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g n ir la eo S
LESSONS FROM MORE THAN A
DECADE OF IFC’S EXPERIENCE

Washington. DC 20433 USA ebfp Environmental Business Finance Program Telephone: 202-473-3800 e energy e≈ciency Internet: . Washington. DC . First printing. provided that clear attribution kw h kilowagi is ven to the tt/hour authors and the original source and that mdg content Millennium is not Development Goals used for commercial purposes. w mdomedia.. Inc. c t g GT Consulting.A. eia Energy Information Administration The findings. Investment Review Committee Content from this document may be usedkrea freely and Kenya Renewable Energy Association copied accurately into other formats without kw prior kilowper-att mission. interpretations.S. July 2007 go n nongovernmental organization eco d Organization for Economic Co-operation and Development This publication is printed with soy-based inks on ne o O≈ce National de l’Electricite ChorusArt. and conclusions ex- emt External Management Team pressed herein are those of the authors and do not neces- a ep U. rs i socially responsible investment teri Tata Energy Research Institute t re d Triodos Renewable Energy for Development esco Swiss State Secretariat for Economic Affairs v b a dr Vietnam Bank for Agriculture and Rural Development vwu Vietnam Women’s Union w bg World Bank Group o wh World Health Organization w p peak watt . views.org/EnviroPublications eaf Environmental Enterprises Assistance Fund Email: enviro@ifc. w ifc.com f ds Solar Development Foundation ds g Solar Development Group es f Sustainable Energy Facility sh solar home system sme small and medium enterprise m ps Sunlight Power Maroc S. cealcp o Cagayan Electric Power and Light Company International Finance Corporation ed distributed generation 2121 Pennsylvania Avenue. Inc. a process chlorine-free paper containing adgo p Portfolio Approach to Distributed Generation Opportunity 50% recycled and 15% post-consumer waste fiber.© 2007nailoter ficna e con otirap acr ony m s and abbr e v i at ions u s e d i n t h i s r e p or t a l h g ts r i r e v s d . vp photovoltaic vp m t i Photovoltaic Market Transformation Initiative Printed by Balmar.org e ts Environ Energy-Tech Service. Environmental Protection Agency sarily reflect the views of the Executive Directors of the fi financial intermediary International Finance Corporation or of the Interna- tional Bank for Reconstruction and Development ge f Global (the Environment Facility World Bank) or the governments they represent. iea International Energy Agency icf International Finance Corporation h g ts r i a n d s n e r o m i p imf International Monetary Fund icf encourages use and distribution of its cir publications. NW d i g s Directorate General for International Cooperation Washington. mw megawatt mw h megawatt/hour rinpted in the united tesa f o acmeri a mbil Moser Baer India Ltd. DC (FSC certified) re renewable energy re f Renewable Energy and Energy E≈ciency Fund Designed by Marc Alain Meadows ds c Solar Development Capital Meadows Design O≈ce. Ltd.

A. Ltd. 45 ∫ e ir s n I frastructure Finance. The ifc / gefSmall and Medium Scale Enterpis Program ( sme Program) 30 ∫ Grameen Shakti 32 ∫ Soluz Honduras S.A. 48 3. 38 2. 47 ∫ Sunlight Power Maroc S. 35 ∫ Selco Vietnam.V. de C. Ltd. Solar Deevlopment Group 49 4.c no t e n t s A Joint Message 4 Executive Summary 6 ap r t 1: r e p or t ov e rv i e w n I to r duction: The Deevlopment Case for Rural Electirfication 8 Chapter 1: ifc s ’ Appo r ach in the Early 1990s 10 Chapter 2: ifc s ’ Expeirnce in the Solar vp Market 12 Chapter 3: ifc s ’ Lesons of Expeirnce 16 ∫ Lessons about the vp marksolar et in general 16 ∫ Lessons about cif ’s financing programs 19 ∫ Lessons about what makes a successf vp company ul 22 solar Chapter 4: ifc s ’ Appo r ach Today 26 ap r t 2: s e l e ct e d cas e s t u di e s 1. Photoov ltaic Market Transformation n I i t a t i ev ( v m t pi ) 40 ∫ Muramati District Tea Growers Savings and Credit Cooperative. Ltd. Cagayan Electirc Power & Light Company 54 References 58 Acknowledgements 60 .

catalyzing private investment and supporting government commitm cies. and widespread consumer acceptance. and other clean forms egf of’s energclean .a i o j n t m e s ga e The Global Environment) Facility is the larg (gef est funder of renewable energy in the developi supporting solar. despite the vp and environmental other renewable energ appeal y tech- of solar nologies. s an institution mitment and proven track record in promoting sustainable private sector inve countries. Monique Barbut Chief Executive Officer and Chairperson Global Environment Facility 4 . I am.y portfolio has grown to more than $1. These projects hold the promise of reduced greenhouse gas emi ating poverty through the provision of modern energy services using locally avail egf ’s approach to renewable energy seeks to create conditions for growing commerciall markets. n I promoting these aims. therefore. wind. but also to avoid repeating mistakes perience going forward. As this study illustrates. p vestments is an encouragi egf ng ’s example influenceof on the larger investment communit late icf for this study and trust it will be widely disseminated. very pleased by icf the haseffomade rt to review the outcome of its projects and make them available for others working in this field of increas discussion of how these lessons have influenced more recently established icf in.y n I 14energ years. eg f seek Ass to define more e∑ective means of engaging the private sector as a pa moting solutions to global environmental problems —a current icf ’s exppriority erience on o and capacity will be increasingly important. the privat national Finance icf Corporation ) is particularly ( important icf bring and valuable.9 billion in grants for projects in more than 60 developin nearly $12 billion. finding practical business solutions toegf their has aintroduction responsibil ity not only to report these results.

t I will be of interest to those now in the context and background.Lack of access to electricity remains one of the key challenges in the developi world. moving toward a broad approach to market-based sol to rural electrification that supports a variety of technologies. of the and have solarnot always lived up to their original expectations. the primary ( source of funding for renewable energy projects in devel countries. hope. they have provided valuable lessons of experience that are documented in this study. I also hope that this publication will contribut regarding sustainable energy solutions for rural electrification. n I light of these lessons icf is of experience. includin power lighting devices. and distributed power generation. This report is in two parts. was. n I the early icf initiated to mid-1990s.y part andof I hope this will be a useful tool to those who are currently operating in. Developing and sharing lessons of experienceicf are’s a pivotal strateg. However. and remains. will be useful to those in the business of exploiting vp market in the approach emerging markets. as well as examples of some of the projects that these initiatives supported. Part 1 describes icf ’s approach theto history of solar and vp explains icf wh today y has developed a di∑erent approach to ad- dressing rural electrification. invaluable in providing the resources requi noncommercial costs of new business models and financing programs. has explored options for the commercialization of solar in vp the developing world. findi way to employ these solutions on a commercial and sustainable basis in ing markets has yet to be discovered. Renewable energy solutions including vp can make asolarsignificant contribution to addressing the issue of rural electrification. orvp planning market on in emerging markets. For almost 20icf years. Part 2 provides case studiesicf ’s solar vp fin onancing initiatives. Rachel Kyte Director Environment & Social Development Department 5 . icf ’s e∑orts in this field would not have been possible without donor su Environment egf Facility ). These. Although thes could not overcome all the complexivp ties market. several solar activities vp in partnership with other investors.

e x cu t i v e s u m a ry

Rural electrification has been a long-time focus for wb the g ) overall,
World Bank icf and Group
, the (
World Bank’s private sector investment arm. The contribution of electrificati
improved livelihoods and health, and increased education and productivity,
proximately one-third of the world’s population living without access to ele
of developing countries—rural electrification is a key means of achieving the Mil
Goals mdgs)( 1and reducing poverty.
Concern about the global environment in recent years has led to an increas
(re ) technologies. The Global Environment egf ) was initiated Facility as ( a pilot project in 1
formally established in its current form in 1994 with a mandate to address
strategy to support er investments. The World Bank Group became interested in explorin
tovoltaic vp ) mark( et as a means to providing clean energy service in rural areas that
grid. icf recognized an opportunity eg f to
funds
useto test various options for the commerci
solar in vp emerging markets.
This publication icf documents
’s solar
vp experience. n I total,
icf managed five egf -funded solar vp ini-
tiatives, of which four are discussed in icf /egf thisSmallpublication: and Medium Scale the Enterpris
Program ( sme Program), the Photovoltaic Market Transformation v pm t i ),n I the itiative Solar Develop- (
ment Group dsg ( ), and the grid-tied solar power plant of the Cagayan Electric Power and L
(cealcp o ).2While icf programs have been responsible for the installation of over 84,0
tems sh ), ( these programs have been less successful fromicf a having financial beenstandpoint
unable to
significantly transform markets and create sustainable businesses as origi
n
I some of the initiatives that were implemented, we have found the main
technology of solar vp , but in accurately judging market reality icf ’s and solar
vp portf trends.
olio has been
significantly impacted by well-documented market trends. These included a failed
of solar pvp anels would come down, the decrease in supply of smaller modules, and a
nomic shocks. Hindsight shows that icf and the manyinitial
market players belief
about s vpthe
of solar
market were overly optimistic. Through the implementation vp initiatives, icf has of its learned solar
a
great deal, not only about vp mark
the et solar
in general, but also about the type of financing
support solar vp market growth and what it takes to develop a vp successf company.ul Perhaps solar one of
the most important icf lessons
has learned that is that supporting the vp mark growt
ethis of the far sola
more complex than first envisioned, particularly due to the level of market segme
icf remains committed to addressing the issue of rural electrification in
tiously optimistic that vp amark
selfet -sustaining
will develop there. solar However, in light of t
we are moving away from focusing narrowly on solar vp as a way of addressing rural electrification. n I
stead, we are moving toward a broader approach, such as supporting a variety of technol
1A set of eight mercialization of low-power lighting devices, and distributed power generation
international
development goals for 2015,
adopted by the international com-
munity in the UN Millennium
Declaration in September 2000,
and endorsed by the International
Monetary Fundimf ( ), the World
Bank, and Organization for
Economic Co-operation and
Development eco d ( ).
2This review does not discuss the
experience of the Renewable
Energy and Energy E≈ciency
Fund re f ( ), due to an agreement
among participating investors
restricting disclosure.

6 s e l i n g s ol a r

k e y l e s ons from i f c’s ex pe r i e nces i n s ol a r p v

ı The issue of affordability cannot be addressed without segmenting the market.

The rural unelectrified market in developing countries is large. To reach it, proper segmentation a
come lines, needs, and lifestyle are necessary. t I vp module
was initially
prices could
felt
be that if solar
brought down to a certain level, or if business models could be structured to maintain low m
ments,vp solarwould become financially a∑ordable to the consumer and competitive with alternative
ergy sources. Experience has shown that the definition of a∑ordability varies among market segment
tive income levels, market applications, etc.), vp companies
and it remains
to identifa challeng
y the e for
niche market segments vp whis ere solar
the least-cost energy alternative for the consumer.

ı While solar PV is a viable technical solution, it is not the only solution. Without some level of
subsidization similar to that provided for grid-connected electricity, it often remains too expensive for the
average rural consumer.

Experience has also demonstrated that people are looking for a constant supply of electricity provi
grid connection. tI is important to vp is
notecheaper
that, for governments
while solar than costly grid ex-
pansion in dispersed rural populations, grid connection has emerged as a key political tool
oping countries, and the grid has almost always been heavily vp simply
subsidized.
can- n
I addition, s
not provide equivalent services to the grid, and it is also not the only technology avail
rural electrification demand. The high initial vp syscost
tem makof acquiring
esvp solar
consider-
a solar
ably less a∑ordable to the rural poor than alternatives, such as car batteries and kerosene.

ı Private equity is not the most appropriate financial mechanism for financing solar PV activities in
developing countries.

An important lesson
icf was that, for while private equity and venture capital firms are heavily involv
the manufacturing vp of fosolar
r developed country markets, the risks and economics vp in theof de-
solar
veloping world mean that the returns that such o∑-grid investors typically look for are nonexis
Profitable opportunities vp utilization
for solar in the developing world lie further up the value chain
marily in the manufacture vp modules
of solarfor export to subsidized, developed world markets.

ı Good government relations and support are a strong success factor.

While there are examples of companies able to establish successful ventures without express
support, those companies fortunate enough to operate with a government concession for exclusive
ial rights to distribute
vp systems solar
(or with some form of subsidy or favorable pricing agreement)
tended to be more successful than companies operating without explicit government support.

e xe cu t i ve su m a ry 7

a r pt 1

n
I ort duco it n: The Delev opmn e t
Case o
f r Ruar l Eleccfiirt ato
i n

More than 1.6 billion people, roughs ol ly a r pv :oneanthird at t r act i v e t e of chnol o gy
the world’s population, live without for ru a l elaccesse ct r i f ic atto ionelec-
tricity. The vast majority of those without electricity
live in rural areas. The World Bank estimates I e≈cient that
n energy infrastructure, rapidly growin
67 percent of the rural population inmand, developing and a general lack of generating capacity
countries is without electricitymean . As that a result, many low -in-
developing countries are un
come households around the world spend meet billions their basic energy demands. The n I tern
of dollars every year on expensive and environmen- Energy Agency ( iea ) estimates under its referen
tally damaging energy sources such as charcoal, scenario firthat e- developing countries requi
wood, and disposable batteries, with lion an estimated
annual investment for the electri
$38 billion a year spent on kerosene alone. alone. 3n
I This rural areas, is where as many as four out of
especially true in Africa, where roughlyfivtw o thirds
e people lack electricity, conventional gri
of households—more than 580 million connected people—de-electricity schemes are often no
pend on wood fuel for their daily cooking and Gridheat- expansion can be extremely costly and h
ing needs. People in emerging marketsdemonstrated who rely on numerous times to be far les
these fuels use much of their labor e∑ective to gather than wood supply
sh . 4 Because
ing of the high
fuel and are exposed daily to indoor air pollution. cost of extending electrical grid coverage in t
The World Health Organization o wh ) estimates
( areas, non-grid-tied renewable energy technologi
that the pollution caused by using such indoor as vp solar biomass
, may be a least-cost solution
cook stoves is responsible for 1.6 million The availability deaths per of clean electricity n
year—mostly of young children and mothers. households avoid the health risks ass
Access to modern, reliable energy is important for forms of energ,
conventional y such as kerosen
rural development and improved livelihoods. charcoal, En- and disposable batteries, but
ergy is a major tool for poverty alleviation, the glincome obal environment through the avoi
generation, health, and other developmental greenhouse gasagen- emissions and convention
das. The provision of clean electricity lution to lowassociated -income with fossil-fuel-bas
3 In ternational Energ y Ag e ncy

(iea ),orldWEnerg y Outlo k 2004,
households allow s f o r increased opportunities
tricity . Renewf o r a ble energ y technologies also
eco d andiea , Paris. studying in the evenings, as well as increased
ernments gainpro- energy independence and elim
4 Foley, 1995, p. 41. ductivity of agricultural and micro-enterprise the need foactivi- r costly grid expansion to remote v
5Erick s on, 1995, p. 1130. ties. Numerous studies have confirmed Solar that vp and the sh are attractive renewable energy
6 Cabraal et al., . 1996 social benefi t s f r om electrifi c ation— t he
technolog ability i es tofor many applications in o∑
7 For more inf o rmation on the power lights, radios, small appliances, Most developing and televi- countries lie in areas wi
wbg renewable energy strateg, y sions—make a significant contribution solarto enhanc-
insolation levels—a —am “ nd,ust” for sola
visit . w worldbank.org/re.
ing quality of life. This enhancedwi quality
th the ofadded lifbenefi e has,
sh t being
of modular,
sh
8 i fc ’s initiative cealcp o in with
the Philippines was the only grid-
in turn, proved to be a key driver of increases can be installed in the to provide energy for one hous
tied investment made.demand for energ. y groups of houses, or an entire village. Oth

8 s e l i n g s ol a r : a p r t 1

vp elec. 2 9. since used its skill and experience in as they generally become economical only structuring if they are projects that target the private sector to able to provide energy to a more sizable 5 develop population. 1 2. China run low-lift 1 400.000 420 5. ular cif funds.900 91.000 113. particularly for children. Kenya. ( but can be less 6 or greater.000 160 1. a higher quality of light Argentina than kerosene for 1 30.000 9.6 Burkina benefits. did not meet its origi nal † ex p ectations.) and other small appliances.0 work hours.500 129 2. icf .000 144. been active in the solar mark vp et since 1989.000 10. and investing i n t r od u c t ion 9 . Pacific Islands 1 21.0 Indonesia 1 8.1 cif was particularly interested in exSwaziland ploring op. when it made Totala $3 mil. one of the most common the developing world.0 come-generating activities to occur beyond normal Cambodia 1 10.000 + ~58MW ~700. Although the investment.. or television.000 2.000 704 12. Faso 1 8.0 With its mandate to further economic Uganda development 1 90.000 2. it made available Mexico a new source of 2 37.500 100 2. typically better suited for less dispersed icf has populations. Ethiopia 1 6. COUNTRY NUMBER NUMBER OF SOLAR PV COST** The direct economic benefi sh t include s of in. and allow for the operation of other Ecuador 1 2. Philippines 2 139. An er 1.7 Multiple countries † 14 84. in China.g.500 30.9 funds to support projects that generated global envi. improved indoor air quality.3 i n vov le m e nt i n s ol a r p v Madagascar 1 15.0 tablished in 1994.000 + 25. able energy resources (e.3 through the private cif had sector.8 t h e wor l d bank grousp’ Laos 1 4. and PVMTI in it established an important precedent for Morocco.000 625 7.000 2..600 38.5 When the Global Environment es. January 2007). cassette play er.5 grams supports renewable energy activities Nicaragua that are 1 6. Includes projects of the SME Program in Bangladesh.4 India 1 45.vp a manuf solaracturer * Figures include both the number of systems installed and the target installation for projects currently under implementation.0 ergy e≈ciency potential in emerging markSenegal ets and to 1 10. efg ’sOne operational of Mozambique pro. made using reg- ** Cost includes only total investment of solar PV components/applications. 44 1.000 520 5.3 million of ov vp systems.000 300 3.300 67. Ltd. Tanzania of solar 1 40.000 to 1 million rural households Bank.2 ronmental benefits.500 24.. a radio.5 vital systems. is lackthe largest financiervp ofin ing access o∑-grid solar to electricity sh is grids.000 6. 21st EU Solar PVSEC. 2006 (with update. The total capacity of the unit is usually inTABLE the range of 30-100 1: WBG SOLAR PV INITITIATIVES peak wattsw p). 8 solar usually provides electricity for two or three (See Table fluores-1 below for details on the World Bank cent lights.300. Honduras. OF PROJECTS SYSTEMS INSTALLED* CAPACITY (kWp) ($ MILLIONS) creased convenience and safety.000 630 16.000 2.096 13. many of which operated across tricity in developing countries tocountry an estimated lines.9 water pumps. and the displacement 2emissions.000 10.000 420 5. having supported the forms of solar vp application in rural sh installation areas.400 4.200 110 1.Mali efg ) was Facility ( 1 10. Solar vp systems can power lights Cape Verdeand 1 4.Todaytogether with the World 500.of CO Bangladesh 1 198. Tunisia. and Vietnam. Mongolia 1 50. India. Dominican Republic.0 reading. and can allow in.176 36.500 425 3.300 407 5. Solarvp Energy Co.0 gain experience in the 7 vp marksolar et. and implement a egf number -funded of Photovoltaic technologies already provide solar projects.000 100 1. Electricity is drawn from rechargeable batteries charged through an electronic charge controller byvp solar modules mounted on a pole beside the house or on the rooftop.800 1. Sri Lanka 2 104.0 unable to secure commercial financing elsewhere.0 lion investment (debt and equity yk ) in Source: Shenzhen Anil Cabraal.3 portunities for the commercialization vp .5 vaccine refrigerators in medical clinics.5 The wbg was at the time particularly interested Papua New Guinea in 1 2.000 215 3. hydro or biomass) in are solar vp businesses in frontier markets.4 m I proved lighting provides additional Bolivia educational 1 60. Group’s solar vp related projects.000 400 4.2 utilizing efg funds to develop the renewable and en.843 36.

