International Conference on Energy & Environment, 2018
Solar Energy as Product Service Systems for the
Low Income Segment - A Case Study in the Rural
Areas of Bangladesh
Zulficar Niaz Tushar,1,*
Department of IPE, Bangladesh University of Engineering and Technology
Dhaka-1000, Bangladesh
*
tushar.gc@gmail.com
Abstract— Providing adequate access to electric energy
represents a great challenge for developing countries. Lack of
necessary infrastructure further complicates the situation for
people in the rural areas of developing countries. In this regard,
Solar Home Systems (SHS) can be a good solution because they
do not require the expensive infrastructure needed for the
electricity transmission and distribution. However, the majority
of the people living in such rural areas are often characterized as
low-income demographics. Consequently, the high cost of solar
home systems becomes a significant barrier for the dissemination
of solar energy. Considering the overall context, the
implementation of Product Service-Systems (PSS) business
model for the provision of solar home systems can be a
sustainable solution. In a PSS business model, the PSS provider
sells the use or availability of a product that is not owned by the
customer. So, this business model will make the SHS more
affordable for the rural people. Furthermore, the vast market
size, high growth rate and less competitive environments of rural
area make the business profitable for the PSS providers. In this
paper, we identified critical factors for generating customer
value and designing a PSS business model of SHS, based on
literature review and a case study with solar energy sector in
rural areas of Bangladesh.
Index Terms— Product Service Systems; Business Model;
Solar Home Systems; Case Study; Bottom of the Pyramid;
Emerging Markets.
I. INTRODUCTION
Solar Home Systems (SHS) are being utilized to fulfil the
basic electricity need of the people who lives in the rural area
of Bangladesh. With the help of partial government funding,
currently 18 million people are using SHS to fulfil their basic
electricity needs [1]. Although sellers are providing low price
SHS packages and instalment facilities to the buyers, SHS is
still not affordable to the many low-income demographics
people who living in such rural areas. SHS sellers of
Bangladesh are still stick on to the ‘sale on product’ concept.
Although there are concrete proofs of Product Service-
Systems (PSS)’s effectiveness in achieving a resource-
efficient society, so far, the whole concept of PSS has been
developed based on the context of the matured economy in
developed countries [2]. However, by utilizing the PSS model,
which puts emphasis on the ‘sell of use’ instead of ‘sell of
product’, it might be possible to ensure a better availability
and affordability of basic required electricity to those low-
income demographics people of developing country such as
Bangladesh [3].
In this study, from the constructed case, the critical factors
for generating customer values had been identified. On the
Paper ID [ICEE_2018_174]
basis of those critical factors a PSS model is developed. The
features of the PSS model have been illustrated in a way that it
could counter those critical factors successfully.
II. LITERATURE REVIEW
A. Product Service-Systems (PSS)
For achieving sustainability and resource-efficient future,
PSS is one of the major concepts. In recent years, the interest
of PSS research has increased significantly in both academia
and industry [4].
PSS implies the focus on the services of the product rather
than the product itself to achieve a longer life time of a
product [5].
PSS business model allows the businesses to gain customer
loyalty and competitive advantage. It also helps businesses to
build unique relationships with their customers by offering
them customized services that fulfils their individual needs [5],
[6].
Goedkoop et al. in 1999 have first gave the first formal
definition of PSS: “A product service-system [PSS] is a
system of products, services, networks of “players” and
supporting infrastructure that continuously strives to be
competitive, satisfy consumer needs and have a lower
environmental impact than traditional business models” [7].
To develop a PSS business model various approaches can
be taken.
 Focusing on selling the services of the product rather
than product itself [3]
 Focusing on the sustainability aspect of the offering [8]
 Replacing product by use of the product [8]
 Shifting customer’s preference towards Service
oriented business model [8]
B. Solar Home Systems (SHS)
Adds SHS converts solar energy into electricity via a
photovoltaic (PV) module. Most of the times this energy is
stored into a battery to run different electrical appliances, such
as LED lights [9].
