Solar photovoltaic (PV) Clusters Project in Tanzania
Case Study

Solar photovoltaic (PV) Clusters Project in Tanzania

Sector: Renewable Energy Area of Expertise: Decentralised energy development

Solar photovoltaic (PV) Clusters Project in Tanzania

Addressing key market barriers to the development of solar PV systems in rural Tanzania

Reducing market barriers

The Clusters Solar PV Project, funded by the World Bank through the Ministry of Energy and Minerals (MEM) and the European Union, implemented by Camco Clean Energy in Tanzania, addresses key market barriers to the development of solar PV systems in rural Tanzania. Standardised high-quality systems, bulk purchases to reduce costs, credit-financing and subsidies are central elements that make this work.

Organised labour or farmer groups (“clusters”) with a minimum of a thousand members, engage in annual wholesale procurements through tendering, ensuring value for money and the best possible combination of price and quality. Both local and international solar PV equipment suppliers bid to become providers and suppliers for the Clusters Solar PV Project.

Only 2% of rural households have access to the grid

Nearly 84% of Tanzanians don’t have access to electricity and the opportunities and improved quality of life that electricity can provide. That figure rises to approximately 98% in rural areas.

The Tanzanian government is currently promoting private sector, renewable energy approaches to rural electrification. One of these approaches involves solar energy, specifically the development of the market for solar photovoltaic (PV) technology.

The once small Tanzanian solar market is growing exponentially, from 100kWp in 2005 to over 1.5 MW in 2009. However, it is small relative to the size of the country and the needs of the rural population.

Much of the transformation of the Tanzanian solar market is the result of donor-funded project activities sponsoring training, awareness raising, marketing and other forms of stimuli. One example is another project implemented by Camco, the Sida/MEM Solar PV Project, a national solar PV energy project funded by the Swedish International Development Agency (Sida) through the Ministry of Energy and Minerals (MEM).

50% mark-ups on solar products

Current barriers to increased growth in the sector include cost, financing and quality. Although there is a far-reaching network of solar technology retailers throughout the country, these dealers frequently apply large margins on the systems that they sell in order to compensate for relatively small sales volumes. It is not rare for a retailer to mark-up the cost of solar equipment by 50% or more above wholesale prices.

There are also very limited financing options for families or businesses who want to procure solar PV systems. Except for a small number of National Microfinance Bank (NMB) and SACCOS (Savings and Credit Cooperative Societies) loans, available mostly to teachers, the market for solar PV equipment is almost entirely based upon cash sales.

Due to Tanzania’s modest per capita income, Tanzanians are also very sensitive about cost and in the absence of good consumer knowledge will purchase the least expensive solar PV equipment for their systems. Knowing this, and limited in their own knowledge and purchasing power, some retailers around the country have begun offering poor quality, sub-standard solar equipment.

High-quality equipment – well trained technicians

The Clusters project is structured to remove these barriers for project participants. Given the tendering process, the systems purchased are standardised into the most popular sizes (30Wp, 60Wp and 100Wp), and thus all users in the area are operating with the same good quality equipment and have access to solar technicians, trained by Camco Clean Energy, who know the equipment.

Under the Clusters Project model, Tanzania’s Rural Energy Agency (REA) provides a small subsidy for systems procured. Farmers pay for 80% of the systems that they receive, 20% down and 60% on credit. Currently, the StanBik Bank is providing loans to the existing Cluster Groups.

Each Cluster Group is a project by itself, owned by the Cluster Group and its farmer/labour members. As quickly as possible, the project transfers skills to managers, technicians and quality control (QC) agents. Local technicians are trained by and become agents of the private sector solar equipment suppliers who win the tenders. QC agents – trained by the project before being managed and remunerated by the Cluster Group managers – monitor the performance of these technicians. The result is thousands of new high-quality solar home systems for the groups that are the hardest to provide for, rural communities and especially farmers.

The first installations in the Southern Highlands (in Mbinga and Tukuyu) have resulted in many homes with solar electric systems.

The potential exists to implement dozens of solar Cluster Groups around Tanzania, benefiting tens-of-thousands of rural households, contributing to greater rates of rural electrification and supporting improved and affordable access to modern energy.

(An earlier version of this information was published in the magazine '25 Degrees in Africa' / Volume 6, Number 2 - April/May 2011)

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