillingtoconsiderincludingqualityproductsintheirportfoliossaidthefollowingfactorsinfluencetheirdecisiontointroducenewproducts:• Customer feedback and field intelligence: After an initial product offering is made to a potential
market,companiesassesssatisfactionlevelsinmeetingcurrentenergydemandsoftheirclients.Thisisnot standardized and more often than not occurs by default. If customer feedback is positive,companieswillthenordermoreoftheproductandinvestalittlemoneyinthepromotionandmarketingoftheproduct.
• Fundingforinnovationandsubsidies:Sometimescompaniespromoteacertainproductlinebecause
oftheincentivesandsubsidiesavailable.Thedangerwiththisapproachisthelikelihoodthatgrowthinthesubsidisedproductlinewillnotbesustainable.CompanieswereopenenoughtosaythatifthereweresubstantialsubsidiesandincentivesinpromotingproductsthatmeettheLightingGlobalQualityStandards,thentheywerepreparedtopromoteandselltheseproducts.
• Marketinterestinproductsandprojectedsales:Marketinterestforparticularproductsisakeydriver
inaddingthemtotheproductportfolio.Ifaparticularproducthasahugepotentialdemandandislikelytoleadtoprofitablesales,companieswerepreparedtoaddittotheirproductportfolioaslongasitmadegoodbusinesssense.
UGX0
UGX500,000,000
UGX1,000,000,000
UGX1,500,000,000
UGX2,000,000,000
UGX2,500,000,000
UGX3,000,000,000
UGX3,500,000,000
UGX4,000,000,000
Centralregion(27)
Easternregion(28)
Northernregion(24)
Westernregion(24)
Total(103)
TotalrevenueSHS(peryear)
Totalrevenuemobilesystems(peryear)
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• Lead-timeformanufactureofproducts:Akeyfactorindeterminingadditionstotheproductlinewas
thelead-timerequiredformanufacturing.IfaproductwasgoingtotakealongtimeformanufactureandshippingUganda,thisdidnotinterestthesolarcompaniesverymuchsinceitwaslikelytotieuptheiroperatingcapital.
4.7 CONCLUSIONSFROMTHESUPPLYANALYSISSupplychain• Mainproductssoldaresolarlanterns(35%),solarpanels(0-10watts)(23%)andsolarpanels(morethan
20watts)(30%).• The supply chain consists of international manufacturers, importers, distributors, importer/
distributor),systemIntegrators,andKampala-basedorregionally-baseddealers,technicalservices,andagents.Theinterviewedimporters/distributorstogetherhavereasonablecoverageinthemoredenselypopulatedareas.IntheEasternRegiontheyareslightlyunderrepresented.
• Themajority (65%) of the 103 surveyed retailers run a small electrical shop and 52%havebeen inbusinessbetween2-5years.Seventeenpercent(17%)havebeeninbusinessforlessthan2yearssoannualgrowth isnomore than9%.Forty-fourpercent (44%)of retailers say they supplydirectly toindividualcustomers.Theyclaimthat95%of theircustomersaremaleandthat79%are fromruralareas.
• MainsuppliersoftheruralretailersaretheshoppingarcadesinKampala(44%).Hencethesupplychaingenerallyconsistsofnotonebutatleasttworetailers,eachrequiringaprofitmargin.
• Main services provided by retailers are the installation of systems (24%), the provision of userinstruction(21%)andinsomecasesawarranty(17%).After-salesservicesdonotseemtobeaserviceprovidedoften(6%).However,customersindicatetheyvalueawarrantycertificateanddirectcontactconvincesthemofthequalityofsolarproducts,soretailerscouldconsiderputtingmoreemphasisontheseservices.
Distributionchannelsimporters/distributorsSupplyandretailofsolarproductsisdonethroughavarietyofchannels.Thefourmostprevalentdistributionmodelsidentifiedwere:• Directsalesmodel(29%)–mainlyforB2Bcustomers/NGOs/Institutions• Traditionalmodel/Thirdpartydistributor(33)–mainlyforlargerSHSs• Franchise/agentmodel(29%)–mainlyformobilesystems.Agents/franchiseesarebranded• MFI/Saccomodel(9%)–relativelynewandwithmixedsuccess.Mostdistributors/importersuseacombinationoftheabove,andsometimesevenallfourmodelsatthesametime.Distributionchannelsofruralretailers• ThemaindistributionchannelsusedbyretailersinUgandaaresellingdirectlytocustomersandtheir
families(75%).• Themain marketing strategies used by retailers in Uganda are posters and FM radio. FM radio is
consideredthemosteffective.PricesandMargins• Verylargepricerangeshavebeenmentionedininterviews;suggestingarelativelyimmaturemarket.• Theaveragemarginretailersmakeonthesalesofsolarproductsis40%.HoweveronSHSof10-20watts
theyonlymake13%onaverage.Noclearreasonforthelowmarginonthisproductgroupcouldbedetermined.
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• Themarginscitedaregrossmarginsrequiredforretailerstobearallcoststheyincur.Distributioncostsareincludedinmostcasesasretailersmostlypickupthegoodsattheirsuppliersthemselves.
GrowthBarriers• Keybarrierstogrowthexperiencedbyimporters/distributorsare:lackofaccesstocredit,lowerquality
competingproducts,lowdisposableincome,poorinfrastructureandthecostofsettingupadistributionnetwork,lackofinterestfromfinancialinstitutionsinthesolarloanproduct,andtheftofsolarpanels.
• End-users,however,generallyfindsolarreliable,saidmostsolarproductsworkwellandthattheytrustsolarpower.Thus,qualityconcernsarenotconfirmedbyend-userinterviews.
• ThemaingrowthbarriersperceivedbytheretailersinUgandaarecustomers’lackofmoneyandlowawareness of solar products. These growthbarriers however donot entirely correspondwithwhathouseholdrespondentsreported.Householdawarenessofsolarproductsisseentobeveryhigh(94%)saidtheyknowwhatsolar is.However,householdawarenessofwheretobuysolar is indeedlower,55%didnotknowwheresolarproductscouldbebought),thushamperingsales.
Finance• Sixty-eightpercentoftheretailersself-financeand75%havenoloan.• Themajorityindicatetheyneverconsideredloansasanoption.Marketsizeandgrowth• Sales of SHS and mobile systems are about equal in terms of units. The fact that the majority of
householdsthathavesolarproductshaveSHS(60%)suggeststhatmobilesystemshaveenteredthemarketlater.
• CurrentcustomerspredominantlyhavelargerSHS(>20W)• Solarownersaregenerallypreparedtopay28%moreforasystemthannon-solarowners.Bothare
preparedtopaymorethantheaverageretailprice.• Ifhouseholdswouldinvestinsolar,theiraveragepaybackperiodwouldbe6-12months.• ThemarketsizeisestimatedatbetweenUGX32and37billion(US$12.8and14.8million)andgrows
at10-50%peryearInfluencingfactorsofdecisionmakers• The key factors influencingmarket players to introduce new products are the following: customer
feedbackandfieldintelligence,fundingforinnovationandsubsidies,marketinterestinproductsandprojectedsales,andleadtimeformanufactureofproducts.
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Table14.Mainchallengesidentifiedfromretailersurveyandinterviewswithsuppliers.Challenges Keyfindings
(Lackof)Maintenance;(lackof)aftersalesservice;
Only15%ofretailersofferwarrantiesand6%aftersalesservices.
