Uganda Off-Grid Lighting Market Assessment · 2019. 4. 24. · Final Report MARKET ASSESSMENT OF MODERN OFF GRID LIGHTING SYSTEMS IN UGANDA Produced for Lighting Africa December 2014

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TRAINING MODULE: WORKING SERVICES

Final Report MARKET ASSESSMENT OF MODERN OFF GRID LIGHTING SYSTEMS

IN UGANDA

ProducedforLightingAfrica

December2014

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+1 (202) 822-9100

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Authors:EncludeBV,TheNetherlands

LisanneHeemskerk,GeertEenhoorn,BobbyNamitiDate:December2014Disclaimer: ThisreportwascommissionedbyWorldBankGroupandtheUgandanRuralElectrificationAgency,aspartoftheLighting Africa programm (a joint IFC andWorld Bank program). The findings, interpretations, and conclusionsexpressedinthispaperareentirelythoseoftheauthors.TheydonotnecessarilyrepresenttheviewoftheLightingAfricaProgram,itsaffiliatedorganizations,orthegovernmentstheyrepresent.This report has been developed with the utmost care and based on primary research conducted in Uganda.Nevertheless,EncludeBVcannotguaranteeorwarranttheaccuracy,reliability,completenessoftheinformationinthispublicationnoritsusefulnessinachievinganypurpose.Readersareresponsibleforassessingtherelevanceandaccuracyofthecontentofthispublication.EncludeBVwillnotbeliableforanyloss,damage,costorexpenseincurredorarisingbyreasonofanypersonusingorrelyingoninformationinthispublication.

Final report WB PO7170868 ‘ Enclude 3

TABLEOFCONTENTS TABLEOFCONTENTS.............................................................................................................................3

LISTOFABBREVIATIONS.......................................................................................................................5

LISTOFFIGURES...................................................................................................................................6

LISTOFTABLES.....................................................................................................................................9

SUMMARY..........................................................................................................................................10

1 INTRODUCTION..........................................................................................................................13

1.1 OBJECTIVEOFTHESTUDY.............................................................................................................131.2 RESEARCHMETHODOLOGY...........................................................................................................131.3 RESEARCHCHALLENGESANDLIMITATIONS..................................................................................171.4 STRUCTUREOFTHEREPORT.........................................................................................................17

2 LIGHTINGMARKETINUGANDA..................................................................................................18

2.1 BACKGROUNDONENERGYACCESSANDOFF-GRIDLIGHTINGINUGANDA.................................18

3 DEMANDASSESSMENTOFTHEMODERNOFF-GRIDLIGHTINGMARKET.....................................20

3.1 CONSUMPTIONANDPURCHASEPATTERNSOFOFF-GRIDLIGHTING...........................................203.2 CONSUMPTIONANDPURCHASEPATTERNSOFMOBILEPHONES................................................333.3 SOLARBRANDS..............................................................................................................................343.4 HOUSEHOLDSPENDING................................................................................................................363.5 CURRENTDEMANDANDCONSUMERSPENDINGTRENDS............................................................393.6 CONSUMERSEGMENTATION........................................................................................................483.7 CONCLUSIONSFROMTHEDEMANDANALYSIS.............................................................................50

4 SUPPLYANALYSISOFF-GRIDLIGHTING.......................................................................................52

4.1 SUPPLYCHAINACTORSANDPRODUCTSONTHEMARKET...........................................................524.2 DISTRIBUTIONCHANNELS.............................................................................................................604.3 BARRIERSTOGROWTH.................................................................................................................64


4.4 FINANCE........................................................................................................................................674.5 MARKETSIZEANDGROWTH.........................................................................................................684.6 FACTORSINFLUENCINGDECISIONMAKERS..................................................................................714.7 CONCLUSIONSFROMTHESUPPLYANALYSIS................................................................................72

5 INSTITUTIONANALYSIS..............................................................................................................75

5.1 GOVERNMENTPOLICIESANDINSTITUTIONS................................................................................755.2 FINANCIALINSTITUTIONS..............................................................................................................785.3 DONOR/NGOPROGRAMMES......................................................................................................805.4 PRVATESECTOR.............................................................................................................................825.5 POTENTIALACTORS.......................................................................................................................825.6 CONCLUSIONSFROMTHEINSTITUTIONALANALYSIS...................................................................84

6 CONCLUSIONS............................................................................................................................85

7 RECOMMENDATIONS.................................................................................................................89

ANNEXES

ANNEX1:DEMANDSURVEY

ANNEX2:SUPPLYSURVEY

ANNEX3:DEMANDSURVEYSAMPLE

ANNEX4:SUPPLYSURVEYSAMPLE

ANNEX5:INCOMEDISTRIBUTIONPERMAINSOURCEOFINCOMEOFEACHHOUSEHOLD

ANNEX6:DETAILSOFINTERVIEWEDIMPORTERSANDDISTRIBUTORS


LISTOFABBREVIATIONSARSO AfricaRegionalOrganizationfor

StandardizationBMZ GermanFederalMinistryfor

EconomicCooperationandDevelopment

BoP BaseofthePyramidCAPI computerassistedpersonal

interviewsCREEC CentreforResearchandEnergy

ConservationEAC EastAfricanCommunityEEP EnergyandEnvironmental

PartnershipERA ElectricityRegulatoryAuthorityERTP EnergyforRuralTransformation

ProgramFESL FerdsultEngineeringServices

LimitedFIs FinancialInstitutesGIZ GesellschaftfürInternationale

ZusammenarbeitGVEP GlobalVillageEnergyPartnership

InternationalGVEP GlobalVillageEnergyPartnershipIFC InternationalFinanceCooperationIFC InternationalFinanceCorporationIRENA InternationalRenewableEnergy

AgencyISO InternationalOrganizationfor

StandardizationKfW GermanDevelopmentBankkWh Kilowatts-hourLED LightEmittingDiodeMDI MicroFinanceDepositTaking

InstitutionMEMD MinistryofEnergyandMineral

DevelopmentMFI MicrofinanceInstitutionMoU MemorandumofUnderstanding

PREEEP PromotionofRenewableEnergyandEnergyEfficiencyProgramme

PV PhotovoltaicPV PhotovoltaicRE RenewableEnergyREA (Uganda)RuralElectrification

Agency(sometimestheacronymUREAisused)

REB RuralElectrificationBoardRESP ruralelectrificationstrategyand

planRETs RenewableEnergyTechnologiesSACCO SavingsandCreditCooperative

SocietiesSEMA SustainableEnergyMarket

Acceleration(project)SHS SolarHomeSystemSME smallandmedium-sizedenterpriseTA TechnicalAssistanceTP TechnicalProvidersUECCC UgandaEnergyandCredit

CapitalizationCompanyUETCL UgandaElectricityTransmission

CompanyLimitedUGX UgandanShillingUNAAC UgandaNationalAlliancefor

CleaningCookingUNBS UgandaNationalBureauof

StandardsUNREA UgandaNationalRenewable

EnergyAssociationVSLA VillagesavingandloanassociationW,Wh,Wp Watts,Wattshour,WattspeakWB WorldBankWENRECO WestNileRuralElectrification

CompanyLimitedWWF WorldWildlifeFundWWF-ESARP WWF-EasternandSouthernAfrica

RegionalProgrammeWWF-UCO WWFUgandaCountryOffice


LISTOFFIGURESFigure 1. Overview of actual locations where demand surveys were taken (see also Annex 3). Insert:

populationdensity................................................................................................................................15Figure2:Answerstothequestion9:‘Whatsourcesofenergydoesyourhouseholduse?’........................20Figure3:Question10:‘Howreliableareyourcurrentsourcesofenergy?’.................................................21Figure 4: Question 10: ‘How reliable are your current sources of energy?’ as perceived by Ugandan

households(n=1249;multipleresponsesperhouseholdwerepossible)...........................................21Figure5:Question11:‘Whichofthefollowingappliancesdoesyourhouseholdhave?’.............................22Figure6.ExamplesoftheKerosenelamps(tadoobas)used.........................................................................22Figure7:Question13:‘Whatarethecurrentlightingsource(s)usedbyyourhousehold?’........................23Figure8:Left:Questions15:‘Howmanyroomsinyourhousearecurrentlylighted?’Right:Questions16:

‘Howmanyroomswouldyouliketohavelighted?’.............................................................................23Figure9:Question21:‘Onaverage,howmuchtimedoesittaketotraveltopayforelectricityorpurchase

lightingproductsperweek?’.................................................................................................................24Figure10:Question17:‘Howsatisfiedareyouwithyourcurrentlightingsource?’asperceivedbyRural/Peri-

Urban/UrbanUgandanhouseholds.....................................................................................................24Figure11:Question17:‘Howsatisfiedareyouwithyourcurrentlightingsource?’....................................24Figure12:Question9:‘What[other]sourcesofenergydoesyourhouseholduse?’Complementarityoff-grid

productsandelectricity(n=194)...........................................................................................................25Figure13.ExamplesofsolarPVinstallations................................................................................................25Figure14:Question35:‘Whatkindofsolarproduct(s)doyouhave?’SolarHomeSystemownersonly.Left:

perlocation;Right:perregion..............................................................................................................26Figure15:Question35: ‘Whatkindofsolarproduct(s)doyouhave?’mobilesolarsystemsonly.Left:by

location;Right:byregion......................................................................................................................26Figure16:Question36:‘Whatarethemainusesofyoursolarproduct(s)?’byareatype..........................27Figure17:Question36:‘Whatarethemainusesofyoursolarproduct(s)?’byproducttype....................27Figure18:Question38:‘Wheredidyoubuyyoursolarproduct?’top:fixedsolarsystems,bottom:mobile

systems..................................................................................................................................................28Figure19:Question38:‘Wheredidyoubuyyoursolarproduct?’SolarHomeSystemowners(topgraph)and

mobilesystemowners(bottomgraph).................................................................................................28Figure20:Question39:‘Whendidyoubuythesolarproduct?’..................................................................29Figure21:Question40:‘Isyoursolarproductstillworking?’.......................................................................29Figure22:Questions38combinedwithQuestion40:‘Fromwhomdidyoubuyyoursolarproductandisit

stillworking?’........................................................................................................................................30Figure23:Question47:‘Howsatisfiedareyouwithyourcurrentsolarproduct?’......................................30Figure24.Left:Question30:‘Doyouthinksolarpoweredproductscanbetrusted?’Right:Question31:‘In

youropinionishavingasolarproductanindicationofamodernhousehold?’...................................31Figure25:Question27:‘’Whichofthefollowingbenefitsofmodernlightingaremostappealing?”(n=568)

...............................................................................................................................................................31Figure26:Question55:‘Reasonsfornotpurchasingasolarproducttillnow’(n=568)...............................32Figure27:Question29:‘Whatconvincesyouofthequalityofasolarproduct?’(n=568).........................32Figure28:Question29:‘Wouldyoubewillingto[promotesolarproducts]ifyouwereofferedanincentive?’

