Mandatory Structure for sub-sector specific Target Market
Transcrição
Mandatory Structure for sub-sector specific Target Market
Project Development Programme East Africa Ethiopia’s Solar Energy Market Target Market Analysis www.renewables-made-in-germany.com www.german-renewable-energy.com www.german-renewable-energy.com Target Market Analysis Ethiopia’s Solar Energy Market www.german-renewable-energy.com Authors Megen Power Melessaw Shanko Integrated Energy Solutions (IES): Mark Hankins Anjali Saini Paul Kirai November 2009 Editor Deutsche Gesellschaft für Technische Zusammenarbeit (GTZ) GmbH On behalf of the German Federal Ministry of Economics and Technology (BMWi) Contact Deutsche Gesellschaft für Technische Zusammenarbeit (GTZ) GmbH Potsdamer Platz 10, 10785 Berlin, Germany Fax: +49 (0)30 408 190 22 253 Email: [email protected] Web: www.gtz.de/projektentwicklungsprogramm Web: www.exportinitiative.bmwi.de This Target Market Analysis is part of the Project Development Programme (PDP) East Africa. PDP East Africa is implemented by the Deutsche Gesellschaft für Technische Zusammenarbeit (GTZ) on behalf of the German Federal Ministry of Economics and Technology (BMWi) in context of the Export Initiative Renewable Energies. More information about the PDP and about renewable energy markets in East Africa: www.gtz.de/projektentwicklungsprogramm This publication, including all its information, is protected by copyright. GTZ cannot be liable for any material or immaterial damages caused directly or indirectly by the use or disuse of parts. Any use that is not expressly permitted under copyright legislation requires the prior consent of GTZ. All contents were created with the utmost care and in good faith. GTZ assumes no responsibility for the accuracy, timeliness, completeness or quality of the information provided. www.german-renewable-energy.com Target Market Analysis: Ethiopia’s Solar Energy Market V Content 1 1.1 STATUS QUO OF THE SOLAR ENERGY SECTOR............................................................. 1 Brief Solar Sector Overview ............................................................................................................... 1 1.2 Major Market Segments .................................................................................................................... 2 1.2.1 The Solar PV Market .......................................................................................................................... 2 1.2.2 The Solar Water Heating Market ...................................................................................................... 5 1.3 Local Capacities ................................................................................................................................. 6 1.3.1 Solar PV ............................................................................................................................................. 6 1.3.2 Solar Water Heating (SWH) ............................................................................................................... 7 2 MARKET POTENTIALS .......................................................................................................... 7 2.1 Overall Sector Outlook....................................................................................................................... 7 2.1.1 Solar PV ............................................................................................................................................. 7 2.1.2 Solar Water Heating (SWH) ............................................................................................................. 11 2.2 Undeveloped Solar Market Opportunities ........................................................................................12 2.2.1 Solar Hybrid PV Systems ................................................................................................................. 12 2.2.2 Grid Connected PV Systems ............................................................................................................ 14 3 SOLAR-SPECIFIC REGULATION AND FRAMEWORK .................................................. 14 3.1 Policies and Regulations ...................................................................................................................15 3.1.1 General Policies and Regulations .................................................................................................... 15 3.1.2 Technology-Specific Considerations................................................................................................ 16 3.2 4 Applicable Public Sector Support / Financing Mechanisms and Sources ...........................................17 BUSINESS PARTNERS AND COMPETITORS .................................................................. 18 4.1 Overview of Solar Key Market Players ..............................................................................................18 4.2 Overview of Major and/or Most Emblematic Solar PV Projects ........................................................23 Target Market Analysis: Ethiopia’s Solar Energy Market VI List of Tables Table 1: Main Market Segments of the Existing Solar PV Markets........................................................................ 2 Table 2: Outline of the Sales of Solar Water Heater and the Market Structure ..................................................... 6 Table 3: Solar PV Off-Grid Market Potential in Ethiopia ........................................................................................ 8 Table 4: Number of Customers and Electrified Towns until 2006 ........................................................................ 13 Table 5: Summary of Estimated Undeveloped Market Potential for Solar Hybrid PV Systems ........................... 14 Table 6: Cost Estimates and Funding Sources for Off-Grid Electrification (in Million €) ...................................... 15 Table 7: Organisations Involved in the SWH Market ........................................................................................... 19 Table 8: List of Relevant Importing Companies in the Solar PV Market .............................................................. 20 Table 9: List of Consultants, NGOs and Non-Governmental Projects in the Solar PV Market ............................ 21 Table 10: Government and Public Sector Projects .............................................................................................. 22 Table 11: Major PV Projects ................................................................................................................................ 23 Currency 1 USD = ETB 13.50 (May 2010) 1€ ETB 16.63 (May 2010) = Measurement W Watt Wp Watt peak Wh Watt hour kW MW Kilowatt Megawatt kWp MWp Kilowatt peak Megawatt peak kWh MWh Kilowatt hour Megawatt hour GW Gigawatt GWp Gigawatt peak GWh Gigawatt hour Target Market Analysis: Ethiopia’s Solar Energy Market List of Acronyms AMES Access to Modern Energy Services (GTZ project) BIPV Building Integrated PV BOS Balance of System BTS Base Transmission Station DSM Demand Side Management EAREP Energy Access and Rural Electrification Programme EBG Equatorial Business Group, Private Trading Company EEPCo Ethiopian Electric Power Corporation EREDPC Ethiopian Rural Energy Development and Promotion Centre ETC Ethiopian Telecommunication Corporation GEF Global Environment Facility GoE Government of Ethiopia GSM Global System for Mobile Communication GTZ IS GTZ International Service IDA International Development Association (World Bank Group) IFC International Finance Corporation (World Bank Group) IGAD Intergovernmental Authority on Development LCH Low Cost Housing LED Light Emitting Diode MME Ministry of Mines and Energy MoFED Ministry of Finance and Economic Development NGO Non-Government Organisation PV Photovoltaic QSAE Quality and Standard Authority of Ethiopia REF Rural Electrification Fund RET Renewable Energy Technology SCS Self Contained System SHS Solar Home System SSA Sub Saharan Africa SWH Solar Water Heater TVET Technical Vocational Education and Training UCBP University Capacity Building Programme UEAP Universal Electricity Access Programme UNEP United Nations Environment Programme VAT Value Added Tax VII Target Market Analysis: Ethiopia’s Solar Energy Market VIII Summary The Ethiopian solar market is still at an early development stage with an estimated installed capacity of 5 MWp. Growth during the 1990s was under 5 % but has reached 15-20 % during the last few years, primarily driven by the telecom market that constitutes 70 % of installed capacity. Five or six companies supply 90 % of the market and some lack a specialist focus on solar PV. The market potential is estimated at 52 MW, the majority within the solar home systems (SHS) market and continued expansion in telecom sector. SHS has the greatest annual growth rate of 20 % with few suppliers and driven by the extension of low-cost housing and real estate developments. In the longer term, the growing inverter charger backup market combined with a feed-in tariff law under revision could constitute a stepping stone to grid-connected PV. For the foreseeable future, larger and in particular grid connected PV systems will face stiff competition from smaller hydro power systems, including small and micro hydro power. Donor support, the establishment of the Renewable Energy Fund (REF) and projects such as those backed by UNEP/GEF have brought opportunities for solar PV and micro-hydro, and should continue to be a driving force behind commercial demand for institutional and household PV systems as well as for solar hybrid PV and village mini-grids. The political environment already turned into positive: th Since 14 December 2009 the Ministry of Finance and Economic Development (MoFED) lifted the import duty fees on PV modules and balance of system (BOS). Target Market Analysis: Ethiopia’s Solar Energy Market 1 1 Status Quo of the Solar Energy Sector 1.1 Brief Solar Sector Overview Ethiopia has abundant solar energy resources. The national annual average irradiance is estimated to 2 2 be 5.2 kWh/m /day with seasonal variations that range between the minimum of 4.5 kWh/m /day in 2 1 July to a maximum of 5.6 kWh/m /day in February and March. The solar resource is relatively lower in the most populous Northern, Central and Western highlands of the country while the rift valley regions, Western and Eastern lowlands of the country receive higher annual average irradiance well above 6 2 kWh/m /day. The Ethiopian solar energy market is at its early stage of development. For about ten years, since the commercial market started in early 1990s, annual sales growth was under 5 %. However, in