In Bangladesh, a typical SHS package contains a solar PV
module, a battery and a regulator for controlling the charging
and discharging of the battery, panel Structure and Cables.
The target of these systems is to provide the basic required
electricity [10].
Infrastructure Development Company Limited (IDCOL),
one of the Government owned organization in Bangladesh,
have started SHS program from January 2003 to fulfilling the
basic electricity need of the people of Bangladesh who are
International Conference on Energy & Environment, 2018
living in the rural areas. Under this program 4.12 million
SHSs have been installed up to May 2017. IDCOL is currently
working to achieve its target to finance 6 million SHS by 2021.
Currently this program is considering as the largest off-grid
renewable energy program in the world [1].
III. METHODOLOGY
The main purpose of this study is to propose a Product
Service-Systems (PSS) business model by identifying the
critical factors for generating customer value to make the
Solar Home Systems (SHS) more accessible and affordable
for the people in the rural areas of developing countries such
as Bangladesh.
The PSS business model has been developed based on the
review of existing PSS and BOP literature, and a case study of
solar energy sector in rural areas of Bangladesh.
The research process starts with developing and connecting
the information regarding SHS in Bangladesh and forming
them into a case. The information necessary to construct the
case on the relevant fields are found through literature survey
based on the key string — “Solar Home Systems” +
Bangladesh.
After the analysis of the SHS case study, the critical factors
were then identified which are to be considered as the
determinant of the PSS model. The identification of the
critical factors is especially important due to the objective of
developing a market specific PSS model. These critical factors
are than used as inputs to develop a PSS business model.
IV. CASE STUDY
A. Case Description
According to world bank, in 2016, 75.9% of the population
in Bangladesh had access to the national electricity grid. But,
this number was far lower in 1990, only 8.5% [11].
Of the total present installed grid power generation capacity
(MW), as of August 2018, 54% is contributed by the public
sector and 46% is contributed by the privet sector [12].
In order to develop medium to large-scale infrastructure
and renewable energy projects, Bangladeshi Government has
established the Infrastructure Development Company Limited
(IDCOL) in 1997 [13].
With the introduction of SHS program in 2003, IDCOL has
been continuously working to provide the basic electricity
need of the rural people of Bangladesh who have no access to
the national grid. Currently IDCOL has 56 Partner
Organizations (PO) who are working in this program. These
POs are getting assistance from IDCOL in the form of grant,
soft loans, and necessary technical support [1].
The common SHS packages provided by the POs of
IDCOL generally ranges from 15 to 130 watt panels. A
standard SHS package contains solar panel, battery, charge
controller, panel structure and cables. The price of these SHS
solution varies from around 9,400 to 58,800 BDT [10], [14].
These SHS packages usually come with separate warranty
for each of the component of the package. For example,
BRAC Solar, a privet organization of SHS seller, provides
separate warranties for the components of SHS package. The
components this particular SHS package contains are solar
panels, battery, solar micro inverter with built in charge
controller, solar inverter with built in charge controller, and
LED lights. The period of warranty they are providing for the
solar panels is 20 years and for the other components 3 years
[15].
Paper ID [ICEE_2018_174]
To make the SHS affordable, both private and public
sectors of Bangladesh are providing many incentives towards
the low-income segment of the rural people of Bangladesh.
Privet organizations are providing long term instalment
facility with small down payments, as low as 10% [16], [17].
On the other hand, to promote and develop the SHS sector,
government is providing huge amount of low interest special
loan incentive towards the POs of IDCOL [18].
B. Study procedure
The case has been studied with the objective in mind to
design a Product Service-Systems (PSS) business model by
identifying the critical factors for generating customer value to
make the Solar Home Systems (SHS) available for the people
in the rural areas of developing countries such as Bangladesh.
The core information as well as the critical factors for
generating customer value has been identified from the case.
The data collection method used for the case study was based
on web search, public surveys and reviewing company
documents.
V. RESULTS
The target group of SHS in Bangladesh is the segment of
people who are living off the grid at the rural area where it is
both difficult and expensive to provide electricity through grid
expansion [1].