10 ket. as the programs had not been des growth had accelerated steadily since wi thearly the financial sustainability or repli 1980s. ch a p t e r 1 F I C’s Apo rp ach n i eht Early 1990s t h e em e rg ence of s ol a r p v tionality of the technolog. icf was when in the process widerof dissemination of the technolog. y Little to was paid to commercializing the market t n I the early 1990s. The opportuni bring about a substantial increase in was present. Overall industry exhausted. it was felt considerations.6 billion people were wit tricity (roughly 400 million households which could be electrifish e.9nI emerging markets. manufacturing vp panels. Shell. y G structuring its vp mark first etsolar initiative. that there was an opportunity for small-scale vp applica- solar By the mid-1990s. and Total Energie. toas replace diesel generationing into and vp solarbusinesses. demand would be similar to that with the arrival of grid-connected electrici the initial start-up cost vp wasof acquirin considerably more expensive than the alte such as batteries or diesel generators. and would purchas tems if credit were available. were enterin systems. future many of of them ended when funding was solar in vp emerging markets. in fact. such to provide supplementary power to grid-connected BP. in emerging markets experim with solar vp in what appeared to be a major emerg- ing business opportunity. d wi The th thought was that ifvp solar was made available to a commu- nity. solar and selling s The first renewable energy initiatives vp sythatstems were to rural electricity consumers implemented in emerging markets were ing countries. s i z a bl e m a r k e t and dem a nd The potential market was considered very att An estimated 1. o could financially a∑ord it. i that a significant segment of the unelect lation would opt for the superior vp quality . Large players. the majority there of early initiatives were grant was a great deal of anticipation aboutprogthe rams. large capital flows were st tions.sh such . some were predicting a 10 s e l i n g s ol a r : a p r t 1 . Anyone with the means an largely donor-led and focused on demonstratingin the electricity func.

cell design. as well as economies of scale in ules was not considered competitive manuf acturing against 11 I . veloping world. in recent years. 2007. as well experience of the Renewable as the increased demand for solar PV. This huge premium 13Some estimates place g r id-con has resulted in a sizable increase in the global demand for solar PV systems. were distorting the market. At the icf time was structuring the vp ini-solar pr ic es wou l d fal l and s ol a r p v tiatives discussed in this report.was expected that alter- t vp solar mod- native electricity sources. p. 2006. but also by shifting production away from the smaller 15Hande.7. w solarbuzz. and manufac- key reasons: (1) the overall price vp mod- of solar turing methods. tomers a significant premium for any surplus solar PV power they sell back to the grid. 1994. of solar vp technology itself was not called into SIGNIFICANT SOLAR PV MARKET TRENDS During the period in which IFC’s solar PV projects were implemented. In the period between mid-2005 and the end of 2006.15 i f cs’ a p roac h i n t h e e a r ly 19 9 0 s 11 . quarters13 of the total solar PV market. nected systems at over 90 percen of the total pv mark solaret. it was widely cou l d becom e mor e fi n anci a l y thought that the prices vp modules of solar would affor dabl e continue to decline. which currently represent well over three restricting disclosure. and the 9/11 attacks). the Argentine economic crisis of 1999. and the global economic shocks that occurred in the late 1990s and early 2000s (the Asian and Russian financial crises of 1997 and 1998.com. this has had a serious impact on the overall price of solar PV 11This review does not discuss systems. These were the discontinuation of the expected downward trend in solar PV module prices. respectively. in the and it was expected that further price reduc- tech- nolog. they did serve to further exacerbate existing obstacles. ponent in the construction of solar PV panels. solarand (3) subsidieslack of consumer access to financing was seen as the for other forms of energ. Prices did not decrease as expected and.growth pattern to that experienced with question. Most of this is for grid-connected systems. According to the United States Department of Energy’s Energy Information Administration (EIA). Theture appropriateness solar vp initiatives to address this constraint. tions ofwould solar continue to occur as a result of techni- Solarvp had proved to be una∑ordable for three cal progress in materials. there were a number of well-docu- mented market trends that emerged in the global solar PV market that had a significant impact on solar PV markets in the developing world. The vp price modules of solar I was widely perceived that the mainhad t decreased barrier to by a factor of over 50 since the early scaling up the industry was rooted not 1970s. fueled by subsidized programs in the industrialized world.14 as well as increased pressure on prices for smaller modules. decline su≈ciently to allow solar (2) there was no financing available vp to vp to help becomesolara cost-e∑ective replacement for diesel consumers with the large initial fuelcost of acquiring or kerosene. The increase in demand for solar PV in the industrialized world has affected solar PV markets in the de- 14Hande. The main reasons for this increase were the continued tight supply of high-grade silicon. the electric utilities are now paying cus. y but in the financial a∑ordability vp . such as ulediesel prices wogeuld nerators. 12http://w. the and installing vp sysatem. icf considered that it could struc- ity. y such as grid-tied majorelectric- constraint. Energy and Energy E≈ciency Fund re f ( ). The lack of supply of smaller modules has led to increased working capital requirements for smaller integrators. technological solution to rural electrification. and manufacturers have chosen to move away from the manufacture of smaller modules in fa- vor of the increased profitability and steady cash flow associated with catering to the industrialized coun- try market.12 As silicon is a key com- 10Ahmed. the price of 40-watt panels has increased by 50 percent (36 percent for 20- watt panels). due to an agreement It is currently estimated that as much as 50 percent of the cost of solar PV electricity is paid for through among participating investors transitional subsidies. While these market trends were not on their own responsible for the limited success of IFC’s portfolio. Load requirements in industrialized countries are significantly higher than those in developing countries. 376. With cost expected to decrease. the exact opposite has occurred. silicon contracts increased by approximately 25 percent between 2004 and 2006. p. the increased demand for large solar PV systems in the industrialized world. for example. the average price for 9 Jack s on. modules. personal as it was largely believed to be the best computers and mobile phones. not only through increased prices. 1999. given its scalability and fit for dispersed populations. In Germany.

These lessons are summarized in the following chapter. tured with a narrow. IFC/GEF SOLAR PV INITIATIVES DATE TOTAL GEF SHARE OPERATIONS INVESTMENT OF TOTAL CURRENT PROGRAM BEGAN GOAL AMOUNT FUNDING STATUS SME Program 1995 Increase access to finance.7 million absorbed into the growth of markets for SMEs used for five Environmental Business active in the areas of climate solar PV.approved itsegf first-financed investment to TABLE 2.775 million plant construction. SDG 2000 Deliver SHS to rural $41 million 25% Dissolved in 2004 households in developing (SDF $12 million. ch a p t e r 2 F I C’s Exneirp ce n i eht Solar PV Markte icf has learned many lessons from its The exinvestment perience in o∑ering can then adequat the solar dress a relatively homogenous set of needs. see the SDG case study on page 49. businesses) investments have been closed. and increase ($2.7 million)† CEPALCO 2002 Demonstrate solar PV $5. both in their e∑ectiv To be successful.775 million 70% Operating successfully effectiveness in supplying (CEPALCO energy during peak usage provided periods. thus avoiding new $1. PVMTI 1998 Accelerate the sustainable $30 million 100% Ongoing commercialization and financial viability of energy services. but many di∑erent target market degrees segmofents. † For details on additional shareholders. success. SDC $28. others are ongoing and operating successfully. vp market. a portion of this funding was earmarked to finance solar PV-related projects. namely the entire result. change mitigation and related Some of the solar PV biodiversity conservation. the experiences unelectrifi ed outlined below le market. By far the most a relatively important di≈cult icf as. well-defined target markecif t.implementation. lesson from the for out- has drawn from its experienceset. in financing) * The SME Program received a total of $20 million in funding from the GEF in two stages. $20 million* 100% The SME program was build capacity. Finance program in 2004. countries. 12 s e l i n g s ol a r : a p r t 1 . lessonicf that is that the goal of many ofvp ourinitiatives solar was there is not simply one targevp t in markesimply t for solar to provide services to the unelect developing countries. based on solar PV electricity. vp ventures solar should be theirstruc.

received a $400. standpoint. vate sector. icf solar portf vp olio has performed well. and( the cealcp o Solar Photovoltaic Demonstration 16Table 2 Project.075 next five ey ars.A. solar mark vp etgender was that it was possible Fund to o∑set re f ( ). an SHS distributor. a leading Tanzanian solar PV distributor. With- The icf /egf sme Program was established in out1995 a sizable as service population. ems Program approved the invest. ul project and Selco Vietnam in Part 2. or collection agent. † The SME Program lent to E+Co fund. egf . de C. all including financed by Soluz Honduras** Honduras 0.750 n I itiative v m pt i ). 84. the experiences ems Program. the local community proved to be in- specifically target vp companies.V. through the provision of concessional Theloan sme Progrfin amanc. COMPANY COUNTRY (IN MILLIONS) ity. The sme Program was the first egf -funded. However. Over the Environmental Enterprise Assistance Fund (EEAF) Dominican Republic 0. since they reduce the financial cost of t h e i f c / gef s m a l and m e di u m monthly rental fee or payment collection. and a major driver of Grameen Shakti’s erational at a time when there was considerable success. with Contrasting over the experience of Grameen Shakti.500 Selco Vietnam Vietnam 0. and some increasedof the risk in. pri-Grameen Shakti’s ties to Grameen Bank and. (See the icf /egf sme defined exclusive government concession to defend Program case studies. which on-lent to Rex Investment Ltd.) geographic service territories was problematic when Over its lifetime. outlines cif ’s egf -funded solar vp initiatives. i w th one successfduras. as well as s c al e ent e r p i s e pro gr a m an ongoing system service and maintenance. Cogener ( Tunisia 0.of the most important icf lessons 16This review does not discuss experience of the Renewable turns. performance has proved below with expecta.A. the operations of phot ovotla ic m a r k e t the ems Program ew re absorbed by the Environmen- t r a ns f or m at ion i n i t i at i v e tal Business Finance ). The programs and projects implemented icf by have resulted in significant overall social and envi- ronmental benefits. eg f . cif supported three additional SoluzsolarDominicana* vp -related initiatives.000 equity investment. solar it became valuable op. experience highlights the im- ing. (also became operational. as it has generally not met showthe ed that initial economies projec-of scale are harder to come tions of investee companies. education. * The SME Program lent to EEAF. s associated vp by invest- with solar restricting disclosure. from a financial which operated in densely populated Bangladesh. ram’s experience withEnerg the y and Energy E≈ciency the displacement of indoor air pollution. a $30 million egf -funded ini- and based on. as well as a $100. Examined for nonfinPerhaps ancialone re. ** Soluz Honduras S. sme financing program targeting the port. health. IFC/GEF SME PROGRAMS’S SOLAR PV PROJECTS PORTFOLIO and Medium Scale Enterprise sme ) Program.500 the Solar Development dgs Group ). Soluz Hon- vp sector aw s mixed. Economies of scale are vital to the success of solar vp companies. solar vp company in 1998 throug cif h/egf the SmallTABLE 3. wh ( ich in-E + Co Rex Investment† Tanzania 0.. by in sparsely populated and remote rural areas. and ulti- and increase markesme ts s foactiver in themately areas of this leads to collection issues and di≈cult climate change mitigation (energy e≈ciency in maintaining and re.000 sh installed..000 loan. aProg$20 ram million (ebpf cfi /feg initiative that aw s designThe ed as icf /aegf vpmti successor is to. which on-lent to Soluz Dominicana S.of build a service technician capacity .150 cluded the Solar Development Foundation f ds ). portance of local ownership and government sup- nongrant. those of Selco Vietnam and Soluz Honduras tions. it was faced with unexpected grid expansions that ments in vp v fi e-related solar businesses (see eliminated Table 3 large numbers of established customers.750 Solar Development Capital dcs ). ems The Program’s experience in the (See solar case studies on Grameen Shakti. of the tiative designed to accelerate the sustainable com- i f c s ’ e x pe r i e n c e i n t h e s o l a r p v m a r k e t 13 . vp a private solar a $20 million initiative. of r details).cif the /egf Photovoltaic Market Transformation Grameen Shakti Bangladesh $ 0. due to an agreement among participating investors empowerment. systems (as was the case with both newable energy) and biodiversity conservation Selco Vietnam and Soluz Honduras). Soluz in-Honduras found that the lack of a terest in vp the markesolart. While sme Progrthe am did not through it. such as the number of households learned frelectrifi om the sme Proged. page 30. t I fincompany anced entirely simply bycannot financially sustain the cost sought to increase access to finance. n I 2004.) (Grameen Shakti in Bangladesh) and other projects i w th more limited success. cif ’s first solar -focusedvp financing facil. come-generation opportunities for theing endin user. ( That COMMITMENT same ey ar. a number the of di∑erent markets and sectors.

maki TABLE 4. and (2) Solar Develo v pm t i financing has resulted in the Foundation installation f ds ).vp -related businesses. underwent a significant The Solar Development Group dgs ) wa(s a $41 mil- restructuring that extended its operational lion initiative mandate which became operatio by two years and has resulted in an increase The goal wain s to the deliver sh to rural households in proportion of disbursements to commitments developing countries. vp market(See was well-established. bilateral. ties in vp the markesolar t that would provide the The vpmti experience highlights thereturns need for that private equity investors we flexibility in program design.60 holder group can be problematic. tot most sme s to absorb.00 di∑erent investors from a wide range of inst Sunlight Power Maroc S. and long negotiation fundingperiods to help proved strengthen the overall m too burdensome for many small and thinly throughcapital. Morocco 1. page 49. The Mid-Term Program Review.7 project. lifetime There simply were no viable opp of the installed sh s. To date.to three investments). vpmti noted will that vp businesses. The extensive documentation process and small investment size also resulted in s ol a r dev e l opm e nt grou p high operationalvpmti costs in forelation r to its portfolio. quickly became small in.466 tonnes of CO 2emissions over the mentation. only $65 plans and other documentation proved wastoo disbursed daunt.finwh ancing ich to support the establishment was completed in July 2006. todgs was comprised of two sep- roughly 80 percent. vp t I quickly becamebyapparent securing government support.) December 2007. b ing for the small businesses vp activeliquidated in the in solar 2004. n I vpmti 2004. million it isfor-profi di≈.) be responsible for the displacement ofdsc an estimated experienced problems very early in imple- 109. particularly those in the on lowethe r density provision rural of early-stage working capital loans. With over 15 Salafin S. Kenya. The initial Despite revisions $500. by the beginning foofr 2007.) players and a true entrepreneurial culture. Kenya Kenya 2. Whil committed over $18 million to 12solar projects. PVMTI’S ACTIVE SOLAR PV PROJECT PORTFOLIO ments totaling over $3.( a $12 ofmillion nonprofit ent over 60.10 Energy for Development terd ( ) Fund and d sg Eskom-Shell Solar Home Systems India 3. COMPANY COUNTRY (IN MILLIONS) transferred its operations to the Triodos Selco India India $ 1. Morocco 1.t private equity fund cult to evaluate its overall performance vided (see growtTable h capital 4 for private vp andsolar solar for a summary of the v pm t i portfolio).000 sh units in previously unelectrifi provided business ed development assistan households.10 for solar vp . page 40. Launched invpmti 1998. flexible. minimum investment proved to beagetoo d tolarg approve e for only six investments. mercialization and financial viability areas where ofsolar vp way s energ ser.50 Barclays Bank. a Capi Asvpmti is still an operational$28. with m v pm t i case study. (See case stu that companies would not be able toonabsorb er i s and re- .that there was a need apparent vestment size.most needed. th its focus sector.000 of return dsc exman-pectations. dsc ’s With liquidation.A.00 relating to the type of financing programs requ Equity Building Society (EBS) Kenya 2. Shri Shakti India 2. India 3. and technical assi was largely able to meet its targets. guarantees. vices based on vp technolog solar y in n I dia. is expectedprogram to better suit the needs of the mar to continue to the end of its extended vpmti mandate ’s experience in in Kenya highlighted December 2009 and.A.23 cif learned a great deal from dgs the experience SREI Infrastructure Finance.90 ceased to exist in April 2004. t v pm t i initially found it di≈cult no to real structure structure deals to the market and no stan as the extensive documentation required. and multi 14 s e l i n g s ol a r : a p r t 1 . of in Part 2. arate entities: (1) Solar Development dcs ).075 (nongovernmental. v pm t i was.A. f ds . Muramati Tea Growecsa cors and Sunlight pay committed funds by the original Pow end er Maroc dateS. dg s case (Seestudy. A key lesson was that a diverse sh Muramati District Tea Growers SACCO Kenya 0. the creation of performance standards ized solar companies.5 million to COMMITMENT 23 countries. technical had assistance funding. and the extensive million business (of the approved projects.indeed. n I wi contrast. Ltd. icf was and able to restructure the and Morocco. f ds however.

Energ y for Developm nt—The Role po- orlfdtWBahe nk Group .. none of the op- portunities identified in the feasibility study re- ceived dsc support. cealcp o project the solar capacity. financial incentives Fully operational since cealcp o 2004. n I December 2002. 18 Other larg e -scalepv solar power vert the vp solar plant’s power output to firm dis.been a very daunting process. over 100 investment opportunities were identified dsc for . dsg Overall. crease the capacity of the hydropower unit tentially and con. Without the use application. and the exi has operated successfully and without of solar incident m vp odules since was simply too high to be com. whereby hydropower vp and solar sta∑ knowledgeable of local government processes. as the market was not prepared for equity-type investments.) cations. Ultimately. and the return expectations by most of the candidate businesses were not met. The dsg experience. companies were not in a position to absorb so much capital.g. which was providedicf throug . resource. as ew ll as private in- dividuals. 17 World Bank Group. eg f grant. reaching consensus on a new structure proved im- possible dcs and was eventually disbanded. solar Perhaps most important. vp Thus. it was very di≈cult to satisfy the share- holders’ di∑erent objectives and expectations. too18high. Although the which was integrated into mw distribution the 80 cealcp o plant was a small plant. When it became obvious dcs required that restructuring. would to have in.solar pany on the island of Mindanao in main the Philippines. making a strong petitive technical with case the for capital mw dieselcostgenera- ofrequire a 1 a certain percentage of the reliability of utility vp power plants -scaletor.other larvp initiative. Without eg f grant. page 22). more than any icf so.icf demonstrates ’s optimistic out- look on the market. page 54. comap ny the intended potential for replication is currently cealcp o is a private electricity distribution somewhat limited. many of which were in- The solar vp plant operated through a conjunctive appropriate for a small. since vp prices global re. e∑ec- h tively subsidized 70 percent of the construction and cagay a n el e ct r ic p ow e r and l ig ht start-up costs cealcp o of the solar plant. for the firstthis time. and private companies). plants.Renewabl resources were used jointly. plant. (e. crippling the project’s implementation. 2004. t I is important plications to note vp . 17 (See cealcp o case study. the potential for conjunctive announced in Europe (see box use ap- house gas emissions. clean RE plant. During the initial planning stages dsg for . local market and its regulations. thereby As delayai result. rather than an intermittent of capital cost reductions for larger-scale in Europe grid and appli- North America. was still required to comply with the per- strate the e∑ectiveness vp in addressing of solar mit dis-process required for much larger fossil-based tribution system capacity issues.have been required. ng over 50 permits and licenses the need to construct a new hydroelectric would plant. The dsg experience also highlighted the necessity of focusing mainly on market development and ca- pacity building. i f c s ’ e x pe r i e n c e i n t h e s o l a r p v m a r k e t 15 .of solar that the relating to Moser Baer. had only focused on developing individual businesses. The cealcp o project also highlightsplants the necessity are now being construct patchable power. plant thewould not have been financially viable. cealcp o received $4 million The incealcp o experience highlights the impor- eg f funding (loan convertible to icf togrant)tance from of a strong local presence and knowledge of buildmw a 1 distributed generation power the plant. rather than on the market as a whole. com. socially responsible investment funds. tence of renew able energy portfo- lio standards. Plans mw for a 40 solar pv plant were recently and resulting in a significant reduction demonstrated in green. the Philippine network of cealcp o and operated in conjunction Government did not make a distinction between it with an existing mw run-of-7the-river hydroelectric and the more conventional electrical plants.as the price tax credits). some of which its inauguration. ing organizations. the cethe alcp o plant due to generous subsidy programs. The purpose of the project was tocealcp o demon.

received The initial While solar vp technology is a well-established market assessmenttech. ch a p t e r 3 F I C’s Leo s ns of Exn eirp ce Through the implementation of themistic projects dis. t I is important to exstudies plore the di∑erent were carried out prior to the implem segments of a potential market. overall. that such as grid extensions. now become despite apparent that vp pro- early solar the apparent social and environmental grams. learned is that vp mark the et solar is far more com- Expectations Were Overly Optimistic plex than first envisioned. in itself vp fin. The mere fact that it is more economically unelectrifi ed households. Perhaps degree of subsidization and political s one of the most significant icf has lessons ternatives. government support is still needed. develop tion products of any icf of’s solar vp programs. had overestimated th nolog. the of equity emergenceinvestment of a dsc was seeking to provide. While extensive the end user. for example. evaluating as weend-userll demand. y and technical advances have ofbeen thesig markn et. focused more andon re. With 400 million tries. the n I case dsc of. these studies that are suitable for di∑erent consumers. es particularly in to develop a successfvp ul company solar .ancially make solara∑ordable to unelectrifi ed population. howethese ver. and not supported by changes in m cussed in this icf has report. the potential a∑ordable for a government to provide electricity seemed vast.identifying businesses t spond to a range of needs and income levels. not l e s ons abou t t h e s ol a r p v m a r k e t one of the over 100 opportunities identifie i n gener a l feasibility study dsc support. A∑ordability remains a key is about the vp solar market in developing countries. icf first Whenbecame Electrification involved in vp the markesolar t. the opportunities that hadthe been ident market studies during the planning stage appropriate. consumer market for solar vp is relatively recent in Solar PV Is Not the Only Answer to Rural most developing countries. an optimistic and too res ize. projections were overly t “ unnel-vision” reflection of the general bel opti- 16 s e l i n g s ol a r : a p r t 1 . upo as identify opportunities vp is where thesolar least- implementation. and di≈cult what it to tak implement. quick As ly came to real. su∑ered from larvp remains una∑ordable to the majority of the overly optimistic outlook vp smarkon et’s the solar unelectrified population in most developing coun- growth opportunities. Furthermore. benefi desig ts. and. unsubsidized solar vp programs are solar market growth in those countries. focus on solar vp . ificant it simply was not yet ripe fo during the last several decades. nicf ed so- and by others. it became apparent th cost alternative. there was a great deal of excitement regarding the potential Most icfoffor ’s financing programs had a dedicated growth in the markicf et. but it rapidly became apparent through solar than vp through grid expansion actual doespotential demand did not equal t not. but the type of financing required to support vp ing . This complexity is rooted in thet I fact has that. learned a great deal damentals.