(n=213)................................................................................................................................................33Figure29:Left:Question11:‘Whichofthefollowingappliancesdoesyourhouseholdhave?’(Answersfor

cell-phones only) (n=845), Right: Question 12: ‘Howmany cell phones does your household havetogether?’..............................................................................................................................................33

Figure30Question22:‘Whatis(are)thecurrentcellphonechargingsource(s)usedbythehousehold?’ 34Figure31:Distributionofmobilephonechargecosts(basedonQuestion19:‘Howmuchdoyouspendon

averageforeach,perweek?’)...............................................................................................................34Figure32:Question28:‘Whichsolarbrandshaveyouheardof?’Nationaltotalandbyregion.................35Figure33:Question37:‘Whatbrandis(are)yoursolarproduct(s)?’Nationaltotalandbysystemtype....35Figure34:Question37:‘Whatbrandis(are)yoursolarproduct(s)?’byarea..Error!Bookmarknotdefined.


Figure35:Question63:“Howmuchofyourhouseholdincomedoyouspendonthefollowingitemsonamonthlybasis?”.....................................................................................................................................36

Figure36:Distributioncurveformonthlyhousehold’senergyexpendituresQuestion63:“Howmuchofyourhouseholdincomedoyouspendontheenergyonamonthlybasis?”................................................37

Figure37:Question19:‘Howmuchdoyouspendonaverageforeachlightingsource,perweek?(Recurringcosts).....................................................................................................................................................37

Figure38:Question19:‘Howmuchdoyouspendonaverageforeachlightingsource,perweek?(Recurringcosts)perregionanddistrict.................................................................................................................37

Figure39:Distributionofoff-gridlighting(includingphonecharging)weeklyexpenditure(basedonquestion19:‘Howmuchdoyouspendonaverageforeach,perweek?)...........................................................38

Figure40:Question20:‘Doyoufeelthatasignificantshareofthehouseholdincomeisspentonlightingandphonecharging?’...................................................................................................................................38

Figure41:CorrelationbetweenQuestion32andQuestion34showsthatwhenaschoolorclinicusessolarpower,45%morehouseholdshavepowertoo(32%vs22%non-solarowners).................................39

Figure 42: Correlation between Question 32 and Question 33 shows that when neighbours, friend orrelativesownsolarpower,45%morerespondentsalsousesolarpower(32%vs22%non-solarowners)................................................................................................................................................................39

Figure43:Left:Question25: ‘Doyouknowwhatsolarpower is?’andRight:Question26: ‘Doyouknowwheretobuysolarproducts?’..............................................................................................................40

Figure44:Question54:Willingnesstopayforasolarproduct,inUGX.......................................................40Figure45:Question51andQuestion54:‘Howmuchwouldyoubewillingtopayforthechosenproduct?

(non-solar-owners)................................................................................................................................41Figure46:Left:Question56:‘Wouldyoube(more)interestedinbuyingsolarproductsifyouwereableto

takeoutaloantofinancethepurchase?’Right:Question57:‘Wouldyoube(more)interestedinsolarproductsifyouwereabletorentorleasethem?’................................................................................41

Figure47:Left:Breakdownsourceofincome(Q58)byprofession,andRight:district/region...................42Figure48.Monthlyincomebyincomesource.Bluetriangle=averageincomeofsolarpowerownersand

non-solarpowerowners.(DatabasedonQuestion55and56sortedpermainsourceofincome)...42Figure49:Left:Question60:‘Doesyourhouseholdincomehavestrongseasonalfluctuations?’,andRight:

Question62:‘Aretheremultipleincomeearnersinyourhousehold?’................................................43Figure50:Question61:‘Inwhichmonth(s)doyouhavemostincome?’.....................................................43Figure51:Left:Question64:‘Doesanyoneinthehouseholdhaveabankingrelationship?’Right:Question

65:‘Withwhichkind(s)oforganizationsisthisaccount?’....................................................................44Figure52:Question66:‘Doyoucurrentlyhaveanoutstandingloan?’(left),Question67:‘Withwhichkindor

organizationwasyourloanwith?’........................................................................................................45Figure53:Willingnessversusability(averagemonthlyhouseholdincome)topay.....................................45Figure54:Question24:‘Ifyouhadgreateraccesstoenergy,whatotheractivitieswouldyouusethenew

energyfor?’...........................................................................................................................................46Figure55:Question53:‘Whichtype(s)ofsolarproduct(s)wouldyoubewillingtobuy?bydistrict..........47Figure56:Question53:‘Whichtype(s)ofsolarproduct(s)wouldyoubewillingtobuy?’bylocation........47Figure57:Question50:‘Whatwouldyoubuy?’...........................................................................................48Figure58.GeneralrepresentationofUgandanoff-gridlightingproductsupplychain................................52Figure59:Question4:‘Whichorganizationbestdescribesthebusiness?’..................................................56Figure60.QuestionS7:‘Howmanyyearshaveyoubeeninbusiness?’.......................................................56Figure61:QuestionS33:‘Whoareyourmaincustomers?’..........................................................................57Figure62:QuestionS34:‘Wheredoesyouraveragesolarcustomerlive?’bydistrictandregion...............57Figure63:QuestionS35:‘Whatisthegenderofyouraveragesolarclient?’bydistrictandregion............57Figure64:QuestionS10:‘Whattypesofoff-gridlightingproductsdoyousell?’.........................................58Figure65:QuestionS20:‘Whichproduct(s)soldbestlastmonth?’ProductsthatsoldbestinApril2014by

district...................................................................................................................................................58Figure66:QuestionS8:‘Fromwhichsuppliersdoyoucurrentlygetyourproducts?’.................................59Figure67:QuestionS21:‘Whichofthebelowservicesdoyouoffer?’.........................................................59Figure68:Question29:‘Whatconvincesyouofthequalityofasolarproduct?’........................................60


Figure 69. Direct Sales model. Direct contact between seller and customer, sometimes through (local)branchoffices.......................................................................................................................................60

Figure70.Traditionaldistributionmodel.Onlyindirectcontactbetweenimporterandendcustomer......61Figure71:Franchise/agentdistributionmodel.............................................................................................61Figure72.MFI/SACCOmodel.ImportersellseitherviaMFI/SACCOordirectlytoend-usersbasedonjoint

promotionschemeswithMFIs/SACCOs...............................................................................................62Figure73.Combinationofmodels................................................................................................................62Figure74:QuestionS22:‘Whattypeofdistributionchannelsdoesthebusinessuse?’...............................62Figure75:QuestionS27:‘Whatkindsofmarketingstrategiesdoesthebusinessuse?’..............................63Figure76:QuestionS28:‘Whatkindsofmarketingworksbestforthebusiness?’......................................63Figure80:Question45:‘Whichofthebelowfactorsarethemostimportantobstaclestogrowingsalesof

solarproducts?’.....................................................................................................................................66Figure81:Question45:‘Whichofthebelowfactoraremostimportantobstaclestogrowingsalesofsolar

products?’byproducttype...................................................................................................................66Figure82:QuestionS40:‘Howisyourbusinessfinanced?’Multipleanswerspossible..............................67Figure83:QuestionS41:‘Doyoucurrentlyhaveanoutstandingloanforyourbusiness?’Multipleanswers

possible.................................................................................................................................................67Figure84:QuestionS42:‘Whyhaveyouneverhadaloan?’Multipleanswerspossible...........................68Figure85.QuestionS18andS19:‘Howmanyfixed/mobilesolarunitsdidyouselloveralllastmonth?..69Figure86.QuestionS12:‘Atwhatpricedoyouselltheproducts?’Aggregatedintomobilesolarunitsand

SHSsandsplitretailersperregion(andaggregatedfornationalaverages).........................................69Figure87.TotalAnnualTurnoverofInterviewedRetailers..........................................................................70Figure88.AverageTurnoverperRetailer.....................................................................................................70Figure89.MarketSizeforSolarHomeProductsinUganda.........................................................................71Figure90.Identifiedviciouscyclehamperinggrowthofthesolarmarket...................................................88


LISTOFTABLESTable1:Randomstratifiedsampledemandsurvey(households)................................................................14Table2:Interviewedimporters.....................................................................................................................16Table3.Interviewedinfluencers...................................................................................................................16Table4.Averagefixedcostsoftraditionallightingproducts........................................................................38Table5.Expenditureontraditionallightsourcesandtheaveragepaybacktimeifhouseholdswouldinvest

inasolarpoweredalternative(exchangerate:US$1=UGX2500).......................................................44Table6.Summaryofhousehold’sabilityandwillingnesstopayforsolarproducts*..................................46Table7:Maincharacteristicsoftheidentifiedcustomersegments.............................................................48Table8:Marketsegmentcharacteristics......................................................................................................49Table9.Mainchallengeidentifiedfromdemandanalysis............................................................................51Table10.MaincharacteristicsoftheinterviewedMobilesystemimporters/distributors..........................54Table11.MaincharacteristicsofSHSimporters/distributorsinterviewed..................................................55Table12.MaincharacteristicsoftheinterviewedSHSandmobileimporters/distributors........................55Table13:AverageEstimatedSalesperYear,byProductType,fromImportersandRetailers...................71Table14:Potentialmarketsizeforsolarsystems(fixedandmobile)andcorrespondingpaymentplanError!

Bookmarknotdefined.Table15.Mainchallengesidentifiedfromretailersurveyandinterviewswithsuppliers............................74


SUMMARYLightingAfrica,ajointIFCandWorldBankprogram,catalysesandacceleratesdevelopmentofcommercialoff-gridlightingmarketsinSub-SaharanAfricaaspartoftheWorldBankGroup'swidereffortstoimproveaccesstoenergy.LightingAfricaismobilizingtheprivatesectortobuildmarketsthatprovideaffordable,modernoff-gridlightingproductstocommunitiesacrossAfricathatarenotconnectedtogridelectricity.Enclude was contracted to conduct an off-grid lightingmarket assessment in Uganda, with the overallobjectivesto:(i) offerinsightonhowtheLightingAfricaprogramcanaddvalueandsupportmarketplayersinorder

togrowthemarketformodernoff-gridproductsthatmeettheLightingGlobalQualityStandards;(ii) offerinsightthatcanbeusedbycurrentandpotentialmarketplayerstogrowtheirbusiness.Toachievethisobjectivethemarketassessmentaddressesdemand,supplyandkeyinstitutionsinvolvedintheoff-gridlightingmarketinUganda.ApproachThemarketassessmentconsistsofademandsurveyof845households;asupplysurveyof103retailers;and interviewswithmain importers/distributors andwith institutions andmarket influencers in all fourregions inUganda.For thedemandsurvey,quotasamplingwasusedtoensure thatat least20%of thehouseholdsinterviewedweregridconnectedand20%ownedsolarproductstoassesssatisfactionlevels.Inaddition, a balanced split wasmade to ensure sufficient representation of urban, peri-urban and ruralhouseholdsintwopreselecteddistrictsineachofthefourregionsofUganda.Forthesupplysurvey,quotasamplingwasalsousedtoensurethattheretailersinterviewedinthesupplysurveywereevenlydistributedovertheeightselecteddistricts.The10interviewedimportersandthe10interviewedmarketinfluencerswereselectedinconsultationwiththeUgandanRuralElectrificationAgency(REA).KeyfindingsThe solar market in Uganda is immature and dispersed, consisting of a multitude of relatively smallcompanies,withhardlyanylarge(multinational)corporationsactiveinthesector.Findings indicate that thesolarproductendusersaregenerallymoreawareandmoreconvincedof thequalityofsolarenergythanthemarketplayers, institutionsandNGOs/donorsrealise.Endusersarealsoquiteconvincedofthebenefitsthatsolarproductscanbringthem.Theneedtochargecellphonesseemstobeincreasinglyprevalent.Eightythreepercent(83%)ofthehouseholdssurveyedownoneormorecellphones.Eightypercentofhouseholdsthatownasolarproductwouldliketohavealargersystem(morethan20watts peak). Thedemandof thehouseholds that donot owna solar product ismorediverse, but theypredominantlydemandlargesolarhomesystems(SHS)andmobilesolarsystemswithaphonechargerandwithmorethanonelight.Theoff-gridlightingmarketinUgandafacesthefollowingkeychallenges:• Limitedsolarpurchasingpointsandbrandawareness;householdsneedsupporttomakeaninformed

decisionAlthough86%ofthesurveyedhouseholdsareawareofwhatsolaris,and90%alsotrustsolarproducts,only65%ofthehouseholds(especiallyintheCentralandEasternregions)actuallyknowwheretobuysolarproducts.Inaddition,85%ofthehouseholdscouldnotmentionanytypeofsolarbrand.Ofthosethatdid,mostmentionedSolarNow,D-lightandBarefoot.SolarNowwasalsothemostownedbrand,with33%ofthehouseholdsowningsuchasystem.Evenforhouseholdsowningasolarproduct,20%didn’tknowthebrandoftheirproduct;thiswasparticularlyevidentintheCentralregion.