Limiteddistributionnetwork;limitedinfrastructure
Distance to end-user is very large. Retailers offer limited services. Nomaintenance network. Suppliers/franchise concepts (notably Barefoot)sufferfromhighattritionratesoftrainedfranchisees.Mostretailersaresmallelectronicshopsoragents(Easternregion).Close to 45% of all solar products are sold indirectly – via the shoppingarcadesinKampala–increasingtheend-usermarketprice.SmallSolutions’regionalwarehousemanagersgaveoutunapprovedcredit,henceregionaldistributioncentreswereclosed.Nowthereisonly1centreinKampala
High(perceived)costofsystems/Highexpenditureoncostsotherthanenergy(schooltuitions!);otherpriorities
Energycostdoesn'tseemtobehouseholds’mainconcern.Householdsspendonaverageover50%oftheirdisposableincomeonschoolfees.Azuri and FRES offer fee-for-service (‘pay-as-you-go’). FRES had a 90%paymentrateafterthefirsttwoyears.Despiteendusersclaiminglimitedinterestinsolarlanterns,retailersindicatethatthesesellbest–togetherwiththe>20Wpsystems.
(Lackof)Accesstoworkingcapitalthrough-outthedistributionchain
Many suppliers indicate that lack of working capital limits their growthprospects. Financial institutions acknowledge this aswell. Franchisees andagentsoftencannotpayforrequiredstock.
(Lackof)Accesstocash;highcostsofloanorunfavourableloanterms
Loanconditionsareunfavourableandinterestratesarehigh.Retailersclaimuserslackcashordonothaveaccesstoloans.MFIsandSACCOsarehardlyinterested in solar product loans (only 2 in 40 approached by SolarNowfollowed-up andmade sales). Retailers believe lack ofmoney is themainreason customers are not buying. Non-solar owners indicated the mainreason for not purchasing a solar product has to do with not having themoney.
Defaultingcustomers/defaultingretailers;(Perceptionof)Solarbusinessbeingahighriskbusiness
Some suppliers (e.g. AB Matra and BBbox) have had major issues withdefaultingretailers.Thishascausedmarketpenetrationtoslowdownandsupplierstoshrinktheirdistributionnetworks.Defaultingalsohappenswhenproductsmalfunctionasusersarereluctanttopayremaininginstalmentsinthatthecase.FREShasa10%defaultrateattheendoftheirfirst2yearsofoperation.SolarNowonlyhasa1%defaultrate,mainlyduetocarefulduediligencebytheiragentsofnewcustomers.HighdefaultratesarecommoninB2B,withlowerratesofdefaultbyB2Ccustomers.
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5 INSTITUTIONANALYSISInUganda,thereareseveralmarketactors,bothpublicandprivate,thatareactiveandhaveinfluencedthesubsectorfromthepolicytotheretaillevel.Thispartofthereportidentifiessomeofthesekeyactorsandanalysestheircurrentroleinthesubsector.
5.1 GOVERNMENTPOLICIESANDINSTITUTIONS
Increasing access to modern energy services through alternative and renewable energy developmentremainsakeypriorityfortheUgandangovernmentandenergyministry.TheGovernmentofUgandahasdeveloped an energy policy (2002) and renewable energy (RE) policy (2007) that both fall under theElectricity Act of 1999. In addition, the government established the independent Electricity RegulatoryAuthority (ERA) in 2000 to regulate the generation, transmission, distribution, sale, export& import ofelectrical energy inUganda, and to guide the liberalizationof theelectricity industry,manage licensing,rates,safetyandothermattersconcerningtheelectricityindustry.TheRuralElectrificationAgency(REA)wasestablishedtopromotebothoff-gridandgrid-connectedelectricitythroughprivatesector-ledinitiativesinruralelectrification11.AsperthenewRESP2013-2022,theoverallresponsibilitylieswithUNREA.REAoversees and coordinates the implementation of this policy by various stakeholders and ensures theeffectivenessoftheseactivities.WithintheMinistry,theRenewableEnergyDepartment isresponsibleforthepromotionofREandRETs(RenewableEnergyTechnologies)andanEnergyEfficiencyandConservationDepartmentisresponsibleforthepromotionofEnergyEfficiencyandConservation.Since2005,thegovernmentofUgandahasremovedtaxesonsolarproductsandequipment,aninitiativeaimedtoreducepricesofsolarPVproductsandincreaseaccesstosolarenergyforUganda’spopulation.TheUgandaNational Bureau of Standards (UNBS) has played an important role in the development ofstandardsforsolarproductssincetheUNDPsolarpilotprojectin2001.Currently,UNBSisabletoproduceauniquemark12,whichisonalltestedandcertifiedproducts.However,usersneedtobeeducatedtolookforthismark.Whilestandardshavebeendeveloped,enforcementisthebiggerconstraintduetothelimitedfinancialandhumanresourcesofUNBS.Furthermore,theGovernmentofUgandahasinitiatedaprogrammetotestandcertifyproductsatsource,ratherthanrequiringthemalltobetestedinUganda.Theprogrammeisworkingwiththreeinternationalcompanies,whichhave aworldwidepresence and can ensureproducts are certified in their country oforigin,whichwillincludesolarproductswhicharemadeinChina.Finally,throughfundsprovidedbytheOfficeofthePresidentofUganda,theCentreforResearchandEnergyConservation (CREEC) is constructing a solar PV laboratory that will be furnished with state-of-the-artequipment.ThislaboratorywillbeusedtotestvarioustypesofsolarPVequipmentrangingfrompanelstoinverterstolamps.Thisshouldbecomeanindependenttestingandcertifyinglaboratoryforprivatesectorimportation,marketingandsalesofsolarPVsystems.
5.1.1 UgandaEnergyCreditandCapitalizationCompanyThegovernment-ownedUgandaEnergyandCreditCapitalizationCompany(UECCC)facilitatesinvestmentsin Uganda’s renewable energy sector. UECCC’smandate is to provide a reliable framework for poolingresources from various sources like government, investors and development partners and channellingresourcestorenewableenergyprojects.
11REA-TheRenewableEnergyPolicyforUganda2007.www.era.or.ug;12Informationaboutthemarkwasnotfoundontheinternet,indicatingthatUNBSshouldmakeitmorereadilyavailablesothemarkcanbeusedmoreeffectively.
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The company’smain objective is to provide financial, technical and other support to renewable energyinfrastructuredevelopmentinUgandawithparticularfocusonenablingprivatesectorparticipation.UECCCprovidestechnicalassistancetoprojectstoovercomebarrierstoinvestmentaswellasfinancingoptionslikeapartialriskguaranteeduringtheconstructionphaseofprojects.Thisfacilityenablesprojectstoinitiallyaccess guaranteed cover for cost overruns beyond 15% of the total project cost. UECCC also works tointroducenewandinnovativefinancingmodalitiesincludingcreditenhancementinstrumentsdirectedatreductionofrealorperceivedrisksfacedbyprimarylendersandfinancialintermediaries.Inaddition,UECCCoffers transaction advisory services and various forms of technical assistance to independent powerproducersandfinancialinstitutions.UECCCoffersasolarrefinancefacilitytoparticipatingandregulatedmicrofinanceinstitutions(MFIs)foron-lendingtoruralbeneficiaries,bothhouseholdsandSMEsacquiringsolarPVsystems.Thisfacilityhasaceilingof$300,000perparticipatinginstitution.Currentlythefollowingthreefinancialinstitutionsusethisfacility:CentenaryBank($250,000seealsoparagraph2.2.2),PostBankandFinanceTrustBank.UECCCisnegotiatingwithafourthinstitution.UECCCcurrentlyprovidesrefinancingfacilitiestoPFItomitigatethehighcostoffundsforenergyloans.Thisinitiativehasreceivedsupportfromparticipatingfinancialinstitutionsandthereisongoingworktochangethecurrentlegislationtosupportsolarcompaniesdirectlywithoutgoingthroughfinancialinstitutions.Thecompanycurrentlyhason-goingpartnershipswiththeMinistryofEnergyandMineralDevelopment,MinistryofFinanceanddevelopmentpartners(BTC,GIZandKfW).Inaddition,itcoordinatestheOrioMinihydropowerandruralelectrificationproject.UECCCisfacedwithnumerouschallengesasthefinancialinstitutionslackguaranteesforonlendingtosolarcompanieswhileborrowerslackcollateraltoincreasetheirborrowingcapacity.