the last four years a significant sales growth at an average rate of 15 % to 20 % has been reported by major PV suppliers. The market is yet in its pioneer stage where there is not a distinct role for the players in the business. Capacity building and awareness raising projects in the past - even though they were uncoordinated in nature - seem to have created demand for solar home systems (SHS) in rural households and businesses. In addition to this, the establishment of the Rural Electrification Fund (REF) under the Ministry of Mines and Energy has also been a milestone for the solar industry. In the 1990s and early 2000, the market for solar PV was mainly a tender market for procurements of systems for NGO supported projects. The telecom sector has always been the biggest market constitution about 70 % of an estimated installed capacity of 5 MW, supported by the Ethiopian Telecommunication Corporation (ETC) Universal Connectivity Programme (for which BP Solar has historically been the major supplier). Estimations based on information obtained from major suppliers, the annual sales for the year 2008 is over 500 kWp without systems for the telecom sector. The annual solar PV sales seem to have doubled in the last three to four years. There are about 15 solar equipment suppliers in Ethiopia. However, over 90 % of sales are from five or six major suppliers at the moment. Less than half of these suppliers sell solar as a primary business. For most of them solar is not a specialised market but an additional item in their business. Compared to other countries in the region, the developed market in Ethiopia is at the low end with major international PV companies (such as “Solar 23”) initiating a presence. The market for institutional PV system is developing but very slowly. NGOs support and Rural Electrification Fund (REF) for rural schools and health institution are creating a significant market for solar PV systems. The demand from the tourism sector is not growing as rapidly as would be expected. So far not more than 20 kWp systems are sold to the sector and these are mainly in national parks and resorts in off grid areas. The solar water heater (SWH) market was started with locally manufactured products and is currently entirely based on imported products. Technologies available in the market range from simple flat plate collectors to evacuated tube with heat-pipes. The market for SWH is concentrated in major cities particularly in Addis Ababa. Demand for SWH is still low but continuously growing particularly driven by newly developed real estate businesses for residential buildings. SWH installed to date is in the order of 2000 units with annual sales of about 200 units. 1 Solar Energy Resources, Technical Report 3, CESEN 1986. Target Market Analysis: Ethiopia’s Solar Energy Market 2 1.2 Major Market Segments 1.2.1 The Solar PV Market Following rural income growth in the last few years the demand for solar PV systems in the household and small commercial sectors is growing significantly. This demand is primarily coming from the need for lighting, powering TV sets and charging mobile phones. The growing institutional demand is primarily due to the catalytic role played by the rural electrification fund and support from various NGOs as part of their newly introduced energy programmes. The Ethiopian solar PV market seems to be in the transition from pioneer to emerging market. Existing companies and some of the new entrants have not yet started to play defined roles as they are involved in imports, whole selling, retailing and installation works. About half a dozen solar PV dealers are known to actively operate in towns other than Addis Ababa, including Awassa, Dilla, Jimma and Harar. Even though the number of dealers in other towns is still small, it is indicative of the growing trend of the solar PV business. Table 1: Main Market Segments of the Existing Solar PV Markets 2 Solar PV technology Estimated installed capacity Estimated kWp installed in 2008 Estimated financial 3 volume Degree of competition Off-grid household electrification & small scale commercial (Solar Home System) > 1.2 MWp (Approx. 2000 to 2008) > 260 kW > 3 million Euros (2008) Very low competition. Customer’s choice of equipment is usually limited by availability. Number of players is increasing but reliability in products supply is still low. Off-grid community systems (including institutional, worship places and pumping systems) > 500 kWp > 220 kW About 2.5 million Euros (2008) Telecom > 3.5 MWp > 150 kW About 2 million Euros (2008) Supply of goods for institutions has never been from stocks. Suppliers import goods after securing contracts. Large size supplies have always been international competitive bids. Telecom sector is a Government monopoly. All equipment is supplied by international suppliers. Off-grid household and small-scale business electrification Off-grid solar PV market for households and commercial establishments in Ethiopia began around mid 1990s. Initial demand was below 5 kWp per year and the business was not encouraging at all to suppliers. For almost all suppliers solar business accounted for only less than 5 % of their annual turnover which was mainly in response to institutional tender markets. The major demand for SHS today comes from the cash crop growing areas such as Jimma, Sidama and to some extent Hararghe. Typical SHS sizes are in the range of 20-30 Wp for households. Typical system sizes in the commercial establishments are in the range of 50-80 Wp. With growing telecommunication coverage, a micro system with a single light bulb and a mobile phone charger is in high demand in rural areas. 2 Estimated based on information from four major suppliers, REF tender document and UNEP/GEF Project, previous studies by Megen Power, 2005. 3 Total system volume including complete system and installation costs. Target Market Analysis: Ethiopia’s Solar Energy Market 3 This conveniently coincided with growing rural income over the past few years. However, this potential market remains entirely unserved at the moment. The total installed capacity for SHS in households and small commercial establishments is estimated to be over 1 MWp. The present demand for SHS is in the order of 200 kWp per annum with an average annual growth rate of about 20 %. In summary, the relative growth in PV SHS and small commercial applications is attributable to the following factors: Awareness creation and capacity building efforts by donor-funded projects since 2000, even though they were spontaneous in nature, have played significant role in creating demand and establishing linkages between Addis based suppliers and rural retailers. Improving rural income in many parts of the country due to favourable terms of trade for agricultural products (i.e. coffee and chat growers) created demand for consumer electronics. Telecommunication expansion into rural areas created new demand for smaller systems. Presence of Rural Energy Fund (REF) created awareness about solar PV system as alternative power supply systems at the level of regional energy bureaus which was further propagated to districts and rural consumers. Procurements of PV systems through regional energy bureaus (in Oromia and Southern Peoples Regions) for re-sell at subsidised prices to rural households and businesses for promotional purposes have sensitised the market. As a result of the convergence of all the above favourable market conditions, the PV solar market is set to grow. The market would grow to even higher levels if more innovative and flexible financing mechanisms were put in place; fortunately as a step forward to the stimulation of the solar market, the Ministry of Finance and Economic Development (MoFED) waived the tax duty from the importation of solar energy equipment in December 2009. Despite such favourable market conditions, however, PV equipment and accessories are not always available in the local commercial market in quantities and sizes the market requires. Therefore, this is an opportunity for German companies to forge partnerships with local companies and keep equipment in stock in the required commercial market. In addition to maintaining the momentum, such partnerships would lead the local market to grow into the next higher level of development. Off-grid community systems Off-grid community systems are primarily addressing demands from health institutions, schools, religious institutions (i.e. churches and mosques) and community water supply systems. Demand from health institutions and schools are dependent on external support from government programmes or NGO initiatives. At the moment, the driving force for institutional PV market is financial support from NGOs and international donors. Procurement for religious institutions, however, is fully financed by members’ contributions. For instance, in 2008, REF alone internationally procured solar PV systems worth over 4 one million Euros in one bid. These systems are earmarked for installation in selected rural schools and health facilities. Total capacity of equipment is in the range of 70-80 kWp. More recently it has become a trend for religious institutions to install solar PV systems to power their sound systems and musical instruments. For instance, in 2008 one single supplier sold PV systems in the range of 30 kWp for off-grid rural churches mainly in Southern parts of Ethiopia. An 80 Wp system has been a typical size for rural religious institutions. 