• Retailers&solarcompaniesfearsolarproductshaveabadname


Institutions,importersandsolarcompaniesbelievethatconsumershavedoubtsonthequalityofsolarproducts–mainlyduetoimportsoflowgrade,cheapChineseproductssoldthrough“dubioushardwareshops”.Thisassumptionaboutconsumerperceptionsisnotconfirmedbythisresearch.Solarproductsareboughtpredominantlyatelectronic/hardwareshops(55%ofSHSsand38%ofmobilesystems).About65%ofthesolarownerswereverysatisfiedwiththeirsolardevice,and80%wanttopurchaseothersolarproducts.Currentlightingsourcesused–mainlycandles,kerosenelampsandtorches–areconsideredtobeunreliableby56%ofthesurveyedhouseholds,especiallyinruralareas(68%).Ninetypercentof solarequipmentownersconsider it tobe reliable. In termsof satisfaction levels,60%ofhouseholdsarenotsatisfiedwiththeirkerosenelightingsource,and95%offixedsolarhomesystemownersaresatisfied.

• Limitedavailabilityofmaintenance&aftersalesservices–‘deeper’distributionnetworksrequiredOnly15%ofretailersinUgandaofferwarrantiesandonly6%offeraftersalesservicestotheircustomers,forbothmobileandfixedsolarsystems.Fourmaindistributionmodelsareprevalent:thedirectsalesmodel;thetraditionaldistributionmodel(throughindependent3rdparties);the(branded)franchise/agentmodel;andtherelativelynewMFI/SACCOmodel.Mostsuppliers,however,useamixoftwoorevenallfourdistributionmodelsinanefforttogettheproducttothe‘lastmile’consumer.Morethan45%ofsolarproductsaresoldthroughmultiplepartiesinthesupplychain,eachearningamargin,andthus driving up costs of the products. Nonetheless, end-users value direct contact andwarranties.Correlationsbetweenownershipandpresenceofsolarinthecommunity(neighbours,schools,clinics)suggestthatlocalpresence–andhence‘deeper’distributionnetworks–increasesolarproductuptake.

• Highinvestmentsrequiredtoobtainsolarproducts;workingcapital&affordablelendingareneededLackofmoneyandotherfinancialprioritieswerethemainreasonsthathouseholdscitedfornothavingpurchased a solar product yet. Since, on average, over 38% of the sample households’ disposableincomeisspentonschoolfees,thereislittleroomforotherexpenditures,includingenergy.Currently,lessthan5%ofthehousehold income isspentonenergy,andonaverageUGX1,910(US$0.70)perweekisspentonkerosene.However,householdinvestmentsinsolarproductscouldbeearnedbackwithin6-12monthsforsmallsystemsand2.5-3yearsforlargesystems,basedoncurrentenergyusage.DistributionisfurtherlimitedbythefactthatImporters,suppliers,franchiseesandagentsareoftennotabletopre-financestock,whichlimitstheirgrowth.Interviewedimporters indicatedloanconditionsareunfavourableandinterestratestoohigh.

• Importersandretailershavehighmargins,whichbanksandotherstakeholdersfeelarenotjustifiedRetailers,onaverage,adda40%marginontothewholesalepriceofsolarproducts(bothforfixedandmobilesystems).However,theygenerallycoveralldistributioncosts,includingthetransportneededandcorrespondingcostsofgettingtheproductsfromthesuppliertothe‘lastmile’consumer.

• Highperceiveddefaultrisk,whenpre-financingproductsAlthoughhighdefaultratesonpre-financedproductshavebeenevidentinthepast,severalcompaniescurrentlyhavea90%paybackrateafterthefirsttwoyearsofpre-financingsolarproductstoend-users.However,highdefaultriskaccompaniedbypre-financingisstillaprevailingperceptionamongmarketplayers(bothprivateandpublic).

The challenges above cannotbe considered independently fromeachother and seem tobe linked in aviciouscycle:financialinstitutionsarereluctanttoprovideloans(tosuppliers,retailersand/ortoend-users)→therefore,cash-poorsuppliers&retailerscanonlysellonacashbasisandcanonlyprovidelimitedservice&maintenanceinfrastructure→therefore,customersdonotbuy,resultinginalimited,highriskmarketthatfinancialinstitutionsarereluctanttofinance.A number of initiatives have acknowledged these interrelated issues and are working to solve them.Programs working to address the problems include the Promotion of Renewable Energy and EnergyEfficiencyProgramme(PREEEP)byGIZandENdev;FINCAPlusbyFINCA,REAandMEMD;SustainableEnergyMarketAcceleration(SEMA)byEnclude;andtheChampionDistrictInitiativebyWWF,MEMD,REA,GIZandCREEC.Inadditiontothechallenges,thisstudyidentifiedanumberofkeyopportunitiesforincreasedsolarproductuptakeinUganda.


• Householdsneedworkingsolutionsforchargingtheirmobilephones:Nearlyeveryruralhousehold(73%)owns amobile phone. Seventypercentof thesehouseholds charges their phoneoutside thehome,usuallyatakioskofsomesort,andspendsonaverageUGX1,000(US$0.40)perweektodoso.

• Households spend valuable time accessing energy: Rural households spend 26 minutes per weektravellingtocollectandpurchaselightingproducts.Peri-urbanresidentsspend21minutes,andurbandwellersspendanaverageof15minutesperweekoncollectingandpurchasinglightingproducts.

• Increaseretailerawarenessonfinancingoptions:Seventyfivepercentofsolarretailersdon’thavealoan,and30%ofthemnevereventhoughtofcreditasanoption.Increasinguptakeoffinancingoptionswouldincreasecapitalinthesupplychain.

• Thesolarmarketisyoungbutgrowingquickly:Ofthesolar-owninghouseholdsinterviewed,60%ownaSHSand40%ownamobilesystem.However,50%ofthesemobilesystemswereboughtwithinthelast12months,whereasover60%oftheSHSwereboughtmorethanayearago.ThetotalmarketsizeforsolarproductsisestimatedtobebetweenUGX32and37billion(US$115K–130K)annually,andgrowsatarateof10-50%peryear.

InterventionrecommendationsTo improve access to energy in the Sub-Saharan region, Lighting Africa can consider the followinginterventionstoacceleratethedevelopmentofcommercialoff-gridlightingmarketsinUganda.TobreaktheviciouscyclehamperingsolarmarketplayersinUganda,thereisaneedtosupport,createandfundfee-for-serviceorpay-as-you-gobusinessmodels(withfinancialinstitutions,suppliersandretailers).Wesuggestthefollowingmarketinterventions:• SolarCompanies:Set-upandstrengthendistributionandaftersalesnetworks;Increasecustomercare

and services (including after-sales); Increase informal marketing; and provide/facilitate warranties.Thesetypesofinterventionsarecapitalintensiveforsolarcompanies,hencestrengtheningtheworkingcapitalpositionofthesecompaniesiskey.

• Financial Institutions (FIs): Provide technical assistance (TA) to FIs, by training loan officers anddeveloping specificmarketingprograms;providea loanguarantee fund toparticipatingFIs;providepartialriskguaranteestoallowFIstofinancesolarcompanies;providetechnicalassistanceondefaultand bad debt management; and provide TA, seed money and/or guarantees to standardised andsimplified loan appraisal systems. These measures will add more capital to the supply chain, thusacceleratinggrowth.

• Government and development institutions: Government institutions: Radio awareness campaignspromotingsolarversuskerosenetostrengthenthesolarmarket,withafocusonwheretobuysolarproducts;MEMD(supportedbyLightingAfrica):Enforcestandards,strengthenUNBS(UgandaNationalBureauofStandards)tofurtherincreasemarkettrust;LightingAfrica(supportedbyUECCCandMEMD):Createaguaranteefundtoincreaseworkingcapitalthroughoutthesupplychain;MEMD(supportedbyLighting Africa): Create warranty legislation tomature themarket; extendworking capital to solarcompanies;promotesolar throughschoolprograms;andsubsidiseawarenesscampaignstosupportsolar companies and retailers. These measures will strengthen the solar market and build furtherproducttrust.


1 INTRODUCTION

1.1 OBJECTIVEOFTHESTUDY

ThismarketassessmentisconductedaspartoftheLightingAfricaprogram.LightingAfrica,ajointIFCandWorldBankprogram,catalysesandacceleratesdevelopmentofcommercialoff-gridlightingmarketsinSub-SaharanAfricaaspartoftheWorldBankGroup'swidereffortstoimproveaccesstoenergy.LightingAfricaismobilizingtheprivatesectortobuildmarketsthatprovideaffordable,modernoff-gridlightingproductstocommunitiesacrossAfricathatarenotconnectedtogridelectricity.Improvedlightingprovidessignificantsocio-economic,healthandenvironmentalbenefits,suchasnewincomegenerationopportunitiesforsmallbusinesses.LightingAfricacarriesoutongoingdiscussionswiththeGovernmentofUgandaandpreliminarybackgroundwork in preparation for a possible integration of its activities into the Uganda Energy for RuralTransformationPhaseIIIproject,anupcomingprojectundersupervisionofUganda’sRuralElectrificationAgency(REA).LightingAfricacontractedEncludetoconductthismarketassessmentinUganda.EncludewassupportedbyFriendsConsultLtd.Ugandaforsurveyimplementationandcoordination,andtheUgandanenergyexpert,BobbyNamiti.Theoverallobjectivesofthisassignmentareto:

(i) offerinsightastohowtheLightingAfricaprogramcanaddvalueandsupportmarketplayersinordertogrowthemarketformodernoff-gridproductsthatmeettheLightingGlobalQualityStandards;and

(ii) offerinsightthatcanbeusedbycurrentandpotentialmarketplayerstogrowtheirbusinesses.