5.1.2 MinistryofEnergyandMineralDevelopment(MEMD)TheMinistryofEnergyandMineralDevelopmentwasestablishedin1995withavisionofensuringthatthepopulation of Uganda use inexhaustible and environmentally-friendly renewable energy for social andeconomicdevelopment.ThemissionofMEMDistoincreasetheuseofmodernrenewableenergyinthenationalenergymixtodevelopandsustaintheeconomy.KeyfunctionsoftheMinistryinclude:• Toestablishandimplementpolicies,strategies,legalandinstitutionalframeworksgoverningrenewable
energyresources;• To promote and develop renewable energy technologies (solar, wind, small/mini/pico hydro,
geothermal,andbiomassresources);• To develop technical and managerial capacities to develop and promote renewable energy
technologies;• Tosetupdemonstrationsandpilotsofrenewableenergytechnologiestoencourageadoption;• TocollaboratewiththeUgandaNationalBureauofStandardstoestablishandimplementstandardsto
ensurehighqualityrenewableenergyproductsandsystems;• To collect, assess, andmanage renewable energy data and recommend the appropriate renewable
energysystemstocustomers;and• Toestablishlocal,regional,andinternationalcooperationinrenewableenergyresources.TheMinistryiscurrentlyactiveinthefollowingareas:biomassenergytechnologiesdevelopment,biofuels,gasification,biogascogeneration,hydro(picoandsmall/minihydro),windforwaterpumpingandelectricitygenerationnationwide.WithspecificfocusonsolarPV,theMEMDiscurrentlyinvolvedinpolicyformulation,SolarPVpromotion,nationalstandardsdevelopmentandmonitoringofstakeholderactivities.
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Further,theMinistryrunsprogrammesacrossallsectorsincludingagriculture,health,communicationandwatersupply,andsupportsprivatesectorenterprisedevelopmentthroughCivilSocietyorganizations,theUgandaNationalRenewableEnergyAssociation (UNREA),UgandaNationalAlliance forCleaningCooking(UNAAC),andtheFocalPointfortheInternationalRenewableEnergyAgency(IRENA).Finally,theMinistrycoordinates RE activities within the East African Community (EAC) and the Energy and EnvironmentalPartnership(EEP)ProgramofEasternandSouthernAfrica.TheUgandaRenewableEnergyPolicyof2007setsouttheGovernment’svisionforrenewableenergy inUgandawiththeaimofincreasingtheuseofmodernrenewableenergyfromthecurrent4%oftotalenergyconsumption to 61% by the year 2017. The policy defines renewable energy as those sources that arereplenished continuously by natural processes, including solar energy, hydro power, biomass,wind andgeothermalaswellasthesustainableuseoforganicwastes.Under the Renewable Energy Policy, there are specificmeasures to support the promotion of solar PVpower.TheseincludesupporttosolarPVmarketdevelopment,financingforhouseholdsandinstitutionsacquiring solar PV systems, and the introduction of a curriculum to train solar PV technicians throughtechnicalinstitutes.TheoverallresponsibilityforpolicyimplementationlieswithMEMD.TheMinistryoverseesandcoordinatesthe implementation of policy by various stakeholders and ensures the effectiveness of these activitiesthroughmonitoring.WithintheMinistry,aRenewableEnergyDepartmenthasbeencreatedtospecificallyfocusonthepromotionofrenewableenergyandrenewableenergytechnologies.Due to the support being provided to the energy sector by the Ministry, a multiplier effect has beenstimulated in thedevelopment andadoptionofRE technologies. SolarPVgrowthhasevolved fromanestimated capacity of over 10MW, compared to 2MW10 years ago. Adoption of improved stoves hasincreasedfrom170,000in2007to700,000currently.13
5.1.3 UgandaNationalBureauofStandardsThe Uganda National Bureau of Standards (UNBS) is a statutory organization established by an Act ofParliamentinJune1983.Itbecameoperationalin1989.UNBSisamemberoftheInternationalOrganizationforStandardization(ISO)andalsoamemberoftheAfricaRegionalOrganizationforStandardization(ARSO).UNBS is a leading institution of international repute in provision of sustainable standardization serviceswhosemission is toprovidestandards,measurementsandconformityassessmentservicesfor improvedqualityoflife.ThemainobjectivesofUNBSaretoformulateandpromotetheuseofnationalstandardsandtodevelopquality control andquality assurance systems thatwill enhance consumerprotection,publichealth andsafety,industrialandcommercialdevelopment,andinternationaltrade.UNBSiscurrentlyundertakingthefollowingactivities:• Developingandissuingnationalstandards;• Provisionofimportinspectionservices;• Provisionofqualityassuranceservices;• Testingandcertificationofimportedandlocallymanufacturedproducts;• Calibration,checkingandmeasuringequipmentintrade;• DevelopingstandardsonICT,power-linesandpoles,petroleumstandardsandagriculturalstandards.Whilestandardshavebeendeveloped,UNBSisfacedwithnumerouschallenges,suchas:• porousborderswhichallowimportofpoorqualityproductswithoutnecessarychecksandcertification;• lackofadequatestaffingtocopewiththedemandforservices;
13DatafromtheMinistryofEnergyandMineralDevelopment
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• numeroussectors/areaswithoutstandards,sincestandardsareproducedondemand;and• theneedtotrainusersonthestandards,whichisperceivedasacostlyexercise.ManytimesUNBSstaffresorttorelyingonlabelsandsamplestocertifyproducts.Labelshavebeenknowntobecounterfeitedandpoorqualityproductshavebeenimportedintothecountry.FurtheruseofE-Tax(internet based tax) services pressurizes UNBS staff to sometimes release products without adequatechecks.
5.1.4 RuralElectrificationAgency(REA)TheRuralElectrificationAgency (REA)wasestablishedasa semi-autonomousagencyby theMinisterofEnergy and Mineral Development through Statutory Instrument 2001 no. 75, to operationaliseGovernment's rural electrification function under a public-private partnership. REA is responsible forexecutingthegovernment’sRuralElectrificationProgrammeandfunctionsasthesecretariatoftheRuralElectrificationBoard(REB),whichcarriesouttheMinister'sruralelectrificationresponsibilities,asdefinedintheElectricityActof1999.REAismandatedtofacilitatethegovernment’sgoalofachievingaruralelectrificationrateofatleast22%bytheyear2022, from1%atthebeginningof thedecadeas indicated inREA'sstrategyandplan2013-202214.REA'smissionis"tofacilitatetheprovisionofelectricityforsocial-economicruraltransformationinanequitableandsustainablemanner".REAisspearheadingtheenergysectortransformationfromtheuseoftraditionalenergysources(firewoodandotherbasicformsofbiomass)totheadoptionofmodernenergyservices(e.g.electricity,petroleumfuels,bio-fuelsandimprovedstoves).REAdevelopedaRuralElectrificationMasterPlantoguideprojectdesignandsequencingtoprovideappropriateenergyservices.ThisMasterPlanprioritisesprojectsonthebasis of their value in financing the economy (economic growth centres), social well-being, education,health,watersupply,andsupporttolocaladministration.REA’smajorresponsibilitiesinclude:planningandpackagingprojectsforpublicorprivateinvestmentinruralelectrification and renewable energy power generation; implementation of priority rural electrificationprojects;administeringcapitalsubsidiesforprivateinvestments;maintaininganationaldatabaseforruralelectrification; and advising the Ministry of Energy and Mineral Development on policy issues in ruralelectrification. TheAgencyhas been able to procureprivate operators tomanage7 rural electrificationdistributionconcessions.