4 An Asian company won the bid at a price of about € 9.3 per Wp before tax. The quoted price includes transportation, installation and after sales service. Target Market Analysis: Ethiopia’s Solar Energy Market 4 The total installed solar PV capacity in off grid institutional systems including health institutions, schools, and water supply systems is estimated to be around 500 kWp. However, in the last one or two years demand is growing mainly due to REF funds and NGO support. During the last six months alone international and local tenders worth over one million Euros were announced for the supply of institutional PV systems. Based on sales volume in the past two years, the market for off-grid community systems is estimated to be over 200 kWp per year. Given the number of pipeline projects over the next one year or so, installation of systems is expected to exceed the current annual estimate. Telecommunication The Ethiopian telecommunication sector is one of the fastest growing and largest PV market perhaps in the whole of Eastern Africa. In 2005 total installed capacity stood at around 3 MWp which constituted over 70 % of the total market share. Currently, as part of the overall national development programme, the Ethiopian Telecommunication Corporation (ETC) has been implementing a five-year-programme (Universal Connectivity Programme) since 2005. Over 18,000 villages are known to exist in rural Ethiopia. The programme 5 aims to achieve 100 % telecommunication coverage (universal telecom access ) in the country by 6 connecting all rural villages so that rural dwellers will get telephone access within a radius of about 5 7 km. According to ETC, about 80 % of the target has been achieved so far. In order to connect the remaining 20 % of the villages and service centres, ETC needs to install additional 6,000 to 8,000 wireless telephones. This would create additional demand for over 200 kWp systems (i.e. 8000 rural telephones x 30 Wp) over the coming one year. Nevertheless, in some villages due to highly scattered settlement patterns rural communities and local topography, people have to travel as far as 15 km to get access to a telephone service. In order to reduce travelling distance for people living in scattered settlements and improve overall access on per capita basis, ETC has planned to increase the number of wireless telephone units from one to five in each rural village over a time horizon of five years. Installation of additional telephone units would create an additional demand for about 1.8 MWp systems. In off-grid locations ETC powers its rural base stations and wireless telephones with either solar PV or generator sets. It is worth noting that, unlike previous telecom installations which are in the range of 1-2 kWp, power requirements of wireless telephone are smaller (between 20-30 Wp). It should also be noted that the aggressive advance of the grid into the rural areas in recent years has resulted in a continuous replacement of the existing solar PV and genset powered base transmission stations by grid electricity throughout several rural parts of the country. Tourism Despite several tourist destinations, the tourism industry is at its early stages of development. The industry has yet to fullfill basic infrastructure and services. Most of the tourist destinations in the North, (historic route) are grid connected. With the exception of the Semen Mountain National Park (14 kWp installed capacity) and few other eco-lodges in the South, other off-grid tourist destinations have yet to develop camping facilities which may require alternative source of power such as solar PV. Therefore, despite its considerable potential for the future, the PV market for the Ethiopian tourism sector has yet to be developed. 5 “Access” is defined as having one telecom service station in each village. In addition to the minimum access to telecom service, rural connectivity programme includes the provision of telecom service to rural administrative offices, government organisations, cooperatives and investment schemes. 6 Total number of rural villages in the country is about 18,000. 7 Interview with Telecom Agency Planning Department Target Market Analysis: Ethiopia’s Solar Energy Market 5 Other markets Until 2003/04 the national power grid was fairly reliable. However, the utility is unable to keep pace with the growing need for energy to fuel the growing economy in recent years. As a result, frequent power shedding has become a common practice. In response to this power crisis, demand for generator sets and - more recently - inverter battery backup systems is growing exceptionally. At the moment inverter backup systems may not constitute a real PV market, but in the medium term, the inverter charger backup market together with the upcoming feed-in tariff law may constitute an opportunity for grid-connected PV. Predominant operator models Despite the considerable growth in solar PV sales in recent years, the local PV market is still in early stages. Instead of specialising in one or another aspect of the PV supply chain, all local PV companies are engaged in doing everything from import and whole sale through retail, installation and maintenance. With growing demand for equipment and renewed interest of some international companies to enter the market, the Ethiopian PV market is expected to develop rapidly and transform to the next higher level which can be termed as full-fledged commercial market. With this description of prospective market in mind, currently operating PV market players’ characteristics can be summarised as follows: There are about five or six major players in the industry which import PV systems and components from various suppliers. Companies typically import systems in small consignments because of two reasons. The first is fear of tying up capitals on equipments in stocks due to limited market to absorb large imports. Secondly, companies themselves have limited finance as solar constitutes a small percentage of their business. New entrants to the market who have links or affiliation to international PV companies have set their presence in the country waiting for major demands. Some of them import solar equipments for retail while others are simply waiting for opportunities. Few others import whenever they can but usually obtain systems locally for installation businesses. NGOs and regional governments such as Oromia and Southern Region are actively promoting solar PV systems through procurement, financing and training PV installation in their respective jurisdictions. 1.2.2 The Solar Water Heating Market The market for solar water heaters started with locally manufactured products about a decade ago. There were very few instances of installation of imported SWHs earlier mainly in government institutions such as training centres. Currently, local manufacturing has been squeezed out of the market for it could not compete with cheaper but higher quality imported products. Because of the real estate boom in recent years, demand for solar water heaters has risen significantly. Unlike solar PV, installation of SWHs was not monitored in the past, so obtaining accurate data on the number of installations is difficult. However, based on some information from previous studies and interviews with key players in the sector, the total installed capacity is estimated to be 5,000 units which is equivalent 2 to about 10,000 m (see Table 2 below). Locally manufactured flat plate collectors were the most common types of SWHs until they were outcompeted by evacuated-tube-type collectors (with and without heat pipes) imported mainly from China, Israel and Italy. Target Market Analysis: Ethiopia’s Solar Energy Market 6 Table 2: Outline of the Sales of Solar Water Heater and the Market Structure Solar water heater technology Urban Households Tourism (Hotels) and Institutions TOTAL Estimated installed units area 2 (Number) (m ) 4,500 9,000 500 1,000 5,000 10,000 Estimated installed/year (2008) Estimated financial 8 volume (€/year/2008) 800 200 1,000 0.48 Million 0.12 Million 0.6 Million Assessing the total potential market volume of 1000 units of SWHs per annum, this could be considered too small a market to attract investment. However, the market is steadily growing in recent years and such growth in the market is witnessed in the face of inexpensive grid electricity (less than USD 0.06/kWh domestic tariff) and in the absence of enabling policy environment for renewable energy technologies. Integrating SWHs with ongoing low cost housing and real-estate development could provide further impetus to the SWH market. Therefore, by creating partnerships with local businesses German companies could position themselves strategically to take advantage of the growing market opportunities in this sector in the near future. The predominant operator model in the SWH industry is characterised by companies engaged in doing everything including importation, retail, installation and maintenance by them. Currently, there are about seven companies that import and sell SWHs in large volumes. 1.3 Local Capacities 1.3.1 Solar PV Availability of qualified solar technicians in Ethiopia is limited. Training is mainly given by companies to their technicians. With very few exceptions such as REF, the NGO “Solar Stiftung” (Solar Energy Foundation), and projects financed by international donors (UNEP/GEF, EU/IGAD), there has been no properly organised, industry-wide solar PV technicians training programme in Ethiopia. Whenever there is a training session it is sporadic, non-modular and project specific. As a result a cadre of highly skilled technician with technical capacities to design, size and install larger and more complex PV systems is lacking. Some of the technicians trained by projects such as EU/IGAD and UNEP/GEF in the past are active in providing limited installation and, repair and maintenance services in some rural towns. Sizing and installations of larger systems are always conducted by in-house technicians of the companies themselves. Lack of autonomous skilled technicians is so severe that local PV companies are often compelled to use their in-house capacities to install even smaller SHS in some areas. Including in-house technicians of local PV dealers, all of whom are based in Addis Ababa, a total of about 50 technicians are believed to exist nationwide. About one-quarter of the total number of technicians are supposedly autonomous and not necessarily attached to one or the other PV dealer. Each PV dealer on the average maintains one or two technicians in-house. PV companies outsource autonomous technicians only when necessary. 8 Equipment and installation cost Target Market Analysis: Ethiopia’s Solar Energy Market 1.3.2 7 Solar Water Heating (SWH) Solar Water Heating systems installed in the country are mostly simple and modular collectors with separate water tanks. Systems with central heating that require a relatively complex installation procedure, and hence skills, are not common in the local market. Even with simpler systems technical capacity in terms of both quality and quantity is lacking. SWH dealers usually have one technician inhouse assisted by a plumber out-sourced. All in all, the total number of SWH technicians is estimated to be in the order of ten to 15 nationwide. In summary, therefore, considerable technical capacity constraints are evident in the local market in both PV and SWH sub sectors. Conversely, such capacity limitations present themselves as ample opportunities for German companies who wish to either sell their skills and services or develop strategic business partnerships with local solar companies, or both. 2 Market Potentials 2.1 Overall Sector Outlook 2.1.1 Solar PV Market Potentials In the past, the Ethiopian PV market was dominated by bulk purchases by the telecom industry and donor driven large projects. Until early 2000s there was a gross misconception about commercial PV market in Ethiopia. That is, firstly, PV is too expensive and too high-tech to be used by rural consumers, and secondly, rural Ethiopians are too poor to afford PV. Further, the official attitude towards PV is such that PV does not have a role to play in energising development for it does not provide adequate motive power. Such misconceptions have improved considerably over the past several years thanks to few ice-breaking donor supported projects which helped to unleash the market. Demand for PV has been growing in Ethiopia over the last ten years. Some of the favourable market conditions that have led to current PV market growth include the following: 1. Officially, access to electricity is estimated at about 22 % with actual connection rate of only about 6 % nationwide. This leaves massive sections of off grid communities unelectrified by the grid. Given the distributed nature of PV solar, a good portion of this market could be served using PV technology. 