Toachievethisobjectivethemarketassessmentaddressesthedemand,supplyandkeyinstitutionsinvolvedin the off-grid lightingmarket. These off-grid lighting products include both fixed systems (solar homesystems,orSHS)andmobileorportablesystems(lanternsandplugandplaysystems).Morespecifically,thisstudyhasthreespecificobjectives:

1. Onthedemandside:Analyseconsumptionandpurchasepatternsrelatedtohousehold lightinganddetermineurbanandruralconsumers’willingness/abilitytopayformodernoff-gridproductsthatmeettheLightingGlobalQualityStandards;

2. Onthesupplyside:Analysethemodernoff-gridlightingmarketincludingmarketsize,distributionmodelsandgrowthonnationalaswellasregionallevels,etc.,andmaptheactorsinthesupplychain.

3. Ontheinstitutionalside:Identifyinstitutions,bothinthepublicandprivatesectorandfromthepolicy to retail levels which can influence the sub-sector and prospective actors entering themodernoff-gridlightingmarket.Analysetheircurrentandprospectiverolesinthesub-sector.

1.2 RESEARCHMETHODOLOGY

1.2.1 ApproachThismarketassessmentexamineswhichLightingAfricainterventionsandactivitiescanbestaddvalueandsupport both existing market players (operating for 5-20 years) and newmarket entrants. This reportincludessuggestedactivitiesforLightingAfricatofurthergrowthemarket,andspurinvestmentinscalingupsuccessfulapproachesandinnovationsintheoff-gridlightingmarketinUganda.


Thesectionbelowelaboratesthemethodologiesemployedtodevelopconclusionsandexecuteresearchactivities.

1.2.2 DataCollectionThedatacollectionconsistedof:

• aquantitativedemandsurveyof845households;• aquantitativesupplysurveyof103retailersofoff-gridlightingproducts• qualitativeinterviewsof10importersordistributorsofmodernoff-gridlightingproducts;and• qualitativeinterviewsof10keymarketstakeholders,includingpublicandprivateinstitutions.

DemandsurveyTogetawell-balancedperspectiveoftheeffectivedemandforhighqualitysolar lanternsinurban,peri-urbanandruralareas,thesurveycoveredallfourregionsofUganda,andtwodistrictsperregion.Quotasamplingwasusedtocometothesampleofgridconnectedandnon-gridconnectedhouseholdsinUganda.Aquotawasalsosettoincludeapproximately20%grid-connectedhouseholds,toassesstheextenttowhichoff-gridlightingproductscomplementgrid-connectedelectricityservices.Anotherquotawassettoincludeapproximately20%solar-owninghouseholds,togaininsightintocurrentproductuseandusersatisfaction.Thetablebelowhighlightsthemake-upofthestratifiedhouseholdsampleinmoredetail(seeAnnex4fortheactualsurveysample).Figure1providesanoverviewofthesurveylocations.Table1:Randomstratifiedsampledemandsurvey(households)

Regions Samplesizeperregion Urban/ruralsplit Energysource Districtsproposed

Northernregion 17535urban70peri-urban70rural

Min.35grid-connectedMin.35solar-owning Nebbi,Gulu

Westernregion 17535urban70peri-urban70rural

Min.35grid-connectedMin.35solar-owning Mbarara,Kabarole

Easternregion 17535urban70peri-urban70rural

Min.35grid-connectedMin.35solar-owning Soroti,Mbale

Centralregion 17535urban70peri-urban70rural

Min.35grid-connectedMin.35solar-owning Mubende,Masaka

Total 700140urban280peri-urban280rural

Min.140grid-connectedMin.140solar-owning

Indicativetargetfordistributionofgenderofrespondents 70%male30%female


Figure1.Overviewofactuallocationswheredemandsurveysweretaken(seealsoAnnex3).Insert:populationdensity.

SupplysurveyThesupplysurveywasconductedamong100retailersofoff-gridlightingproducts,spreadevenlyoverthefourregionsand8districtschoseninUganda(seeAnnex5forthesampledistributionbyregion).Thesurveyincludes a range of different suppliers and retailers: general shops, electronic/hardware shops, solarspecialistshops,andagentsandruralfinancialinstitutionsthatretailoff-gridlightingproducts.PilotsurveysApilotsurveywasconductedtotestandimprovethedemandandsupplysurveys.FriendsConsultprovidedfeedbackonlocalparameters.Thefollowingpre-identifiedstakeholderswereinvitedtocommentonthedraftdemandandsupplysurveys:Barefootpower,SolarNow,IncafexandREA.Commentswerereceivedfromthelattertwo(seeAnnex1).Enclude and Friends Consult ltd. used the pilot survey as field training for the two supervisors and 10enumerators on using the CAPI (computer assisted personal interviews) survey software for both thedemandandsupplysurvey.ThepilottookplaceintheareasofSeetaandMukono(incentralUganda).Forthedemandsurvey,40pilotsurveyswereconducted,including20%gridconnected,20%solarowners,andamixofurban(20%),peri-urban(40%)andruralinhabitants(40%).Duringthetraining,thedefinitions


of urban, peri-urban and rural were presented and discussed in detail1. Data from both surveys wasevaluatedandthesurveyswereimprovedwherenecessary.ThefinalsurveyscanbefoundinAnnexes2and3.ImporterInterviewsThefollowing10importersofoff-gridlightingproductsinUgandawereinterviewed:Table2:Interviewedimporters

Importers BarefootPowerUgandaLTD*SolarNowFRESUltraTec*TASS

BBoxABMatraAzuri/Indigo*GiraSolar*SmallSolutions*

*Pico-PVproductsthathavemettheLightingGlobalMinimumQualityStandards

MarketinfluencerInterviewsThefollowinginstitutionswereidentifiedwhoareeitheractiveinorinfluencetheoff-gridlightingmarketinUganda.Publicandprivateinstitutionsareincludedbecauseofcurrentandfuturerolesinthesector,andhigh potential new market entrants were also interviewed. The following market influencers wereinterviewed:Table3.Interviewedinfluencers

MarketinfluencersGovernment

- UgandaEnergyCreditandCapitalizationCompany- MinistryofEnergyandMineralDevelopment- UgandaNationalBureauofStandards- REA

FinancialInstitutions- CentenaryBank- RwanyamahembeSACCO

Donor/NGOprogrammes- GIZ/ENdev- SEMAproject- WWF

Privatesector- KilembeInvestmentsLimited

DeskResearchThefollowingservedasresourcematerialstoinformresearchdesignandanalysis:

• GTZ–TargetMarketAnalysis,Uganda’sSolarEnergyMarket(November2009);• Enclude-InternalreportproducedforDGIS/PhillipsfundedSESAproject(SustainableEnergy

SolutionsAfrica)–SolarmarketassessmentUganda(2013);• UNCDF/UNDP–UgandaCountryAssessment:CleanStartUganda,MicrofinanceOpportunitiesfor

aCleanEnergyFuture(October2012);• Enclude–Internalreport:MarketSurveyonPossibleCo-operationwithFinanceInstitutionsfor

EnergyFinancinginKenya,UgandaandTanzania(2011);• USAID-ImprovingAccesstofinancialServicesinRuralUganda(November2007);• UNEPRisøCentre-ReviewofSolarPVmarketdevelopmentinEastAfrica(March2014).

Inaddition,Encludeconsulteditsregionalnetworktoobtainlocalinsightsintothecurrentmarketforoff-gridlightingproducts,includinginformationonvendorsanddistributorsalreadyactiveinUganda.1Rural:settlementsoflowdensity(about5-10,000personstotal);aspacewherehumansettlementandinfrastructureoccupyonlyasmallshareofthelandscape;naturalenvironmentdominatedbypastures,forests,mountainsanddeserts;Peri-urban:settlementsofmediumdensity(about10,000-50,000persons);Urban:settlementsofhighdensity(morethan50,000persons);highdensityofinfrastructure(occupyingalargeshareofthelandscape);landscapedominatedbybuildings.


1.3 RESEARCHCHALLENGESANDLIMITATIONS

Therearesomelimitationstohowtheresultspresentedinthisreportcanbeinterpreted.First,althoughweaimedtointerviewallactorsfacetoface,afewstakeholderswereinterviewedbyphoneduetotheirremotelocationsandtraveltime.Althoughquestionsinphoneinterviewswerethesameaswhenconductingaface-to-faceinterview,theremightbeslightinterpretationdifferenceswhenusingthismethod.Second, the results show an overrepresentation of solar owners and grid-connected households. Asexplainedintheresearchmethodology,thisisdeliberatetoensurecomparisonscouldbemadebetweengrid connected and off-grid households and between solar-owning and non-solar-owning households.Therefore,notallresultscanbedirectlygeneralizedtorepresentallhouseholdsinUganda.

1.4 STRUCTUREOFTHEREPORT

Followingtheintroductionandbackgroundmaterial,Chapter2providesanoverviewofthecurrentmarketsituationofoff-gridlightinginUganda,includingthemainplayersactiveinthemarket.Chapter3highlightsthemainfindingsofthedemandsurveyinrespecttoproductsusedandhouseholds’expendituresforsolarproductsinUganda.Chapter4providesanoverviewofthekeyfindingsofthesupplysurveyandinterviewsregarding the main distribution and business models of Ugandan retailers and importers. Chapter 5highlightsthekeycharacteristicsandactivitiesofmarketplayersthatwereinterviewed.InChapters6and7,thekeyconclusionsandmainrecommendationsofthestudyarepresented.


2 LIGHTINGMARKETINUGANDA

2.1 BACKGROUNDONENERGYACCESSANDOFF-GRIDLIGHTINGINUGANDA

2.1.1 EnergyAccessChallengesinUgandaHistorically,Uganda’selectrificationratehasbeenquitelow.Grid-connectedhouseholdshavegrownfrom5.6%in1991to9%in2006and10%in2010.Presentlyonlyaboutfivemillionhouseholdsareconnectedtothenationalgrid.Thisisjustunder14%ofthecountry’sentirepopulationof36millionpeople.Thegridisalmostentirelyfocusedinurbanareasandprovincialtowns,oftenonlyconnectingafewthousandpeopleper district2. At the same, only about 16% of the population is urbanized. Of the rural population,approximately4%isgrid-connected.Hydro-generatedpoweristheprimarysourceofpowertothenationalgridandaccountsforjustover70%ofthe595MWinstalledgenerationcapacity(20103).Renewableenergysources,e.g.solarPVandbiogasproduce,contributeanegligible0.1%ofthetotalnationalenergysupply.Thatapproximately31millionpeopleinUgandalivewithoutelectricityhassignificantramificationsfortheeconomyandqualityoflife.Lackofaccesstoreliablelightinglimitstheproductivityofabout85%ofthecountry,hinderingpeoples’ability tocarryoutbasicactivitiesatnightor intheearlymorning, includinghousehold chores, reading, schoolwork, and business activities. Fuel-based lighting also has health andsafetyimplications:chronicillnessduetoindoorairpollution,andriskofinjuryduetotheflammablenatureof the fuels used. Kerosene lamps emit fine particles that are a major source of air pollution. Theseimplicationsalsohaveanegativeimpactontheeconomy(lowerproductivity,higherhealthcarecosts)andreducedqualityoflife(lowerlifeexpectancy,respiratoryissues).