5.2 FINANCIALINSTITUTIONS
5.2.1 CentenaryBankLtdCentenaryBank,foundedin1983,hasover60branchesacrossthecountry,withbranchlocationsinmostofthekeyurbancentresaswellasavastruralandurbanclientele.In2011CentenaryBanksignedaMemorandumofUnderstanding(MoU)withtheGovernmentofUgandatofacilitatetheEnergyforRuralTransformationProgram(ERTP)intheruralsectorthroughaccesstocredit.Under the partnership, REA pre-qualifies technical providers and provides the bank with a subsidycomponentforqualifyingruralborrowers.Asmentionedinparagraph2.2.1,aSolarRefinancefacilityofUS$250.000wasalsosignedwithUECCCinJuly 2012 to access on-lending funds to be applied exclusively to the provision of solar loans to ruralhouseholds.CentenaryBankhasalsopreviouslypartneredwithGlobalVillageEnergyPartnership (GVEPInternational) to access a 50% energy-product loan guarantee fund. The latter was aimed at partiallycoveringlossesonloanstopurchasecookstoves.
14http://rea.or.ug/phocadownload/rural%20electrification%20strategy%20and%20plan%202013-2022.pdf
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Demandforsolarproductshasbeenquiteextensive.Accordingtothebank’srepresentative,thetypicalsolarloancustomerlivesinanoff-gridarea,hasanincomefromfarmingorpettytrade,andhastheabilitytospendatleastUGX5,000(US$2.00)onenergy(nowkerosene)perweek.Typicalsolarloansarecharged24%interestrateperyearwithmonthlypaymentsonadecliningbalancesystem. Othercosts inaccessingasolar loanincludeapplicationfees(UGX15,000;US$6.00), insurance(0.45%ofloanamount)andachargeof1%oftheloanamountasaprocessingfee.TheBankrepresentativeidentifiedvariouschallengesinprovidingsolarloanstoclients.ThebankhasformalworkingrelationshipswithseveralvendorsincludingBarefootPower,SolarNow,NacoSolar,SolarSenseandMatrix.Thesevendors/technicalprovidersaremainlybasedinurbanareasandquitefarfromtheirclients,thusmakingitdifficultforclientstoaccesspromptafter-salesservices.Inaddition,thesetechnicalprovidershavelittlecapitalandthereforearesometimesunabletofundrequiredsysteminstallations.Poorqualityproductsonthemarketareaseriouschallengetoloanrepaymentsinceclientswillattempttostopmakingpaymentsiftheinstalledsystemsmalfunction.The risk of lending to households, dealers, retailers, and importers by thebank isminimizedby carefulappraisalofclientspriortoloandisbursal.However,thesestringentappraisalsmeanthatfewerandfewerclientsareabletoaccessloansfromthebank.Atotalof95solarloanclientshavebenefitedfrombankfinancing,withuptoUGX128,8million(US$51.52k)drawndownwhich isapprox.48%of theUGX269million (US$107.6million)UECCCon-lending facility.CurrentlyCentenaryBank’soutstandingenergyportfolioisapproximatelyUGX151million(US$60.4k)withabout87clients.
5.2.2 FINCAFINCAwasestablishedin1992asalegalentityandcurrentlyhas25branchesacrossurban,peri-urbanandruralareas.Withinitsnewtechnologiesportfolio,FINCAUgandaLtdofferssolarhomesystems(since2008)andisactivelyconsideringintroducingbiogasandenergyefficientcook-stoves.Thelatterarecollectivelycategorizedundertheinstitution’srenewableenergyportfolio.ProductdevelopmentwasfundedthroughFINCA’sownresourceswithexternaltechnicalsupportfrompartnerssuchasMicroEnergyInternational(whohelpeddesignandpilotthesolarenergyproduct).TheorganizationhasalsobenefittedfromtheRuralElectrificationAgencyprogram(forsolarenergyproductsubsidy)bydisbursingthesubsidyonbehalfoftheGovernmentandusingthisasaplatformtogiveoutloans.Besidesclientappraisalandloandisbursement,loanofficersareresponsibleformarketingandsalesofthenewtechnologyproductstopotentialclients.Lendingmethodologyandrequirementsaresimilartotheirotherbusinessorassetfinanceloans.TechnicalProviders(TP)arecurrentlypre-screenedundertheRuralElectrificationAgency’ssubsidyprogrampriortoengaginginaformalpartnershipwithFINCA.ThemostnotableTPpartneratthemomentisBarefootPower(U)Ltd.TechnicalProvidersareresponsiblefordistribution,installationandafter-salesservicestoFINCAcustomersthathavebeenqualifiedforloans.Inselectedcases,TPswillalsoundertakejointmarketingactivitieswithFINCAstaff.FINCAindicatesover2.600clientshavepurchasedasolarproductthroughthisprogram.Energyloans(underwhichsolar loansaredisbursed)arechargedataninterestrateof2%permonthor26.8%compoundedforloanvaluesuptoUGX2.5million(US$1000).Loansabovethisamountarecharged2.5%permonth.Loanrepaymentsaretypicallyupto12monthswiththesolarsystemservingascollateral.ThetypicalFINCAenergyloancustomerlivesinanoff-gridlocation,canspendbetweenUGX5,000((US$2.00)toUGX10,000(US$4.00)perweekonkerosene,andisgenerallyafarmerwithseasonalincome,oratraderorsmallbusinessowner.
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FINCAreduceddefault riskofon-lending tohouseholds, solardealersand importersof solarequipmentthrougharigorousappraisalprocessforborrowers. FINCAbelievesthatreducingtheloanrequirementswouldincreasetheriskofdefaultingonloans.Six solar installers (NacoSolar,Powercom,BareFootPower,SolexandPhoenix)are thecurrent installingpartnersofFINCA.FINCAindicatedtheyaresettingupanewinitiative,FINCAPlus,toboosttheenergyloanproduct.Underthisinitiative,FINCAwillbepositionedtoimportsolarsystemsinbulk,setupadistributionnetwork,recruitparticipatingentrepreneursandprovidebusinesssupportservices,suchasmarketingandtechnicaltraining,totheseentrepreneurs.Thisnetworkofentrepreneurswillserveasthemaindistributionchannelforthisnew initiative. FINCA also plans to venture into biogas, briquettes and improved cookstoves, aswell assanitizationandcleandrinkingwaterinthenearfuture.FINCA representatives identified unfavourable loan terms for clients and limited marketing budget asconstraintstotheprogram.
5.3 DONOR/NGOPROGRAMMES
5.3.1 SEMAprojectTheSEMAproject(SustainableEnergyMarketAcceleration)isafour-yearproject(2011-2015)activeinUganda,KenyaandTanzania.TheprojectisfundedbytheEUEnergyFacilityandHIVOS,andisimplementedbyEnclude(formerlyTriodosFacet),FriendsConsultUgandaandIntegralAdvisoryKenya.TheoverallobjectiveoftheSEMAprojectistoincreaseaccesstoaffordableandsustainableenergyservices(solar,biogasandcleancookstoves)forrurallow-incomepeopleinUgandaandKenyathroughsmallloans.Todothis, theprojectpromotesbusinesspartnershipsbetweenrenewableenergyenterprisesandruralfinancialinstitutions.Thestartingpointoftheprojectistherealisationthat,whileend-userfinancingforenergyaccesscanbecriticalforensuringproductaffordability, italsointroducescomplications.Companiesprovidingend-userfinanceneedtodevelopnewskillsandback-officestructures,andtheymusthaveappropriatelystructuredcapitalbackingthem.Energycompaniesthatpartnerwithfinancialinstitutionsneedtoagreeonproductspecifications, prices, payment conditions, terms of delivery and after-sales services. Also, roles in thepartnershipneedtobeclear:whowillmarketandselltheproducts,whowillcompleteinstallations,andwhowill provide repair services?Toaddress these issues, theSEMAproject facilitatespartnershipsandprovidestechnicalsupporttoruralenergycompaniesandfinancialinstitutionstoovercometheseobstaclesandmakeenergysolutionsmoreaccessibletoruralhouseholds.In Uganda, the project is active in particularly the northern areas in the country, and has partnershipsestablishedwith7solarcompanies,includingBarefootPower,IncafexSolarSystems,KirchnerSolar,NACOSolar,SolarEnergyUgandaLtd,MOSETInvestmentsandSolarEnergyDistributors.Inaddition,SEMAworkswithover35financialinstitutions,particularlySavingsandCreditCooperativeSocieties(SACCOs)andMicroFinanceInstitutes(MFIs).PartnershipsbetweenSACCOsandsolarcompanieshaverequiredmoremaintenanceandattentionthananticipated, resulting in sloweruptakeand limitedsuccess.Somepartnershipshave takenmore timetobuildthanothers.ParticularlyintermsofthecapacitybuildingneedsoftheSACCOs,significanteffortswererequiredtoraiseawarenessofsolarproducts,thebenefitssolarcanbringtohouseholds,andthebenefitsofprovidingsolar(loans)asaSACCO.OtherSACCOswereslowinfollowinguponpartnershippossibilitiesduetoselectionofnewSACCOboards.TheparticipatingsolarcompanieswerechallengedintheirabilitytoquicklyrespondtosolarproductneedsfromSACCOslocatedintheruralareas,duetolimiteddistributioncentresandafter-salescapabilities.