the plant capacity will be ramped up to 1. and complex in the need stalling to recognize vp the systems solar can be recovered by the the di∑erent market segments. as indicated previously. thus vp electricity making solar more to the electrical grid. and without focused financing rialize. vice.62 Czech crowns/ kWh ($0. Small-scale vp systemscompetitive. This installation. or rental model.660 silicon-based solar PV modules. income level. A∑ordability is also linked to the per- vp technologies is a∑ordability. The 2. For solar PV power. ways companies have generally followed one of two (diesel generators.of solar the icf initiatives was structured. models employ vp compa. At ceivedthe value time and eachopportunity of cost vp pur. consumers nies. 2007. can ensure electricity supply for 172 households. further o∑set by the issue of perceived value. the marketvp for is solarmuch smallermately and proved unsustainable. which solar utility are rooted in . the not o∑er the constant supply of electricity anticipated thatdecrease most vp prices in solar did not mate- people want. the n I business the ab. or they have arranged for financ- The Hard-to-Define and Very Segmented ing to allow the consumer to pay the balance of the Solar PV Market sh in monthly installments (lease/hire purchase The market for solar vp in developing countries model).2MW solar power plant. Honduras.62/kWh). * IFC/GEF-CEEF. Electricity from solar PV. real. approaches: they have provided kerosene sh on a fee-for-ser- lamps) to meet their electricity needs. dosolar However. as well as other renewable sources. model has ulti- ity. disposable batteries. pro. the feed-in tariff is 13. in vp modules continue to decrease significantly as Vietnam.170 m2. the largest solar PV power plant installed to date in Central and Eastern Europe. which guarantees feed-in electricity tariffs for 15 years from project commission- ing and off-take obligation for the grid operator. The plant has already been connected to the distribution network and started commercial operation on February 1. experience has shown trified households. and will produce 620MWh/year. initially defined to be the total Throug number h Soluz of unelec. the systems provided by LESSON LEARNED: GOVERNMENT SUPPORT CAN MAKE A DIFFERENCE SOLAR PV PLANT CONSTRUCTION IN THE CZECH REPUBLIC The IFC/GEF CEEF program* has issued a $1.2 MW . The maximum planned capacity of the power plant is 693 kW. the Commercializing Energy Efficiency Finance Facility. charging a monthly fee for the service provided. the fee-fn I or-service. By the end of 2007. rural settings.08 million project guarantee for a 1. some 1. grams. i f c s ’ l e s o n s o f e x pe r i e n c e 17 . the purchase of a solar lieved that the price for solarwould vp system represents a very significant expense. or rental. as well as technical assistance. has the support of Czech national renew- able energy legislation. operates in Eastern Europe with both GEF and IFC financing. which are spread across 6. the price actually increased in 2004/2005. since unexpected grid significantly more complex to define. southern Bohemia (Czech Re- public). lifestyle.chase. Expe- rience icf by and others has shown that a∑ordability Financial Affordability and Perceived Value is not exclusively linked to price or the availability The biggest barrier to widespread adoption of finofancing solar . and numerous The continued regional andhigh price vp modulesof solar is geographic di∑erences. A solar PV panel with an area of 1 m2 produces as much electricity in a year as 250 kg of coal and saves a total of 750 tonnes annually of CO2 that would otherwise be discharged into the atmosphere by the oper- ation of a coal-fired power station. it wasn I wimany dely be. have n I order to keep the upfront sh a∑ord- cost of continued to find other. solar wavp s the best solution in areas tion not scaled connected up. 2007. upfront costs of acquiring and in- ceived value. more a∑ordableable. will decrease the country’s CO2 emissions by 743 tonnes annually. it continues to be una∑ordable Theto issuethe vast of a∑ordability has been a key driver of majority of the unelectrified population. for example. mass produc. The solar PV power plant became operational on January 29. smaller expansion largtends ely to jeopardize the customer base be- due to the issues of financial a∑ordability fore the hig andhper.ed by solar sence of a grid connection market. The fa- cility provides a partial guarantee for loans made by local financial intermediaries for EE/RE projects. was Many businesses also engage in cash sales. in Busanovice.6 billion thatpeople.

tems solar often do are examples of vp solar there businesses that h not come out on top. supportive highly legal environment is essen dispersed. t I contrast. publ a need to reach too far out of the central long -term government electrification plans commu- nity to increase the scale. it can legabecome l basis too exfopren- enforcing loan collection. As a result. a largeis r item. sparsely populated areas.Selco Vietnam were sold for roughly a year’s in- companies are able to take advantage of economi come. but if the company competingsees subsidized electricity. eas. is only v pm t i ’s investment with Sunligh when operating in a relatively dense Maroc benefi market ted from an agreement with the that 18 s e l i n g s ol a r : a p r t 1 . economies of scale were not an issue electricity supply capacity vp sys. however: with their limited areas. scale is incentives requiredvp energ iny orfor absence solar of order to become profitable. thesme the Program’s investment economies of in Soluz scale are then lost. it is certainly a more di≈cult ven Economies of Scale Government Support and Enabling Environment Solarvp technology is well suited to Arural. in forcing Soluz Honduras to rem markets with critical masses of potential newly installed consumers systems at a considerab that were geographically concentrated.as many of the following el cisely in these areas vp progrthat ams aresolar mostpossible: no import duties sh compo- or tari∑s on di≈cult to implement. when compared to operated possible al. the decision to buy even Part of scale. Solar are more duras had significant issues surrounding vp companies likely to experience success when ablegrid to exoperate pansion. andple. sive to service the consumers. A certainnents.ully in more sparsely popula successf ternative purchases. but shouldit include is pre. a small of Grameen Shakti’s success. solar sy vp stem often meant sacrificing ple. attributed to its servicing d There is a trade-o∑.

as a result. Lower income With ge f fundingicf . t I is widely acknowledged sigf ds n. The Rural solar market is vp electrifi ca. in what form? source of power for a market shareholders concerning its attempted segment. pro gr a m s vol at i l e m a r k e t condi t ions . if so. as are solar vp and other RE technologproject ies in design. as monthly incomes vp programs that the market reality wasfluctuate not what according to seasonal harvests and spo- had been envisioned. some (providing working capital loans with minimal se- form of subsidy is necessary to vpmaintain solar curity. government program. restructuring. or if more substantial dies whenamong they are or if it had been able to reach consensus sthe lowest co t its subsidies are needed and. People were focused on the essentials quired tailoring to the specific needs (food and of individual shelter) and. particularl egf using through cif at terms unavailable in the with respect mark et.national utility sh under to provide countries and. it is possible that the d sg overall experience of l e s ons abou t i f c’s fi n anci ng would have been much more positive. y due to their inex plans perience to accommodate these issues. great deal of di≈culty placing its available 19Solar funds.has been able to implement rural populations are particularly susceptible to the a number of di∑erentvp solar financing programs. therefore. guarantees. with nomic which the shockinception s. These issues had a flexibility and patience. price of crops). currency changes. They are learned very early in the implementation also subject of its to solar cash flow issues. with wh its ile that there is a particular need for continued techni- focus on larger projects. or to the financial instrument used. is whether technical assistance grants will pv businesses are able to Had dsc been designed di∑erently from the outset. however. All programs examined need toin adapt thisinitialre. was able to success- businesses in the 19 developing world.ets. Subsidies Need for Flexibility in Program Design Unsubsidized vp progsolar rams have proved particularly di≈cult to implement. and grants). developed countries. had a grams. changes in the of the di∑erent financing programsicf was based. particularly v pm t i ’s in Kenya. the experience o∑ered a subsidized limited fee-for-service scheme within an exclusive geo. profitable opportunities vp in markthe et also solar lay further upstream in the value chain. While the plant makes a strong vided to Kenyan clients. it was when the worst flood in over a century hit found that many icf ’s of financing programs re. The question that remains to be answered. subsidizing fee-for-service so- approach to the market was restructured. Most graphic concession.’s experience and in vp has solardemonstrated the the United States.by in large part throug ge f sup- h at the consumer and project icf level. y the smes. had a significant e∑ect on technological case for the reliability of utility-scale v pm t i ’s ability to place funds. In the end. such as Germany. with its more flexible funding options that given most current market conditions. cif has found fully meet its financingdsc targ . macroeconomic situation of their country (eco- Despite the enthusiasm. as in the case of Sunlight r e s t ruc t u r i ng. The di∑erent experi- solar vp power plants. n I the face of continued di≈cul- Power Maroc. financial institutions fi s) continued tohad per- ( to introduce some flexibility into the repayment ceive solar vp to be risk. from a financial standpoint ences f ds of and dsc also highlight the importance the plant would not have been feasible without of being open to revising the original program de- some form of subsidy. programs and port. which has benefited from an extensive ties in placing funds. through local government. as well as natural disasters. allowing for more technical assistance equivalent to 70 percent of the overall construction funding and longer repayment periods to be pro- cost of the plant. replicability at a general level. out the as such. sales were non- i f c s ’ l e s o n s o f e x pe r i e n c e 19 . cal assistance funding as part of its financing pro- and exclusive focus on equity investments. developing it requires substantial flexibilit world. funds provided interest rates to the business plan and. There was need foradic r greaterincome-generation activity. The re- larvp systems.very much a developing mar- tion is heavily subsidized throug kethand.. Grameen Shakti with the technolog. Despite the strong risk -sharing e∑ect on the ability to make payments both tools o∑eredicf . areas: frbe om it thein length of repayment schedules to the form of financing. operate sustainably without s provide enough of a subsidy. icf Japan. cealcp o The project received a grant structuring. project designs to a number of port received some form of subsidization. Bangladesh. and naturetheof saw a full 90 percent of its operating area flooded in economics of the vp mark solaret.1998. as shown by the following examples. greater return expectations.

distribution problems less daunting. with 94 percent being women. sme The Program. smaller it was found vp solar companies.dsc t I found. nels. limited management skills. where bigger banded due to its inability to disburse not onlyfunds. Shakti had been structured with a two-year grace period. The Program loan to Grameen out the help of intermediaries. specific country. are most appropriate. requires a significant upfront investmen search project. The members elect e≈ciency projects often attract similar t 9 of the 13 members of the Board of Directors. Grameen Shakicf ti did not to attempted haveattract is. bothdsc and vpmti had cumbersome itoring required for equity investments Yet. as a result. the bank had equity of $100 million. To com documentation processes. to be as a financial instru delayed as a result of the flood. Grameen Bank is notionally owned by its 2 million members. tory body. as a result. pay b ack periods can be in excess of 10 years. in energ y e≈ciency deals being projects often have payback canceled due to the fact that the time from approval periods of less than two years. and the icf underestimated the conservativeness unique to the developing world. andcan placed theed to finance renewable energy pro- be deploy 20 s e l i n g s ol a r : a p r t 1 . coup this investment. 1995. and raise consumer icf expawerience areness. and needed economies vestments. flesimple xibil. however. vestors. even thougvp mark h et through . Selco Honduras well-adaptedalso to the needs vp of the marketsolar in su∑ered a major setback following the devastation the developing20woand rld the demanding require- brought byHurricane Mitch in 1998. which had been nI addition to poordsc returns. solar vp companies are in need of capital. or regional Financial needs. Renewable energy an less and live in rural areas. The private model is premised on the concept of high s i m pl i f i e d t r a ns act ion pro ces s . ments of a private equity fund. Muhammad Yunus and Grameen Bank were awarded the Nobel that the payback periods for renewable energy pro- Peace Prize for their work on economic and social development among the poor. jects. The majority of the bank’s clients are poor and land. For small nI addition to flexibility in programnesses. private equity to sues in servicing sme Programthe loan. based on market segment. found it di≈cult to specifically designed for small and medium compa- make equity investments. sme Program provided concessional loans through institutions as far as provi financial Many private equity and venture capital companies are involved intermediaries— in and. with vp -related tremely highsme . proved more flexible. GRAMEEN BANK Launching a successf sh distribution ul company Grameen Bank was established by Professor Muhammad Yunus in 1971 as a re. icf ’s lengthy and cumbersome deal ap- has certainly proved itself to be high ris proval process proved too stringent for small solar financial returns have generally been disapp vp companies. in- but also engage the local financial higher. process that was more in line with the characteris- accounting standards. each has shown that it generally takes several of whom owns one share. design. with its concessional more directly by devising risk-sharing produc of scale are easier to come byloan . it is important to kee In 2006.Institutions Many Still Find Solar PV to Be Too Risky of icf ’s programs o∑ered one particular type of 20This ex p erience is somewfin hat ancingdsc— provided private equity. existent and the default rate on collections majority of its was ex-solar funds directly. adopted a less burdensome deal approval sizes. By December 31. Lacking an extensive fo- the time-consuming and costly admini cus on sme s. financi pectations are what is needed.loan instruments wi ity in investment o∑ering n s is rity I vestment provisions necessary . icf believes that in o solarpv manufacturing projects di≈cult to place their dsc was fueventually nds. n I tional costs in relation to portfolio size. o∑erings. derdis-to leverage local financial resources. due to the s nies. inadequate exit s tics of vp solar companies. the case of solar v p projects. always over three years. mark prices etarewas generally not ready for private equity tance.capital Patient and long-term Need for Flexibility in Investment Offerings loan commitments with modest ex. with payments to be made on Private Equity Is Not the Answer an annual ba- sis and. solarare much longer than those for energy e≈ciency projects. n I many return. resulting pare. that pri collections from Grameen Shakti’s vate clients equityhad funds. as well ergy projects as higare h almost opera. in particular vp projects. raise awas arenessthe and provide techni systems are being sold. while renewab to disbursement was too long. establish distri regulated by the Bangladesh Superintendent of Banking or any similar regula. The solar vp market in the developing world instances. however. o∑ering needs vary significantly. sme ProgThe ram. it looking to sell pv in solar devel- oped countries. Not purchase equipment.

Unfortunae. a s a e r sult. rec- nes of Grameen Bank (see box. y page 32) was a notable exception Phase 1 of the project will focus on Sri Lanka. u l a r s o u g h t t o w o kr lems that the electricity grid may face with large-scale DE generation. both d sc a n d v pm t i sional loan fina cing to solar vp porjects. THE PORTFOLIO APPROACH TO DISTRIBUTED GENERATION OPPORTUNITY (PADGO) PROJECT son: (1) most solar vp companies ae r smes. vided was greatly needed and in high demand in the tal mis on . v pm t i tha had the flexibilty to also invest in other sectors was e r str uctue r d to alwo for longer e r payment peri- and technolgies ( sme Program). First. r straes hwo the same model can lead to di∑erent e r - this success can be linked to its pe r -age r ed scope of sult in di∑erent countries because of specific coun- operation. ly solar v p pve ro d to be to risky LESSON LEARNED: THE NEED FOR A MIX OF TECHNOLOGIES for most fi s. In order to achieve Bas ’nk suport of Grameen Shakti (see Grameen this goal. In Vietnam. the r e countries selected for their suport- ment asitnce and seed finacing to establish new ive policy environments and the pe r sence of a i f c s ’ l e s o n s o f e x pe r i e n c e 21 . v pm t i operates in India. The financing process will move closer finacing to the Vietnam Womes ’ n Union ( vwu ). f ds was largely able by the sme Program tha age r ed to comit conces. Kenya. Howeve. E+Co and Enviornmental Enterpises Asitance Fund ( e af). Hoe w e v . and fi s The ultimate goal of the PADGO project is to reduce CO2 emissions by displac- have generaly been wary of finacing smes. the sme Program vpiorded the loan die r ctly to Selco Vietnam. r while the develop key guidelines on how DE generation can be assimilated into an inte- porgram was able to wokr thorugh intermediaries grated resource planning effort at Ceylon Electricity Board. t h o s e t y p e s o f p ro g r a m s we e r able to o∑set some of v pm t i also e r lied only on eg f funding. dro investments. ular demon- focus on solar vp . when it came to solar v p ine v stments. Grameen heat recovery (also known as combined heat and power). Solar vp is deemed risky for two e r a. with its exclusive The experience of vpmti . Third.jects. we e r faced with having to undergo major e r str uctur- i n g . been extensively implemented in Sri Lanka. was largely successful. Second. r the vwu vie e w d the risk tion of DE technologies into a mini-grid structure that allows for dispatch ca- of vpiording end-user finacing as to high. had private capital. and will have three specific to the e r luctance of fi s to sup or t solar vp projects goals. which was moe r demanding. The type of flexible suport f ds p ro - ( go n s) and finacing instuo with enviornmen. e w e r the only intermediaries suported solar v p m a rk e t a n d . Hoe w e v . r this is moer e r pe r s e n t a i ve o f t h e u n i q e - to the DE mix by promoting complementary DE technologies (for example. in partic. and entiy tha pvroided a range of busines develop. biomass. the project has been divided into two phases. unwil g to take on the e r sponibilty for the finacing. this e v p or d lessons learned from the introduction of the new technology-based pilot pro- to be a significant chalenge. Shakti case stud. for a number of the porjects implemented thorugh During Phase 2. page 20) than it is iprocating engines. it will develop a performance framework that would enable risk and pvroides a successful example of hwo finacial sharing between IFC and the local banks on their existing portfolio of mini-hy- intermediaries can suport the solar v p m a rk e t . By contras. ods and ince r ased funding for technical asitnce. investment faciltes tha wee r tualy disbanded when mangement was unable to exclusively focused on solar vp ( d sc a n d v pm t i ) had identify a large enough number of investments to moe r di≈culty placing funds than the programs p v r oi d e t h e t y p e o f e r t u r n s i n ve s t o r s o u g h t . it will identify the key prob- The sme Program. unlike other projects. The framework will thus be made more robust and ap- ple. IFC will work with established private i n d i c a t i ve o f t h e p o s i b l e i n t e e r st of most local fi s to sector players to do one or more pilot projects with a technology that has not engage in solar vp . and (2) ing central fossil-fuel-based generation in favor of a portfolio of renewable and the economics of the solar v p m a rk e t m e a n s t h a clean fossil-based distributed energy (DE) generation technologies with waste thee r ae r high risk and uncertain e r turns. In the end. PV. f ds was a no prfit try conditons. s i n c e t h e i r n a r w o i n t a l i n ve s t m e n t t e r m s we e r Need for a Broader Technological Focus o u t o f t o u c h w i t h t h e m a rk e t e r . solar vp ve n t u e r s and suport existng early-stage both noprfit noge v o rnmental organiz t o s busineses. to an asset-backed securities approach. Significant progress is also expected during Phase 2 on the integra- Selco Vietnam. In fact. and will thorugh finacial intermediaries. Morocco. Need for a Broader Operational Focus Limited Replicability It is importan to note tha f ds . Furthermoe. and was pability and value for capacity. thesme Program had intaly hoped to vpiorde plicable to a larger set of technologies. while d sc the risk as ociated with solar vp . IFC will incorporate into the risk-sharing framework the it. PADGO will focus on introducing new technologies Howeve.ality d sc was even- In the icf experience. to meet its goals. for exam- ject initiated in Phase 1. wind). in partic. as larger volumes of transactions are which had taken on the sales and colections orle for targeted.

should focus on and resources that need to 22 s e l i n g s ol a r : a p r t 1 . This project. vibrant emerging vp solar market. found it impossible to reac and to provide financing only when it ison not chang es. But They Lie Further Upstream The more diverse a shareholder group is. dsc structuring proved. ed howedscver. icf ’s investments lay primarily fuBoth rther vpmti downand streamdsc found very early on in the im- in the value chain. India. An important finding thaticf emerg fromrity of the vp solar ’sed solar market means that financing vp experience is that there are more viable programsopportu. undermining particularly needed the ini. vast majority of manufacturing activity shareholder in thediversitysolar that had been much vp industry is focused on export to subsidizedduring the weinitial st. nI order funding. MBIL is also an ex- some of the vpsolar companiesicf provided isting IFC client.5 million long-term loan to the company to developing countries to replicate. the et. A large number ofvp solar systems hadfor commercial solar vp enterprises to be success been sold in Kenya on a pure cash basis technicians by very need to be trained. unlike the cash-fl chang ow-back es. of solar subsidized by the government. where foicf r the to use eg f funds when it could not vp was widely established ensure market for solar and en-that they would be used to support ren joyed considerable government support. MBIL is undertaking a two-year diversification pro- financing for. the majority of them did not gram that involves setting up an export-oriented solar PV cell and module to their original expectations. with its very diverse sh financing providedsh to distributors. and the quality to of many systems be lobbied for support. because shareholder it isbase. to be one dsc ’s of greatest constraints. indus small local companies. the in the Value Chain di≈cult it is to manage expectations.000 tonnes of CO2 emissions annually.able energy in the developing country. v pm t i experi. with its sim commercial financing more readily. this flexibility often does n sh dowdistributors). ern markets (primarily Europe). found that there Technical assistance grants are still was considerably more need for technical toassistance help move the vp mark solar et forward. which forced its dissoluti available through local sources. There Are Profitable Opportunities in the Shareholder Diversity Solar PV Market. icf has not Althou manufacturing facility with an installed annual production capacity of 80MW in been able to identify a fully viable sust Greater Noida. (MBIL) is the third-largest manufacturer of recordable op- While there are some notable successes am tical storage media products (CDs and DVDs) in the world. n I initiative grapproved ant additi Morocco. will also lead to the creation of about lighted a number of key areas that companies 600 additional jobs. and local governments mance standards. Currently. y n I Keny v pm t i a. A second reason than is that allowithe ng for more flexible restructuring. One reason for this plementation is that stag manu. ). local v pm t i . n I the 2004 re tial progress that had been made inturing the mark . its support this $92 million project. . which has the potential to avoid experience working in thevp mark solar et has high- 80. in Kenya. a stepped-up fee-for-service program. for sh in the Kenyan market. With a di ) in the value chain than nstream ( holder group. and it was n enced considerably more success in n I propriate dia. e that original target facturing companies are often able to obtain restructured and reevaluated. v pm t i found that a t was had been called into question. ness model forvp solar distribution companies IFC has recently approved a $22. in the of end. LESSON LEARNED: MOVING UP THE VALUE CHAIN l e s ons abou t w h at m a k e s a MOSER BAER IN INDIA s uc ces s f u l s ol a r p v comap ny Moser Baer India Ltd. and establish a quality assuran sure on module prices.the need for quality awareness in the m create consumer financing. reduced cians. and there were a large number of established vp compa-solar nies and relatively widespread knowledgeNeed about for Technical Assistance Funds so- larvp technolog.have to be flexible in order to respond nities further upstream (module manuf the acturingchangi ng market realities. while increased port availability the Kenya Renew of able Energy Association black market solarvp modules put increased(kera pres. was able to complete th backed with assets.icf aims holder base. funding to support the training vp techni. but thereneed were no to perf beor-developed.