2. The majority of rural Ethiopians may be too poor to afford PV. However, due to the sheer number of rural population, even if a minute fraction of that population is served with PV, the absolute numbers are too significant to be ignored. Smaller products (for example solar lanterns) will considerably increase access. 3. Despite the overall low rural incomes, there are a number of cash crop growing areas that will constitute a considerable market for solar PV. 4. The overall Ethiopian economy has been growing by over 10 % for the past several years in a row. Similarly, export re-orientation of the government policies have resulted in a steady rising of rural incomes during the same period. Such growth of rural incomes has resulted in growing demand industrial goods and services including solar PV. Target Market Analysis: Ethiopia’s Solar Energy Market 8 5. Efforts made jointly by the Ethiopian Government and international donors to build market infrastructure for solar PV commercialisation have led to growing awareness, some technical capacity, and creation of linkages between various players in the industry. For instance, some ten years ago awareness about solar PV technology among rural communities in Ethiopia was none existent. Thanks to efforts made by IGAD/EU, UNEP/GEF, REF and regional Governments of Oromia and Southern Ethiopia, at present, over one-third of the rural communities have either heard about, or seen, or used solar PV. 6. More recently, there are also efforts that are aimed at building upon previous gains and accelerate the commercial PV market growth. Key players behind recent PV commercial market development include GTZ-AMES and the NGO Solar Stiftung (Solar Energy Foundation). 7. The penetration of telecom services into the rural arena has given an additional impetus to rising demand for solar PV for charging mobile and wireless phones in rural off grid areas. It will open up new niches for different types of products and services. In summary, the convergence of the above favourable market conditions has resulted in an average market growth rate of about 20 % per annum during the last three years. Table 3 below presents an indicative matrix of the potential market for solar PV systems in Ethiopia. Table 3: Solar PV Off-Grid Market Potential in Ethiopia Market segments Solar home systems Small-scale commercial Off-grid schools Health institutions Community Water Supply NGO power Isolated grids and rural mini-grids (RE) Telecom Tourism TOTAL 9 Category of system sizes All Micro systems (< 5 Wp) One light + Radio (10 Wp) Two lights + radio cassette player (20 Wp) Four light system or more (50 Wp) Larger systems with inverter (150 Wp) 9 Basic potential market size 38 MW 4.0 MW Estimated financial volume (million €) 400 ~43 4.8 MW ~50 4.8 MW ~50 Existing penetration 1 MW N/A 12.0 MW ~130 12.0 MW ~130 1 MW 3.6 MW 4.6 MW ~2 MW > 10 ~40 ~50 ~20 N/A < 0.05 MWp > 0.06 MWp N/A 0.1 MW 1.5 MW ~1 ~15 N/A N/A > 2 MW ~0.5 MW 52.3 MW >20 ~5 500 >3 MWp < 0.05 MW 4.2 MW Multiple sources: Own estimation based on information from Lighting Africa (2008), Central Statistics Authority 2007, information from suppliers. Target Market Analysis: Ethiopia’s Solar Energy Market 9 Some important conclusions can be drawn from potential PV market analysis presented in Table 3 above. These are: The total potential market for solar PV in Ethiopia is estimated to be about 52 MW. Currently, the estimated market penetration rate is about 8 % of the potential. Over three-quarters of the total demand comes from the household sector distantly followed by the health institutions, rural schools and the telecom industry. Despite its diminishing role as a major PV market, the telecom sector will continue to constitute immediate cash market. According to ETC’s short to medium term rural connectivity plan, the estimated PV market in the telecom sector is likely to saturate over the coming five years or so. However, this does not mean that market for the rural telecom connectivity is entirely exhausted. With rapidly growing urbanization and improving rural incomes demand for solar PV to power rural telecommunication in off grid locations is expected to continue growing. At present, community water supply and institutional PV markets (health institutions and schools) are financed almost entirely by donors. Out of an estimated potential market of about 10 MW in community and institutional PV market, only a small fraction (about 1 %) is currently served. Since the bulk of the market is yet to be tapped and financing is most likely to come from donors, demand in these sectors will continue to provide much needed incentives to the commercial PV market growth. As there is no local experience yet, it is difficult to estimate the potential market for gridconnected PV. Obviously, however, PV grid connection will become hugely relevant and the long term prospect is considerable. However, as it stands now, grid-connected PV is far from being competitive to Ethiopia’s highly hydro dominated power supply option. Perhaps this could be the reason why the feed-in tariff law under review did not consider solar PV grid connect as the current and short-term generation cost per kWh can simply be several times 10 higher than the competing options. Telecom coverage is expanding rapidly into rural areas at a rate much faster than that of grid electricity. This has created considerable demand for electricity for charging mobile phones in off-grid areas. An estimated one million mobile phones are believed to exist in off-grid areas. At the moment mobile phone consumers are travelling 10-20 km to access electricity for charging their phones. Beside the inconvenience and considerable travel effort, consumers are paying € 0.11 per charge, or approximately € 11 per capita per year. This is equivalent to 11 million Euros business annually. At the moment, this is a cash market which is entirely unserved. This market can best be served in the following ways: 1. Centralised mobile phone charging station: this is a multi-port charging unit with a battery (fixed or portable) capable of charging several phones simultaneously. Such units can be bought and owned by private small businesses as an additional income generating activity. 2. Micro PV systems that could serve off-grid market: Micro PV systems for mobile phone charging only Integrated micro PV charging-lighting systems with 3-5 Wp. The integration of mobile phone charger with lighting feature using LEDs will make the whole system more attractive to off grid consumers. 10 Feed-in tariff law, Second draft, Ethiopian Electric Agency, Ministry of Mines and Energy, October 2009. Target Market Analysis: Ethiopia’s Solar Energy Market 10 Obstacles / constraints Currently, the global economic downturn has caused some economic difficulties including shortage of foreign exchange to import solar PV equipments. As a result, currently local companies are either out of stock or under stocked. This problem is expected to be only temporal. Another issue that will continue to pose challenges to solar PV market is the rapidly advancing grid without clear and enforceable master plan. The grid, however, is not necessarily a threat to potential PV market. It could even be considered as new opportunity for integrated grid connected PV. Still another constraint in the sector is capacity limitation both at the level of dealers/companies and autonomous technicians. Major constraints at the level of PV companies include: in adequate working capital, managerial skills, lack of specialisation, limited network both upstream and downstream. Constraints on part of technicians include lack of organisation, lack of technical skills for sizing and designing larger systems, and inadequate skills for installation of smaller systems. High upfront cost of solar PV systems in the face of absence or inadequate innovative financing mechanisms. More recently, the acute shortage of foreign currency has become a serious constraint for supply and stocking of PV equipment and accessories in adequate quantities. Lack of appreciation among policy makers of the role of PV as a complementary strategy in both on-grid and off-grid electrification. Solar PV: Recommendations for German enterprises First of all, German enterprises should forge partnerships with capable local PV companies to position themselves strategically for the growing solar PV market in Ethiopia and the region as a whole. Such partnerships would help German companies to tap into large scale international competitive bidding for telecom industry and donor supported institutional PV market. Initially, such partnerships would require some investment in building technical and managerial capacities of local partners. Technical capacities and skills for designing, sizing and installing larger systems hardly exist locally. Therefore, in addition to supplying PV equipment and accessories, such constraints constitute an opportunity for German enterprises to market their expertise and services. While tapping into existing commercial as well as institutional solar PV market, German companies should be vigilant and be ready to take advantage of much larger PV market such as isolated mini grids and integrated grid connected PV which are likely to unfold in due course. Currently, despite a rapid expansion of mobile phone into the rural market, the market is unable to provide innovative mobile phone charging technologies. German enterprises could fill in this niche market. To facilitate reaching out to off-grid micro PV market, it makes sense for German companies to forge partnership with mobile phone manufacturers, telecom operators and local PV dealers. Target Market Analysis: Ethiopia’s Solar Energy Market 2.1.2 11 Solar Water Heating (SWH) Market