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However,theprojecthasbeensuccessfulintakingonathirdpartyroletoeffectivelyfacilitatelong-termpartnerships between financial institutions and solar companies,which has resulted in 3,515 units soldthroughfinancialinstitutionsand1,090energyloans.
5.3.2 GIZ/ENdevThePromotionofRenewableEnergyandEnergyEfficiencyProgramme (PREEEP) is implementedbyGIZ(GesellschaftfürInternationaleZusammenarbeit)onbehalfoftheGermanFederalMinistryforEconomicCooperationandDevelopment(BMZ). Theprogrammeofferssupportindevelopingskills,resourcesandcapacities in the fields of energy policy, disseminatingmodernbiomass energy technologies, promotingenergy efficiency and rural electrification. This work includes capacity development activities for theMinistryofEnergyandMineralDevelopment,forstakeholdersatthenationalanddistrict levels,andforselectedcommunity-basedenergysuppliers.GIZcurrentlyoffersspecificsectorsupporttoruralelectrificationthroughgriddensification,microhydroinstallations and promotion of solar PV to households, social institutions, government centres and forproductive use in the Lango andWest Nile regions (solar PV) and Kiboga,Masaka, and Lwamata (griddensification).Theresponsetosupportforruralelectrificationactivitieshasbeenverypositive.Griddensificationhasbeensupportedwitha70%subsidyaswellascoordinationandtechnicalassistancefromGIZ.SolarPVactivitieshavebeensupportedbyofferingsolarinstallersalocalsubsidycontractwithfinancialsupportfromGIZ.AsaresultofPREEEP,morethan120social institutions(schools,healthcentresandothers)havegainedaccesstoelectricitythroughconnectiontothenationalelectricitygridoroff-gridphotovoltaicsystems.Inaddition,over2,800householdsandsmallandmedium-sizedenterprises(SMEs)havebeenabletopurchaseasolarsystemthatgeneratesenoughpowertolightahouse,rechargemobiletelephonesandpoweraradioor television. These systems are also being used for commercial purposes to run hair trimmers, chargemobiletelephonesandpowersmallshops,forinstance.Theadventof LED lightinghasmade it possible to increase thenumberof lights a solarPV systemcanaccommodate.Despitethispositivetrend,PVsystemsinstalledwithGIZsupportstillrequiredonorfundingtostayfunctionalsincethesupportedinstitutionsareunabletosustainablymaintainthem.In the original plan, GIZ project partners would provide co-funding. But during implementation thishappenedonlytoalimitedextent.Wheninstitutionalsupportprogramswerebeingdesigned,partnersintheprogramwererequiredtocontributetothefundingoftheprogram,whichwasreferredtoascounter-partfunding.However,thiscounter-partfundinghasbeenslowincontributingtoprojectcostsandhasonoccasion resulted in delays in project implementation. As a response to this particular challenge, GIZprovided the necessary financing to overcome the funding gap that was slowing down projectimplementation.Other problems faced by the program include unreliable equipment, with batteries and lights of thesponsoredsystemsoftenfailing,leadingtoabadreputationforquality.
5.3.3 WWFWWFUgandaCountryOffice (WWF-UCO)wasestablished in2009byWWF-International topromote itsmissioninthecountryasanintegralpartofWWF’sGlobalmissioninEastAfrica.TheGoalofWWF-Easternand Southern Africa Regional Programme (WWF-ESARP) is to ensure that biodiversity and biologicalprocesses in Eastern Africa are conserved in harmony with the aspirations of the East African people,throughtheactivitiesofWWF-UCOandothersectorplayers.WWF’ssectorsofoperationincludefreshwater,forestrybiodiversity,andenergyandclimate.Undertheenergyandclimateprogram,WWFisrunningtheCleanEnergyChampionDistrictprogram.Inthisprogram,
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WWF-UCO is supporting the Government of Uganda in increasing access to clean energy alternativesthroughadistrictledapproachdubbedthe“ChampionDistrictInitiative”.TheinitiativeispilotedintheKasesedistrict,whereWWFisshowcasingtoolsandapproachesforengagingwithlocalstakeholdersatthedistrictlevel,whichisWWF’spreferredapproachtoincreasingenergyaccessforoff-gridcommunitiesinUganda.Focusareasincludecleanenergyforhouseholdcookingandlighting,anddocumentingandsharinglessonslearned.WWF has provided technical assistance, linkages to pre-qualified suppliers and seed funding under theinitiative.KaseseDistricthascooperatedwiththeprivatesectortoprovideanenablingenvironmentforsolarlightingcompaniestoworkintheDistrictbywaivingtaxesthatwouldotherwisehavebeenpaidbythecompaniestooperateintheDistrict.PartnersinthisprogramincludeMEMD,REA,GIZ,CREEC,BareFootPower,BBOXXandUgastove.Marketplayershavewelcomedfinancialinitiativesthatsupportcreditbothatanindividualandgrouplevel,whichhavegreatly increasedaccesstogoodquality lightingproducts. Markettrends indicateagrowingneedforportablelightingforBaseofthePyramid(BoP)customersasgridextensionwillnotreachallareasoftheDistrictinthemediumterm.Therehavebeenafewchallenges,however,limitingtheimpactoftheinitiative.Uptakeofproductswasslowuntiltheprogramintroducedplanswitha30%upfrontpaymentforlightingproductsand4,6or12monthly payments thereafter.WWFhas also noted thatmultiple actors are trying to provide the sameservices,whichleadstoinefficiencies.Forgrowthandefficiency,WWFbelievesconsolidationinthesectorisneeded.
5.4 PRVATESECTOR
5.4.1 KilembeInvestmentsLimitedKilembeInvestmentsLtd(KIL)isapublicLimitedLiabilityCompany,locatedinKaseseDistrictwithbranchesinMpondweandKatererathathas12staffmembersand1,217shareholders.Thecompanyhasavisionofbeingacompetitivecleanenergyproviderforacleanerenvironmentandamissionoflightingvillagesforruraltransformationtoimprovethequalityoflife.KILisengagedinthedistributionandsaleofpowerfromthenationalgridona10-yearconcessionthatrunsuntil2017withacurrentcustomerbaseof3,481customersundertheprepaidmeteringsystem.KIL iscurrentlyworkingonanewprojecttoextendthepowernetworktotheruralareasofKaseseandsurroundings,whichisunderconstruction.KILworkswiththelocalgovernmentinKaseseandwithBelgiumTechnicalCooperation.StakeholdersinKampalainclude:ElectricityRegulatoryAuthority(ERA),UgandaElectricityTransmissionCompanyLimited(UETCL),RuralElectrificationAgency(REA)andtheGovernmentofUganda,throughtheMinistryofEnergyandMineralDevelopment.