and regional experience. IFC believes there is an opportunity to attract customers vary greatly. i. IFC estimates the total spending on fuel-based. The needs of each of these di∑erent to be $1. well- it is documented that hands-on managers established and respected Grameen Bank who. consumption priori- In order to seize this opportunity. vp Given that solar Program. off-grid lighting power outages.. accept- country. off-grid lighting should adjust both their product o∑ering and their market with modern and affordable off-grid lighting products. people were more interested in vate companies. candles). trified citizens in Kenya and Ghana a variety of modern off-grid lighting there was little market for smaller systems. tem that will support a single light source. not like to finance vp purchases.000 tonnes (high-end scenario) by 2015. Grameensh Shak provider ti. in an experience is that the entrepreneur is absolutely crit- Bangladesh that received financing sme from icaltheto the success of the project.909. Hence.ifc. while Current consumption of fuel-based lighting represents a large global mar- higher income consumers might well be grid-con- ket. experience has shown that investors and banks do For more information. mostly served by oil and gas companies.000 tonnes (low-end scenario) majority of the population without icf ’s electricity. and are not concerned with the risk s associated tionship was a major contributing factor to the suc- with provision of consumer financing. having a televi- able pricing points. Their sumers tended to be from higher income groups.place in order to help ensure the successf ul opera- LESSON LEARNED: AFFORDABLE PRODUCT OFFERING TAILORED TO TARGET MARKET SEGMENT tion of such businesses. for example. cessSuccessf ul of Grameen Shakti.g. IFC will facilitate the entry of local and for- ties and lifestyle have proven to be key segmenta- eign lighting companies to this market by helping firms (i) understand the mar- tion issues. for most pri- light. The project target end-results for Kenya and Ghana are (1) to provide greater access to off- Consumer financing has often been seen as the key grid lighting products that are more modern and affordable than fuel-based element to developing vp the market. called e“ arly adopters”). n I Vietnam. strong management skills are crucial. solar companies vp are those that have a way of en- Management and Staffing gaging skilled providers of consumer financing . as well as donor funds to cat- n I order to ensure that they are providing the right alyze local and international lighting-related companies to offer the unelectri- products. y Also identified was that solar vp companies are generally more skilled at the manufacturing and commercial distribution of solar vp . andvp companies solar lighting companies to enter and compete in the fuel-based. harnessing the marketing strategies in order to satisfy di∑erent con- private sector profit-seeking motivation to increase access to modern lighting sumer market segments. is very challenging. including consumer behavior and preferences concerning lighting.4 billion per year. and (ii) understand and mitigate sion was seen as more important than having a the perceived risks of entering into a new market in a region that. These issues also vary from country to ket. solar as they per- ceive them to be too risk. 135 private companies and 63 stakeholders from 35 Provision of Consumer Financing countries had expressed interest in participating in this initiative.000 (high-end scenario) financing. but largely untapped by lighting nected and be looking to purchasevp larger solar companies. and (3) to reduce solar sy vp stem is simply una∑ordable to the vast CO2 emissions from fuel-based lighting from 782.. solar vp companies should acknowledge fied population in Kenya and Ghana greater access to modern and affordable the di∑erent market segments that exist.org/led. Independent estimates indicate that worldwide spending on fuel- systems that recharge back-up batteries to help en- based lighting in developing countries is $38 billion per year. Additionally. there was no panies in this market and their competition for market share will bring unelec- debt or consumer credit culture in Vietnam. off-grid lighting products by 2015.500.possess This rela. please visit www. was well positioned to provideplay consumer ers tend to be small and operate in complex financing because of its parent companymark . i f c s ’ l e s o n s o f e x pe r i e n c e 23 .e. therefore.000 (low-end scenario) to 1. the large initial price tag of acquiring a end users with modern. the ets. and con- products that will be better and more affordable than fuel-based lighting. solar Without lighting. LIGHTING THE BOTTOM OF THE PYRAMID Product Offering and Market Segmentation The Lighting the Bottom of the Pyramid program will leverage IFC’s global net- work. In Kenya and sure an uninterrupted power supply in the event of Ghana alone. lower power requirements will also enable more cost-effective use of solar PV who could a∑ord to purchase systems outright (so- as a power source (e. As of January 2007. services and reduce poverty. and distribution channels. Low-in- off-grid lighting products and displace fuel-based lighting products (kerosene come consumers are often lookingvp forsy assolar - lamps. industry expertise. to 3. thus allowing them to remain focused on their A consistentcore solar theme that icf ’s emerg solar vp ed from vp business. solar PV lanterns). The entry of several modern lighting com- larger solarvp systems. (2) to reach 316. n I addition to income level.

Soluz was operating in Honduras without any formal government conces- sions and. especially given current m highlights the need for a strong and experiencedSoluz Honduras began operations a tions. that t approvals before construction cealcp o onsolar the model was not financially sustainable. found itself unprepared for competition from unexpected grid expansions. Bank. was eventually dissolved. the socialrural and communities. the development of local partner- ships is pivotal to the vp company success . strong manage- ment was required for the project to be completed on schedule. toicf ’s experience. it was o As mentioned above. a feat that would rental likely have made it easier for the end us model been impossible without adequately knowledgeable local sta∑. due to inadequate govern- ment relations. Although it mw was on only a small. however. cultural vwu hadTherepresentatives in knowledge of local sta∑ is essentialevery tovillag e in the country. of a solar When Grameen Shakti first began operations in Bangladesh. it fo sta∑ is mandatory for any company looking partnership to be a with the Vietnam Women’s player in the vp solar market. a rental basis.. as the bank’s presence in approximately Sales versus Rental 36. for example. Acc Grameen Shakti. and are often unpredictable in terms of funding and timing. The Soluz Hon- duras experience showed the significance for strong government relations to be backed by legally bind- ing concession agreements. in some instances. Grameen Bank’s general managploy er dedi- ed in the vp solar market: sales (on a hire-pur- cated 20 percent of his time to thechase direction basis) of and fee-for-service rentals. remainedEstablishingon the cutting a edge of technolog. primary Fur-models currently being em thermore. y W local presence through appropriately trained Selco entered local the Vietnamese market. Operating without some sort of binding legal agreement from the gov- ernment puts companies at increased risk of cus- tomer loss. Furthermore. n I addition to supportive government relations and.000 villages provided significant local knowledge that it was able to share with Grameen There are Shak twto i. local government support was lacking. management team and sta∑ who understand for-service thecompany lo. Managers should be flexible in order to respond with local educational institution quickly to changing market realities. Grameen Shakti tobenefi Selco ted Vietnam. and the company sought to partner 24 s e l i n g s ol a r : a p r t 1 . 1 t I became apparent after er project. local sta∑ had to obtain yearsoverof 50 permit implementation. vp plant could begin. particularly in terms of understanding planned grid expansions. As the market (vwu vp solar ) to support the financingsh of in sales of in each country di∑ers. the permitting process de- layed construction and. as they began to gain a significantly from its relationships in the with country Grameen. and while th the develop- ment of a solid understanding of consumer ship needs. cannot be overstated. Grid expansions are a political tool in many devel- oping countries. supply sh i tongconsumers cal environment. as a result. Local Partnerships and Government Relations The importance of strong government relations. as a result. the sales model is muc The experience ceofalcp o in the Philippines sustainable.

pv for solar tion projects should be in place in sysorder tems. Furthermore. for an The initial large outlays for capital equipment could not be Entrepreneurial Spirit o∑set by small monthly rental fees. the equipment had costpresence and influence in just about every vil- accumulated with the company and. This entrepreneurial Even when a company has matched thespirit right prod. gies contributed significantly to overall sales. the presence able of poor to qual-purchase a largpv er sy solar stem while also ity systems in some markets has vp providing resulted in a better solareducation opportunity for his being perceived as unreliable and even children. there was a considerable entrepreneurial spirit to Marketing be found among end users. t I also demonstrated how providedsh the provisionpv ofcan free of charge to key people in a vil. as a result. to educate and consumers had a greater ability to the general population. His business was so successful that he was what cost. In some countries. Grameen Shakt makie initially their payments. promoting a type of demand associated income-g with enerating activities. cess a strong of themarkpv esolar company itself.quire the systems. Soluz Honduras eventually adopted a sales model. t- ing e∑ort is crucial.. appeared to have some influence on the suc- ucts to the right market segment. Where this type of entrepreneurial spirit Solid marketing strategies that include existed.lag e in it wasthenotcountryfinan. These unique marketing strate- cially sustainable sme start-up. “keeping up with the neighbors”. solar lead to increased lage. In Bangladesh. there was greater demand demonstra. as the i f c s ’ l e s o n s o f e x pe r i e n c e 25 . to what which he then rented out to people in his services avp solar system can reliably provide villag and eat . There is still one end user usedpv solar substantial panels misin-to charge cellular formation and lack of understanding as phones. undesirable. notably India and Bangladesh. Selco Vietnam en- gaged thevwu to help sell theirvwu systems.

The corporation is increas providing its own funding on commercial t without reliance on donor subsidies. electrification in developing icf has countries. Total WBG Continued Support to the Market sustainable energy financing in 2006 supported 61 projects in 34 different countries. n I creased manufactu ternational Conference for Renewable Energies in Bonn. moved away from solarvp -focused initiatives. While solar vp is no longer a specifi icf c re- focus. The most important factor that will de 21This includes hyd ropowe r projects greater than mw per 10 Although generally less heralded nowthe compared future role of vp solar in rural electrification facility. sol gies to address the issue of rural electrifi will cbecome ation. the WBG surpassed newer and higher e≈ciency vp solar materials and its Bonn target.led lig s) h areting all con- via and $461 million worth in 2005. more than double the Bonn 20 percent target.Moser Baer in n I dia (see box on page 22). opti. The that extent. it is currently exploring sector newcanways play to ad. in favor of more technologicall positive impact. During both 2005 and 2006. tributing factors that should reverse th crease for new RE and EE. including of solar vp . These commitments represent a 45 percent in.own experi. rec. financial support to EE/RE21 was $860 million in fiscal year 2006. ward trend in vsolar p price. cif remains cautiouslytelevision. of these opportunities. to the mid-1990s. but With of wh the rising price of cru “ en” the goal of a self-sustaining vp market in solar natural gas. dropower projects greater than 10MW. ch a p t e r 4 F I C’s Apo rp ach Today Having extensively evaluated not just to its hold promise. having financed $668 million worth of EE/RE projects in 2006 end-user devices (i. all. t 26 s e l i n g s ol a r : a p r t 1 . Over. Germany. Goals and Kyoto Protocol ognizes the current limitation vp technolo-new able energy technologies. more To economically viable. to increase pacity. new materials that bypass the gl its renewable energy and energy efficiency portfolio by 20 percent during a necks caused by the limited supply of sil five-year period (2005–2009). neutral programs.nium Development cif Simultaneously . certed efforts of the WBG to scale up support for new RE and EE are having a asdsg and vpmti . Among the various WBG institutions and units. These increases suggest that the con. but also the experience of several propriate key playersway in of meeting the power needs (lighti the solarvp business. IFC was the largest contrib.e.having proved to be the m ence. mains committed to it as a renewable en utor to RE and EE.. neutral approach. with $393 million in commitments. of “if ”. the global commitment to devel- oping countries will be met. vp as asolar technology continuestiatives continues to lie in the ab to identify the niche market segments for technology is the least-cost alternati WORLD BANK GROUP COMMITMENT TO RENEWABLE ENERGY ued decline in vp prices solar will help create more The WBG has remained true to the commitment it made at the June 2004 In. as renewable energy technologies as it moves demonstrated away icf by through its recent invest from a specific solarvp focus to a more technolog in y. an important role in maki dress rural electrification through using able aenerg y and solar variety of vp services available. and contributions of $326 nology for addressing the issue of rural million of its own funds for new RE and EE projects and $67 million for hy. radio) of dispersed and remote mistic that it is not a question households.

7 118. greater access to modern and a∑ordable o∑-garid lack of financing. * The IFC’s “other trust funds” category includes the Environmental Opportunities Facility.2 62.6 447. Thelimited managerial and technical skills initiative aims to facilitateamong theprojectmarket developers. has been very challeng- turing Department. A clear focus was placed on debtmance instru. toh un-carefully designed market interven- derstand the market. central fossil-fuel-based generation in favor of a a $20-million egf -funded facility.a and Ghana These barriers may include high upfront costs. buildsportf upon olio theof renewable and clean fossil-based distrib- experiences of the sme Program.) such assh the distributors profiled in this study. including consumer tions. and on piloting private com- take advantage of any potential upside. and displacingquate fuel-based product lig hting standards. The esf is a $14 million icf /egf fund that finances sustainable energMIGA y and energy 0.larger utility-scale projects.4 67. Designed based on the experience of previous icf programs. the corporation aims to provide technical as- focu s on affor dabl e off-gr i d l ig ht i ng sistance and financing to support renewable energy produc t s : l ig ht i ng t h e bot t om of t h e technologies and practices that are commercially vi- p y r a m i d .8 191. the financing smes involved of in activities A key focus that of the project is on developing a perfor- benefit the global environment.8 China.0 20. as well vp moduleas solarmanu-risks of entering into a new market in a region that. By addressing these lighting companies by helping firms. 220.1 33.4 di r e ct i n v e s t m e nt t o s u p or t a m i x of IFC (GEF.0 1. en- and preferences concerning lighting. This pro- wor k i ng t h roug h fi s : t h e env i ronm e nta l ject aims to reduce CO 2emissions by displacing bu s i n es s fi n ance pro gr a m (ebfp ) . This initiative seeks to cataly ablezin e local certain and applications. successful business models. esf has movedthe away from a Learned box onadgo p . terprise acceptable and public education. (GEF and Carbon Finance) IFC (own funds) 17. but whose market pene- international lighting-related companies.) single focus on vp to solar a broader renewable en- ergy focus. and mitigate the perceived ture Department. barriers firstlythroug . page 21. Through the above market acceleration initia- tives. entry of the etc.1 t e chnol o gi e s : t h e s u ta i n abl e energ y other trust funds*) faci l i t y (s e f ).0 0.6 115. and consumer quality products (such as kerosene lamps or candles).8 e≈ciency projects in Brazil. Designed to pro- vide fi s with risk-sharing mechanisms TABLE 5:that WORLD BANK encour- GROUP COMMITMENTS FOR RENEWABLE ENERGY AND ENERGY age intermediaries to providesme fins ancing un. including dsg .0 key focus of this program. and World Bank (IBRD/IDA) 135. ade- lighting products. ton I understand frastruc. and.3 369. fp also the SOURCE OF FUNDS NEW–RE HYDRO >10MW EE TOTAL provides technical assistance grants to develop and strengthen fi ’s anappraisal.0 393. risk management.4 859. and development of pricing points. behavior which may include transaction support. solar Bottom of the Pyramid initiative.EFFICIENCY to IN FISCAL YEAR 2006 (MILLIONS OF DOLLARS) dertaking environmental eb projects. (See Lesson Learneding box . the esf structure has a more streamlined approval process. (See Lesson earlier initiatives. and is specificuted ally energy generation technologies with waste heat interested in engaging financial intermediaries recovery (also knownin as combined heat and power). Central Total America. facturing companies. with convertibility icf and local features bankto s.0 1. page 22) Smaller vp initiatives. awareness.8 1.7 6.0 0.pany projects Unlik e some using new technologies. The ebfp . sec.0 309. througondly h its . Carbon Finance and 13. and Southeast Asia. companies. tration iso∑ering hindered by the persistence of market bar- the unelectrified population in Keny riers. these initiatives seek to acceler i f c s ’ a p r o a c h t oda y 27 . and distribution quality channels standards.on(See Lesson Learned box on the Lighting the Moser Baer. through its Global for mostManuf privateac. page 23. as well as pro- mote market development. Sustainable Worldenerg Bank y is a 54. framework to enable risk sharing between ments over equity.5 monitoring and evaluation processes. may find icf support through the followingfocu s onet mark di s t r i bu t e d gener at oi n proje ct s : acceleration schemes: t h e p o r t f ol i o approach t o di s t r i bu t e d gener at ion opp or t u n i t y (pa dgo).

∫ Other positive attributes that may increase IFC interest in a project include opportunities to engage and influence government policy (e. at the end of project implementation. renewable energy field and increasing confidence i der SDG).developi cial terms without donor subsidies. support worthwhile the projects that are likely market is further ahead than it woulderate havethe beenapplication er and e technolog of ies in otherwise. to play a vital i c f ’s continued role in support and wind initiatives.e∑ects of global climate icf has re-change. a significant quantity of funds has number of opportunities for mainstream vided renew byegf ableunder its operational programs to energy and energy e≈ciency investments. One measure of success in donor-supported programs is the process solar technolog vp y among suppliers. energy finance program (see Lesson Learned box on solar plant construction in the Czech Republic.icf expects to see an increasing 1991. Most importantly. ∫ The proposed financing should also meet standard IFC conditions. page 22) and has indirectly supported a bank financial leverage and experience and acts on p loan for a grid-tied solar PV power plant in the Czech Republic through a clean ular opportunities to aggregate markets. has utilized and will continueof to solar utilize avp nd otherlimited— renewable technolog 22icf ies. which may be an issue for the production and sale of solar PV cells and modules currently being sold. able energy technologies become more competitive ceived approval for more than $200 egf million 22While ge f and regulatory frameworks are improved to encour- support is generally funds to support climate change mitigati age greater utilization. always attempts to minimize the use funding and targets the subsidies in a MAINSTREAMING SOLAR PV INTO IFC INVESTMENTS preferred market interventions that favor proje The projects described in this report were primarily financed with concessional that are closest to commercial viabili resources from GEF and other donor support mechanisms. page 17). and the United States. deals of less than $10 million are unlikely to be attractive. Beyond these not needed for small hydro initia. eg f was Since established in Going forward. including maintenance of appropriate minimum debt service coverage ratios. As described in this report. i.g. principally Germany. an evolution that is occurring in the context as part of the World Bank Group. the financing should be based upon a sound and financially viable business plan that addresses a quantifiable market opportunity and is guided by an experienced management team. it seeks to identify avenues to m son Learned box on Moser Baer. the penetration of sustainable energ andy technolog carefully targ ies eted—concessional funding t so that. it is still an important com- ponent of solar pv . developing countries. tives. ∫ The expected rate of return should be commensurate with the level of per- ceived risk. For IFC to make additional fully commercial in- vestments in solar PV production or enterprises. While some latitude has been allowed for RE projects. the Corporation has solar and vp sustainable energy technologies approved an investment in a solar PV manufacturing facility in India (see Les. igate as the renew. the ability to make similar investments on commer. not meet minimum eligibility requirements for IFC investments (although IFC By building partnerships with key players also did invest on its own account in the externally managed funds created un.. sponsor support. y con- tives. general. and end users in icf .e. the leveraging of commercial finance from local FIs. and security arrangements. e∑orts to including renew egf ablefunding energ.. fi n ance mainstream sustainable i c f energ y tinues projects. projected business performance metrics. seeks to promot of IFC’s EE financing programs. utilities. through a solar PV purchase program). lo- cal employment and associated supply chain benefits of the investment. because they did ably involve a mainstream icf investment. Spain. governmen of “mainstreaming”. geothermal. several conditions will have to be met: ∫ The investment should meet minimum size requirements to justify IFC’s transaction costs. primarily to satisfy short-term regulatory policies in a few industrialized countries. and expected opportunities for further business growth. 28 s e l i n g s ol a r : a p r t 1 .

a r pt 2 Selce det Case Stdu sei .