2.1.2 TheUgandanSolarMarketThesolarPVmarket inUgandahas steadilygrownover the last15yearswithnewplayersentering themarket, includingforeigninvestors.WhiletenyearsagotherewereahandfulofsolarcompaniesmainlyengagedininstitutionalsolarPVinstallations,currentlyanumberofcompaniesareinvolvedinthesolarPVandevensolarthermalbusinesses.Themarketisintransition,however,anddifferentplayersarestrugglingtofindtheiroptimumservicinglevels,particularlyregardinglastmiledistribution.ThehistoricalgrowthofsolarintheUgandanmarketisaccountedforbyfivekeyfactors:4

• Conduciveregulatorypolicies,includingtheUgandanenergyandrenewableenergypoliciesthatencourageinvestmentandtradeinthesolarsectorbyprovidingfinancing(credit)mechanismsandbyaimingtodiversifytheenergysupplysourcesandtechnologies;

• Governmentprojectsthatspecificallypromotetheuseofsolarinruralelectrification;• Thedemandforreliableelectricityandmodernenergyservicesbyanexpandingmiddle-income

society;• Thegrowthinthetelecommunicationsector;• Nationalawarenessprogramsfacilitatedbydonorsupport.

Ugandahasanaveragesolarinsolationof5-6kWhpersquaremeterperday.Throughouttheyear,ithasanaverageof8sunshinehoursperday.Thisprovidesanexcellentpotentialforsolarenergyuse.Solarenergy

2IRENA–CountryprofileUganda2011(http://www.irena.org/REmaps/countryprofiles/africa/Uganda.pdf#zoom=75);Reegle–CountryprofileUganda2011(http://www.reegle.info/countries/uganda-energy-profile/UG).3Enclude-InternalreportproducedforDGIS/PhillipsfundedSESAproject(SustainableEnergySolutionsAfrica)–SolarmarketassessmentUganda (2013);UgandaBureauof statistics, statistical abstract2013;www.era.or.ug;REA - TheRenewableEnergyPolicyforUganda2007.4GTZ–TargetMarketAnalysis,Uganda’sSolarEnergyMarket(November2009)


iscurrentlyusedprimarilyforoff-gridelectrificationforruralcommunities,aswellasforwaterheatingandpoweringpublicbuildings,includinghospitals.In2009anestimated1.1MWofsolarPVpowerwasinstallednationwide5, including both institutional and home systems. The SHSmarket is regarded as one of thebiggestareasinUgandaforcommerciallydrivensolarPVbusiness,andconsideredtohavehighpotential.Despite its growth and promising potential, according to previous research themarket for solar is stillnascentandhampered6bythefollowingmainchallenges:• Cost of solar PV systems: Solar systems are expensive to buy both from an upfront investment

perspectiveandinabsolutecostterms.Evenwhereacreditschemeisprovided,theultimatecostofasolarsystemisstillhigh,mainlyduetothehighmarginsofmiddle-menandinterestrateschargedbyfinancialinstitutionsinUganda(typically2.5-4%permonthflatrate).

• Quality of solar PV products, systems and system components: Quality control is low both atimportationandlocalproductionlevels(forlocalcomponents),aswellasininstallationsofthesystems.Thehighmarketpotentialhasresultedinaninfluxofdealerssellinglowqualityproductsorinstallingsystemsincorrectly,especiallyinthecaseofsolarlanterns.Ruralcustomersaremoreconcernedwiththepriceofsystemswhilerelativelyuninformedabouthowtodeterminethequalityofsystems.

• Last mile distribution: Rural commercial marketing and distribution networks for solar are largelyabsent.ThesolarcompaniesinUgandaarestuckatalowlevelequilibriumoflowsalesvolumesandhighpriceswithlargeunitmargins.Thecompaniesaresmallandentrepreneurial,withlimitedfinancialcapabilities.Theyhaveneithertheresourcesnortheriskappetiteformajorinvestmentsontheirowninruralmarketingandlastmiledistribution.

• Financialrisks:Becauseofthehighcapitaloutlay,solarisconsideredbybothcashandcreditbuyerstobe a risky asset. Financial Institutions, including micro finance institutions and Savings and CreditCooperatives(SACCOs)oftenassumethatfinancingsolarproductscarriesahighcreditrisk,particularlybecauseitisanewproductofwhichthetechnicalaspectsaregenerallyunknown.

• Service and after-sales service: There is inadequate rural presence of solar equipment and serviceproviders and thus service and maintenance is often out of reach. As a result, solar consumersexperiencealackoftechnicalsupportontheground.

Theabovechallengesweretakenashypothesesandfurtherassessedinthisstudy.

5Reegle–CountryprofileUganda2011 (http://www.reegle.info/countries/uganda-energy-profile/UG);GTZ–TargetMarketAnalysis,Uganda’sSolarEnergyMarket(November2009).6Enclude-InternalreportproducedforDGIS/PhillipsfundedSESAproject(SustainableEnergySolutionsAfrica)–SolarmarketassessmentUganda(2013);GTZ–TargetMarketAnalysis,Uganda’sSolarEnergyMarket(November2009).


3 DEMAND ASSESSMENT OF THE MODERN OFF-GRIDLIGHTINGMARKET

Theenumeratorsconducted845demandsurveyswithhouseholdsinallfourregions,andeightdistrictsinUganda.Thesurveysconsistedof70questionsonoff-gridlightinguse,awareness,satisfactionanddemand.SeeAnnex2forthefullsurvey.Themainresultsaresummarizedbelow.

3.1 CONSUMPTIONANDPURCHASEPATTERNSOFOFF-GRIDLIGHTING

3.1.1 CurrentaccesstoanduseofenergysourcesThemainenergysourceusedbysurveyedhouseholdsiskerosene,particularlyintheruralareas.Onaverage,40%ofhouseholdsuse kerosene, and18%use candles. In the rural areas, over 56%ofhouseholdsusekerosene,whereasinurbanareasthefigureis21%.Figure2:Answerstothequestion9:‘Whatsourcesofenergydoesyourhouseholduse?’

Note:Becauseof thestratified/quotasamplingmethodused,grid-connectedhouseholdsandhouseholdsusingsolarenergyareoverrepresented.TheUgandanhouseholdssurveyedconsidertheenergysourcesusedtobeveryunreliable.Particularlyinruralandperi-urbanareas,almost70%and55%ofrespondentssaidtheirenergysourcewas‘extremelyunreliable’to‘notsoreliable’.Thisisprimarilythecaseforhouseholdsusingbasicenergysourcesincludingkerosene, candlesandnon-rechargeablebatteries, and far lessprevalent forgrid-connectedhouseholds(either national or local) and solar-using households. Urban households find their energy source mostreliable(67%sayitis‘very’or‘moderately’reliable).

6%

56%

17%

5%

15%

12%

12%

0%

42%

12%

7%

14%29%

3%

15%21%

9%

7%

16% Nationalgrid

Localmini-grid

Biogas

Candles

Diesel/petrolgenerator

Kerosene

Non-rechargeablebatteries

Rechargeablebatteries

Solarenergy

Urban

Rural

Peri-Urban


Figure3:Question10:‘Howreliableareyourcurrentsourcesofenergy?’

Whencomparingthereliabilityofthedifferentenergysources(seeFigure4below),itbecomesclearthatsolarenergyisperceivedasquitereliable,whereaskeroseneandnon-rechargeablebatteriesareseenasunreliable.About90%ofthehouseholds indicatedthattheytrustsolarproductsandthreequartersseesolarastheintroductiontoamodernhousehold.Figure4:Question10:‘Howreliableareyourcurrentsourcesofenergy?’asperceivedbyUgandanhouseholds(n=1249;multipleresponsesperhouseholdwerepossible)

Figure5showswhichappliancesareusedbythesurveyedhouseholds.Themajorityofthehouseholdsowna cell phone, radio and flashlight/torch (using dry cell batteries), particularly in the rural areas. ThehouseholdsinurbanareasalsotypicallyownTVs,refrigeratorsandelectriccookstoves.

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Rural

Peri-Urban

Urban

GrandTotal

Extremelyunreliable Notsoreliable Moderatelyreliable Veryreliable

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Other(6)

Solarenergy(203)

Nationalgrid(179)

Localmini-grid(15)

Rechargeablebatteries(85)

Non-rechargeablebatteries(168)

Candles(79)

Kerosene(514)

Extremelyunreliable Notsoreliable Moderatelyreliable Veryreliable


Figure5:Question11:‘Whichofthefollowingappliancesdoesyourhouseholdhave?’

3.1.2 CurrentAccesstoandUseofOff-gridLightingProductsKerosenelamps(alsoknownastadooba)areusedby28%ofthesurveyedhouseholdsasthemainsourceoflightinginthehome.Inaddition,thelightfromfirefuelledbycharcoalorwood(23%)andfromflashlightsusingdrycellbatteries(15%)arealsowidelyused,particularlyintheruralandperi-urbanareas.Figure6.ExamplesoftheKerosenelamps(tadoobas)used

Figure7demonstratesthatthemoreremote(orrural)thehousehold,themoreitreliesonbasicenergysources such as kerosene, wood and charcoal fire, and candles. Notably, although nearly 24% of thehouseholds in urban areas are grid-connected (either national or local grid), almost 50% still use basicsourcesforlightingthehome,generallyasaback-upduringpowercuts.Themajority(about57%)ofsurveyedhouseholdsusethese lightingsourcesfor lessthan2hoursaday.Othersusethelightingsourcebetween2to4hoursaday.

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Cellphone(696)

Radio(675)

Flashlight/torch(rechargeable)(100)

TV(244)

Refrigerator(76)

Computer(32)

Electricstove(11)

Otherelectricalpoweredappliances(101)

None(48)

Cellphone(696) Radio(675)

Flashlight/torch

(rechargeable)(100)

TV(244) Refrigerator(76)

Computer(32)

Electricstove(11)

Otherelectricalpoweredappliances

(101)

None(48)

Urban 96% 85% 18% 72% 28% 10% 4% 28% 1%

Peri-Urban 84% 78% 14% 24% 6% 4% 1% 11% 4%

Rural 73% 78% 6% 9% 1% 1% 1% 4% 10%


Figure7:Question13:‘Whatarethecurrentlightingsource(s)usedbyyourhousehold?’

Note:Becauseofthestratifiedsamplingmethodused,grid-connectedhouseholdsandhouseholdsusingsolarenergyareoverrepresented.Thefigurebelowindicatesthecurrentlightinguse,byroomscurrentlylighted,andthedemandedlighting.Inruralareas,73%ofthehouseholdshave1or2roomslitwhiletheywouldwant3ormoreroomslighted(74%). Inperi-urbanareas,63%ofthehouseholdshave1or2rooms lightedbutwouldwant4ormoreroomslighted(56%).Inurbanareasthenumberofroomscurrentlylightedshowsadiffusepicture,however38%indicatestodesiretohave5ormoreroomslighted.Figure8:Left:Questions15:‘Howmanyroomsinyourhousearecurrentlylighted?’Right:Questions16:‘Howmanyroomswouldyouliketohavelighted?’

Aruralhouseholdfromoursamplespendsonaverage26minutesperweektravellingtopurchasetheirlightingsource.Inperi-urbanandurbanareasthisisrespectively21and15minutesperweek.

30%

3%

18%2%

35%

1%7% 3%1% 22%

8%

15%

6%

32%

1%

7%3%

6%17%

12%

11%

7%18%

1%

9%

2%

23%

Firefuelledbycharcoal/firewoodCandles

Flashlight/torch(drybatteries)

Flashlight/torch(rechargeable)

Kerosenelamp

Lightpoweredbyhomebattery/automotivebatterySolarpoweredlightsource(fixedsystem)Solarpoweredlightsource(mobilesystem)Electricitypoweredlightingfixture(gridpowered)

0%10%20%30%40%50%60%70%80%90%

100%

5ormore

4

3

2

10%10%20%30%40%50%60%70%80%90%

100%

5ormore

4

3

2

1

Rural

Urban

Peri-urban


Figure9:Question21:‘Onaverage,howmuchtimedoesittaketotraveltopayforelectricityorpurchaselightingproductsperweek?’