5.5 POTENTIALACTORS
Anassessmentofpotentialactorsinterestedinenteringandscalingupcommercialactivitiesintheoff-gridsectorwasundertakenincollaborationwithREA.SourcesforidentifyingtheseorganizationsincludedtheindustryknowledgeofREAstaffandtheresearchteam,whowerefamiliarwithsectoractors, initiatives,trendsandorganizationswithanappetiteforinvestingintherenewableenergysectorinUganda.Theteamassesseddifferentpublicandprivatesectoractorsontheirinterestandcapacitytoundertakeoff-gridcommercialactivitiesatscale.Specificcriteriatoassesscapacitywerebasedonthefollowing:
• astrongmanagementteaminplace;• local/regionalpresence;
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• capabletechnical/operationsteam;• historyofgoodservicedelivery;• strongsupportstructureswithincommunitiestoprovidecustomercare;and• demonstratedabilitytodeliveroncontractedservices.
Interestonthepartoftheseorganizationswasestablishedbycontactingthemdirectly,orbythefactthatthey had previously voiced their interest to or were alreadyworkingwith REA.When contacting likelycandidates,theresearchteamaskedifparticipationinlargescaleSHSbusinesswasaninterestingareaforthem.Theorganizationsstudiedcanbedividedintothreecategories:a) thosethathadinterestandcapacitytoengage, includingWenreco,FerdsultandBundibugyoEnergy
Cooperative;b) thosewithcapacitybutnointerest,includingUmemeandKalangalaInfrastructureServices;andc) thosewithinterestbutnocapacity,including.TheorganisationslistedbelowbelongtoCategory‘a’above.Theresearchteamhasfoundthemtohavetheinterestandcapacitytoundertakeoff-gridcommercialactivitiesatscale,andthusdeemsthemthemostsuitablepotentialactors.Theseorganizationshaveauniquestanding in thecommunitiesandregions inwhichtheyoperate.Theyhavegoodmanagementteamsinplace,havecapabletechnical/operationsteams,have a history of service delivery, have strong support structures within the community that providecustomercare,andhavebeenabletodeliverontheservicesforwhichtheyhavebeencontracted.Themost important attribute these organizations possess,which is very important in undertaking solaractivitiesonacommercialscale,istheirpresenceonthegroundandthegoodreputationthattheyenjoywithinthecommunitiesinwhichtheyoperate.Theseorganisationsalsomentionedtotheresearchteamthat they are currently in discussion with the Rural Electrification Authority about engaging in solardistributionactivitiesinthenearfuture.
5.5.1 WestNileRuralElectrificationCompanyLimited(WENRECO)WestNileRuralElectrificationCompanyLimited (WENRECO) is anelectricitygeneratinganddistributioncompany in the West Nile sub-region, in Northern Uganda. WENRECO is a subsidiary of IndustrialPromotionalServices,theindustrialdevelopmentarmoftheAgaKhanFundforEconomicDevelopment,andamemberoftheAgaKhanDevelopmentNetwork.WENRECO,throughcompetitivebidding,wonaconcessiontogenerate,distributeandsellelectricityinWestNile,whichconsistsofeightdistrictsandishometoanestimated2.3millionpeople.WENRECOoperatestwo power stations: WENRECO heavy fuel thermal plant with capacity of 1.5 megawatts, located inEwuata, Arua District; and Nyagak I Power Station, a 3.5 megawatt mini-hydropower station, locatedinPaidha,ZomboDistrict.ThesetwofacilitiesarecurrentlythemainpublicelectricpowersourcesavailabletotheWestNilesub-region,whichisnotyetconnectedtothenationalgrid.ConnectiontothenationalgridisexpectedfollowingthecompletionofKarumaHEParound2018.WENRECOhasa20-yearconcessiontosupplypowertotheWestNilesub-region.WENRECO is the implementer and co-funder of the West Nile Rural Electrification Project, which wasinitiatedin2013.TheProjecttargetedelectrificationof30healthcentres,60schools,250businessesand6,000householdsbetween2013and2015throughhydropoweranddieselgensets.Fundingfortheprojectwasprovidedby theGovernmentofUganda, theGermanDevelopmentBank (KfW),WENRECOand theEnergyFacilityPoolingMechanism.Lastyear,WENRECObeganswitchingthe4,000customerstopre-paidmeteringservice. Theadditionof2,500newcustomersincreasedthenumberofcustomersservedbythecompanyto6,500.
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5.5.2 FerdsultEngineeringServicesLimitedFerdsultEngineeringServicesLimited(FESL)wasestablishedin1999andisoneoftheleadingorganizationsinmaintainingandconstructingthehigh-voltageelectricitytransmissionsysteminUganda.Thecompanyinitially provided engineering services, ranging from construction of tower bases, building & civilengineering,electricalandmechanicalworkstoconstructionofpowerlinesrangingfrom132kVto0.415kVandinstallationofopticfibres.Thecompanyhassincebroadeneditsservicestoincludepowerdistribution.FESLhassuccessfullyexecutedseveralprojectsfundedbythegovernmentofUganda,theWorldBank,SIDA,NORAD, and JICA. As part of the rural electrification effort being undertaken by both the Ugandangovernmentandtheprivatesector,FESLisinvolvedinmaintainingandoperatingruralpowerdistribution.Asadistributionutility,thecompanyisactiveinthefollowingelectricitydistributionconcessions:Kakumiro–Kibaale–Kagadi, Rukungiri–Kanungu, Ntugamo–Kitwe–Isingiro, Kyotera–Mutukula–Kansensero, Masaka–BukakataandRugombe–Kyenjojo–Katooke.Todate,thetotalnumberofconsumers(bothhouseholdsandSMEs)connectedtoFESLpowerdistributionnetworkisover5,000,allofwhichareonapre-paymentmeteringsystem.
5.5.3 BundibugyoEnergyCooperativeSociety:BundibugyoEnergyCooperativeSocietyisa2000-member-strongcooperative.TheBundibugyoEnergyandCooperativeSocietywontheconcessiontomanagethenewlyconstructedpowerlineinthedistrictandwasthefirstcooperativetomanageelectricitydistribution,maintenanceofpowerlinesandrevenuecollectionfromconsumers.Ithas1,700registeredmembers,ofwhich1,500havebeenconnectedonthenationalgrid.
Accordingtotheconcession,thecooperativehasresponsibilityforpowerdistribution,maintenanceofthepower lines,andmanagingtherevenuefrompowerconsumers. Thecooperativeconnectselectricitytolocalsatasubsidizedfee.Asownersofthecooperative,allmembershavetherightofownershipoftheincomefrompowertariffscollectedfromthepowerlinemanagedbythecooperative.
5.6 CONCLUSIONSFROMTHEINSTITUTIONALANALYSIS
Keyinstitutionalchallenges• Thekeychallengesintheoff-gridlightingmarketinUgandaidentifiedbyfinancialinstitutionsare:
o vendors/technicalprovidersaremainlybasedinurbanareas,quitefarfromtheirclientsthusmakingitdifficultforclientstoaccesspromptafter-salesservices;
o technical providers have little capital and therefore are not always able to fund systeminstallations;
o poorqualityproductsonthemarketareaseriouschallengetoloanrepaymentsinceclientswillattempttostopmakingpaymentsiftheinstalledsolarsystemsmalfunction;
o availableloantermsareunfavourabletoclients;ando lowmarketingbudgetsconstrainfinancialproductpromotionanduptake.
