Fee-for-service companies for rural electrification with photovoltaic systems: The case of Zambia

In developing countries, photovoltaic systems often remain unaffordable for inhabitants of rural areas. Therefore, special financing mechanisms need to be implemented to support their dissemination. For instance, fee-for-service schemes enable users to spread the up-front costs of photovoltaic systems over a long period, and provide a solution to the problem of their long-term maintenance. The paper surveys Energy Service Companies (ESCOs) that have been established in the Eastern Province of Zambia. Three small enterprises have been selected in 1999 and each manage 100-150 solar home systems. Regular contacts with technicians facilitate their follow-up and provide feedback from customers. Systems are now running efficiently and customers seem satisfied with the quality of the service provided. However, solar systems tend to be overused and batteries to be constantly discharged as the electricity loads increases. Furthermore, these small enterprises still face financial uncertainties due to a high inflation rate in Zambia and the difficulty to increase regularly monthly fees. Even with an initial subsidy from the funding agency, only the wealthiest customers of the area, with regular incomes, can be targeted. And like all rural electrification programs, a long-term involvement of the state is still needed to cover part of the capital costs and expand the scheme to new customers. However, even with its current limitations, this case shows that a well-articulated public-private partnership can deliver a cost-effective energy service in rural areas. With a more flexible offer of photovoltaic systems and the addition of other energy services, small energy companies seem to be able to usefully complement the role of conventional utilities. (C) 2009 International Energy Initiative. Published by Elsevier Inc. All rights reserved.