3.1.3 DegreeofSatisfactionwithOff-gridLightingProductsRuralandperi-urbanhouseholdsshowedhigh levelsofdissatisfaction towards thebasicoff-grid lightingsourcesused,67%and55%respectively(seefigurebelow).Dissatisfactionisfarlessprevalentintheurbanareaswherealargerpartofthehouseholdsaregrid-connected(24%)andownsolarhomesystems(8%).About96%ofsolarusersaresatisfiedversus35%ofkeroseneusers.Figure10:Question17:‘Howsatisfiedareyouwithyourcurrentlightingsource?’asperceivedbyRural/Peri-Urban/UrbanUgandanhouseholds

Figure11:Question17:‘Howsatisfiedareyouwithyourcurrentlightingsource?’

0%10%20%30%40%50%60%70%80%90%

100%

Rural Peri-Urban Urban Overall

Morethan2hours

Between1- 2hours

Between30- 60minutes

Between10- 30minutes

0to10minutes

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Rural

Peri-Urban

Urban

Extremelyunsatisfied Notsatisfied Moderatelysatisfied Verysatisfied

0% 20% 40% 60% 80% 100%

Candles(136)

Electricitypoweredlightingfixture(gridpowered)…

Firefuelledbycharcoal/firewood(432)

Flashlight/torch(drybatteries)(278)

Flashlight/torch(rechargeable)(95)

Kerosenelamp(533)

Lightpoweredbyhomebattery/automotive…

Solarpoweredlightsource(fixedsystem)(134)

Solarpoweredlightsource(mobilesystem)(48)

Extremelyunsatisfied Notsatisfied Moderatelysatisfied Verysatisfied


3.1.4 ComplementaryOff-gridLightingProductsandElectricityServicesSeventypercentofthegrid-connectedhouseholdsmakeuseofcomplementarylightingsources,ofwhichthemaincomplementarysourceiskerosene(23%)andtoalesserextentsolarenergy(16%).Householdsconnectedtoalocalmini-gridmakeuseofacomplementarylightingsourcemoreoftenthanhouseholdsconnectedtothenationalgrid(seeFigure12).Thiscouldindicatethattheunreliabilityofthelocalmini-gridrequireshouseholdstousecomplementaryproducts.Figure12:Question9:‘What[other]sourcesofenergydoesyourhouseholduse?’Complementarityoff-gridproductsandelectricity(n=194)

3.1.5 TypesofSolarSystemsIngeneral,householdsusefixedsolarsystemsmorethanmobilesolarsystems,particularlythefixedsolarhomesystemsofmorethan20watts(seeFigure14).Aprobablereasonforhighfixedsystemuseisthegovernmentsubsidiesprovidedforfixedsolarsystemsonly,providedthroughthePVTMA(SolarPVTargetedMarketing Approach) as part of the World Bank financed Energy for Rural Transformation (Phase II)programme,andthestrongmarketingeffortsofSolarNow(offeringfixedsystems),usingagentsalloverUganda.Figure13.ExamplesofsolarPVinstallations.

IntheCentralregion,thesmallersolarhomesystems(of0-10and10-20wattscapacities)arealsoownedin largenumbers,while in theEasternandNorthern regions,mobile systems (more thanone lightwithphonecharger)ranksecond(seeFigure15).

0% 20% 40% 60% 80% 100%

Localmini-grid

Nationalgrid

None

Biogas

Candles

Kerosene

Non-rechargeablebatteries

Rechargeablebatteries

Solarenergy


Figure14:Question35:‘Whatkindofsolarproduct(s)doyouhave?’SolarHomeSystemownersonly.Left:perlocation;Right:perregion.

Note:Thepercentageontherightaxisisthepercentageofthetotalsample(e.g.14%ofUrbanhouseholdsinterviewedownaSHSsystem).Figure15:Question35:‘Whatkindofsolarproduct(s)doyouhave?’mobilesolarsystemsonly.Left:bylocation;Right:byregion.

3.1.6 WhichSolarSystemsareUsedforWhatSolarproductsaremainlyusedtolightthehome(32%)orchargephonesathome(26%).Alsostudyingforchildrenisoftenmentioned(20%).TVwatchingisparticularlymentionedforSHSsystemusers.

0%

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100%

%-ageoftotalHH(line

)

%-ageofH

Hw/s

olarprodu

cts

FixedSolarhomesystem(0-10watt)


FixedSolarhomesystem(morethan20watt)

TotalofHHs(rightaxis)

0%

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6%

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0%

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100%

%-ageoftotalHHs

(line)

%-ageofH

Hw/s

olarprodu

cts

0%

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%-ageoftotalHHs

(line)

%-ageofH

Hw/s

olarprodu

cts

SinglelightwithphonechargerMorethanonelightwithphonechargerMorethanonelightwithoutphonechargerSinglelightwithoutphonechargerTotalofHHs(rightaxis)

0%

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100%

%-ageoftotalHHs

(line)

%-ageofH

Hw/s

olarprodu

cts


Figure16:Question36:‘Whatarethemainusesofyoursolarproduct(s)?’byareatype.

Figure17:Question36:‘Whatarethemainusesofyoursolarproduct(s)?’byproducttype.

Note: Difference between “Charge phone business” and “Phone charging business”: “Charge phone business”:Respondentchargeshis/herphoneathis/herwork;“Phonechargingbusiness”:Therespondentusestheproducttoearnanincomechargingmobilephonesasabusiness.

3.1.7 SourceofPurchaseandProductSatisfactionSolarproductsweremainlyboughtatelectric/hardwareshops(55%).Onlyaround1.5%ofthehouseholdspurchasedtheirsolarproductthroughaSACCOorMFI.

0% 20% 40% 60% 80% 100%

Rural

Peri-Urban

Urban

Total

Childrenstudying Chargephonebusiness Chargephonehome

Light/powerbusiness Light/powerhome Phonechargingbusiness

TVwatching Cookordryfood Other

0% 20% 40% 60% 80% 100%

FixedSHS

MobileSolarSystem

Childrenstudying Chargephonebusiness Chargephonehome

Light/powerbusiness Light/powerhome Phonechargingbusiness

TVwatching Other


Figure18:Question38:‘Wheredidyoubuyyoursolarproduct?’top:fixedsolarsystems,bottom:mobilesystems

Whenlookingatregionalpurchasingpatterns,itisclearthatparticularlyhouseholdsintheCentral,NorthernandWesternregionsbuytheirsolarproductsathardwareshops.Onlyhouseholds in theEasternregionfrequentlyboughttheirsolarproductsatasolarspecialist(34%)orafieldagent(29%).Figure19:Question38:‘Wheredidyoubuyyoursolarproduct?’SolarHomeSystemowners(topgraph)andmobilesystemowners(bottomgraph)

0% 20% 40% 60% 80% 100%

FixedSHS(0- 10W)

FixedSHS(10- 20W)

FixedSHS(morethan20W)

AverageElectronic/hardwareshop

Fieldagent

Mobilephonecompany

NGO

SACCO/MFI

Solarspecialist

Other

0% 20% 40% 60% 80% 100%

Morethanonelightwithphonecharger(mobilesystem)

Morethanonelightwithoutphonecharger(mobile…

Singlelightwithphonecharger(mobilesystem)

Singlelightwithoutphonecharger(mobilesystem)

Average

0% 20% 40% 60% 80% 100%

Centralregion

Easternregion

Northernregion

Westernregion


Fieldagent

Mobilephonecompany

NGO

SACCO/MFI

Solarspecialist

Other

0% 20% 40% 60% 80% 100%

Centralregion

Easternregion

Northernregion

Westernregion


Fieldagent

Mobilephonecompany

NGO

SACCO/MFI

Solarspecialist

Other


Between24%and29%ofthehouseholdsboughttheirproductsbetween1and2yearsago,particularlyintheruralareas.Themajorityofthesolarproductsownedstillworkwell.Figure20:Question39:‘Whendidyoubuythesolarproduct?’

Figure21:Question40:‘Isyoursolarproductstillworking?’

Householdsdonot seemtoexperiencequality issueswith their solarproducts,which is contrary to theperception of other stakeholders such as suppliers, financial institutions (Banks) and donors/NGOs. Thesmallnumberofhouseholdsthat indicatedtheywerenotsatisfied,primarilyciteddifficulty inuse(forasingle lightwithout phone charger system), power unsuitable for lighting (formore thanone lightwithphonecharger&fixedSHSofmorethan20watts),orpowerunsuitableforotherappliances(singlelightwithphonecharger&fixedSHSofmorethan20watts).

0% 20% 40% 60% 80% 100%

Rural

Peri-Urban

Urban

Lessthan3monthsago

Between3and6monthsago

Between6monthsand1yearago

Between1and2yearsago




Between8to10yearsago

Morethan10yearsago

0% 20% 40% 60% 80% 100%

Rural

Peri-Urban

Urban

GrandTotal

No,itneverworks.

Yesitworkssometimes,butnotwell.

Yes,itworkswellsometimes.

Yes,italwaysworkswell. 0% 20% 40% 60% 80% 100%

FixedSolarhomesystem(<10watt)




Morethanonelightwithoutphonecharger(mobilesystem)



GrandTotal


Figure22:Questions38combinedwithQuestion40:‘Fromwhomdidyoubuyyoursolarproductandisitstillworking?’

Ofthetworespondentswhosesolarsystemswerebroken,onegotitfixedbyasolarspecialistandtheotherdidnot.Figure23:Question47:‘Howsatisfiedareyouwithyourcurrentsolarproduct?’

Therespondentsthatgaveareasonfornotbeingsatisfiedwiththeirsolarsystemsmentionedthefollowing:

• Thelightwastoodifficulttouse(solarlanternowner);• Itdidn'tworkanymore(a>20WSHSowner);• Thepowerwas not reliable for lighting (amobile systemwith charger owner and a >20WSHS

owner);and• Thepowerwasnotreliableforotherappliances(aSHS>20Wownerandasolarlanternowner).

Between78%and82%ofallsolar-owninghouseholdswouldwanttoownmoresolarproducts,particularlyintheruralareasandparticularlyforhouseholdsowningasinglelightsystemwithaphonecharger(mobilesystem);morethanonelightsystemwithphonecharger(mobilesystem);orafixedSHSof10to20watts.In termsof trust in solarproductsandwhethersolar is seenasan indicationof themodernhousehold,responsesareextremelypositive.Over90%ofthehouseholdsinallregionsinUgandatrustsolarproducts,andbetween76%and94%feelitisanindicationofamodernhousehold.

0% 20% 40% 60% 80% 100%

Mobilephonecompany(3)

SACCO/MFI(3)

NGO(7)

Other(12)

Fieldagent(32)

Solarspecialist(54)

Electronic/hardwareshop…

GrandTotal(211)No,itneverworks.

Yesitworkssometimes,butnotwell.

Yes,itworkswellsometimes.

Yes,italwaysworkswell.