• Thekeychallengesintheoff-gridlightingmarketinUgandaidentifiedbydonors/NGOsare:o needforcapacitybuildingoftheprivatesector(retailers)andfinancialinstitutionsinvolvedin
theprovisionofoff-gridlightingproducts;o lowawarenessofsolarproductsandbenefitsforhouseholds;o badqualityreputationofsomesolarsystemsonthemarket;ando theneedfordonorsandNGOstoprovidefinancialandtechnicalassistanceinmaintainingsolar
systems.• PrivatesectorchallengesidentifiedintheUgandanoff-gridlightingmarketinclude:
o underdevelopmentofthesolarmarket;o needforsubstantialinvestmentinmarketawarenesscampaigns;ando lowconsumerpurchasingpower.
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6 CONCLUSIONSDemandforOff-gridLightingProductsThe solarmarket is dominated by several relatively small companies. Hardly any larger (multinational)corporationsareactive.However,thedemandsurveyindicatesthattheendusersaregenerallymoreawareandmoreconvincedofthequalityofsolarenergythanmarketplayers,institutionsandNGOs/donorsthink.Endusersarealsoquiteconvincedofthebenefitsofsolar.Theneedtochargecellphonesisbecomingmorewidespread.Eighty-threepercent(83%)ofthehouseholdsownoneormorecellphonesandspendonaverage1000UGX(US$0.40)forphonechargingperweek.Sixty-eightpercent(68%)oftheintervieweesindicatedtheypurchasechargingtimeoutsidetheirhome.Urban-basedhouseholdswhoaregrid-connectedpayonaverage2to3timesmorefortheirelectricitythannon-grid connected households. Eighty percent (80%) of (local) grid connected households use acomplementarylightingsource,mainlykerosene.Thisimpliesthateventhegridconnectedmarketmaybeaninterestingoneforsolarlightingproducts.Eightypercentofhouseholdsthatownasolarproductwould liketohavea largesystem(morethan20watts peak). Demand for mobile systems is practically non-existent in this group. The demand of thehouseholdswhodonotownasolarproductismorediverse,buttheypredominantlydemandlargeSHSandmobilesystemswithchargerandmorethanonelight.MainChallengesRevealedbySurveysandInterviewsFourteenmainchallengescanbedistilledfromthequantitativeandqualitativedatacollected,whichinturncanbegroupedinfourcategories:
1. Challenges related to the solar products themselves, namely product quality, marketing andpositioning;
2. Challengesrelatedtothemarketandthosethatcustomersface;3. Challengesrelatedtofinancing;and4. Institutionalchallenges.
Belowwediscuss themain typesof challenges ingreaterdetail, noting thatour research refuted somechallengesidentifiedbymarketplayers.
Mainchallengesidentified
Findings Howtoaddress
Product,quality,marketing–challengeslimitingthemarketpullLowproductawareness;lowcapacitytomakeaninformedpurchasingdecision;insufficientorineffectivemarketing.
Mainlysuppliers&donors/NGOsmentionedthis,thoughover85%ofhouseholdssurveyedknowwhatsolaris.AwarenessintheNorthernandEasternregionsandinruralareasisonaveragelower.Retailersperceiveawarenesstobelowerthanitprobablyis.Overhalfoftheruralpopulationdoesn’tknowwheretobuysolarproducts,butinterestinglybrandawarenessishigher.SolarNowisknownby70%ofthoseintervieweeswhoknewabrand.Awarenessmightnotbethemajor
GovernmentInstitutions:Awarenesscampaignsinremoteareasarestillrequiredtoincreaseawareness.Radiocanbeagoodchannel,aswellasbelowtheline(BTL)marketingcampaigns,e.g.demonstrationsatruralfairs,festivals,andmarkets.Suppliers/retailers:providereferralincentivesandstimulatewordofmouth;havelocalrepresentation;advertisebyradio.
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challengeperceivedbydistributorsandothermarketplayers.
Qualityissues;reputationofsolarproducts;havingabadname;lackofconfidenceinsolarproducts;lackofqualitycontrol;lackofcertification;unevencompliancewithstandards
Intervieweesdofindtheirsolarenergysourcereliableandforthemostpart,areextremelysatisfiedwithit(74%),incomparisontokerosene,drybatterytorchandcandleuserswhoaregenerallyunsatisfiedwiththeircurrentlightsource.Ninetypercentofrespondentstrustsolarproductsandthreequartersseesolarastheintroductiontoamodernhousehold.Peoplearereceptivetowarrantycertificates,governmentrecommendationsandtheUNBSsealwhenbuyingproducts.However,UNBSissaidtobeunderstaffed.Suppliers/importerscomplainaboutlaxtaxcontrolandhenceamyriadoflowqualityproducts.Limitedcustomsinspections.
GovernmentInstitutions:strengthenqualitycontrolandenforcement.Retailers:offerwarranties,provideafter-salesandreturnservice.NGOs/donors:supportsupplierswithproductcertification.Financialinstitutions:onlyprovideloanswhenproductscomplywithstandards.
Lackofmaintenanceandaftersalesservice
Only15%ofretailersofferwarrantieswhile6%offeraftersalesservices.PREEEPrequiresdonorfunding.
GovernmentInstitutions:Guaranteefunds,warrantylegislation,Suppliers/retailers:offerwarranties/extenddistributionnetwork;specializeinmaintenance;NGOs/donors:Technicalsupport&trainingtoretailersanddonorfundingtohelpset-uptheinfrastructure
Customer&marketplace–challengeslimitingtheproductpushLimiteddistributionnetwork;limitedinfrastructure
Distancetoend-usersisverylarge.Retailersofferlimitedservices.Nomaintenancenetwork.Suppliers/franchiseconcepts,notablyBarefootPower,sufferfromhighattritionratesoftrainedfranchisees.Mostretailersaresmallelectronicshopsoragents(Easternregion).Closeto55%ofallsolarproductsaresoldindirectly–viatheshoppingarcadesinKampala–increasingtheend-usermarketprice.SmallSolutions’regionalwarehousemanagersgaveoutunapprovedcredit,henceregionaldistributioncentreswereclosed,nowonly1centreinKampala
Stimulatedeepdistributionnetworks.Suppliers/franchisers:improvebusinesscase/incentivesfortrainedfranchisees.
High(perceived)costofsystems;highcompetingexpenditures(school
WWFprogrammeintroducedinstalments.KeroseneisstillthemainenergysourceusedbyUgandanhouseholds.However,
Stimulatepaymentsininstalment;Government/institutes/NGOs/donors:devisepaymentschemes
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tuitions);otherpriorities
theyspendlessonenergythanexpected.Theaveragehouseholdspendslessthan2%oftheirdisposableincomeonkerosene,muchlessthanthe12-17%generallyassumed.Energycostthereforedoesn'tseemtobetheirmainconcern.Householdsspendonaverageover50%oftheirdisposableincomeonschoolfees.AzuriandFRESofferfee-for-service(‘pay-as-you-go’).FREShada90%paymentrateafterthefirsttwoyears.Despiteendusersclaiminglimitedinterestinsolarlanterns,retailersindicatethatthesesellbest–togetherwiththe>20Wpsystems.
viatheschoolfeebudget.Stimulatefee-for-service,pay-as-you-gomodels.Retailers:continueofferingsmallersystems&solarlanterns.
Financialchallenges Accesstoworkingcapitalthroughoutthedistributionchain
Manysuppliersindicatethatlackofworkingcapitallimitstheirgrowth.Financialinstitutionsalsoacknowledgethis.Franchiseesandagentsoftencannotpayforrequiredstock.
NGOs/Donors:pilotprojectswithworkingcapitalforretailerssotheycanofferpaymentininstalmentsandcreditlines
Accesstocash;highcostsofloansorunfavourableloanterms
Loanconditionsunfavourable;interestratesarehigh.Retailersclaimuserslackcashordonothaveaccesstoloans.MFIsandSACCOsarehardlyinterestedinsolarproductloans(only2in40approachedbySolarNowfollowed-upandmadesales).Retailersbelievelackofmoneyisthemainreasoncustomersarenotbuying.Non-solarownersindicatedthemainreasonfornotpurchasingasolarproductisnothavingthemoney.