In order to make SHS available and affordable to the target
segment, the POs of IDCOL are designing their SHS packages
in a way so that it will be able to fulfil its user’s minimum
basic electricity need at the lowest cost [16], [10].
In spite of the fact that the POs of IDCOL and other private
SHS sellers are providing instalment facility at a reduced
down payment, the initial cost is still pretty high for the
majority of the people living in the rural areas of Bangladesh
[16], [17].
According to Preliminary Report on Household Income and
Expenditure Survey (HIES) 2016, presented by Bangladesh
Bureau of Statistics (BBS), a family’s monthly expenditure
and income are respectively 14,156 BDT and 13,353 BDT in
the rural areas of Bangladesh [19].
Furthermore, end user cannot get loan facilities directly
from IDCOL. They only provide loan to its POs and end users
have to get the loans through them [18].
On the other hand, at their lowest price SHS package, SHS
sellers are providing a system which can produce enough
energy to power only 2X3 Watt LED light [10].
Even though SHS sellers are giving 20 years of warranty
for their solar panel, they are giving only 3 years of warranty
for their other products of the packages, i.e. battery, solar
micro inverter with built in charge controller, solar inverter
with built in charge controller, LED lights [15].
Although in the long run SHS is a better option, due to
several reasons such as the relatively high initial cost,
unattractive features, and quality concerns, people often get
reluctant to own a SHS system, even though they have both
need and interests.
Based on the study on the presented case, the following
three major critical factors have been identified of SHS
packages provided by the Bangladeshi SHS sellers:
1. High initial Cost
2. Low features
3. Durability of the components of SHS packages
International Conference on Energy & Environment, 2018
The model of PSS structure which is proposed in this paper
has three features. The features of the proposed PSS structure
which has been suggested to minimize the impact of the
critical factors are explained below.
Pay per use business model: In the pay per use i.e. PSS
business model, users will only pay for the output provided by
a product and do not have to buy the product [20].
Since, users do not have to pay for the product, but only for
the service provided by the product, the PSS business model
has the potential to reduce the entre barrier (i.e. high initial
cost) for new clients [20].
Non-transfer of ownership: On the other hand, since users
only pay for the use of the product, the ownership of the
product stays to the PSS provide. This way, the life cycle of
the product also becomes the provider’s responsibility. This
setting gives PSS providers a good opportunity to design their
product with quality components and might make their
product more durable [20]. On the other hand, non-transfer of
ownership may allow the most appropriate end-of-life
treatment of SHS via cascade use [21].
Ability to add or remove features: With the ability to add or
remove features as per user requirements, users could be able
to use the system as per their need. So, they will no longer
restrict to a specific system limit (i.e. 2X3 Watt LED light).
PSS also fosters upgradability, which ensures longer product
lifespan [5].
With the PSS model built with these three features it might
be possible to counter the three main critical factors for
generating customer value to make the Solar Home Systems
(SHS) available for the people in the rural areas of developing
countries such as Bangladesh.
VI. CONCLUSIONS
With this study a model of Product Service-Systems (PSS)
has been proposed to make the Solar Home Systems (SHS)
available for the people in the rural areas of developing
countries, such as Bangladesh. From the case study, the
identified critical factors – high initial cost, durability of the
components of SHS packages and unattractive features are
working as a resistance factor for the availability of SHS to
the most relevant customer segment. The features of the
proposed PSS structure have been selected to counter these
critical factors. All these critical factors could be counter by
the features (Pay per use business model, non-transfer of
ownership, ability to add or remove features) of the proposed
PSS model introduced in the design. First, high initial cost
could be tackled by the pay per use business model. Second,
with the non-transfer of ownership feature, the life
cycle/durability of the components of SHS package could be
improved. Third, the ability to add or remove features could
counter the unattractive feature of problem of SHS. However,
for better understanding and further improvements, future
research needs to validate the proposed PSS business model
for SHS by applying this model in real market environment.