Grameen Shakti works to develop and deli ronmental sectors. assessed. sme Program the established a (energy e≈ciency and renewable energy) and biodi. The primary fo aries identified. The programegf was . the program’s goal was to improve complement ac. t I provided loans of $500. the. Soluz Ho s these they would generate more environmentalSelco benefiVietnamts. solid reputation and momentum. solar it became oper- to various intermediaries (financial. tising panels at a Tunisian airport). ished with $16. and private companies for on-lending sme s makingto solar vp -related investments. assuming the risk in- herent in these projects by providing ı Solloans u z Hondu r ato. sh distributors). nonprofit financing organizations wit strate that environmental benefitvironmental s could be achieved 25 mission) . s S. gi andble sme markprojects.V.. The goal was to help sme expand so vp businesses: Grameen Shakti.3 million p the private sector and eg f prog the ram first de.9 million t 25 nontraditional financial go n s. and technical capabilities in both renewable energy systems to rural households environmental and financial areas. c a s e s t u id e s 1 The F I C/GEF SmallandMedm ui Scale Entesirp Proarg m The icf /egf Small and Medium Scale Enterprise to 10 years). attrac versity conservation. sme financing program targeting tions. environmental sme projects.orde C. USA. company that installed solar-power without the need for grants or subsidies.A.the tinued first interest of intermediaries and o funded. ational not-for-profi att a. n I c. low-interest-rate loan (typical Program ( sme Program) 23was established in cent 1995.5 million in 1997 t signed to receive capital reflows. The intermedi- businesses in Bangladesh. 24the sme Program approved $16. per year) from the sme Program. non-grant. which have The objective ofsme the Program was to encourage financing to some sme s. capacity building. ets for sme s active in the areas of climate chang Over its e mitig lifaetion time. Over its life- time. (all eaf E&Co and At the same time.140 the private sector to generate global environmental While sme the Program was not designed to benefits. The intermediaries selected were icf byon the focused on the sh three distributors: basis of their experience wosme rkis ng as with well ı Gr a m e en Shak t i . Asubsidiary making equity investments sme s. financed. understanding of envi- Bank. and Cogener (a Swiss engi- through the private sector on a commercial neeringbasis. operations and reach additional sme s. time cif had wh become en interested in go n ). Ultim whose activities would conserve thesme glProg obal ram environ-financed six projects that involve ment. of Soluz. the program sough(both t to demon.000specifi to $1 callymillion target the vp sector. n I wiitially th. and monitored solar vp sh . combining Financed with $20 egf million funds and in man-their own funds with other sources of fundin aged by icf . intermedi or backg rou n d companies in 21 countries. the financing requirements for cess to finance. A subsidiary of Grameen as their financial viability. Soluz Honduras sells the intermediaries typically received smalla long vp solar-sy termstems (up to rural customers in H 30 s e l i n g s ol a r : a p r t 2 /ca s e s t u di e s . The initial $4.

S. Grameen Shakti. with a experience was the importance of local country totalown of -77. 1. nascent technolog y v p lik . One of the key lessons of the sme Progoverall ram Grameen Shakti continues to perform well. focused projects. However. sub-despite the mixed experience vp in the solar Program. fi n ancing solarv p projects (the two -related solar vp ing in less risky markets. f i s remained Many leery of financed by the sme Program had considerable financing sme s. To increase its scale. 700. was a successful venture. 27 http://w. on” management approach enabled the program to needed to expand its area of operations. sentThis the only pv prog ram to projects solar ernment. sme the Program’s most success- The Need for Local Ownership and Government ful solar vp project. 24In 2004 the sme Program was project that was locally owned and operated. found was managed by an internal sta∑ team.S.s fi e solar (particularly velop as had been expected. sidiaries of U. The sme Program experience in solar vp highlights the importance of economies of scale vp to the solar Together. tLd.000 Evidence people sug-in Bang 27l The adesh. commercial bank s ) became even more reluctant. the program ing in areas with more dispersed populations. The swh me ile Program proved overall to be quite suc-by the absorbed gef -funded Envi- ronmental Business Financ both Soluz Honduras and Selco Vietnam cessf ew reul. ership and government involvement. Soluz Such and experience gained has now been 25Both E&Co and incor.the global environment.vp The marksolar et simply did not de. Grameen Shakti. did extend. from a lack ofebfp the isicf an /egf partnership 26The E&Co loan to Rex Invest- government support. This “hands- itself in a no-win situation. Soluz Honduras. As of the previously to solar pv -related projects. wiconcl th wh u s ion ich volved in the vp sector. solar. hit ultimately financed most of its -related solar s m e v p projects directly 26 . its service costs increased.ı Selco Vietnam. as one of its receive sme targ Progream t futechnolo- nds through fi s. and wh sme en s ew re coupled with a di≈culties. for a total electrical capacity of over lated Bangladesh. the program was able fi n ance projects throug fi s. develop networks to overcome that obstacle. A subsidiary of U. Grameen Shakti beingfathe iledonly to live up to original expectations. but when it respond rapidly to restructuring. far exceeded expectations in Support Proved Vital terms of the numbervp of sy solar stems installed. allowi The ng it programto had found that o∑set fis had little interest in the risks of the vp marksolar et througsme h s work.the of other case vp projects among solar of the sme Program projects has million. it had the support of a widely has . benefiting 23In more the than case ofsme the Program. Soluz. February 2. potential markets. Given this flexibility. icf Unlike other people in one community.n er recog including ized. was less so. Both sector. operating in densely popu- 24. and both su∑eredmentioned. respected. t h e i fc /g e f s m a l a n d m e di u m s c a l e e n t e r p i s e pro g r a m 31 . that scale was far eas- A key factor for the successsme of theProgram was ier to attain in a densely populated area than within the small size of the program. projects of the solar that e w re fi n anced f i involved s w i th an en- tures operational around the same period as those vironmental mission). and reasonably ew ll-capitalized gies and organiza-activities. e af on-lent Selco ew re overly enthusiastic about the porated size into the desig of their ebfp n . these three projects have installed over market.000 sh installed. operating in Honduras where the rural population was more dispersed.org tion with a similar client base that helped them to /grameen/gshakti/index. operat- projects with external management. 2007. While Grameen Shakwh tichi did targnot sme ets s working on projects thatment are in Tanzania e af and the loan to Soluz Dominicana repr have considerable support from the Bangbenefi ladeshi cial to gov. Sparsely Selco Vietnam Populated Areas sells solar systems to unelectrified households in Vietnam. w grameen-info. While each entity w h at wor k e d and w h at di d not operated under a di∑erent business plan.- Economies of Scale Are Hard to Come By in based Solar Electric Light Company.html. vp Many ven. both ew re A “Hands-on” Approach confronted with having to reach a certain scale in or- der to be profitable.000 sh . performance sme s were defined as enterprises with assets valued at less t gests that this was similarly vp . which enabled the a dispersed population. to develop a diverse portfolio that was not depen- dent on one particular market.-based companies.3 mw at peak performance. While Grameen Shakti easily management to be very “hands on” and knowledge- gained access to economies of scale serving many able of the projects it financed. solar sme the Program was able to invest sme s worki in ng in sectors other Althoug than hsme the Program initially planned to solarvp . Diversity of Portfolio Offsets Risks of Solar PV n I contrast to other facilities icf was in.

even in rural areas. was in its ability to tap into the exis branch network. enterprise. financing them.000 that the firm received permitted it sh to inven- purchase tory. for the most Shakti also supported wind and biomass a for-profit projects. Grameen Shakti was approved for financing from the Progrsme am. The latter. The $750. Each o≈ce is sta∑ed by two people. established in July 1996 by Grameen Bank. a ma and a technician. low levels banization. high costs and lack of consumer credit. selling. and is overseen by div agers who report to the general manager of Grameen Shakti. n I March 1998. This freed capital for Grameen Shakti to provide financing to custo enabling them to overcome two considerable tosh sales in Bangladesh. The program loan called for the sale of 3. gram represents its largest business li solar vp panels and other systems component batteries) from a range of foreign and local supp ers. aims to support this bank’s poverty reduction Grameen Shaktmis-i has a secondary mandate. namely.gr a m e n s h a k t i Grameen Shakti (meaning v“ illage power” in backgBen. Approximately 70 percent of households do not have accessibility t and frequent floods and cyclones. Further- more.000 villages Bangladesh. it is run. th sion by developing and er delivering systems tohelping connect rural areas to the world th rural households and businesses in (solar-powBangel adesh.r ou n d gali). the density of the Bangladeshi popu means that. nevertheless. The Bangladeshi mark sh etis for considered to be relatively large. An additional sh barrier salesto in Bangladesh was lack of a strong field-based sales and servi structure. The companyvp ’pro. as indicated e a presence in approximately 36. and Grameen Shakti operates th o≈ces housed within the bank’s 28 branch l Grameen Shakti o≈ces are established in with high electricity demand and no acces grid. red) information technolog. there a concentrations of potential consumers. Grameen registered as gon an . and assembling. 32 s e l i n g s ol a r : a p r t 2 /ca s e s t u di e s . The company.2 systems within two ey ars and provided a two- grace period on repayment. and a very slow political a reform process have made establishing a tra energy network (or grid) very challenging. inst necessary. y Alth While the focus was vp sh on solar . s solar though on a much lesser scale.

the company o∑ers clients a 20-year money-back guar- antee in the event that a client is. of Grameen Bank. Heavy import taxes on internationally sourced solar panels and a lack of local suppliers drove up prices. including: limited purchasing power of target end users. rela-2002—Best 50 ∫ Energy Globe tive to the large capital sh cost equip- of imported ∫ European Solar Prize 2003—awarded by Euro- ment. Partnerships with suppliers also proved useful obs tacl e s GRAMEEN SHAKTI Overall. a general lack of awareness surrounding the technol- ogy was a consequence for low demand. While Bangladesh is ideally suited to solar power because of its higher than average solar radiation (ranging from 4. Partnerships with educa- Bank’s branch network to reach customers tional and institutions and suppliers played an impor- quickly establish a local presence. but to e∑ec- ∫ Best Organization Award 2005—awarded by tively do this. y The provision of the ager of Grameen Bank. which is extended to service the client. 28 Today there are over 160 o≈ces. n I partnering with educa- tably is the use of the Grameen name.0 to 6. of trends. There recognized for its efforts in the inter- been widely has been considerable skepticism concerning national communitythe andvi- has been awarded a num- ability andsh cost systems. Thi warranty has enabled the establishment to manage its maintenance costs and has contributed to a high level of customer satisfaction. Most cation no. Shakti has experienced many issues inAWARDS the Bangladeshi market that are similar Liketo those its parent. Grameen Shakti had to rely on partnerships with other organizations n I addition to being able to tap into in orderGrameen to stay ahead. Furthermore. of coupled withber the of honors.. gr a m e n s h a k t i 33 . The local market had not yet been established. Additionally. and e≈cient technolog. Grameen Shakti has othersh companies in other world markets. and the Development Company. and monthly inspections. tional a nameinstitutions. Ltd. routine system maintenance. so- lar energy industry activity was minimal at the time of Grameen Shakti’s founding. Grameen its Shakti resources and provide clients with the most up- also makes use of the expertise of the to-date general man. An extensive warranty package (which could be extended for a small fee) included free maintenance for the first three years.5kWh per square meter). tant GrameenroleShak in pursuit of new technologies and ti also benefits in other ways from the bank identifi. To overcome these obstacles. Lacking government support. who spends 20 percent of most market-applicable technologies allowed his time directing Shakti. training seminars for clients. a large sales force was Infrastructure needed. while making a dedicated e∑ort to reduce costs and thus lower prices. of cost of making individual sales with associated sup- Bangladesh port was high. and the Bangladeshi Government o∑ered no support. for any reason. Grameen Shakti placed considerable focus on providing increased value to its clients. the management to keep a step ahead of the compe- tition. the company hoped to maximi widely recognized and respected. unsatisfied with his/her system or the national grid. Large volumesneeded were to get unit costssolar for spreading RE through micro-credit down to a financially sustainable level.

ment). of t tances.g. recycle. y market- ing strategy involved targeting the wealthier The worst mem. a lack of local day.85 MW company has been able to work toward achieving Daily power generation 16 MW-hr secondary objective. the firm during its early stages. no sales Grameen Shakti also actively promoted sh inthein. cess. y Most of the syst tains an agreement with one of itsprocured battery were fosuppliers r household application and qua to take back. mov i ng foraw r d TABLE 6. GRAMEEN SHAKTI AT A GLANCE.135 provided cleaner energy to 700.000 Bangladeshi Total installation of SHS 77. are key contributors to Grameen suc. Aexakemple). per month—easily covering his payment installments of Tk470 ($6) a month to Grameen Bank was a valuable source of funding for Grameen Shakti. that of connecting th capacity eas of Bangladesh with the rest of the world Installation rate Over 2000 SHS/ month the service of information and communica Installation of micro utility 1.paywi . and as a consequence. y as well as o∑ering computer educat system and n I ternet access. Demand for cell phone services had emerged in his vil.5 percent of sales were full cash clothing remit. 2007 To date.th its two-year grace period and t ment plan.000 people 3. Furthermore. for instance. and the collec perspective. Grameen Shakti. and the owner was able to add cell phone rentals to his product offerings.000 system technolog.) 34 s e l i n g s ol a r : a p r t 2 /ca s e s t u di e s . This successful company has dive operations to include the construction plants to provide improved energy solutions cooking. Computer education includes a plications. income from the phone operations reached Tk2. The sme structure Pro.”was flooded. gram was adjusted main. most sales depended on a 36-month gram loan.accordingl. ple’s focus shifted to the bare essenti A mere 2. this approach in 1998.000 As rural communities have become electri Installed power capacity 3. devastating two-thirds of the c cessful in promoting a type of demand associated 90 percent of the Grameen Shakti operating are with “keeping up with the neighbors.85 mw (a power generation capacitymw of per 16 Unit office 227 hour). customers’ icf enabled ’s client to remain current loan. The bank’s knowledge of the market. knowledge and presence is a major barrier to th In only four months. such as Microsoft O≈ce and sign.Shakti lage and he saw an opportunity to provide solar-charged phone services. (See Table 6 on this page for a summar Grameen Shakti’s achievements. The seasonal cash flow of the arrangeeconomy ment of payments to be made on an ann proved to be a significant influence on basis. A shop owner in the Tangail district of Bangladesh purchased a 40Wp system and its existing distribution infras from Grameen Shakti. with a total install Total beneficiaries More than 700. lighting a batteries. from both a cost and environmentalability management to make payments. and adequately dispose ity of lif of used e improvement (e. flood in over a century hit Banglade bers of a particular village. . provided by engineers at Installation of biogas plant 500 (through October 2006) powered o≈ces. as well as hardware installation language.000 solar sy vp stems.000 ($30) success of a vp solar enterprise. was suc. despite the delay in collections The importance of Grameen Bank cannot be AN EXAMPLE OF AN INCOME-GENERATING ACTIVITY overstated.recorded use of and defaults on collections soared. base. Grameen Shakti has installed ov Number of villages covered 25. howesome ver. As was evidenced in vp the invest- other sola Business growth was significant: operations were extended by four hours a ments under icf ’s sme Program. were used for income-gener- Grameen Shakti has made strong e∑orts ating applications (see box on this page to raise awareness about solar energy systems. This has considerably improved liv Total employees 1. and shelter. come-generating activities..

clining. selling and renting vp sy small stemssolar on a retail basis to rural customers.00 sme solar was a major focus aimed at penetrating each ruralfrom mar-Corporacion Financiera Ambiental. n I c. donor programs. a crit- (purchase of the battery was an additional ical cost step in.000 equityrental investment o∑er was not financially viable. (70 percent) accounting fovp r solar rental and and increase margins. backg rou n d Soluz. Along with rural Byhouseholds.556. Mitch. Soluz Honduras was one vp of the first solar companies to employ a rental model. churches. The to funds be used were tofront costs of installing a system decreased. providing Unexpected grid so.000 deaths. vp rental o∑er was added to the existing cash and mi- cro-credit sales o∑ers. Soluz Honduras S. is a subsidiary of Soluz. per- s ol u z hon d u r a s 35 .expansion and the inabil- larvp systems at monthly fees similar ity to tocontinuethe cost to of pay for installed systems meant alternative energy sources (i. first in the Dominican Re- public in 1994. the number vp rental of solar cus- Soluz Honduras sought to target small tomers was stagnant at 1. on the way to a target of 5.762 (56 percent) accounting for 30 Soluz Honduras w a s f o unded just prior to Hurricane Mitch.500. Honduras was forced to disconnect exist- 29Soluz Dominicana also recei and automotive batteries). the ments using social and envi expand the Soluz customer base. kerosene. and $179. in the Dominican 29The solar Republic.000 loan and a $100. Soluz Honduras and Soluz Dominicana S..057 (30 percent) forvp solar sales.. a . which de- creased the initial costs vp sy of acquiring s. Honduras. Program nI client base and the devastating e∑ects contrast to the year 2000. 30 Soluz Honduras managed to attract $406. of a and Triodos Bank’s Solar n I vestment $20 installation fee.499 r solar vs p ales. July 2002. Customers were charged the equivalent Costa Rica. 500 with $227. USA. solar rental vp clients in its first solar year ofrental vp operations. thatdrySoluz cells. s . and health clinics. schools. sales (primarily by developing its dealer netwowas flooding that rk).500 and in danger of de- businesses. e d c. Soluz increased The heavy rainfafo its llcus associated on wi the hurricane caused catastroph $44. Soluz averag e monthly hoped to expand vp its rentalsolar fee of $15 for rental and maintenance of customer the system base to a break-even point of 2. where Soluz Honduras had been selling vp on a solar wholesale $1 million from a co-investment transaction with basis since 1994. a solar tem without having to depend on consumer subsi- dies.v Headquartered in San Pedro Sula. Today Soluz. Despite ing ancustomers entirely rural faster than it was adding new support from the sme ones. sme Prog the ram approved a t I became evident that the unsubsidized vp 11.e. fowi th $100. or capital buy-downs. curred by the client). revenue in of Hurricane 2002 throug e af totaled h the . While the up- 31The Netherlands’ fi r st g reen investment fund screens its in Soluz Honduras. building upon the vp sales solarenterprise estab- lished by Richard Hansen in the Dominican Re- public in 1986. Rolling vp rental the out o∑er the Program and two other investors ($250. n I c. n I c.000 customers. revenue totaled $144. Soluz Honduras began operations in 1998. de C. and later in Honduras. kets. who had no access to elec- tricity.u l s z o nu dr o a h s . as well asFund an 31 ).A. has two sub- sidiaries.010 (44 percent)whaccounting ich devastated much of By 2000. With a further charges remained too high formental monthly over 50criteria.V.blamed for over nI late 2000. solar $400.A.. n I an e∑ort to increase revenue Honduras and Nicaragua in 1998.772. was established in 1993 to further com- mercialize vp applications solar for rural areas.

thus. Solu operations than would typically be found could in a solar reduce its vp solar rental fiex d-asset invento vp business of equal size. increasing with an $850. sales seeking only profitability. an increased focus on sales. due to the byhig h collec- customer payments. wasThe company clear that be.a change was needed for the compa gan to sell o∑ vp rental solar assets to meet lender to survive. tutions out of its three o≈ce locations. distress. The Soluz busin ing environment. investors o∑ered waivers of certa obligations and focus sta∑ time on andincreasing payments. to rural customers the aggressive and insti. The rental local company operation was simply too challengi then adopted a more streamlined sales I model. Soluz found itself in sev ing wholesale through dealers and. Th revenue through an expanding dealer netwogerksted . cent of rural households.its sales e∑orts. where even obs tacl e s well-established micro-finance institutions were un- willing to provide their financial Lik products.key problem faced by Soluz Honduras rental financial product o∑ering in a wavery s that challeng of a∑ordability . e mostThe other vp solar businesses around the company attempted to essentially build globe. ificantly in . solaron a cash pany. in the short term. required that Soluz Honduras devote streamliningconsider. An unsubsidized c tion and maintenance costs associated cial approach withto such a establishing vp a pioneeri highly dispersed customer base.000 debt burden. Thus. The rental signo∑er. Furthermore. . tI a change in the business model of also continued to vp sy sell stems. able attention (at considerable cost) to collections and service in remote o∑-grid areas. i and micro-credit basis. rental and sales o∑ers) resulted inproposed more complicated that. without the benefi wastdesig of the neddevel- specifically with this eleme opmental subsidies routinely provided n I addition to micro-to cash and micro-credit sal finance institutions when establishing pany placed emphasis operations onin fee-for-service or renta 36 s e l i n g s ol a r : a p r t 2 /ca s e s t u di e s . was established to help meet lender payme The Soluz business model (whichtions included and bothto build a viable operation.sale of vp used rentalsolarsystems. All this l rental o∑er did not succeed in creating and an operating transaction costs that needed to b margin for Soluz Honduras. n July 2003. sales and assuring their margins.vp similarthe solar environments. the a micro. partic- while at the same time ular. sell.