Financialinstitutions:easierappraisal/duediligenceforloansNGOs/Donors:trainMFIsandSACCOstoprovideTAonsolarproducts.Thereclearlyisaneedforinvestigatingthefinancingopportunitiesforsolarproductsforhouseholds.
Accesstofinancingmechanisms
MarketstimulatingorganisationssuchasUECCCandPREEEPlackguaranteesforon-lending.
Provisionoftheseguaranteesforonlending.
Defaultingcustomers/defaultingretailers;perceptionofsolarbusinessashighrisk
Somesuppliers(e.g.ABMatraandBBbox)havehadmajorissueswithdefaultingretailers.Thishascausedmarketpenetrationtoslowdownandsupplierstoshrinktheirdistributionnetworks.Defaultalsohappenswhenproductsmalfunctionasusersarereluctanttopayremaininginstalments.Onecompanyhada10%defaultrateattheendoftheirfirst2yearsofoperation.Anothercompanyonlyhasa1%defaultrate,mainlyduetotheiragents’thoroughduediligenceonnewcustomers.HighdefaultratesexistinB2B,andlowerratespertaintoB2Ccustomers.
Retailers/financialinstitutes:learnfrompreviousmistakesmadebysupplierswhen(re-)introducingasolarproductusingcredit.Retailers:increaselocalpresence,after-salesserviceandmaintenanceservices
Institutionalchallenges
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Lackofbusinessmanagementskills;limitedtechnical&institutionalcapacity;enforcementofstandardsandquality
Institutionsstruggletoimproveskillsoftheirteams.
Technicalassistanceandtraining,specificallyonproductuse,maintenanceandproductqualityawareness.
Lackofinsurance Retailersnotethattheftisariskforbothlendersandbuyersofsolarsystems
Thesechallengesidentifiedabovecannotbeseenasisolatedfromeachotherandseemtobelinkedinaviciouscycle:financialinstitutionsarereluctanttoprovideloans,thereforecash-poorsuppliersandretailerscanonlysellonacashbasisandcanonlyprovidelimitedserviceandmaintenance;thereforecustomersdonotbuy,limitingthemarket;thereforeitisperceivedasahighriskbusinessandfinancialinstitutionsarereluctanttoprovideloans.Figure86.Identifiedviciouscyclehamperinggrowthofthesolarmarket.
Thismarketdynamicscyclehasalsobeenidentifiedbyothersandthereareanumberofinitiativesseekingtobreakthecycle:- PREEEP,byGIZ/ENdev, isprovidingcapacitybuildingatdifferent levels inthemarketandproviding
subsidiestoinstitutionsworkingtoexpandthemarket- FINCA Plus, together with installers, REA and MEMD, is importing systems in bulk, setting up a
distributionnetwork,providingtrainingandmarketingtoentrepreneurs.- SEMA,managedbyEnclude, FriendsConsult,Hivos,EUEnergyFacilityand IntegralAdvisoryKenya,
brings financial institutions and energy companies together in official partnerships and deliverstechnicalassistancetofinancialinstitutions.
- ChampionDistrictInitiative,runbyWWF,MEMD,REA,GIZ,CREEEC,andcommercialpartners,providestechnicalassistance,seedfunding,andlinkagetopre-qualifiedsuppliers.
FIsreluctanttoprovideloans
Supplierscashpoor
Salesonlyoncashbasis
Limitedserviceprovided
Noinfrastructure
Customersdonot/cannotbuy
Marketsize/growthlimited
Highrisk
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7 RECOMMENDATIONSFor LightingAfrica toachieve itsobjectiveof improvingaccess toenergy in theSub-Saharan regionandacceleratingthedevelopmentofcommercialoff-gridlightingmarkets,specificinterventionsarerequired.ThiscanbeachievedbyprovidingsupporttospecificactorsinthelightingmarketinUganda.Outlinedbelowis a set of recommendations informing the design andmarket development ofmodern off-grid lightingproductsdeploymentactivitiestospurdemand.Basedondeskandfieldresearch,threedifferentbusinessinterventionswereidentifiedthatcouldachievesocialimpact,financialsustainabilityandpotentiallyscale.Theseinterventiontypeswillbefurtherdiscussedwiththeclient,LightingAfrica,anduponapprovalfurtherdetailedandresearched.RecommendedInterventionsTobreaktheviciouscycledescribedabove,werecommendsupporting,creatingandfundingfee-for-servicebusinessmodels,workingwithfinancial institutions,suppliersandretailers. Belowwesuggesttargetedinterventionsforspecificmarketactorsthatwillstrengthenthesolarmarketandfurtherbuildconsumertrust.
InterventionsRelatedtoSolarCompanieso Further improve management skills in business development, marketing, promotions and
technicalskills.o Focusonsetting-upandstrengtheningdistributionandafter-salesnetworks.Createbusiness
models which include servicing, thereby adding additional revenue streams beyond initialsales.
o Increasecustomercareandcustomersatisfactionbysettingupcustomerfeedbacksystemsandimprovingabilitytoimplementcustomerserviceprograms.
o Increase informalmarketing through incentive offers such as coupons anddiscountswhenfamilymembersbuythesameproduct.
o Provide or facilitate warranties, which are demanded by end-users and will improverelationshipsbetweenretailerandcustomer.
InterventionsRelatedtoFinancialInstitutions
o ProvidetechnicalassistancetoFIs intrainingof loansofficersondifferent lightingproductsandthebenefitsofsolarenergyvs.kerosene(lesscontaminating,healthier, lower lifetime/operationalcosts,increasedproductivityofthehousehold).
o Improvingknowledgeofsolarproductswillmakeloanofficersmoreconfidentinpromotingfinancial products to fund purchases of solar equipment. Further technical assistance isrequiredinthedevelopmentofarea-andorganization-specificmarketingprogramstoimprovepromotionanduptakeofloansforlightingproducts.
o ProvidealoanguaranteefundtoparticipatingFIs.Usethisfundtoreduceinterestratesforsolarloans,thusmakingthemmoreaffordabletoamajorityofcustomers.Limitsuchloanstoprequalified suppliers and to products that complywith the solar product standard of theUgandanNationalBureauofStandards.
o Providepartialriskguaranteetoallowfinancial institutionstofinancesolarcompanies.Thiswill also improve the solar companies’ position in accessing finance for import of solarproducts.
o Providetechnicalassistanceondefaultandbaddebtmanagement.o Provide TA, seed money and/or guarantees to standardised and simplified loan appraisal
systems.
Thesemeasureswilladdmorecapitaltothesupplychain,thusallowingittoaccelerategrowth.Defaultriskscanbecontainedassomemarketplayershaveproven.
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InterventionsRelatedtoInstitutions
o Government institutions: Radio awareness campaigns promoting solar vs. kerosene tostrengthenthesolarmarket.
o MEMD(supportedbyLightingAfrica):Enforcestandards,strengthenUNBStofurtherincreasemarkettrust.
o LightingAfrica(supportedbyUECCCandMEMD):Createguaranteefundtoincreaseworkingcapitalthroughoutthesupplychain.
o MEMD(supportedbyLightingAfrica):Createwarrantylegislation.o Extendworkingcapitaltosolarcompanies.o Promotesolarthroughschoolprograms.Schoolfeesarehigh,asisawarenessthatsolarlight
stimulatesandsupportsstudying.Distributesolarlanternsthroughschoolprojectsorreduceenergycostsofschoolsbyprovidingloanstoinstallsolarsystems.Reducedenergycostswilllowerschoolfees,andchildrenwillspreadknowledgeofsolarproductstotheirhouseholds.
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