for SWH has been growing rapidly in recent years. Given a very low penetration rate at present coupled with booming real-estate development in major cities and towns, demand for SWHs is set to rise increasingly for some time to come. Real-estates developers and owners of private residential housing constitute high-end market with readily available cash to purchase SWHs. For this market segment is important the quality of equipment and the reliability of service. On the average, two electric water heaters are installed in almost every newly built residential house. In addition to the government financed low cost housing (condominium), dozens of real-estate developers are engaged in constructions of residential houses in the capital as well as other major towns. Currently, construction of tens of thousands of housing units (close to 100,000 at present) is either completed or underway throughout the country. Therefore, even if a fraction of existing electric water heaters is replaced by SWHs over the next several years the market would remain attractive enough for private investment. For instance, if one assumes that only one-quarter (25,000 units) of existing electric water heaters in the domestic sector were to be replaced by SWHs, the potential market would be five times more than total installed capacity to-date, which stands at about 5,000 units. An estimated 80 % of total installed capacity of SWHs is within Addis Ababa. It is estimated that the residential housing SWH market takes the lion’s share of 90 % while the surplus goes to hotels and tourism. Conservatively, an estimated 2000 hotels and pensions with an average number of 20 rooms each fitted with electric geysers exist throughout all towns in the country. Given the attractive financial incentives that SWHs would bring to the businesses, it is assumed that 100 % of them would replace their electric geysers with SWHs. This would translate into an estimated market potential of 40,000 units of domestic size SWHs. Putting domestic and hotel potential markets for SWHs together, the total aggregate potential market for SWHs would become about 65,000 units. Assuming a concurrence factor of 40 % for households and 80 % for hotels on the morning hour peak demand, the contribution of SWH to serve the peak demand is estimated to reach 50 MW. Existing growth and estimated market potential for SWHs is in the absence of conducive policy environment for the technology. In fact, relatively low existing electricity tariff (0.06 €/kWh), is a considerable challenge for a wide spread market uptake. Therefore, if favourable policy environment were created - including upward electricity tariff revision – then the total potential market would be much higher. Owing to delays in completion of construction of several large hydro power projects, there is an estimated 200 MW power shortage at the moment. In response to prevailing power shortage, EEPCo, the national power utility, has embarked upon demand side management (DSM) interventions other than load shedding. Target Market Analysis: Ethiopia’s Solar Energy Market 12 Solar Water Heating: Recommendations for German enterprises German enterprises need to establish partnerships and alliances with local SWH suppliers to tap in existing real-estate market. German enterprises, jointly with their local partners should use existing GTZ (AMES-E) infrastructure and contacts to: o Lobby policy makers to formulate policies that are favourable to Renewable Energy. o Influence real-estate developers to integrate SWH in their design and construction of buildings. German companies in partnership with existing GTZ infrastructure could play a catalytic role in unleashing this potential market through implementing pilot projects on some of the ongoing GTZ International Service programmes such as Low Cost Housing (LCH) and University Capacity Building Programme (UCBP). 2.2 Undeveloped Solar Market Opportunities Undeveloped market opportunities considered in this section will focus primarily on solar hybrid PV in the tourism, telecom sectors and village mini-grids. 2.2.1 Solar Hybrid PV Systems The primary purpose of hybrid power applications is to enhance system reliability and rationalise energy utilization and investment outlay in an optimal manner. For example, an off-grid telecom centre could use solar PV-genset hybrid in which PV could support the base load while the genset could be used for the peak load only. Despite value addition, enhanced reliability and cost-effectiveness of energy solutions that such hybrid systems could provide to off-grid consumers, potential markets for such systems remain largely undeveloped in Ethiopia. Solar hybrid PV and tourism Ethiopia has several tourist destinations. According to official statistics, in 2007, Ethiopia has earned a total of about 100 million Euros from 400,000 tourists that had arrived in Ethiopia. Despite the gloomy outlook in the global economy at present, senior officials in the tourism sector expect that the number of tourists will reach half a million in the current year and the number will hit the mark of one million per annum in the coming few years (www.hotelresortinsider.com). With an estimated one million international tourists expected to arrive each year, tourism is set to grow rapidly in Ethiopia. However, as far as solar hybrid PV in the tourism market is concerned, there are a few important points to bear in mind. These are: The tourism industry as a whole is not fully developed and well diversified The majority of the destinations, particularly those in the Northern “historic” route are gridconnected Lodges and tourist camping facilities, which would be ideal places for solar hybrid PV electrification, are uncommon or only coming up in recent years. Therefore, despite growth in number of tourists in recent years, the market for solar hybrid PV in the tourism sector is not yet developed. Target Market Analysis: Ethiopia’s Solar Energy Market 13 Solar hybrid PV and telecommunication Ethiopian Telecommunications Corporation (ETC) is the monopoly telecom operator in the country. With only about 15 % of the population living in electrified areas, the rate of electrification is very low in Ethiopia. Besides, the pace of electricity grid expansion has almost always been slow compared to rural telecom connectivity. With rapidly growing mobile phone markets that began to expand into the rural areas in recent years, the gap grew even bigger. For example, since mid 2004, ETC has embarked upon a series of major investment projects aimed at improving the coverage and quality of the mobile network. Introduction and subsequent expansion of wireless and mobile phones into the vast off-grid rural market in recent years required more innovative and cost-effective energy solutions than the traditional, often unsustainable, diesel gensets. For instance, the GSM and GPRS mobile networks with fibre optic backbone supplied by Nokia Siemens Networks required the construction of some 300 new base transmission stations (BTS) in the Northern and Central parts of the country alone. According ETC, half of these stations are located in “hard-to-access rural areas” where there is no grid electricity to provide power. In response to this challenge, ETC approached Nokia Siemens to come up with a sustainable alternative to diesel generators. Nokia Siemens Networks built more than 50 solar-powered BTSs where solar PV, including battery banks, is being used to power the stations as well as the transmission node sites for 11 the fibre optic backbone network. Therefore, all or most of the remaining 100 BTSs constitute undeveloped market for PV hybrid. Although the grid is advancing rapidly and hundreds of small towns and villages are getting connected every year at present, an estimated 200 to 300, diesel powered BTSs might still exist in Ethiopia. 12 Potentially, all of these stations could be powered using solar PV, or PV-diesel hybrid. Replacing the power supply systems for the BTSs alone with solar PV would require 1.5-2 MWp systems. Solar hybrid PV and village mini-grid There are about 18,000 rural villages and 2000 towns in Ethiopia. The Ethiopian Electric Power Corporation (EEPCO), under its Universal Electricity Access Programme (UEAP), plans to electrify some 7,500 more towns and rural villages between 2005 and 2010. As of 2004, there were about 700 electrified towns in Ethiopia. Table 4: Number of Customers and Electrified Towns until 2006 Fiscal year Total number of customers directly connected Number of customers directly connected per year Electrified towns per year Number of electrified towns 13 2002 654,885 29,389 2003 698,360 43,475 2004 797697 99,337 2005 947697 150,000 2006 1,126,464 178,767 23 492 66 558 74 632 32 664 227 891 Given the faster pace of rural electrification in the past two years, the number of electrified towns and villages might have currently reached 3000. Even then, this leaves nearly 5,000 towns and villages to be electrified yet in the next years. Therefore, we can safely assume that there are over 10,000 rural 11 Ethiopian Telecommunications Network Powered by Renewable Energy Solutions: A Success Story, www.nokiasiemensnetworks.com. 12 However, officials within ETC are skeptical about this because, according to them, the majority of off-grid VSats and BTSs, which used to be powered by solar PV and gensets are now being replaced by grid electricity; and this leaves no or very little room for PV hybrid application in the sector. 13 The World Bank: Electricity Access (Rural) Grid And Off-Grid Expansion Project – Phase II, May 25, 2007 Target Market Analysis: Ethiopia’s Solar Energy Market 14 villages that will remain un-electrified for foreseeable future. Even if we assume a fraction of those villages (say 5 %) as potential market for solar hybrid PV, it constitutes a considerable market for PV. Table 5: Summary of Estimated Undeveloped Market Potential for Solar Hybrid PV Systems Number KWp Time frame (years) Financial volume (million Euro) Tourism 50 250 5 2.69 Telecom 100 150 5 1.61 Village mini-grid 500 5000 10 53.75 Sector Total 5400 58.05 EEPCo, under its so called self-contained system (SCS), operates several mini-grids providing electricity to dozens of rural towns. An estimated 30 to 40 small towns are currently being served by SCS mini-grids. The SCS has a total installed capacity of about 22 MW of which only about 6 MW is mini and small hydro and the balance diesel genset. Similarly, there are hundreds of small informal businesses and private individuals who generate and sell electricity using gensets. Informal electricity suppliers generate an estimated 100 MW of which some 30 % are located off-grid. Therefore, while the bulk of thousands (5,000+) of unelectrified rural towns constitutes undeveloped market, urban settlements with diesel-based mini-grids could be considered as immediate potential market for hybrid PV systems. 