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%




Morethanonelightwithphonecharger(mobile…

Morethanonelightwithoutphonecharger(mobile…



Notsatisfied Moderatelysatisfied Verysatisfied


Figure24.Left:Question30:‘Doyouthinksolarpoweredproductscanbetrusted?’Right:Question31:‘Inyouropinionishavingasolarproductanindicationofamodernhousehold?’

3.1.8 DemandDriversofOff-gridLightingProductsThemostappealingbenefitofoff-gridlightingproductsforUgandanhouseholdswithoutasolarproductiscostsavings,followedbyimprovementinhealth,modernlifestyleandsafetyfromfirehazard(seefigure25).Figure25:Question27:‘’Whichofthefollowingbenefitsofmodernlightingaremostappealing?”(n=568)

Surveyed rural households spend, on average, 26minutes per week travelling to collect and purchaselighting products. Peri-urban residents spend 21 minutes, and urban dwellers spend an average of 15minutesperweekoncollectingandpurchasinglightingproducts.Non-solarownersindicatedthemainreasonfornothavingpurchasedasolarproducthastodowithnothavingthemoney(51%),followedby‘otherfinancialpriorities’(26%)(Figure26).Interestingly,about12%ofthehouseholdsinurbanareaswerenotconvincedofthequalityofsolarproducts,whichdoesnotseemtobeanissueinruralandperi-urbanareas.Thislackoffinancingamongthesehouseholdspointstoaclearneedtoexplorethepotentialforend-userfinancingsolutions.Forty-fivepercentofthenon-solarowninghouseholdsindicatedtheywouldbemoreinterestedinbuyingsolarifprovidedaloan,particularlyintheurbanareas.

0%10%20%30%40%50%60%70%80%90%100%

Centralregion

Easternregion

Northernregion

Westernregion

Yes No

0%10%20%30%40%50%60%70%80%90%100%

Centralregion

Easternregion

Northernregion

Westernregion

Yes No Idon'tknow

27%

13%

12%12%

10%

9%

6%

6%5%

Costsavings

Improvementinhealth

Modernlifestyle

Safety(firehazard)

Timesavings

Reliablepowerforotherelectricitybasesolarappliances(TV,radio,electricstove,etc.)Reliablepowerforphone

Security(outsidesecuritylight)

Morereliableandbetterqualitylightindoors


Figure26:Question55:‘Reasonsfornotpurchasingasolarproducttillnow’(n=568).

Non-solarowninghouseholdsgenerallyconsiderthesolarproductwarrantyasanindicatorofthequalityoftheproduct(21%).However,alargepartofthehouseholdsdonotknowhowtoassessthequalityofasolarproduct,especiallyintheCentralandWesternregionsinUganda(45%and50%)(seefigurebelow).Onlyasmallpercentageindicatesthelackofqualitymightbeanissue.Figure27:Question29:‘Whatconvincesyouofthequalityofasolarproduct?’(n=568)

Inall regions,morethan90%ofhouseholds indicatethatsolarproductscanbetrusted(Northern:95%,Eastern:94%Western:96%,Central:90%).Theconfidenceinsolarproductsisstronglydrivenbyawarranty,the Uganda Bureau of Standards (UNBS) mark or by Government recommendation. This is particularlyevidentintheNorthernandEasternregions.

3.1.9 DemandDriversofSolarOwnersAlthoughthemajorityofthesolarownerswerenotofferedanincentivewhenbuyingtheirsolarproduct(71%),thelargemajorityindicatedthattheywouldbewillingtopromotesolarproducts(bywordofmouth,forinstancetoneighboursandrelatives)whenofferedanincentivetodoso(81%onaverage).Ninety-fivepercent of the households that had been offered an incentive in the pastwerewilling to promote theproductagainwhenofferedanincentive.

0% 20% 40% 60% 80% 100%

Rural

Peri-Urban

UrbanAfraidtopaytoomuch

Donothavemoney

Donotknowwheretobuy

Notconvincedofthequality

Otherfinancialpriorities

Savingforalargesolarsystem

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Centralregion

Easternregion

Northernregion

Westernregion

Buyingatthesource Governmentrecommendation Judgebythepackaging

Prizewinningproduct Salesrepresentative UgandaBureauofStandardssign

Warrantycertificate Idon'tknow


Figure28:Question29:‘Wouldyoubewillingto[promotesolarproducts]ifyouwereofferedanincentive?’(n=213)

3.2 CONSUMPTIONANDPURCHASEPATTERNSOFMOBILEPHONES

3.2.1 CurrentUseofMobilePhonesThemajorityofthesurveyedhouseholdsownatleastonemobilephone,rangingfrom73%inruralareasto96% in urban areas. A large part of the households in peri-urban and urban areas generally own 2 orsometimeseven3mobilephones.Figure29:Left:Question11:‘Whichofthefollowingappliancesdoesyourhouseholdhave?’(Answersforcell-phonesonly)(n=845),Right:Question12:‘Howmanycellphonesdoesyourhouseholdhavetogether?’

Asfigure30indicates,mobilephonechargingisdonebyalmost70%ofthehouseholdsbypurchasingtimeoutsidethehome.Themajority(60%)ofthehouseholdsspendlessthan1000UGX(US$0.40)7onmobilephonechargingperweek.About11%ofthehouseholdsareabletochargetheirphoneseitherthroughthegridtheyareconnectedtoand17%throughthesolarproducttheyown.

7Exchangeratewasusedthroughoutthereport(1US$=2,500UGX)istheaverageofUGX2,500perUSDollarexchangerateforthefirsthalfyearof2014.Thisistherateassumedinthisreport.

0%

20%

40%

60%

80%

100%

No,Iwasn'tofferedanincentive Yes,IwasofferedanincentiveWereyouofferedanincentivetopromoteasolarproduct?

No,Iwouldn't

Idon'tknow

Yes,Iwould

0%10%20%30%40%50%60%70%80%90%100%

Cellphone

Rural Peri-Urban Urban

0%10%20%30%40%50%60%70%80%90%100%


1 2 3 4ormore


Figure30Question22:‘Whatis(are)thecurrentcellphonechargingsource(s)usedbythehousehold?’

Averagephonechargingcosts UGX/week

US$/week

Centralregion 1,083 0.43Easternregion 964 0.39Northernregion 920 0.37Westernregion 1,025 0.41 Rural 1,098 0.44Peri-urban 857 0.34Urban 1,071 0.43Average 1,000 0.40

Figure31:Distributionofmobilephonechargecosts(basedonQuestion19:‘Howmuchdoyouspendonaverageforeach,perweek?’)

AsisseeninFigure16(page27),themainuseofsolarproductsisforchargingmobilephones,particularlythesmallermobileandfixedsolarsystemsareusedforchargingmobilephones.

3.3 SOLARBRANDS

3.3.1 BrandAwarenessAmongstHouseholdsBrand awareness is lowest in the Central andWestern regions,where 89% and 83%of the householdscouldn’tmentionanybrand.SolarNowisthemostwell-knownbrand,especiallyintheNorthernandEasternregionswhererespectively34%and38%ofthehouseholdsknewthebrand.

0%

8%

34%

5%

39%

0%

8%

0%3%

1% 1% 0% 0% 0% 1%0%5%10%15%20%25%30%35%40%45%

UGX250

UGX500

UGX750

UGX1,000

UGX1,250

UGX1,500

UGX1,750

UGX2,000

UGX2,500

UGX3,000

UGX3,500

UGX4,000

UGX4,500

UGX5,000

UGX6,000

72%

17%

11%

56%

40%

4%

60%20%

20%

PurchasesolarchargingtimeoutsidehomeChargeathomeOther

Rural

Peri-urban

Urban


Figure32:Question28:‘Whichsolarbrandshaveyouheardof?’Nationaltotalandbyregion.

3.3.2 BrandAwarenessAmongstSolarSystemOwnersThemostcommonbrandsofsolarproductsthatrespondentsownareSolarNow(closeto33%),AseSolar(10%)andBarefoot(7%).About24%ofthehouseholdsthatownaSHSproductdidnotknoworrememberthebrandthattheywereusingversus14%ofthemobilesolarsystemowners.Figure33:Question37:‘Whatbrandis(are)yoursolarproduct(s)?’Nationaltotalandbysystemtype.

Froma regionalperspective,mosthouseholds in theCentral regiondon’tknowthebrandof their solarsystem (57%). In the Eastern region, 54%of the solar owners surveyedmentioned theyhave SolarNowsystems.AseSolarsystemsareownedby20%ofthehouseholdsintheNorthernregion.

0% 20% 40% 60% 80% 100%

Centralregion(192)

Easternregion(200)

Northernregion(209)

Westernregion(179)

Total(780)

SolarNow

Barefoot

D-Light

AseSolar

GreenLightPlanet

Sunshine

Phoenix

Trony

Marathoner

Kirchner

Kopak

SunAfrica

Other

0% 20% 40% 60% 80% 100%

MobileSystems(97)

SHS(123)

Totalaverage(220)

SolarNow

AseSolar

Barefoot

D-Light

Phoenix

Marathoner

GreenLightPlanet

Trony

SunAfrica

Pulsee

Other


3.4 HOUSEHOLDSPENDING

Onaverage, aUgandanhousehold (fromour sample) spends4.8%of itsdisposablemonthly incomeonenergyand fuel, or aboutUGX25,000 (US$10).Mainhouseholdexpendituresareon food (18.5%)andschoolfees(38%).Expendituresonenergyandfuelareclearlylow,whileexpendituresonschoolfees,foodandrentmakeup60-75%ofdisposableincome.Thisexplainswhyover50%ofthehouseholdsdonotfeelthatasignificantshareoftheirhouseholdincomeisspentonlightingandphonecharging.Thefigurebelowprovidesabreakdownofhouseholdexpendituresbyregiontype(rural,peri-urbanandurban).Figure34:Question63:“Howmuchofyourhouseholdincomedoyouspendonthefollowingitemsonamonthlybasis?”

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Rural Peri-Urban Urban Total

Other

Healthcare

Transport

Clothes

Energy/fuel

Schoolfees

Food

Housing/rent


Figure35:Distributioncurveformonthlyhousehold’senergyexpendituresQuestion63:“Howmuchofyourhouseholdincomedoyouspendontheenergyonamonthlybasis?”

Almost40%ofsurveyedhouseholds’weeklylightingexpenditureisonkerosene,amountingonaveragetoUGX1,910(US$0.76)aweek8.Averageexpendituresonoff-gridlightingproductsarehigherinurbanareas.ThedistrictsKabaroleandSoroti,intheWesternandEasternregionshowhighestexpenditurelevels,whileNebbiandGuluintheNorthernregionshowlowestlevels(seefigure38).Figure36:Question19:‘Howmuchdoyouspendonaverageforeachlightingsource,perweek?(Recurringcosts)

Figure37:Question19:‘Howmuchdoyouspendonaverageforeachlightingsource,perweek?(Recurringcosts)perregionanddistrict.

8 In spring 2014 the tax on kerosene was increased by UGX 200 (~ 11% price increase) per liter. This, this is notrepresentedinthenumberabove.