Many households did vp sy rent stem. thus solar vp system. three Fromyears of financial restructuring has this. The company’s financial structure was too highly leveraged with debt for such a risk Operationsy new ven. Employment opportunities and The unpredictable timing of government income rural were provided for the micro-enterprises that electrification project timing. This required duran firmSoluz expects to now have a viable business to remove hundreds of installedvp systems solar be- model. Total financing was $1. tomers. The company. collection The company and was well-respected and had little service operations in remote areas. and the continually company became more dispersed and thereby maintained vp sy solar stem ownership to facilitate more di≈cult to serve.000 systems. company it has would require installed well over 5. sale Furthermore. required Thus. project y leading to pos- unable to make their payments. significant portion of the debt would be forgiven. had its to di≈culties.500 clients to break even. Soluz Honduras attemptedambitious to price attempt to pioneer an unsubsidized solar rental fees to the equivalence of combined vp rental currento∑er. at this therate.of car the batteries). it is notuntil as crucial theyas were being sold on short-term credit to existing obligated to pay for a rental contract vp forora new solar customers). Despite however. particularly in the areas of gov- clients during startup simply did ernment not o∑set bids the and institutional sales. rollout peaked at 1. Soluz Honduras was seen raise significant capitalvp to units invest as ain pioneer solar in the vp area rental of solarin the na- and to develop e≈cient micro-rental tion. 2. as c“ ustomer churn” reached high levels (3-5 mov i ng foraw r d percent). kerosene. even were wh en there weto contracted re collect monthly fees.5 million. the environmental and social benefits energy costs (e. in anwie∑ort th $850. customers future. To date. remaining financing. A in loans. the business model has proved di≈cult. The aggres- in a loss of income. communication e∑orts with the local The authorities. Soluz began to focus ex- system from the company to be higher than clusively those on sales. dry cells. they capital. nected a significant number of customers the wh o were did provide clean energ. a solar At this point. will begin to emerge. itself.systems.repayment plan was designed for the cantly lowering the upfront costs for customers. thus reducing found out about grid expansions just its months debtbef ore burden. repossession. to purchase on credit. Although Soluz Honduras succeeded in andsig a one-ynifi ear. project should not be overlooked. made further it di≈cult com.g.000to overcome the large debt burden. system. a solar While the financial performance of Soluz Hon- but later found that they were unable duras to continue was disappointing as a result of this overly payments. The firm and instead while discon. With the reduced debt. meant that creased Soluz cash floofws ten to Soluz Honduras. competition a process thatin thethe direct servicing of rural cus- company struggled with for several years. Sta≈ng and all expenses were many found the monthly costs ofvp renting streamlined. move away from a rental o∑er to a cash and coupled with unexpected grid expansions. high debt on the books during fore the initial investment could thebepast recovered.500 rental units. a viable and sustainable residents wealthy enough to vp a∑ord systemssolar future. an interesting paradox emerged. Up to now. With a debt- pounding the issue of unexpected grid exfrpee ansion: balance sheet. using the cash proceeds from the associated with kerosene and batteries. Debt repayment obligations memorandum providedof little understanding was signed between in the way of flexibility if the rollout Soluz of revenue Honduras and and sme the Program. of solar vp rental assets to pay back its creditors when rural families lack the funds to purchase (installed rental systems continued to be serviced kerosene and batteries. resulting itive social not onlyand environmental impacts. By renting systems. were more likely to receive grid service in the near s ol u z hon d u r a s 37 . short-term especially credit sales focus has resulted in in- due to election promises. however. whereby a expense did not stay to plan.. increasing demand. com- monthly fees collected from the limited petition number wasof strong. however. but also insive costs related to penetration vp ofthe rental a solarsystem created physical act of disconnecting and remark widespread etingawathe reness of solar vp in rural areas. ture. in which the company will operate with less generally lived close to urban centers. firm’s operating costs. While When it came to larger sales. the Hon- the grid reached a community. whavoided ile the theavailable o∑-grid customer base high upfront costs of purchase. but it estimated that.were further restructured in May 2005.

based in Ho Chi Development Minh vbadr City( ). it solar power (i. among and its the targ eted consumer group. considerably les 38 s e l i n g s ol a r : a p r t 2 /ca s e s t u di e s . Sri Lanka. Unlike other countries. which was little capacity to meet urban demand with and the no inf Selco ra.000 loan from solar systems to unelectrified households icf ’s sme Progin ram in Viet. n I based approach. t I grew out of the activities gon Solar of the Elec- obs tacl e s tric Light Fund. the Award for Corporate Excellence pany had on o∑er. a∑ordability sh even of further. coupled the matter the issues were around with the fact that even rural Vietnamese the mass had hig publicityher of grid expansion and disposable incomes than those in ating neig incomes hboring coun. most cust AWARD FOR CORPORATE EXCELLENCE sought the largest and more sh exthepensive com- Established by the U. pany with o≈ces in India. scious. an secure loans for the company’s customers t backg rou n d purchasessh of .-based called for the com.Com. n I fact. intermediaries vbadr (specifi ) for cally working capital financing up to $200. the loan agreem Solar Electric Light Company is a U. rental).S. n I addition. 1998. As a result partnership with the Vietnam Bank for Agriculturelarg and er solar vp systems. of consumer fina eas. Selco Vietnam Selco sold Vietnam received a $750. However. The general lack of access to electricity Complicating .S.such asa solar fact that also contributed to street lights. of the banking sector sign oping countries through a commercial would markerather t. Vietnam (see and loans were approved n box below). on batteries per month in Vietnam was t lent of between 66¢ and $2. Ltd. banks were controlled by local companies in India. water pumps. of consumers. which resulted in reducin recognizes businesses that exemplify good corporate citizenship abroad. the Vi Selco Vietnam’s primary focus in the not country establish was income-generating busin on the sale sh toof households. andinstitutions. which was founded in 1990 to as- sist in the financing and installation The principal barrierenerg of solar facedy by Selco Vietnam wa system projects throughout a number that of developing of a∑ordability. The for-profit Solar Electricand.salesh of 12. t ld .-based Solar Electric financing. with people’s committee. The average amount plying household electricity to families that lack access to the power grid. and hot sciousness water heaters. Light thus. do without than incur debt.no consumer financing availab pany was launched in the late 1990s bank to iscale ng. Launched in 1998. ng consumers considerably pric ket for sh providers. capable of powering a tele Rural sion.000.000 in two years.ichis provides consumer a subsidiary of the U. rather.e. The loan was to enabl nam and was the first 100-percent foreign the -ownedcompany to provide collateral to third company licensed to operate in the country financial . Vietnam had no debt countries. t I operated through itsuntil subsidiary 2002.s e l c o v i e t n a m . battery-charging station. Secretary of State.. throug h vision with the was considered more important th which it had access to villages. In 2001 the Solar Electric Light Company received the award for its work in Most potential customers km livedof a withi reducing poverty and spurring economic development in rural Vietnam by sup. attractive makimar. or home up the mortgage market. An important part of Selcobusiness Vietnam’sVietnam presented a further complicatio model was its relationship vwu . on the recommen Vietnam has a significant power shortag the elocal . solar-charged cellular phon also provided specialized applications. Light Company. common among the rural popu tries. and Vietnam. Selco Vietnam. made Vietnam appear to be an tion. A general over- provision of solar electricity to households all distrust in devel.Vietnam business model structure to distribute electricity lied beyond on urban the availability ar.S. Sri Lanka. worthiness but.. were in demand. wh .

Selco Vietnam has struggled finacialy since it The intal intent had been to work through v b ad r began operations. ntly when the vwu failed able. r the vwu was concerned with the ship with other Solar Electric Light Company sub- liabilty isue. tionaly it has learned from the experi- Selco Vies ’ tnam expertise lies in the ae r as of solar ences of other subsidiares by sharing informatin. co. Thee r was a heavy local polit cal influence.S. the company has nwo formed partner- sumers. Unfortu. sales and service. d A di. yet it was not alwys suportive of Selcs ’ o m o v i n g f a or w d activ es.icf originaly hoped to make the eg f loan to In an e∑ort to lwe o r the cost of the solar vp the womes ’ n unio. Since the end of 2006. Seen as a U. No credit is avil- finacing itself. vo r a s t h e tha only about te hr e pecr ent of the unelectrified company was unskiled in the ae r as of consumer poulatin could actualy a∑d or a solar v p sy tem. mpany Selco Vietnam did not alwys get the same level of suport tha a In the end. The number having shifted as a e r sult of a pending election). Selco Vietnam was forced to accept tha Vietnamese company might have e r ceived. not in tha of consumer finace. untry During its first two years. so tha it could on-lend to con. with the vwu age r eing to larger quanties from supliers with volume dis- admin ster them. Subseque. expenses. Sales targets wee r eventu- In an atempt to addres the isue of consumer al y e r vised downad r by 50 percent. nate. credit. ly when v b ad r failed to make finacing avil. se l co v i e t n a m 39 . and the firm is not expected to make its sme to pvroide proer colections service (its priotes Program loan e r payment deadline. While demand for lighting was considerably les than ex- import duties for solar modules and bateries wee r pected in the co. finace and colections. The mangement has undertaken (which would pvroide consumer finacing with some significant changes to impve ro fi n a c i a l p e r - funds guarnteed by the sme Program) and the vwu formance.000 units. the of those withou access to electricity (60 pecr ent) solar vp company was forced to take on the added was in t al y taken as a mease ur of the porsectie v e r sponibilty of a colections agent. ket with no debt history or consumer bankig. and was operating in a mar- Thee r we e r also isues suronding the policy en. the waived for Selco Vietnam. But this pve ro d makret. and ultimaely the funds wee r loaned s i d i a r e s a ro u n d t h e w o r l d i n od r er to purchase die r ctly to Selco Vietnam. with only five emplye o es fo- Vietnam was forced to star pvroiding consumer cused exclusively on cash sales. struggled to e r ach 1. Howeve. Selco ating in survial mode. the inconsitent subsidy entiy had planed on sales of 12.600. w it was determined to be a particulary chalenging endea. but it policy for electricity pve ro d p ro b l e m a t i c . vironment. e r ducing operationl and adminstrave (which would handle the colections). the company has been oper- able to potential Selco Vietnam customers. but upon later e r vie. equipment. counts. and ince r asing its per s e n c e i n t h e m a rk e t .what was e r que ir d for a solar vp sytem.

in Indonesia. and has committed over The $18 initial million selection to process began wi 12 projects. Ke technologies in developing countries. held Argentina. While designed the initiative was to accelerate the sustainable commercialization ceived to be a $60 million and program that wou financial viability of energy services. t sector project design and financing on a commercial number basis of countries. ge f or un- go n s. sector companies. wb and g others interested in favorable theeconomic acceler. Brazil. c a s e s t u id e s 2 Phoo t o v ltaci Markte Transof m r atoi nnI ait evit The icf /egf Photovoltaic Market Transformation program) continued to play a key role in the pro- n I itiative ) is (pvmti a $30-million initiative gram design.conditions. Zam Princeton." consultation was during the first half of 199 based on the same market transformation Threeconcepts countries were ultimately selected used bythe United States Environmental plementation: Protection n I dia. Keny private a.et and a supportive policy environmen feasible. ing world. mark et wi which em. volve based global competitive procurement among on solar electricity vp )(solar technology in n I dia. still opera- tional today. n I 40 s e l i n g s ol a r : a p r t 2 /ca s e s t u di e s . were visited for f project concept. management of the program was passed fromhome the to the largevp st marksolar et in the develop- World Bank to icf . Zimbabw The ewere meet- removed from consideration due ing was attended by a large number of academics. the program was rebranded v pm t i . which had avp dynamic sol (un- dertaken in North America and Europe. The remain ation of the global markevp tand for solar other er countries. Pakistan. as and which thevp solar sector could 32 grow. 30 were supplied with a summar vp m t i program concept and a request for an ex- backg rou n d pression of interest. New Jersey. n I Keny a. thements in new commercial (not government lessons learned from m “ arket pull” initiatives sectors. Launched v pm t i inis1998. Kenya.000 sh sold without any for- ployed financial incentives to engage mal the credit privatefacilities. identification of 35 potential countrie countries. Funded egf by and managed byicf . the . would be more prudent to pilot the concept a v pm t i was based on the premise that private smaller $30-million initiative. v pm t i was expected to stimulate inv Although vpmti was restructured under icf . n I n I dia. sec- v pm t i was expected to provide tor to encourage market adoption of new energ worky ing capital and end-user financing in a m and er technologies such as the “Golden dominated Carrot” by small-scale enterprises. three was considered to have an emergin page 41). China. to planned World Bank and/or projects. India. Of those that res The vpmti concept originated at a meeting ria. would stimulate more sustainable ventures than government or donor-financed vp solar procure- cou n t r y s e l e ct ion pro ces s ments alone. it was soon dec and Morocco. Agency’s (EPA) "Golden Carrot" program (see the box. dubbed the "Green Carrot. The origand inal Thailand. in the early 1990s. and Morocco. When o∑ering the p“ rize” was deemed vp mark un. Sri Lanka. th over 150.

Power has completed over 1. same. from Capital Corporation (now m I pax Asset Manag allocated e. as follows: $15 million for project financ- ment. from investments and portfolio earning is a specialist s. similar to that of an investment fund.. to retain m I pax vp m t i was financed with $30 million ge f . 24 utilities The financing terms o∑ered v pm t i by’s were de. such as technical financial assistance. That program then held a contest. consulting firm with a special awarded guaranteed rebates from the pool to off. The set project would be needed over a longer period of timemanag than ement fees make up the majority emt of the originally planned. some During the country assessment period. Pipal guarantee facilities to finance alternatives Ltd. signed to be su≈ciently flexible to respond necessary sk to ills the to assess p investments and to implem tor Program. energy-efficient appliances in the residential sector. 34 both firms expe-ing in India. eO≈ce ment National company)—whde ich provided critical l’Electricite ne o ). With £420m ($83 cial incentive to manufacturers to support advances erational period. and entry into new markets. were also available. and grant funding. at the ti amounted to $3 million. and existingpv solar sales market The Golden Carrot program is a federal program of training. needs of each project. Sector and country compensation. Additional financing tools. In the program. and pv equipment.)and IT Power. creased complexity. The ment team emt ). some process.and private equity. commerci set the incremental product costs. and were identified. assistance and project execution. of which it are becametied to performance and some of which apparent that a much higher level of are engtied agement to timing in the program. and (either subsidized or unsubs addi- the United States Environmental Protection Agency tional uses as required by individual dized). commercial. and fund managem company focused on the environ- The “Golden Carrot” program offered a finan. if the and environmental considera. expertise. such tools deemed were su≈cient to justif tions. an adequate THE GOLDEN CARROT PROGRAM commercial purposes. Rather than establish s t ru c t u r e in-house expertise. the development of standards. including tion re in engi neering andgurelated partial aran- economic. Many of these projects to westructurere vpsolarbusiness proposals and conduct support companies that sold and/orthe leased. the emt would be re- of projects were identified workingfi s with to es.. financial. 33 Ltd. were 34 I T Powe r.000 projects for both gov- mentally friendly refrigerators. consumers got more affordable and environ. Once emt fethe lt it had a solid pro- Other projects were focused on supportingject. t I designed to support the commercialization of new was expected that $13. ernment and private sector cli in over 100 countries.mental sector. would be returnedgef toat the end vp m t i of ’s op. based on a commitment the solar to field). gerisn solar and (a Moroccan project vp by the national electric utility manag . the exit . was impor- tant vpmti if were to succeed. and renewthe able remaining $5 million to be used energy portfolios. Impax had th pooled $30 million in the Super Efficient Refrigera. project management company in able grid extension. icf management chose to select an external manag icf edecided r. y the IT in. g u aran- and the manufacturer that built the most efficient tees. serviced solar due diligence. is an energ y CFC-free refrigerator at the lowest cost was pected to request debt at or below market terms. were end as userwell as for reviewing progress on purchases. Ltd. and included debt. The emt is compensated in two forms: a set project management fee paid quarterly over the life of the m a nagem e nt program. and financial uted. or 10 percent of total a large number of households in funds. technical.. benefi t s of time. $5 million each for Kenya and rienced in managing small. installed. to serve as an external for technical manage.( Theemt also included local technical part. a regular basis subsequent to disbursement. Most investments ex. 25 potential projects totaling nearly $175 million The role inof fin the emt ancing was to solicit. sponsible for ensuring that all disbursement condi- tablish financing mechanisms to tions support met. p ho t o v l a ic m a r k e t t r a n s f or m a t ion i n i t i at i v e 41 . ( support and local knowledge at all stages of the During the preliminary stage. (a Keny to annonvi. Ltd. projects. screen.v pm t i was expected to contribute to thener demonstra-organizations in each of the countries—IT tion of the potential of private franchise Power n I diamodels (a subsidiary and of IT Power UK). million) in funds under man ment in a combination of li in energy efficiency. assistance component of the program 32Each country had. These funds towerebe provided for non-o∑-grid areas.5 million would 33Im pax be recovered Asset Management. services sector. would present the icf n Iproject vest-to the pansion of existing sales and distribution ment Review Committee netwcir orks ) for final ( approval. innovative Morocco. and a small After approval number from the cir . and a series of performance bonuses. At the same tees and equity. Ltd. appropriate distrib.

3. ram imple. The slow execution of deals in the of the early years of program funds to a maximum of 20 overall the v pm t i program. and team. v pm t i sought. This report has focused PROJECT (IN MILLIONS) (APPROXIMATELY) mati District Tea Growers Savings & Credit ative Ltd. resulted in a lower-than-ex p ected should explore the possibility of deployin dis- bursement rate.000 tive.700 Total PVMTI 17.00 0 and direct investments vp companies. to solarment new technical assistance and capa creation of quality awareness in the market. from a maximum ing. ). the and the provision of training vp technicians. v pm t i ’s Sinceincep- $1 million v pm t i ’s of investment fundstion.A. ( the cir has approved a total of 16 sub-pro- projects approved through icr the are documented by the ifc legal The total cost f o r these activities is jects (six in n estimated I dia. and capac ran into issues with insu≈cient for the cash industry flow to cover sector that will help ad its ongoing administrative and operating overall objective costs.10 15. Ltd.075 1. egf funds used for this are all grant fulion nds. This request was made in respons tation. and information dissemination.10 0 jects that achieved varying degrees of success Muramati Tea Growers SACCO 0. approval fromegf to increase the funds availab n I 2004.000 for a stand-alone technical overall assistance investments).90 26. at six in Kenya.A. 1.that and in an e∑ort to bring disbursements lessons of committed from subsequent projects seemed funds to approximately 70 percent.eris ( ). mainly the result of a larger emphasis on received approval for a grant of approximately assistance and capacity building (as a p $350.000 35 rocco). With funds not being mitted disbursed.ofThe This was suggested. technical assistance. and Sunlight Power Maroc m ps S. with some proving very successfu TABLE 7: PVMTI’S ACTIVE SOLAR PV PROJECT PORTFOLIO some unable to make any progress due to a varie COMMITMENT UNITS INSTALLED of outside reasons. projects The with commitments of over due to a variety of reasons. (see Table 7 at left).A. ormation initiatives icf had managed. estab- lishment of a quality assurance sh in program for the Kenyan market. vpmti underwent a significant restructur. er i s n I frastructure Finance.23 2. Selco India 1. To date.000 Ltd. v pm t i . 1. projects $476. and was granted.000 jects in each of the countries v pm t i was in ac.60 170 Total Kenya 4. The active of in-k v pm t i i nd portfolio is comprised of approved by the icr . r e s t ru c t u r i ng n I October 2006.000 the overall v pm t i portfolio. to icf finance has managed a number of other programs the cash shortfall on the administrative that have resulted side of the in greater market impact project.505 59. investment resources to grant-ori the expected reflows (interest and principal nical pay-assistance activities.which Total India 10. but legal documentation was not finalized contributions and co-financing for the nine project. and provision of support to pe r f or m a nce 35t I is important to note that the Kenyan Renewable Energy Association k er a ).50 15. The change in Oct capacity-building program in Kenya. projects involving both financial Barclays Bank. This project sought to correct this imbalance. with and pro- Equity Building Society (EBS) 2. as they represent pro- SREI Infrastructure Finance. percent.70 170 Salafin S. (Muramati).075 1. in restructuring sought to extend the progpart. In some cases.00 0 Sunlight Power Maroc S. were which includes about $115. ( Eskom-Shell Solar Home Systems 3. v pm t i is likely to have at the end of its As part of the 2004 restructuring v pm t i also . due to the extensive documen. whil consists of the development of training still curriculum ample time v pm t i wi progrthin am to imple.900. Kenya 2.73 58. Experience to date with the di∑erent proje been mixed. and tovpmti reclassif at they mid-term point.870 42 s e l i n g s ol a r : a p r t 2 /ca s e s t u di e s .000 These projects were selected to be representat Shri Shakti 2. because v pm t i was one of the earliest market mentation period by two years (from 10 years transf to 12). minimum investmentfinsize. dings of and thelong Mid-Term negotia- Review that icf suggested tion periods.700 Total Morocco 2. vp such ments) did not accumulate as v pm t i expected.

such fis as . Product Quality Standards Are also Critical The vpmti experience was similar to that of other solar vp projects undertakeicf n and by others. the fact that the population of n I dia is large and densely populated means that service techni- cians can economically serve a small geographical area (relatively inexpensive to reach potential clients) with a critical sh units. and foster an enabli environment for the establishment of high-quality solar products vp and service providers. and quality control. v pm t i experience The also component would have been well spent investing in demonstrates that there is an ongproduct oing need innovation for ca. its e∑orts at providing technical assistance to rais public awareness of the merits vp . were not interested in pursing the rural solar markvp et. n I dia has er the financing largeste∑ort o∑ered by any developing country. in those Muramati mar. n I far from the grid and thus vpneed . and loan security docu- p ho t o v l a ic m a r k e t t r a n s f or m a t ion i n i t i a t i v e 43 . Many in of vpmti ’s investments found the lack of that it highligvp hprojects ted that are solar most product quality standards to be detrimental to their challenging to implement. upgrade of solar the skills of local technicians. A portion of the grant sive subsidies. justification for it. pacity building and technical assistance. and thetions economic delayed as a result of mfaps ulty saw batteries. favorable tax. will depend to a large de- gree on the enabling environment in which the firm operates. precisely operations. The minimum deal sizes were too large for existingvp solar firms. should have been more proactive likely to generate the resources necessary infor improving pur.on prices as a result of cheaper poor. the Kenyan market was not pre- pared for the financial product and services that v pm t i o∑ered. saw systems fail and installa- kets where the demand for it. and sparsely dispersed communities. and larger entities. including vp . Qualityvp solar products and a re- liablevp solar service network were also lacking in this market. pressures rural. regulatory. increased Often. y Addition- ally. and grid-extension policies may help the development vp of the solar w h at wor k e d and w h at di d not market in a given country. contraband who product are on the Moroccan market. Governmental e∑orts to promote er . mass Further- of more. product quality and establishing qual- chasing or maintaining these units ity-control without mechanisms. and for several years thereafter. Capacity Building and Technical Assistance May Be More Important than Business Finance At the time wasvpmti introduced. solar compete with v pm t i . exten. Enabling Environment Is Critical Success in the vp business. that invest- IFC’s Typical Project Financing Requirements Are ment terms and management vp focused of solar Ill-Suited to Small Business Transactions projects should be tailored to the specific needs of solar.hindsig solar vpmti ht. might be greatest. solar and the appropriate business model to adopt. n I recognition v pm t i directed of this. are un.vp and that product quality is icf a’s legal documentation serious issue. but also help open up the market and establish vp assolar a viable technolog.