2.2.2 Grid Connected PV Systems So far there has not been any experience in the area of grid-connected PV. However, with rapidly advancing technology globally coupled with abundant solar resource and feed-in tariff law under review in Ethiopia, the technical potential for grid-connected PV is enormous. Nonetheless, unless it is considered on strategic and prestige grounds, grid-connected PV is far from being competitive in the short to medium term in Ethiopia. 3 Solar-Specific Regulation and Framework The Government of Ethiopia (GoE) has adopted a twin-track strategy of rural electrification. The central focus of the strategy is accelerating grid expansion to rural towns on the one hand, while using gensets and mini-grids to bring electricity to off-grid consumers on the other. To realise this strategy of grid-based rural electrification, a programme known as “Universal Electricity Access Programme” (UEAP) was established under EEPCo in 2005. The UEAP, a ten year rural electrification programme of the GoE that aims to connect over 7000 towns and villages during its life span, envisages improving electricity access from 15 % to about 50 % over a five year horizon. The programme also aims at raising per capita electricity consumption from the level of 24 KWh per year in 2007 to 128 KWh by 2015. The UEAP has successfully connected hundreds of small towns and villages each year over the last three to four years. As ambitious as it is, EEPCo’s grid-based rural electrification (implemented through UEAP) alone might not be able to meet the energy needs of the country any time soon. This is because, firstly, 2 Ethiopia is a vast country with an estimated land area of 1.1 million km ; and secondly, the rate of electrification is one of the lowest (6 % direct connection) even compared with Sub Sahara Africa (SSA) standards. Challenged by those inconvenient realities mentioned above, the GoE has recognised the need for more innovative energy solutions and flexible technologies to complement its Target Market Analysis: Ethiopia’s Solar Energy Market 15 overall national rural electrification programme. In line with this, the GoE has established the necessary institutional and financing frameworks to facilitate and accelerate off-grid rural electrification. The establishment of rural electrification fund (REF) under the Ethiopian Rural Energy Development and Promotion Centre (EREDPC) has opened up new opportunities for Renewable Energy Technologies (RETs) particularly solar PV and mini and micro hydro power development in the country. Cognizant of the inherent limitations of grid-based rural electrification, the GoE, has set up the Rural Electrification Fund (REF) to electrify off-grid rural areas. The two most important components of the REF initiatives are promotion and support to mini-grids and solar PV for institutions such as health and education. The mini-grid component with its initial budget of about 29 million Euros was designed to finance about 180- 200 projects of isolated grids, with majority of renewable energy projects, i.e., mini and micro hydro, and solar PV. It was targeted at providing electricity services to 150,000 customers, representing a population of 750,000 inhabitants. The institutional PV component, which had a budget of about 1.9 million Euros, was designed to support installation 1000 institutional PV systems in selected clinics and schools. Details of cost estimates and funding sources are presented in Table 6 below. The REF is still active and running, despite its very slow process in financing RE projects. Table 6: Cost Estimates and Funding Sources for Off-Grid Electrification (in Million €) Component Estimated total costs IDA (to GoE) Customers and developers Develop about 180-200 Mini-Grids serving 150,000 new customers (Mini hydro, PV, Diesel) Install 1,000 small PV systems for social services 29 26.4 2.6 1.9 1.9 -- Provide low cost lighting to 150,000 customers 5.4 1.2 4.1 3.1 Policies and Regulations 3.1.1 General Policies and Regulations The Rural Development Strategy, November 2001 The Rural Development Strategy recognises development of physical infrastructure, among which energy is recognised to be an essential rural infrastructure. The strategy explicitly addresses the issue of rural electrification and proposes rural electrification implementation by both the public and private sector. Solar energy is specifically addressed in the strategy as potential alternatives for rural electrification. The strategy pointed out that the participation of non-government sector would be crucial in the application of solar energy in rural areas. The Amended Investment Proclamation (No. 116/1998) In an attempt to attract foreign direct investment in key economic sectors, Ethiopia has revised its investment codes several times. The revised investment proclamation, in addition to several incentive schemes including tax relief, has lowered investment capital requirement from about 0.7 million Euros to 70,000 Euros. In fact, the code slashes back this sealing to nearly one-half (43,000 Euros) if foreign private investors forge partnerships with local businesses. The National Energy Policy, 1994 The general policy direction was towards a least-cost, indigenous resource based and environmentally sustainable development for the energy sector. The policy sees energy security only from cost and reliance on indigenous resources points of view. It seems to disregard achievement of energy security Target Market Analysis: Ethiopia’s Solar Energy Market 16 through increased diversity of generation options. The policy has given less emphasis towards the application of solar energy technologies to rural development and livelihood improvement. The Rural Electrification Strategy, 2002 The main objectives of the strategy are to improve access to better social services (communication, water health and education), reduce negative environmental impacts, and promote private sector participation in increasing access to electricity in off-grid areas. The strategy proposed three basic rural electrification approaches: grid extension by the public utility (EEPCO), private sector led off-grid electrification, and promotion of new energy sources. Solar PV based electrification is recommended for isolated and dispersed electricity requirements. Rural Electrification Fund (REF) Establishment Proclamation (Proclamation no. 317/2003) The fund is established to promote private sector participation through the provision of accessible finance and technical assistance. It is financed by international donors and financial organisation such as GEF and the World Bank with some contribution from the GoE. The REF proclamation states that priority will be given to electrification through renewable energy sources. Feed-in Tariff Proclamation A draft feed-in tariff law is under preparation by the electricity regulatory agency (Ethiopian Electricity Agency). Presence of feed-in tariff with an attractive price per unit of power generated would be an incentive to encourage grid based solar power projects. Quality and standards Solar energy equipment is currently imported from various sources in different qualities. Unregulated importation of PV equipment and accessories from uncertified suppliers has been a challenge to solar companies that provide standard products and services as they hardly compete with cheaper but inferior quality products. This is more vivid in the SHS and small commercial systems market where awareness is low and cost reduction as opposed to product quality is usually accorded high priority. The Quality and Standard Authority of Ethiopia (QSAE) does not have codes of standards to solar equipment and installation of systems. More recently, however, with appearance of finance and support organisations (i.e. REF, NGOs, etc) in the solar PV industry, quality and standard of products has become an issue. However, on the other hand, building the capacities of PV technicians’ both in quality and quantity is highly required and it has to go together with the effort of setting codes of standard for products and practices in the industry. To this effect, GTZ AMES-E and Solar Stiftung (Solar Energy Foundation) have taken initiatives to establish solar competence centres in the country Solar Stiftung (Solar Energy Foundation) has already established a training facility in Amhara Region of Ethiopia. GTZ AMES-E on the other hand signed a Memorandum of Understanding (MoU) with Selam Technical Vocational Training Centre for establishment of a training facility in Addis Ababa. 3.1.2 Technology-Specific Considerations Off-grid solar PV In its various sectoral and national economic policies, the GoE recognises the role renewable energy particularly solar PV could play in providing electricity to off-grid rural towns and villages. In fact, solar PV is one of the key rural electrification strategies through which the government intends to improve electricity access to off-grid consumers. In line with this, the GoE showed its commitment to the promotion and widespread adoption of RETs through the establishment of institutions and financing mechanism (REF) for off-grid rural electrification. Target Market Analysis: Ethiopia’s Solar Energy Market 17 Grid connected solar PV The feed-in tariff law is under discussion at the present, but grid connected PV is not considered yet. Among the reasons for disregarding grid connected PV in the draft feed-in tariff law could be due to relative abundance of far less expensive options. Solar water heaters (SWH) Despite the conscious promotion of the use of natural and renewable resources, the Ethiopian energy policy and various strategies do not explicitly mention SWH (except for large scale process heating). Recommendations for German enterprises Tax revoking and introduction of appropriate feed-in tariff could prompt large-scale solar power plant and Building Integrated PV (BIPV) systems. German companies may need to work with their Government to lobby the Government of Ethiopia for placement of effective policy implementation strategy to support the industry. Companies need to closely follow up the progress to such changes and monitor how the market would respond. German companies should work with the German bilateral technical support programmes to influence Ministry of Education to incorporate technical solar energy system installation skills in the curriculum of Technical Vocational Education and Training (TVET) programmes. German companies need to forge partnership with local PV companies to follow up local and international tenders for the supply of PV systems and components, and also to source out installation works. 