Off-grid electrification with solar home systems: The experience of a fee-for-service concession in South Africa

In rural areas of developing countries, electrification projects with photovoltaic systems were conceived as pilot projects with the implementation of a limited number of systems. After considerable financial support from international donors, photovoltaic systems were often quickly abandoned few years after their installation. Using micro-credit institutions in the energy sector or implementing small utilities with a fee-for-service model is now considered as two desirable options to create a dynamic self-sustained market for solar home systems.South Africa launched in 1999 an ambitious off-grid solar electrification programme with fee-for-service concessions. Operating as small-scale utilities, fee-for-service concessions have facilitated the implementation on a large scale of solar home systems and solved the issue of high up-front cost and of long-term maintenance.This paper focuses on operational and design issues linked to the implementation of fee-for-service concessions. Even in a challenging institutional context, some South African operators seem almost able to reach their break-even point. The case of one concessionaire is detailed and serves as a basis for a discussion on the benefits and difficulties linked to the fee-for-service model and on the potential for replication.

► In 1999, South Africa launched an ambitious solar electrification programme.
► The experience of a fee-for-service concession is related.
► An unstable institutional framework has created uncertainties for local operators.
► Fee-for-service companies can cover maintenance and operating costs.
► Fee-for-service companies need capital subsidies to expand their business.