REFERENCES
[1] (2018) Infrastructure Development Company Limited (IDCOL)
website. [Online]. Available: http://idcol.org/home/solar
[2] Ana Marzal Lópeza, Frazer Musondaa, Tomohiko Sakaoa and Noara
Kebirb, “Lessons learnt from designing PSS for Base of Pyramid,” in
Proc. The 24th CIRP Conference on Life Cycle Engineering, pp. 623 –
628, 2017.
[3] Stahel WR. Langlebigkeit und Materialrecycling, Strategienzur
Vermeidung von Abfa¨llen im Bereich der Produckte. Essen: Vulkan
Verlag, 1991.
Paper ID [ICEE_2018_174]
[4] Khan, M.A. and Wuest, T. “Mapping of PSS Research: A Bibliometric
Analysis.” In 3rd North American Industrial Engineering and
Operations Management (IEOM) Conference: September 27-29,
Washington, DC, USA, 2018.
[5] Khan, M.A., Mittal, S., West, S. and Wuest, T., "Review on
upgradability–A product lifetime extension strategy in the context of
product service systems." Journal of Cleaner Production (2018).
[6] Farrell, J. and Saloner, G., “Standardization, compatibility, and
innovation.” The RAND Journal of Economics, Vol. 16, pp.70-83, 1985.
[7] Goedkoop, M. J., Van Halen, C. J., Te Riele, H. R., and Rommens, P.
J., “Product service systems, ecological and economic basics,” Report
for Dutch Ministries of environment (VROM) and economic affairs
(EZ), Vol. 36(1), pp.1-122, 1999.
[8] Mont O.K., “Clarifying the Concept of Product Service Systems,”
Journal of Cleaner Product, Vol 10, pp. 237-245. June 2002
[9] Noara Zohra Kebira and Daniel Philippa, “The PSS Quality
Framework for Solar Home Systems,” Energy Procedia, Vol. 93,
pp.168-173, August 2016.
[10] (2018) SolarEn Foundation website. [Online]. Available:
http://www.solarenbd.org/packages.php
[11] (2018) The World Bank website. [Online]. Available:
https://data.worldbank.org/indicator/eg.elc.accs.zs
[12] (2011) Bangladesh Power Development Board (BPDB) website.
[Online]. Available:
http://www.bpdb.gov.bd/bpdb/index.php?option=com_content&view=
article&id=5&Itemid=6
[13] (2018) Infrastructure Development Company Limited (IDCOL)
website. [Online]. Available: http://idcol.org/home/about
[14] (2018) RIMSP Foundation website [Online]. Available:
http://rimsobd.com/rimso%20foundation/subpages/products/solar%20h
ome%20systems/Solar_home_systems.html
[15] BRAC Solar IPS BRAC Solar Home System, BRAC.
[16] (2018) Bright Green Energy Foundation (BGEF) website [Online].
Available: http://www.greenenergybd.com/shs.php
[17] NAOMI AHMAD. (2011) The world Bank website [Online]. Available:
http://blogs.worldbank.org/endpovertyinsouthasia/solar-home-systems-
lighting-bangladeshs-countryside
[18] (2018) Infrastructure Development Company Limited (IDCOL)
website. [Online]. Available: http://idcol.org/home/r_lending_terms
[19] Preliminary Report on Household Income and Expenditure Survey
2016, BANGLADESH BUREAU OF STATISTICS (BBS),
STATISTICS AND INFORMATICS DIVISION (SID), MINISTRY
OF PLANNING, GOVERNMENT OF THE PEOPLE’S REPUBLIC
OF BANGLADESH, 2017.
[20] Arnold Tukker, “Eight types of product–service system: eight ways to
sustainability? Experiences from SusProNet,” Business Strategy and
the Environment, Vol. 13(4), pp.246–260, July/August 2004
[21] Khan, M.A., Kalverkamp, M. and Wuest, T., "Cascade Utilization
During the End-of-Life of Product Service Systems: Synergies and
Challenges." In Cascade Use in Technologies 2018, pp. 1-7. Springer
Vieweg, Berlin, Heidelberg, 2019.