3.2 Applicable Public Sector Support / Financing Mechanisms and Sources Rural Electrification Fund (REF) Currently, the REF provides concessional loans for the development of off-grid electrification projects – 85 % loan with an interest rate of 7.5 % for diesel projects, and 95 % loan with zero interest rate for renewable energy projects. Learning from the experience and lessons of the off-grid component under Energy Access and Rural Electrification Programme (EAREP-II) (financing heavily biased in favor of diesel generators), REF provides co-financing grants for renewable energy off-grid projects. Renewable energy technologies that receive support under this programme include solar PV, mini and micro hydro, and biomass cogeneration. The co-financing grant will provide 20-30 % capital subsidy of the investment costs to project developers on a reimbursement basis. In addition to the co-financing grant, the REF will continue to provide 60-70 % concessional loans to project developers, who will contribute 10 % of equity investment. Under Energy Access Project-I, the majority of approved and co-financed projects were diesel generators. As diesel gensets not only unsustainable but also not favoured by government policies (increased foreign exchange burden from oil imports), EAREP-II gives priority to Renewable Energy projects when and wherever resource availability allows. In addition to co-financing, the REF also assists Renewable Energy project developers in evaluating least-cost options such as solar, biomass technologies and diesel/wind hybrid systems in areas without hydro resources. In the last couple of years, the REF has disbursed about two million Euros for procurement and installation of solar PV systems for rural schools (100), health facilities (200), and households (about 600). The REF floats one or two tenders annually for the supply and installation of PV system. Target Market Analysis: Ethiopia’s Solar Energy Market 18 GTZ AMES-E GTZ under its six-year-programme “Access to Modern Energy Services – Ethiopia” (AMES-E) promotes solar PV system through capacity building and installation of pilot institutional solar PV systems. GTZ has already procured solar PV modules and equipments to be installed in 50 rural health centers in 2009. The total system size is about 75 kWp. In the coming three years, before the completion of the project, GTZ will install solar PV systems in 50 more rural health clinics and about 30 rural schools. Moreover, in partnership with the Ministry of Mines and Energy and Selam Technical Vocational Centre, GTZ will set up a solar PV training centre, the centre to be set up will have all the necessary equipment needed for conducting standardized training. Plan Ethiopia Plan Ethiopia is the local representative of the NGO Plan International. It is involved in various community development activities in various sectors such as health, education, water development. As part of its social service improvement activities, Plan Ethiopia recently adopted integration of solar PV systems into rural health facilities, schools and community water supply system. In the coming two years it will require supply of solar PV systems of size over 90 kWp. Others There are several local regional governments in Ethiopia, particularly health bureaus and energy agencies, set aside budgets for procurement of solar PV systems. For instance, Amhara Regional Health Bureau, with support obtained from Austrian Development Cooperation, needs a supply of solar PV systems and vaccine fridges for rural health facilities to be installed in 2009. Lighting Africa Lighting Africa is a World Bank/IFC funded project currently under implementation in several African countries including Ethiopia. Currently, the project is in preparation to conduct nationwide market assessment for solar PV lighting opportunities. 4 Business Partners and Competitors 4.1 Overview of Solar Key Market Players With growing demand for solar PV and SWH, the number of suppliers has also grown over the past years. At present, there are about 15 solar PV companies at different capacities and levels of involvement in the business. However, over 80 % of the annual solar PV sales are constituted by about five companies. The others are opportunistic traders who sometimes import few systems otherwise purchase from the major suppliers. Including all players in the PV market, their number has grown by about 50 % in the last three years. Table 8 below shows the list of major solar PV dealers in Ethiopia. New companies are also getting into the SWH market. At present there are about ten SWH dealers in the country. Solar water heater market is mainly the urban households market. Imported products are of smaller sizes suitable for households. Systems with pumps and central hot water distribution for hotels and institutions are not adapted in the country. Hotels and institutions use several smaller modular units each having their own hot water tank. In addition to the PV dealers outlined in Table 8, the following companies are involved in the SWH market: Target Market Analysis: Ethiopia’s Solar Energy Market 19 Table 7: Companies Involved in the SWH Market Full name Activities Contact details Equatorial Business Group (EBG) A multi million business company. SWH account for less than 5 % of the total business. It takes the biggest share of total sales in the country. Products are mainly of heat-pipe technology. EBG Head Office Debre Zeit Road P.O.Box 8964 Addis Ababa Ethiopia Tel : (+251) (0) 11-4400103/4407492 Tel : (+251) (0) 11-4424955(PABX) Fax : (+251) (0) 11-4422148 NBA-Solar Energy & Security Centre PLC A new entrant to the SWH business specialising in SWH. Email [email protected] Internet: www.ebg-ethiopia.com NBA-Solar Energy & Security Centre PLC Yelebe Molla Abebe P.O.BOX 24859/1 Addis Ababa Ethiopia Tel. : (+251) (0) 6460420/6477070 Fax. : (+251) (0) 6477070 Cell. : (+251) (0) 1919381 Sat Mechanical Workshop GPG Energy & Security Vonall.com One of the earliest businesses in SWH. Company started with local manufacturing but currently all products are imported. Pioneer in local manufacturing of SWH. It forged partnership with an Israeli based company. Set up an assembling unit for flat-plate collectors importing components from Israel. It was market leader some five years before. is specialised on solar systems for hot water solutions. In addition, the company is considering to move into solar PV. Addis Ababa Ethiopia Tel. (+251) (0) 11 416 0575 Fax: (+251) (0) 11 416 0576 Addis Ababa, Ethiopia Tel. (+251) (0) 11 551 1659 Fax(+251) (0) 11 551 1647 Target Market Analysis: Ethiopia’s Solar Energy Market 20 Table 8: List of Relevant Importing Companies in the Solar PV Market 2008 Importing company Company description & distributors Company strategy Major PV product PV business sector 200 kWp Direct Solar Energy Privately owned Ethiopian company based in Addis Ababa. Total number of employees less than five 100 % PV work. Aggressive marketing to donors. Supplies PV systems to all markets - households, commercial, NGO and government projects. Pioneer in development of commercial sales outside Addis Ababa. SHS, commercial, solar pump, and institutional systems market 150 kWp Everbright Private Ethiopian solar PV company. More than ten employees Over 90 % PV work. Targets home systems and small commercial system markets. Has retailing shops in some rural towns. Modules and controllers are mostly imported from suppliers in Europe and Dubai. Batteries: mainly from China. Imports equipment from changing suppliers. Modules and balance of systems including controllers, batteries and light bulbs SHS and small commercial systems market Imports products mostly from China Tesfaye Legese Tel: (+251) (0) 911619474 40 kWp Lydetco P.L.C Private Limited Ethiopian Company. Number of employees more than ten PV products mainly from Europe BETA Electrical Engineering P.L.C. Private Ethiopian Company. Total number of employees (both permanent and short term) is more than 50. Those involved in solar are less than ten in number All modules and system components from major PV multinational PV company in Europe Modules: Opportunistic, BOS: India, Europe. Institutional, telecom 20 kWp Solar PV constitutes less than 20 % of business turnover. Company strategy is to respond to tenders also wholesales and retails. PV constitutes between 10-15 % of the business. Electrical spares and engineers with operations in off-grid areas. Strategic partnership with international finance organisation. Household, small commercial and institutional systems market Mostly from India Dereje Walelign Tel: (+251) (0) 911207283 or 114 663189 Email: [email protected] Kassa W.Senbet Mob: (+251) (0) 911242766 Email: [email protected] 5 kWp Ethio-Ducth Business P.L.C Company established in partnership with Ethiopian and Netherlands company (Gira Mundo/ Solar Man). Employees less than five Product list includes modules, BOS Institutional system markets China and Europe Davis & Shirtliff A subsidiary of Davis Shirtliff Kenya 100 % PV company. It aims for large scale donor supported institutional systems. Wholesales and retails equipment including home systems and small commercial systems market. Specialised in pumps and PV systems. Focus on institutional and wholesale market. Supplies pumps and PV systems market. Wholesale to distributers. Equipment sources Contact details Mulugeta Girma Mob: (+251) (0) 911207830 Email: [email protected] Adane W. Michael Tel: (+ 251) (0) 113200021 Email: [email protected] Urael Bole Tele Road P.O. Box 170540 Addis Ababa / Ethiopia Tel: (+251) (0) 11 51 59 341/44 Fax: (+251) (0) 11 51 59 351 Email: d&[email protected] Target Market Analysis: Ethiopia’s Solar Energy Market Solar 23 A subsidiary of Solar 23 Germany (About a year since opened business in Ethiopia). Employees less than ten 21 Institutional systems market, wholesale to distributers. Nabil Ishak Nefas Silk Lafto Sub City Kebele 06 - House No. 182 P.O. Box 22572/1000 Addis Ababa / Ethiopia Tel: (+251) (0) 118 500 024 Mob: (+251) (0) 911 714 668 Email: [email protected] Table 9: List of Consultants, NGOs and Non-Governmental Projects in the Solar PV Market Full name Role in sector Activities GTZ - AMES Promoter Installation of pilot institutional systems to rural health facilities and schools. Plans to set up a solar training facility in Addis Ababa. Solar Stiftung (Solar Energy Foundation) Promoter Promotes SHS through installation of PV systems at subsidised price, Installed over a 1000 small solar PV powered LED system in more than 1000 homes in a rural village, Works closely with local regional governments in Ethiopia to install SHS at subsidised price, Established a solar PV training facility in Amhara Regional State. Plan Ethiopia/ Plan International NGO-involved in community development activities Development of community water supply system, construction of rural health facilities and schools, child sponsorship programme. Megen Power Ltd Consultant Energy, environment, development Partners Consulting and Information Services Consultant Business development, energy Procurements (types of equipment/ services) Solar PV systems Volume kWp or € Over 75 kWp (about € 700,000 for clinics plus between 15-30 kWp for schools (over € 200,000) Plans in immediate future 1 to 3 years Contact details Joachim Gaube, or Samson Tolosa (+251) (0) 911 429640/ 911211284 Email: [email protected]; [email protected] Samson Tsegaye Tel: (+251) (0) 116 181462, Mob: (+251) (0) 911 228710 Email: [email protected] Institutional systems for rural schools, health facilities and community water supply systems Over 90 kWp (above 800,000 Euros) In few months time Asnake W. Michael Email: [email protected] Melessaw Shanko Mob: (+ 251) (0) 911203096 Email: [email protected] Mekonen Kassa Mob: (+ 251) (0) 911 203097 Email: [email protected] Target Market Analysis: Ethiopia’s Solar Energy Market ERG Consultant Renewable energy, environment, development SolaTech Consultant Energy B-Cad Management Consultants Consultant Specialised in business development, training. 