(theemt ) we er not making the decision. As a e r s u l t o f t h i s fi n a c i n g .ity The Mid-Term Revie. This success can tiously on the projects. investment transctions take months or a d m i n s t r a ve s t r u c t u e r adopted in this project. market condi. Going through the banks. s lwo y terms of util z ng v pm t i e r sources and drawing disbursements have ince r ased significantly since the down their comitents wee r ale r ady in the solar 2004 e r structuring. This e r sulted in long negotiaon periods for s i n c e s h i f t e d t o p v r oi d i n g m o e r technical asitnce customiez d contracts. Howeve. In some instaces it tok a funding. With ve o r $12 milon in dis- vp busines. Muramti. India than in Kenya or Morocco. seemed to do tric. r pve ro d to be cumber- c on l u s ion some and time consumig. t h e fi n a c i n g o f sh fell outside the core busines line.vpmti found tha e r vised disbursement goals. The pace of decision making was hindered by the quence. the smal busineses and ene tr e pr . quality asurnce. disbursements. sponible for the displacement of an estimaed Firms tha received vp m t i finacing tha did not 109. This was particulary true in Kenya. w which was com- significantly better than firms tha wee r mee r ly en. since the banks did not see fina cing sh as a main line of busines. and acceptabilty of loan ment apvrol and finacial closue r time frame. decision e r gad r ing investment comitent. particulary in the ae r as of train g and e y ar from the date of e r view to the date of disbursal. avil ble.466 tones of CO2 emison ve o r the lifetime have a particular focus on solar vp w e re s i g n i fi . whee r in. knwoledge about solar vp technolg.ments ae r suited to large project finace transc. This Many solar vp busineses in the target countries str uctuer has e r sulted in significant delays in the ad- found the $500. cantly les successful. ment) upon the e r comendation of the emt . and the e r latively widespe r ad plans and other documentaio e r qe uir d to be some. ve o r 60. and proer resources were not dedicated. closue r . density in o∑-grid ae r as. They can be exte r mely bud r ensome and time est to the Project consumig for sme s tha ae r moe r accustomed to much simpler due diligence processes. the existence of established neurs targeted by vmtip found the extensie v busines solar vp companies. vpmti is curently on track to meet the they e r ceived funding from icf . Al years to complete and. for example. it Added Services Are Critical to Success is di≈cult to come to any conclusion as to its ve o r- Al of the firms tha achieved modest success in al performance. Those who mve o d farther up the value chain. ve s t m e n t s we e r lim ted to fi s and banks. pleted in July 2006. was dedicated to prvoiding finacing to people working in the Kenyan tea sect. hwe o ve. r the focus has plans. As a conse.000 a n d we e r involed in the asembly of solar compo. v pm t i had intaly set out to pvroide working capi- many e w e r not skiled in the writng of busines tal and end-user finacing. wee r moe r success. to the high poulatin Furthere mo . and it v pm t i has experienced considerably moe r success in was di≈cult to get many of them to mve o expedi. A s a re s u l t . when bursements. While the program stared . util y ne o . Decision Making Needs to Be Done by Those Clos- tions.000 minu investment to be to minstrao process. per viously unelectrified households nwo have elec- nents and the instal o of sytems. be atributed. o r n o t t o p ro m t i n g s o l a r vp . In Morocco v pm t i has contiued to e r ly on suport from the natiol . or seeking to enter the busines. in particu. of the sh instaled. firms tha pvroided further value added. in some cases. While they had energy and ideas. Dedication to Solar PV and Provision of Value- Given tha v pm t i is stil an operationl project. in large part. of busineses tha otherwise would not have been ful.y In Kenya what dauntig. noted tha vpmti wil be e r - gaged in consumer or producer finacing. 4 s e l i n g s ol a r : a p r t 2 /c a s e s t u di e s . A colateral wee r made by icf sta∑ (Legal Department further consequence is tha the adminstrave cost and Environment and Social Development Depart- ae r high in e r l a t i o n t o i n ve s t m e n t s i ze . loan tions wil change significantly between the invest. as those closest to the projects large. v pm t i was able to pvroide finacing for a number lar servicing and maintenace.

The Muramati District Tea Growers Saving pricing s andsystems. Muramati was assuming most of Credit Cooperative. percent dow whnile-payment Mu. An additional reason for the slow initial progress of the project was rooted in that Muramati only had backg rou n d to pay interest on drawn funds and.requirement proved too ramati would market the systems andmuch provide for po- many potential borrowers. therefore. four hours awa. however. and the inter- tential customers with the financing est rates to purchase set at the15 percent per annum were consid- systems. the tea sector.000. Muramati’s primary purpose is delay toing the second and third disbursements. A further issue resulted when the supplier received a faulty batch of batteries. as provide basic savings and lending services well to as those the involved overall repayment schedule. of they were un- willing to make this investment and provided ser- vice from their headquarters in Nairobi. there was a problem with the m u r a m at i di s t r ic t t e a g row e r s sv ai ng s a n d cr e di t co ope r at i v e 45 . deposit on the system and maintain No mark et survey. yet with tea Kenya. m u r a m t i i d s t r c i t t e a g wr o e s v s i a g n a n d c r e i d t c o e p r ta i v e . dertaken during the preliminary stages of the pro- obs tacl e s Progress on the project was initially quite slow. The credit terms initially o∑ered by Muramati The concept for which vpmti thefunds were proved to be problematic. causing a number of sys- tem failures. The customer would be required ered totoopayhig a h. Under the initial agsh reement. as well as in delays in responding to maintenance calls.supplierthe had agreed to establish infrastructure in Muramati’s regions to ser- vice thesh installed through the project. (Muramati). y This resulted in delays in sh . The short-term loan of dedicated was relatively simple.the based financial in risk in the arrangement. Given serving this slow initialv pm t i has progress. as both Muramati and sh supplier the seemed to be waiting for the other party to drive progress. Ltd. was approved for financingvpmti from in prices having been stagnant over the past several June 2000. was Founded in 1993. a local wha∑ordable ich repayment installments. Muramati up to 18would months proved to be far too short to ensure work in partnership with sh supplier. had been un- monthly ments. Finally. the 50 would supply and maintain the systems. of tems were seen as being particularly expensive. t l d . Muramati has grown in to beno one great of rush to proceed with the disbursements the largest savings and credit cooperatives from icf . with a current membership had to restructureof over the terms of the Muramati loan. in the tea sector in Kenya.installing new as the supplier would only install in batches.pay-unfortunately. The funding received was to support years. Similarly. 32. tea the growers were particularly aware of what introduction of a loan scheme to finconstituted ance Muramati value for money. and the supplier’s sys- members in the purchase sh . given the low volume sh orders.

where theythree were years with a down payment no longer re- available for a competitive price. This process could take four the origi sh nalsupplier for the project. this did highlig per annum. of accounts Until 2006. attempted to undertake marketin down funds from this account paigns for sh awareness to its entire members only on approval frifcom. and Muramati eventually did eng a g e a new and supplier it to has f u lly repaid its outstandin 2) request approval of withdraw provide als systems at considerably lower used prices grant than funds. it became sh . there andwas interest rates were reduced to 12 indeed a demandsh for. evidentCredit terms thato∑ered by the cooperation wer many Muramati members were taking out loans changed. While quired. e. 36 financing to its members sh to . Muramati contin was established to manage theTo. plier there partnership were con. at the that the driving factor in purchasing considered decisions to be wamuch s more attractive to po price.flow of funds. a rather cumbersome systemships. Muramati asked to vpmti halt program. Muramati was to draw conditions in the tea sector in mati recenthas years. The gram issuewas too cumbersome to manage and that i weeks or more.MuramatiAs no longer engages in such part a result. systems o∑ered by Muramati at a distinct disadvantag However. its request a disbursement i fc from to the ifc /Muramati account. ject to determine the level sh of demand grant for funds from vpmti . This process meant that Muramati had The results of this strategy have been li two steps to receive funds: 1) mov i ng foraw r d 2006. despite of their the choice. used to train local freel among Muramati members.to the maturity of loans was increas purchase sh on the open market. despite the above initiatives At the time of financial closure. of maintenance was addressed through the was ultimately use of outside its core busine 46 s e l i n g s ol a r : a p r t 2 /ca s e s t u di e s . During the last four years. has failed to properly mat cerns about weak finances and internal and controls. not quality. beMuramati continues to expand its members membership were free to select the system and i held in a joint ifc and account ( Muramati) at Barclays Bank in and is in good financial health. Over the course technicians of the to perform ongoing maintena program’s implementation. The company felt that th from the jointly held account. ht theThese fact revised terms were. di≈cult Kenya. althoug purchaseh 36i fc required that the disbursed funds to the Muramati project day. thus leavingborrow the ers.

ternational Finance.( This new partnership has been The project involved a partnership er i s betw ineen place for over two years and is considered to be (providing management and a financing prog mechanism ressing well. e st toenabling intro- vided the sh ). initially experiencing a great deal of obs tacl e s di≈culty. partnership was dissolved. t ld . and search n I stitute teri) (which (brought project man.solar funds to establish The Ramakrishna Mission infra- structure in rural areas in order to install and s r e i i n f r a s t ru c t u r e f i n a n c e . Currently. dustry. er i s received financing vpmti from to sales service and maintenance were fully integrated. particu- around the initial anticipation sr e i would use loan larly in a challeng that vp mark inget.000 tween the partners. by the provision of consumer loans. n I itial attempts to establish a rural credit mecha nism were unsuccessf er i s was ul. Environ Energy-Tech integrators. banking fi s in n I eirs dia. This endeavor never materialized. Ltd. . it still su∑ers fromsue the wassame addressed eris by providing supplier credit. During the early years of operation. t I s over 15. address two key issues facing the vp n I in- dian The solar concept. The Ramakrishna Mission go n duce(an several small innovations to enhance customer with solar electrification experience satisf and contacts action. maintain sh . eris howperfever. despite its partial backg rou n d guarantee. unfortunately. and after- ruary 2001. five years of free service. and thereplacement. namely. for rural credit). issues that face solar vp markets around the world: a∑ord. reluctant to take on rural consumer credit risk. Tata BP Solar n I dia (India’s v pm t i larg fin ancingest made it possible e st to provide solar cell vp and module manufacturer.Today and . tl d . such as theft insurance.s r e i i n f r a s t u rc r e f i n a c e . damaged parts with rural communities). and renewable energy systems. agement and quality assurance experience). ject sought to address these issues by developing a financial model to provide unelectrified households mov i ng foraw r d with easy access to credit facilities in order to be able to access lighting options. Feb- sh and spare parts sales. y The eventually. er i s n I (formerly .). sumer n I credit. the imple. lack of rural credit mechanisms. and the is- energy programs. Ltd. eris developing continues a to source solar modules from network of solar service centers in the Tata rural BP in areasn I bydia.regular visits by field technicians. Tata Energy Re. The disputes centered experience highlights the need for patience. is engaged in the financing er i s hoped to simplify operations and reduce of construction and mining equipment. and the structure. Ltd. sales Although n I dia has one of the world’s were larg almostest solar 100 percent cash and carry. 47 . Service. working capital loans. whwi ich thpro. orms well— During the first few years of the project. did not materialize. e st ). er i s n I frastructure Finance. The eris experience presents an interesting case studyeris . is and among the largest eventually the non. project has expandedvpmti beyond to other mentation was impeded by significant projects— disputes and it be-has installed sh . focused on some of the more challenging areas of n I dia. and is working with a new rural building on the existing infrastructure electrifiofcation systems service provider. establishing partnerships with rural banks for credit ability and reliabilityeris of technolog pro. and. the lack of after-salesdueservices to the and reluctance er i s toofestablish rural infra- maintenance activities. costs byinf rastruc- establishing a one-stop location where con- ture projects.

000 over a 10-year period. has mov i ng foraw r d awarded six contracts for a total sh of. was given Despite the above obstacles. To overcome this icf consid.000) that are not targeted for grid con- nection. re. of scheme. putting pressure on pri the households would pay a deposit follow maki edngby potential sales margins signific monthly fees. installations ne o scheme. subsidized Swfrou. ments. t I currently dertakes the maintenance and repair ofhas theinstalled system approxish mately . established in 2002. it has not put fort ered historical equity contributions sary e∑ort as tocofinestablish ance to a credit busines meet minimum leverage requirements. m ps argues that con- company had insu≈cient capital tosumers meet leverag cannot e yet a∑ord the monthly credit requirements. 80 increased availability of cheapvp contraband m ps would maintain ownership of the modules systems. Sunlight Power Maroc S. contri. m ps ). its ability to expand and es tion. 6. ne o pays m ps an upfront subsidy m ps . Secondly ne o has . a . sh m ps was originally founded in 1998 to provide potential in. as well as to create a new obs tacl e s credit business vp sales. m ps has made exclusivity in the regions in which sign it ificant was to progress install vpmti under . and it was provided wi increaseth a seven.A. fee-for-service scheme m ps (which Taounate. Firstly. As a result. n I early 2004. inand Morocco. as the company maintain butions that had funded thevpmti business on installations prior to ne o scheme. for solar A number of market issues impacted negativ m ps ’s initial success.112. no new cofinancing was 48 s e l i n g s ol a r : a p r t 2 /ca s e s t u di e s .( in Morocco. ments and. and continues to the ne o systems. required for the project. Thi rental scheme sh rang for ing from 20 to w p. expan- sion and working capital requirements for a fee-for-service project. therefore. closure. obstacle.portfolio. The scheme. v pm t i no fuand rther e∑orts are being made to establi was able to recognize historical shareholder credit scheme. as it has focused e∑orts on Whenm ps applied for financingvpmti from . The the fuvpmti nd. The benefi origi tnal s from). As an exceptional ca ceived v pm t i funding in December 2004. under m ps has the and-a-half-year time frame to complete the attributed installa. under the involvement.000 Under the terms of the agm ps reement. special approval had to be ing was requested to finance infrastructure granted. Furthermore. m ps signed an agreement with m ps had a similar experience v pm t i to pro-other O≈ce National de l’Electricité ne o ).of the system. significantly increas marily in the northern regions of Taza.market for recipients ne o under the stallation and maintenance sh in Morocco (pri. TheThe cumbersome documentation proc ne o scheme was established to vp elec- provide sulted solar in a two-and-a-half-yearcir delay from tricity to the 15 percent of rural households approval to (approx financial . and new service centers v pm t i to funding.business making credit schemes less model was based on a nonsubsidizedforfee-f the or-service public and impacting sales. the ne o business. in return for a monthly m ps fee has not yet managed to establish a paid by the end user. imately 300. depending on the size rower.s u n l g ih t p w o e r m a r o c s . to provide ( jects relating to meeting the disbursem sh under a subsidized fee-for-service scheme. and El Khemisset). si backg rou n d sion has taken place in recent years.un. business.

planning as well process as grants began. n I ment Foundation ). for business development services. goal of increasing contractedthe in July of 1997 to develop a delivery sh of to rural households in developing feasibility study and business plan. toandaddress solar pv sectorboth iss experts GT Consultinggtc . so hig that her volumes they and greater commercial returns could develop and provide rural energy services. turn. ofproviding growth capital in the range of members of the charitable foundation $100. “ assive” amounts of money to launch the emergi dsc ngwas mark desig et ned in response to a view that there solar industry vp . ).( a $41-million rience in private sector project finance.dsg (sprovided fd financing to March 1999. the charitable foundation $10. through the development was a cost-e∑ective of an business over the horizon. icf was brought under one framework. An external initiative. f sd andsdc . and the fundraising and business activities in developing countries. requiring more of a nonprofit model. Inc.000– community $100. was created with theconsultant. Environmental By the end of 1996. found that the countries. solar mark vp et show Solar ed tremendous potential. which vp solar became Management (part of the Triodos Bank Group). n I early 1996.a ( Corporation” was being circulated.raise a total of $50 million Enersol Associates. Enterprises t I soon became Assistance Fun concept paper for a $50-million “Solar Development evident that it was impossible(eeaf). giThe the vengoal its was exto pe. Inc. the sdg . as the final initiative was named. a significantly kn own as an scaled-dow patient capital approach. an in to work on wb g -led initiative. subsidiary. investing up (wi toth high costs $1 billion toand underfunded entrepreneurs) Triodos International Fund catalyze the market was discussed. then wb president g . Comprised of two separate entities.000. joint venture of Soluz. and Development Capital dsc ) and (the Solar Develop. con- backg rou n d sisted of two separate but closely related and sup- Motivated by the enthusiasm about portive the potential entities. pro- investment vehicle that would dramatically vided economies expandof scale could be achieved through financing for commercial companies. f sd was initially for rural solar vp electrification exhibited those proposed by as a $19. dsg . from a Inc.5 million g on . of page 50). The vision was grand. o∑ering business involved in vp the solar during the development industry mid.000–community $2. in e∑ect re- The proposal called for the injection sponded of m to two perceived problems in the market. sdc was envi- the w bg . Originally envisioned as a single entity with both financing and technical assistance components. s ol a r de v e l op m e n t g r o u p 49 . 37 A nonprofi t org n I anization. c a s e s t u id e s 3 Solar Delev opmn e t Gropu The Solar Development Group dsg ).000 ) for privatevp andsolar solar to Jim Wolfensohn. a letter was sent sioned from the as a $32 million for-profit private equity Rockefeller Foundation (on behalf of a number fund. could be realized through lower unit costs. and at the earliest f ds was desig stag needof to respond tovp the market Triodos Solar solar pv Partners was formed by three organizations: concept development. identified over 100 investment opportunities. vp -related of the businesses in developing countries (see proposing the creation of a solar energy investment Table 8 for an overviewsdg.000 in the to assist vp companies solar in United States saw an opportunity topreparing engage with for private investment. and seed financing in the range of 1990s. Triodosvp Solar Partners 37 was ap- private sector companies involved vp in pointed rural solar as advisor. through its two separate entities.

multilat.) received mul- 40 ge f .5 million Target: $32 million Achieved: $12 million Achieved: $28. in large part. totaling $650. 40 as e i m pl e m e ntat ion 41Cordaid and Environmental tilateral and bilateral w llsupport. not only to ties addressidentifithe two ed in the feasibility st key perceived issues in the market. including eight loans to $3.000 Total Capitalization Target: $19. vestment five months later. charitable private investors. $41 million was raised froming activities. microfinance institutions and leasing companies Company Type Not-for-Profit For-profit private equity fund with venture capital elements Number of Target: 75 enterprises in first five years Target: 27 investments in 15 companies Investments Made Achieved: Commitments totaling over totaling $18 million. as support Enterprise Assistance from FundAstroPower (now GE Solar). clear as that the investment previously mentioned.9 million) approved. on dsc concluded its fundraising phase tional Equity Fund. and various socially responsible ri s ) ket development investment ( activities and riskier s 39Cordaid. donors for dg s provided they do not engage in profit national Cooperation ) of ( d gi s mately. go n s. . and Triodos Bank Each entity d s c and( f d s ) w a s established April w i th 2001 at $29 million. Joyce Mertz-Gilmore funds. 42(See Table in commitments. private sector such as venture capit the Netherlands Ministry of Foreign A∑airs. Rockefeller Founda- f ds was supported. the orgaf ds nizations. table go n andcommunity . page 51. Foundation. go n charged with the mar- (seco ). These foundations enjoy mately a tax received -exempt support dsc fr. since in fact.ris funds while were focused the on by tion. and soon approved its 10 for detail 42Calvert World Values In terna- dcs shareholders. Table 9 for detail onf ds shareholders. Swiss State solar vp businesses. . a private individ. not one of th d sg had raised funds from foundations based opportunities in the identified in the feasibi United States. and w bg . Rockefeller Brothers eral and bilateral org38 Fund. three investments disbursed. thereby liquidating Renewable Energy for Development (TRED) the fund Fund 38 Directorate General for Inter.2 million disbursed by early 2004 Achieved: Six investments ($3. Rabobank Foundation. banks. ifc . and approved Group. anizations. foundations made up much of th Secretariat for Economic A∑airs multilateral organizations. but grossly also overstated.) actions. bilateralholder base for.ifc .7 million Geographical Scope Target: Global Target: Global Achieved: 23 countries Achieved: Three countries Type of Investment Vehicles Loans (up to four years at 0 –10 percent Minority position capital investments interest in local or U. ual. the for-profit venture capital fund. dcs page also 51.5 million in 63 projects (54 companies) FIs totaling $10 million $2. The separation of the two entities was t I necessary soon was. individual og n s. as ew ll as thedsc chari- and Stichting Triodos-Doen 39(See Foundation. its own mandate and separate board of directors. by initiatives.41and a numberris of Funds.seco . currency) Provision of additional debt/quasi debt Guarantees (to facilitate local bank lending) Technical Assistance Grants Date Began Operations March 2000 April 2001 Date Closed and Managing March 2004 April 2004 Agency Appointed Operations transferred to the Triodos Assets sold to TRED Fund. private investment ESCOs. f ds began operations in early 2000 with $12 (eeaf). omThere was a ma- 50 s e l i n g s ol a r : a p r t 2 /ca s e s t u di e s .consortium of investors and Ulti-status. TABLE 8: SOLAR DEVELOPMENT GROUP AT A GLANCE SDF SDC Objective Help PV companies prepare for Provision of capital to PV-related SMEs.S.