22 Hilawe Lakew Mob: (+ 251) (0) 114 670802 Email: [email protected] Tesfaye Bayou Mob: (+251) (0) 911 226556 Email: [email protected] Table 10: Government and Public Sector Projects Full name Role in sector Activities Rural Electrification Fund Promotion and financing rural electrification projects Electricity regulation Ensures provision of health services Assists developers on rural electrification projects, Disburse loans. Engineering support for ETC's rural telephony programme Procurement of solar PV modules for telecom infrastructure. Ethiopian Electric Agency Amhara Region Bureau of Health Ethiopian Telecommunication Corporation (ETC) Procurements (types of equipment/ services) SHS for 300 homes in Somali regional state Volume kWp or € 7 kWp system (about 70 thousand Euros) Plans in Immediate Future Tender already floated Issues operational licenses for power generation, distribution and sales, regulates electricity tariff. Contact Details Amare Hadgo Tel: (+251) (0) 116 558 654 Email: [email protected] Getahun Moges Solar PV systems for rural health facilities Solar PV modules Over 7 kWp (over 70 thousand Euros) In few months Wudu Ayalew Tel: (+251) (0) 582 201 722 >2 MW PV module (worth over 20 million Euros) from 1 to 5 years Tayework Tel:(+251) (0) 115 529 687 or 115 527579 Target Market Analysis: Ethiopia’s Solar Energy Market 23 4.2 Overview of Major and/or Most Emblematic Solar PV Projects Several ongoing projects are stimulating the solar PV market in Ethiopia. As it has been mentioned in section 2.1, institutional demand for solar PV is driven mainly by donors’ support. Such demands are incentives for businesses with a trickle-down effect on developing the commercial market. In this regard, solar PV support-programmes by UNEP/GEF, REF, GTZ AMES-E and Solar Stiftung (Solar Energy Foundation) are worth mentioning. Table 11: Major PV Projects Projects Location Size Project participants UNEP/GEF Jimma, South West Ethiopia East African regional project in five countries Donors, government, consumers, local PV companies, consultants REF National ~ USD 40 million GEF, World Bank, Ministry of Mines and Energy GTZ AMES-E Oromia, Amhara, Southern Ethiopia Solar Stiftung (Solar Energy Foundation) Oromia and Amhara Ministry of Mines and Energy, Universities, Rural Technology Promotion Centres, regional energy bureaus, local PV companies, international PV companies Success factors/stories Building commercial PV market infrastructure through technical training, raising awareness, creating linkages and installing subsidised demo PV systems. Removing market barriers through promotion, “flexible” financing to RETs. Institutional and technical capacity building for RETs. Piloting RETs for institutional and community electrification. Removing barriers through awareness raising, technical training to local PV technicians, and installation of demo SHS. Target Market Analysis: Ethiopia’s Solar Energy Market 24 Important Projects The Rural Electrification Fund (REF) - One of primary purposes for the establishment of REF is to stimulate the solar PV market through provision of financing mechanism in the form of soft loans. Since its formation, REF has disbursed over two million Euros for direct purchase of solar PV equipment and local technical capacity building activities. Out of the total finance made available in the PV sector through REF, about half goes to installation of PV systems in rural health facilities and schools. REF encourages rural communities to organise in unions/cooperatives in order to become eligible to access REF loans. REF financed the following institutional and SHS installation: REF-financed institutional systems: Lower Primary Schools: 100 schools each with 200 Wp institutional PV systems is underway in various parts of the country. Health Posts: 200 health posts with each with 360 Wp is underway in various parts of the country. REF-financed solar home systems: Yirgachefe SHS: Installation of SHS in 300 households with a total capacity of 6 kWp is completed in Yirgachefe. Nazereth SHS: Installation of SHS in 100 households with a total capacity of 7 kWp is completed in Nazreth area. Somali region SHS: Installation of SHS in 100 households with a total capacity of about 10 kWp is underway in Somali regional state. GTZ AMES-E is implementing a six years programme with the financial support obtained from the Dutch Government under “Energising Development Programme”. Under this programme, GTZ promotes solar PV systems and micro-hydro power as pilot projects intended to remove barriers for PV commercial market development. GTZ AMES-E is currently working on the installation of the following institutional PV systems: First-round installations: Installation of a total of 57.6 kWp (1.44 kWp x 40 institutions) in 40 health institutions is currently completed in various parts of the country. Second-round installations: Installation of a total of 72 kWp (1.44 kWp x 50 institutions) in 50 health institutions is underway. Community Service and Schools: Another round of institutional PV installations for community services and rural schools is being envisaged by AMES to be completed over the coming years. Besides, GTZ AMES has signed a Memorandum of Understanding with Ethiopian Rural Energy Development and Promotion Centre and Selam Technical Vocational Centre for establishment of a solar PV training centre. The training facility is expected to start functioning over the coming three years. Solar Stiftung (Solar Energy Foundation) is a German NGO that works on promotion of solar PV technologies and technical capacity building. Over the last few years, Solar Stiftung installed solar home system in more than 3,000 households in various parts of the country. The following are PV SHS projects under Solar Stiftung: Rema-Dire SHS project: Installation of a total of 2,000 SHS in Rema and Dire Villages in Amahara region. SHS in various regions: A total of 1,000 SHS were installed in Oromia, Southern Ethiopia, Amhara and Tigray regions. Target Market Analysis: Ethiopia’s Solar Energy Market 25 Solar Stiftung (Solar Energy Foundation) envisages installing 49,000 SHS in various parts of the country over the coming two years. Besides, the NGO has established a solar competence centre in Amhara regional state. This centre is expected to increase the availability of capable solar technicians in the country over the coming few years. These and various other efforts by governmental organisations, NGOs and private firms are expected to set the solar PV industry to grow in an accelerated rate over the coming years. Additional local solar market developments include: The REF released in May 2009 a fourth round tender for procurement of an estimated 7 kWp PV systems for households in Somali Region of Ethiopia. There is a renewed interest on renewables among policy makers and high level officials as indicated by a series of forums led by Ministers and Vice Ministers were organised by the Ministry of Mines and Energy since mid 2008. The following are the key issues that the high level renewable energy discussion forum is attempting to address currently feed-in tariff law and establishment of Solar Energy Society. NGOs are showing keen interest in integrating RETs in their development programmes. A case in point is, Plan Ethiopia, an NGO, which has committed to install more than 70 kWp solar PV systems to provide electricity to rural villagers in some of its community development projects. New entrants to the solar market: Two companies, one international and one local have 14 recently opened offices in Addis Ababa and joined the solar market. Current Market News: due to the prevailing power shortage, demand for charger/inverter backup systems is growing significantly in recent months. Inexpensive Chinese LED lights have started to appear in the market. Many PV dealers have reported either no or very low stock due to shortages of foreign exchanges to import PV equipment. 14 Solar 23 Pvt. Ltd Co. a local company but affiliated with Solar 23 Germany, and Davis & Shirtliff, a subsidiary of Davis & Shirtliff Kenya. Target Market Analysis: Ethiopia’s Solar Energy Market 26 References Ethiopian Electric Agency (EEA): http://ethioelectricagency.org/ (July 2010). Ethiopian Telecommunication Corporation (ETC): http://www.ethionet.et/ (July 2010). Ethiopian Telecommunications Network Powered by Renewable Energy Solutions: A Success Story, www.nokiasiemensnetworks.com (July 2010). Feed-in tariff law, Second draft, Ethiopian Electric Agency, Ministry of Mines and Energy, October 2009. Ministry of Mines and Energy: www.mome.gov.et (July 2010). Rural Electrification Fund (REF): http://ethiopiaref.energyprojects.net/ (July 2010). Solar Energy Resources, Technical Report 3, CESEN 1986. The World Bank: Electricity Access (Rural) Grid And Off-Grid Expansion Project – Phase II, May 25, 2007. This publication is available free of charge as part of the public relations work of the Federal Ministry of Economics and Technology, and may not be sold. It may not be used by political parties or campaigners or electoral assistants during an election for the purposes of campaigning. 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