to manage the go n in thedsc event were to fail. ergy through rental services in Lao PDR. f ds transferred operations terd to the the provision of financing. less than dsc had a yearbegafu tner International Finance Corporation** 3.500 19. less risk-averse.2 having overestimated the maturity vp International of the solar Finance Corporation* 4. SDC SHARREHOLDERS increased rather than decreased. $2. their and in June 2004. expand the the remainder went to operational and number of financing instruments d sc deal-related o∑ered by expenses. the mar- ket.Renewable such Energ asy for Development t er d )( Fund. Those shareholders. the f ds Board of Directors solicited proposals SUNLABOB RURAL ENERGY SYSTEM CO. icf ’s those. Assets were sold to the Triodos should be closed. Amid discussions relating to the restructuring of dsc .8 world. and more holds or villages without the use of subsidies.6 million) of the which had a mandate to provide innovative $29 million project in funds dsc committed had been to financing. with its flexible. the 9/11 attacks had an impact on **Represented emergingby IFC’s markEnvironment et and Social Development Department.0 market and the number of business opportunities. resulted in lower return expectations. used The dsg initiative began in 1996 and ended in this handbook in the development of its business 2004. in fact. Fund. SDF in SHAREHOLDERS the initial structuring d sg felt theof market was and SHAREHOLDER PERCENT where it actually was. a∑ordable funding.500 1. Sunlabob Rural Energy System Co. the time of sale. A SHARES C SHARES PERCENT tention of manufacturers away from the developing Global Environment Facility* — 10. dsc was disbanded felt that the investment fund had as no a leg al entity future and .. within dsc began to take place. tohow ever. disbursed to vp solarprojects in over 20 countries. the conflicting interests the smaller of the di∑er. During those eight years. the World markeBank t assessment 45. was able to meet most of its in- vestment objectives.000 2. while the increased NUMBER OF NUMBER OF demand in the developed world was shifSHAREHOLDER ting the at. sumer financing handbook that provided modeling tools and guidelines for the assessment of credit pe r f or m a nce and ou t c om e s risk.8 Global Environment Facility** 2. felt dsc should that be restructured.000 34.0 Furthermore. f ds financing was provided to s ol a r de v e l op m e n t g r o u p 51 . Despite the restructuring ent shareholders were making it di≈cult e∑ort. the vp cost had actually of solar TABLE 10. n I contrast. which has proved effective. These issues. Though not quite the billion-dollar order-of- The World Bank awarded Sunlabob the Devel.jor disconnect between where those involved TABLE 9. shareholders. and that new investment guidelines were needed.0 ment indicated that the existing investment guide- *Represented by IFC’s Environment and Social Development Department. The market was simply not ripe for equity investments.000 was disbursed to A revised implementation plan to investments. given the**IFC’s nature Infrastructure of Department. there were not enough viable invest- reach consensus. standpoint. Environment and Social Development At Department. lines were unrealistic. 11. While restructuring The plan required larger shareholders buying out was necessary.750 46. market conditions were changing: the Latin American and East Asian fin*ancial IFC–Environment and crises and Social Development Department. Ltd. Triodos n I ternational Fund Others Manage. only three involvement more from a profitabilityyears after it began operations. Neither had vp mark the et solar moved as expected. called. $650. 13 percent ($3. economies. magnitude initiative thatdsg was initially called for. whoment looked at opportunities. consequently. Of this amount. n I 2002.85 million was plan for providing affordable and reliable solar en. Others 48. f ds . LTD. valuable lessons for the future.1 operations.. n I SDG had an impact on the solar PV market beyond early 2004. tricity affordable for the majority of rural house. opment Marketplace Award in 2005 for its work in was certainly an experience that has provided many developing a rental system that makes solar elec.. and to lower the return requirements was presented Discussions on restructuring share to and ownership approved by a majoritydsc of the board. SDF developed a con.

has been moderately successf u l. This simply sue from did thenot very beginning 43The initial . Measuring the environmental sector experts impact was very has attractive d sg investees. with eac vestments were approved dscby the Board of In. therefore. each wound vestors. the foundation was insu≈ciently als. d sg never set out to determine Along thethese same d sg lines. often family owned. for the equity investments dsc was looking to make Strategic Alliances Were Not Developed and. the diversity (investment of terminated prematurely sofsubsequent t financing vehicle. thus. the for-profit investors. go n s. having a separate board of directors. it proved im the dsc management took its fiduciary responsibil. to providing working capi sd g shareholders forced a man- agement structure that was not the cancellation of the World vp subsidy Bank solar rather than providing the seed capital an only cumbersome. portive policy and regulatory environment. n I the dsg . struct occur. the market was as yerestructuring t unprepared . go n s. retail distribution reflect the need made to up satisf 80 y the di∑erent obj percent of the f ds portfolio. but one prog in ram in the country). evolving into or overall success. to reach consensus among the shareholders ity very seriously. This Furthermore. an success is- companiesdsc for investment. is perhaps one of the greatest (non f ds had been envisioned to be an entity related) toreasons prepare for the limited dsg . on the With so diverse a compositi solar industry vp . but one of the primarywereargequally umentsinterested in dsg the . had been celebrated during the fundrais keting and consumer financing than manuf stagea. ris s. was and f ds not in-one sin 43 While perhaps not a direct ultimately disbursed to three countries: vestment Keny a (in- graduated dsc . d sg found it sizable to produce the large-scale d sg chang next e that to impossible to satisfy everyone’s investors had envisioned and desired. despite a year of attempts. of dsg was designed sof ds that and dsc would pro- dsc was to have made 28 investments videover a complementary services. private individuals). only companies six in. vp has been trumpeted Solarn I fact. on the I nd s c donesia project pipeline. guidelines While were inappropriate. dsc for investment. and foundations (15 While f ds certainly had a positive impact in total). The CO opportunity to consult vp wit emissions. f ds transcended cause ofsdg ’s lack of profitability vestment w e nt bank r upt in early 2005). omitted to take number of solar vp systems installed as siga n result ificantof advantage of its relationshi d sg support. and Boliviadevelopment (investment assistance originally int which the intended relationships did not materialize. diversity of the di∑erent s lenges facing the market were more relatedin to d sg mar. f ds would p“ repare” 10-year period. a 52 s e l i n g s ol a r : a p r t 2 /ca s e s t u di e s .000 own mandate. that tation retail that operations it would be di≈cult to ma more directly benefit the rural people. althoug became h only apparent half that the structure and in of the approved funds have been disbursed). Following the beliefAlthoug s that h the the chal. support Shareholder Diversity Proved Problematic enterprise growth. cturing it rapidly became apparent during im and wholesale distribution. impact achieved through the implementation er and have grown wi of thout the benefit of techni technologies and the resulting 2 reduction training in . Between 2001 and 2003. and it is therefore gi saf ven e tothat dsg assume shareholders that did not stay inve the environmental dsg impact was neglig of ible. the initiative long enough to cement Furthermore. and support innovation within the industry.case fe w of however. it decided not to invest in unsatisfactory deals. however. totaling $3. this type of relationship d sg between sh systems were actually installed d sg shareholders as a result dsg ofand investees did not materi investment. was di≈cult to manage. Strategic alli mandates that served as motivation could for have their been partici- developed along a number of li pation in the initiative. help create a more enabling environment. with Only its $650. Yet. w h at wor k e d increase and w h at di d not the amount of consumer finance available. Most contacts has consistently been the positive solar environmental companies vp sme ares. it would be impossible World Bank Group toand other shareholders in t determine the actual amount 2emissions of CO creation that of an enabling market environment were displaced. to proved di≈cult.to nI fact.9 million. dsc ultimately was able to return tI money is interesting to to note that while some of its investors upon project shareholders closure. most potential investees expres for many reasons. it a Many of dsg ’s shareholders had environmental have been used to advantage. ous and that interests of such a diverse sharehol stimulating demand at the retail Thelevel separation would dsc benefiandof tf ds had been designed to the entire industry.

which pvroided loans. dg s grosly e vo e r s t i m a e d t h e m ak re t por t of solar v p i n t a ve s . Furthermoe. isted withn it. The i t s t e n . and tha additional finacing Despite the fact tha thee r was. Rather than making bad deals. Had the solar vp tentio been paid by f ds to develop the enabling sector actualy performed as foe r cast. An enabling environ. tA the time for market development and capacity building in the porject was implemented. Perhaps one of the greatest leson tha can be drawn from d sg is one tha e r sulted not from a fail- ue r to achieve investment goals. c on l u s ion dsg s ’ intal goal was to ince r ase the delivery of sh to rual households in developing countries and to suport the development of the solar v p m a rk e t . In hindsight. ustr y d sc failed to accomplish any of its goals. while d sc . til this occurs. could e r gulatory and policy environment wil not alter un.ye a r fi e x d life and e r turn expectations. bilites for equity investment. d sc . While f ds is seen as having had a positve impact on the solar vp ind. or the e r ality was tha d sg was fo. Had moe r at. and. and is. Early e r cognito of market e r ality would have led to a smaler los of funds. d sc mangement was quick to e r cognize tha the intal investment criteria wee r to stringent. op r tuni es. pvroiding a leson on the merit of e r - strain. While the World Bank is in a posi. but rather from the er spone to this failue r . knwoledge and awe r .f ds . a clear need i n s t r u m e n t s s h o u l d h ae v been vid por ed. and the family-woned na- s o l a r i n t a ve s . di∑erent finacing instruments costly and e r quie r s significant er sources. and grants. abilty of end-user finace. it is easy to stae tha the focus of the porject was to . for example) wee r a l s o i n vo l e d i n for equity investments. At this stage of mar- ment is necessary for sector development. d sg came up short. r those in- the solar vp sect. the same time. guarntees. did not even come close. and it worked with shae r holders to e r - vise them. e r sulting in lit e investment los. d sc may have found moe r i n ve s t m e n t ence would e s u r l y h ae v been quite di∑erent. e w ho e v . w i t h enthusiam by local governments for solar vp . s ol a r de v e l op m e n t g r o u p 53 . was largely able to meet its investment goals. it failed to make any deals. ve o ral . d sg was disbanded. vp makret was poised to take o∑. nes of solar vp ). w n a ro t h a t h e po r- Need to Focus on Market Development and ject should hae v focused on other er technolgies in Capacity Building addition to solar vp . t h i s e r lationsh p was not and the number of busines oprtunies tha ex- taken advantge of by d sg . The two enties tha made up d sg h a d ve r y di∑erent experiences. the private equity fund. Management was corect in making this decision. the dg s experi- environment. ovled in the industry truly did beliee v tha the solar cused moe r on indivdual busineses. other groups (the Solar v p m a rk e t s s i m p l y we e r not matue r enough United Nations. which could have jeopad r i ze d t h e e r puta ions of those in- voled. Like many other porjects implemented aorund tion to impact and promte local government sup. but it is ket development. a l t h o u g h t h e e r was no cood r inat o tue r of most solar vp sme s further limted the posi- between the di∑erent projects. the not-for-profit arm. as wel as and long-term patient capital was needed. n o t p v r oi d e t h i s . and d sg would have had a greater ve o ral impact. When it became ape r n t t h a t h e m a rk e t could not produce oprtunies tha met the e r - vised investment criteria.

whenvp solar company remained competitive in a newly privatized environment. used The futo nds build wesion re system. but isolated. er. cealcp o was in discussions icf for ponds with available at the Bubunawan plant. withconjunction seasonal chang wieth s the mw recently built 7 with a local currency loan (the first provided in the Philippines) in g e neration capacity occurring . c a s e s t u id e s 4 Cagaay n Eleccirt Powre & Lithg Company Cagayan Electric Power & Light Company generating equipment within the dist (cealcp o ). The electrical grid on the island up the productive is well capacity devel. received $4 million in ndinghfromnear load centers. plant. egf fu(throug believedwere to o∑er the poten- icf ) in 2002. w a s estimated to lead to customer base. The funds will allow large amounts of power over mw 200 across large was already supplying powercealcp o to ’s system. The purpose of the project tial was to to address seasonal generation capaci demonstratevp solar ’s e∑ectiveness (throug They h weare con. cealcp o to pursue its expansion program through a more stable distances without compromising sy The stem hydroelectric reliability plant . also considered compatible with junctive-use application) in addressing cealcp o ’s distribution needs and the geography of the trans system capacity issues. w i th tal. total generating ca- 44 Af t er the solar pv plant became operational. for power generation during peak load period with a subsidiary of Hawaiian pany ’ s ex p ansion 45The plans. 7 run-of-the-river installation hydro. included forming a partnership 44 to assist with general corporate financing lized the com. vestigating suitable applications vp -based tion for solar in 2emissionsCO on the island of M 54 s e l i n g s ol a r : a p r t 2 /ca s e s t u di e s . The stated obje the project was to demonstrate the techn backg rou n d ational. The addition Electric Industries. In toward e≈ciently expanding its system and attracting a larger Environmental Finance Group. and planning an based project. As a result. of an existing hyd oped. the m w g the o alplant of 1 in. then thus reducing 2emissions. The Bubunaw transmission a n Hy d ropow e r Plant Project. pany on the island of Mindanao in wh the ich are by their very nature small and si Philippines. an interna- tional utility with undertak private poweer n identified the possibility vp . a private electricity distribution work of cealcp o . varying its output with the avail 45Desig n ed to ensure that the nies on the island must obtain solar vp epowportions larg er.800 m w . the fosolar r vp a solar plant would reduce the need for investment objectives in the Pacific Rim. their power supply from local sources. Most of the g e neration The solar capacity vp plant was designed to operate in Department provided cealcp o is from hydroelectric plants. and operated in conjunction that wouldgef use funds to partially finance the with an existing mw small.the-river transport hy d roelectric power plant.com.environmental w h en review solar vp was not available. A pre-appraisal mission ce a l c p o took toplace purchasein thermal energy during peak investment program geared the Philippines in December icf ’s1998load by the periods. CO to. The waterof saved. cealcp o and other distribution followcompa. whi million. mw of asolar nominal vp -based pow1er electric plant. Distributed vp technolog solar ies. power was being produced. a 1mw distributed generation vp power plant. and economic feasibility vp of us Mindanao is the second largest island electricity in the supplies Philip-for supplementing a pines. a small in an amount equivalent to $15 inf r astructure on Mindanao is unable run-of to . would be held in smal cealcp o ’s expansion plans n I 1998. was to operate as a l financing structure. ifc ’s Infrastructure pacity of 1. icf proposed to gef a project network of cealcp o . solar Based on the findings of the December 1998 which was integrated into mw distribution the 80 appraisal mission. which would be integcealcp ro ated with th power distribution network. and it has a project.

issued an international host of project re. President to a small Arroy mw o -solar 1 investment.of approximately 1. Construction startedthe inty Aug ust 2003 pical project finance structure were not geared and was completed on schedule. The convertible loan structure (grant cag a y n e l e c t r ic p ow e r a n d l ig h t coma pn y 5 . During project implementation.200 metric tonnesw h atannually wor k e d and. which was savingsge. was awarded to Sumitomo Corporation of Japan. benefits and the proven nature of solar out incident since its commission. Today. the in De- Philippine regulations did not make the cember 2004. it quickly be- which utilized pv modules solar supplied by Sharp came evident that both the local permit process and Corporation.w h at di d not The project was endorsed bygef the Council in December 2002.y remains As a result. with the understanding that sta∑ the cealcp o at loan and wotheuld contractors from Sumit- be forgiven after five years of satisfactory project omo Corporation did an impressive job. obtaining more than 50 permits and licenses in In the period leading up to the final placeapproval for the of facility.in-country financed the remaining $1. but also of complying with a the funding cealcp o . vp technolog t I . The Philippine loan. despite the obvious envi- developing world. and local presence. cealcp o the solar thepro- vp only solar pv power plant in the world that jectis manag oper- ement team was required to perform ational in a conjunctive-use application tasks and submit with a hyreports . both through icf the rep. learning to successfully operate the pro- turnkey 1 mw grid-tied solar pv plant. that were not relevant to dro plant. aner project. not only of operation. f The funds were initially provided critical as a to the success of the project. cealcp o received a $4 million The icf /egf project wiceth alcp o has had a strong convertible loan icf . vp On the permit of the Philippines inaugurated the plant side. ceathe lcp o solar pv facilitydistinction betw vp een plant the and solar the much represents the largpv est installation solar larginer fossil-based the plants. The contract ject since completion of construction. finance disbursement requirements quest for proposals for the construction and. offinaally. usingfrom gef funds.8 million resentative in construction o≈ce in Manila and through the e∑orts costs frcealcompo ’s own cash flow and interest of the cealcp o management and sta∑. and it has been operating ronmental with.

that. cost e∑ective vp ifprices solar declined su≈ciently When the . solarHowever. t I also ill that the technical solution is not market solution. in order to ensure timely The completion cealcp o experience of is an interesting on construction. many of which were designed t I was widely recognized at the timemark theet project transformation initiatives. grams and projects. been aappears projectto with a high potential date to have been successful in vp to proving tion.convertible to loan) of the project called conclus iofon r a rigid disbursement structure. t I became apparent. in the cealcp o future). The plant. it was ex- Furthermore.y the basis of cost e≈ciency. icf served to subsidize approxiing mately distribution 70 system capacity iss percent of the construction and startup cealcp o solar plant costs vp of the has made a strong techn cealcp o solar plant.000 be tonnes 2over its of CO lifetime. resulted in a significant re strate that vp could solar be used as an e∑ective greenhouse and gas emissions. how- ever. significant subsidization is limi most important demonstration cealcp o value of t project is that vp workssolare∑ectively in a con- junctive-use application. vp cealcp o The solar pro-vp case for the reliability of utility vp power -scale ject never intended to compete head-on plants. n Iegf fagrct. with vp prices solar having in- be an e∑ective and technically reliable creased. but it didvp intend plant has to demon. financing was provided. The plant is technically reliable source of power that displace could 24. theprovided (through a conjunctive-use application) i through . would cident since its inauguration in have2004. which has operated predicted without to occur in. ant. the prescribed disbursement like other icf /egf structureclimate change mitigation would have to serve as a guide only. technolog the potential y to for replication wit address peak-load energy supply issues. Had the p an existing small hydro plant with of solar limited govp ne downstorag as was e expected (and it is s capacity.cealcp o the project intended topected thatvp solar prices would decrease and that demonstrate that there are technical solar advantag technolog vp es to y used on a utility scale wo the operation of such a plant in conjunction therefore becomewimore thcost e∑ective. with other Furthermore. 56 s e l i n g s ol a r : a p r t 2 /ca s e s t u di e s . by avoiding the need alternative energy generation technolog chase ies alternative on the thermal cealcp o energ solar . cealcp o was de- was developed that there were more cost-e∑ective signed as a stand-alone experiment to dem technologies available to address peak the load energy appropriateness ofvp the technolog solar y supply issues.

.

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Bernard McNelis. Joanna Willott Please address questions or comments to Alan Miller (amiller2@ifc. Stacy Swann.ack now l e dgm e nt s SelingSolar has been prepared by the Sustainable Business n I novator Group of Environment and Social Development Department icf . Heather Simpson Reviewers Anil Cabraal. Devyani Hari. Authors Natalia Magradze. Jon Forster. Fernando Manibog. Lucie Giraud. Photography All images courtesy of IFC and World Bank Sta∑ unless otherwise credited. Pallavi Shah. Amy Sweeting Contributors Sachin Agarwal.org).org) or Natalia Magradze (nmagradze@ifc. Lisa Da Silva. of This report would not be possible without the insight and guidance of Dana Younger. Maurice Biron. Terry Hart. Eluma Obibuaku. Shilpa Patel Editorial Team Louise Gardiner. Hany Assaad. Margie Peters-Fawcett. Cover inset (woman pumping water): National Renewable Energy Laboratory Page 32: Micro Energy n I ternational 60 . Shir Ashar Naveh. Fabio Nehme. Sandeep Kohli. Russell Sturm. Ashington Ngigi. Alan Miller.