0%

6%

18%20% 21%

13%

8%

4% 3% 2%0% 0% 1% 1%

0%

5%

10%

15%

20%

25%

30%

UGX0

UGX1,000

UGX2,000

UGX3,000

UGX4,000

UGX5,000

UGX6,000

UGX7,000

Rural Peri-Urban Urban Average

Candles

DryCellBattery

PhoneCharge

Kerosene

0

1000

2000

3000

4000

5000

6000

7000

8000

Candles

DryCellBattery

PhoneCharge

Kerosene


Theaveragespendingonrecurrentcostsmightindicatehowmuchhouseholdscouldpayunderpay-as-you-goschemes.TheseexpendituresindicatethattheaveragesurveyedhouseholdcouldaffordtospendUGX6,000(US$2.40)onsolarservicesformobilephonechargingandlightingperweek.Figure38:Distributionofoff-gridlighting(includingphonecharging)weeklyexpenditure(basedonquestion19:‘Howmuchdoyouspendonaverageforeach,perweek?)

Table4.Averagefixedcostsoftraditionallightingproducts.

Item AverageFixedCost(inUGX)

AverageFixedCosts(inUS$)

Recurringcostspermonth(inUGX)

Recurringcostspermonth(inUS$)

Candles - - 7,843 3.14KeroseneLamp-large 12,000 4.80 8,279 3.31KeroseneLamp-medium 8,000 3.20 8,279 3.31KeroseneLamp-small 5,000 2.00 8,279 3.31Torch-rechargeable 4,000 1.60 7,669 3.06Torch-drycell 3,000 1.20 7,669 3.06Torch-smalldrycell 1,000 0.40 7,669 3.06Tadoobawithwick 1,000 0.40 8,279 3.31Tadoobawithoutwick 600 0.24 8,279 3.31

Mostsurveyedhouseholdsfeltthatexpendituresonoff-grid lightingandphonechargingrepresentedaninsignificanttomoderatelysignificantshareofthetotalhouseholdincome.However,inruralareasoverhalfofthehouseholdsfeelthattheseexpenditurestakeupasignificantshareoftheirtotalexpenditures.Figure39:Question20:‘Doyoufeelthatasignificantshareofthehouseholdincomeisspentonlightingandphonecharging?’

Inruralareastherelativeexpendituresonkeroseneanddry-cellbatteriesarehighest,whileinurbanareastheexpendituresondieselandpetrolareamongthehighest.

UGX30,021

UGX17,429

UGX11,939UGX9,891

UGX8,191 UGX6,754 UGX6,013 UGX5,229

USD0

USD2

USD4

USD6

USD8

USD10

USD12

USD14

UGX0

UGX5,000

UGX10,000

UGX15,000

UGX20,000

UGX25,000

UGX30,000

UGX35,000

1% 5% 20% 30% 50% 70% 80% 90%

0% 20% 40% 60% 80% 100%

Rural

Peri-Urban

Urban

Extremelyinsignificant

Notsignificant

Moderatelysignificant

Verysignificant


Figure40:CorrelationbetweenQuestion32andQuestion34showsthatwhenaschoolorclinicusessolarpower,45%morehouseholdshavepowertoo(32%vs22%non-solarowners).

A positive correlation exists between schools and clinics using solar power and the proportion of solarownersinthearea.Thereisalsoapositivecorrelationbetweensolarownerswhohaveneighbours,friendsand/orrelativesthatalsoownasolarproduct.Acausaleffecthowevercannotbedeterminedbasedonthissurvey.Figure41:CorrelationbetweenQuestion32andQuestion33showsthatwhenneighbours,friendorrelativesownsolarpower,45%morerespondentsalsousesolarpower(32%vs22%non-solarowners).

3.5 CURRENTDEMANDANDCONSUMERSPENDINGTRENDS

3.5.1 AwarenessofOff-gridLightingProductsThe awareness on solar power among households in Uganda is generally high, as 86% of surveyedhouseholdsknowaboutsolarpower.IntheEasternandNorthernregions,however,awarenessislower;intheseareas,12-14%ofthesurveyedhouseholdsdidn’tknowwhatsolarpoweris.

0% 20% 40% 60% 80% 100%

Idon'tknow

Notheydon'tusesolar

Yes,theyusesolarDo

you

rlocalclinicsa

nd/o

rscho

olsu

seso

larp

ower?

No,Idon'thaveasolarproduct

Yes,Ihaveasolarproduct

0% 50% 100%

No,friends/neighboursdon'thavesolar

Yes,friends/neighbourshavesolar

Doanyofy

ourn

eighbo

urs,friend

sorre

lativ

eshavesolarp

ower?

No,Idon'thaveasolarproduct

Yes,Ihaveasolarproduct


Figure42:Left:Question25:‘Doyouknowwhatsolarpoweris?’andRight:Question26:‘Doyouknowwheretobuysolarproducts?’

Althoughover86%oftheUgandanhouseholdsareawareofsolar,awarenessofwheretobuysolarproductsislessevident.ParticularlyintheCentralandWesternregions,alargepartofhouseholdssurveyed(between36-50%)didnotknowwhere tobuysolarproducts.Awarenesswasgenerally low in ruralareasaswell,whereonly52%knewwheretobuysolarproducts.

3.5.2 WillingnesstoPayIngeneral,solarownersarewillingtopay28%moreforasolarproductthanhouseholdswhichdonotownasolarproduct(seefigurebelow). Interestingly,bothtypesofhouseholdsarewillingtopaysignificantlymorethantheactualaverageretailprice,withtheexceptionofasinglelightwithoutphonechargersystem.ThebiggestdifferencebetweentheretailpriceandpricehouseholdsarepreparedtopayisforlargerSHSs(<20W).Figure43:Question54:Willingnesstopayforasolarproduct,inUGX

0%10%20%30%40%50%60%70%80%90%100%


Yes

No

Ihaveheardofit,butIamnotsurewhatitis

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Rural Peri-Urban Urban Total

UGX0UGX100,000UGX200,000UGX300,000UGX400,000UGX500,000UGX600,000UGX700,000UGX800,000UGX900,000

UGX1,000,000

Fixedsolarhomesystem(0-10

watt)

Fixedsolarhomesystem(10-20

watt)

Fixedsolarhomesystem(morethan20watt)

Singlelightwithoutphonecharger(mobile

system)


Solarowners

Non-Solarowners

Averageretailprice(supplysurvey)


Figure44:Question51andQuestion54:‘Howmuchwouldyoubewillingtopayforthechosenproduct?(non-solar-owners)

Forty-fivepercentofthenon-solar-owninghouseholdsindicatedtheywouldbemoreinterestedinbuyingsolarifofferedaloan,particularlyintheurbanareas.Whenaskedthesamequestionforalease,only30%showedinterest.Figure45:Left:Question56:‘Wouldyoube(more)interestedinbuyingsolarproductsifyouwereabletotakeoutaloantofinancethepurchase?’Right:Question57:‘Wouldyoube(more)interestedinsolarproductsifyouwereabletorentorleasethem?’

3.5.3 AbilitytoPayTo determine the ability of households to pay for solar systems, the income levels and sources wereexaminedinmoredetail.InAnnex6,theincomedistributionbymainincomesourceispresented.Thereisa clear breakdown within these market segments based on how households obtain their income andwhethertheydosothroughformalorinformalemployment.

UGX0

UGX200,000

UGX400,000

UGX600,000

UGX800,000

UGX1,000,000

UGX1,200,000

Fixedsolarhomesystem(0-10watt)


Fixedsolarhomesystem(morethan20

watt)

Singlelightwithoutphonecharger(mobile

system)


Morethanonelightwith

phonecharger(mobilesystem)

Non-solarownersRural SolarownersRural Non-solarownersPeri-Urban

SolarownersPeri-Urban Non-solarownersUrban SolarownersUrban

0% 20% 40% 60% 80% 100%

Rural

Peri-Urban

Urban

Idon'tknow No Yes

0% 20% 40% 60% 80% 100%

Rural

Peri-Urban

Urban

Idon'tknow No Yes


Figure46:Left:Breakdownsourceofincome(Q58)byprofession,andRight:district/region.

Figure47.Monthlyincomebyincomesource.Bluetriangle=averageincomeofsolarpowerownersandnon-solarpowerowners.(DatabasedonQuestion55and56sortedpermainsourceofincome)

Foroff-gridruralhouseholds,agriculturalcashcropsareakeysourceofincome.Respondentsindicatedthathousehold incomes often fluctuate due to the seasonal nature of these livelihoods. In rural areas themajorityofthehouseholdsrelyononesourceofincome,whileinurbanareashouseholdsgenerallyhavemultipleincomeearners.

0%

20%

40%

60%

80%

100%


Trade

Ownerofasmallbusiness

Casuallabourer

Agriculture/Farmer

Help(guard,maid,driver)

Salariedofficeemployee

0%10%20%30%40%50%60%70%80%90%

100%

Masaka

Mub

ende

Mbale

Soroti

Gulu

Neb

bi

Kabarole

Mbarara

Centralregion

Easternregion

Northernregion

Westernregion

Salariedofficeemployee Help(guard,maid,driver)

Agriculture/Farmer Casuallabourer

Ownerofasmallbusiness Trade

UGX0UGX200,000UGX400,000UGX600,000UGX800,000

UGX1,000,000UGX1,200,000

DonotownSolarPower Doownsolarpower Averageincome


Figure48:Left:Question60:‘Doesyourhouseholdincomehavestrongseasonalfluctuations?’,andRight:Question62:‘Aretheremultipleincomeearnersinyourhousehold?’

ThemonthsinwhichruralhouseholdshavemostincomeareJuly/AugustandNovember/December,whileurbanhouseholdsgenerallyhaverelativelystableincomeinallmonthsoftheyear.Figure49:Question61:‘Inwhichmonth(s)doyouhavemostincome?’

Ifhouseholdswouldinvestinsolarenergy,thepaybacktimewouldbebetween6-12months,dependingonthesizeoftheproduct(Table5).Thispaybackperiodisbasedontheexpectedcostsavingsresultingfromcurrentenergysource,orfuel,beingreplacedbythesolarproduct.

0% 20% 40% 60% 80% 100%

Rural

Peri-Urban

Urban

Stronglyfluctuating Somewhatfluctuating

Neutral Somewhatstable

Verystable

0% 20% 40% 60% 80% 100%

Rural

Peri-Urban

Urban

No Yes

0% 20% 40% 60% 80% 100%

Rural

Peri-Urban

Urban

Allmonthsareequallylikely.

January

February

March

April

May

June

July

August

September

October

November

December


Table5.Expenditureontraditionallightsourcesandtheaveragepaybacktimeifhouseholdswouldinvestinasolarpoweredalternative(exchangerate:US$1=UGX2500)HHEnergy(electricity)source

Purchasecosts Lifetime

Recurringcosts(perweek)

Yearlyexpenditure

Solarpoweredalternative

Averagepriceofthealternative

Paybacktime

Candles UGX550(US$0.22) 3hours UGX1,800

(US$0.72)UGX94,000(US$37.44) Solarlight UGX41,500

(US$16.60) ½year

Tadooba UGX1000(US$0.40) 6months UGX1,900

(US$0.76)UGX100,000(US$39.52)

Solarlight,SHS

UGX41,500(US$16.60) ½year

Device/torchpoweredbydrycellbatteries

varying varying UGX1,760(US$0.71)

UGX91,500(US$36.92)

Solarlight,solarpowereddevices(radios),solarcharger/powerbank

UGX41,500–UGX64,500(US$16.60-25.80)

½-1year

PhoneCharging varying 1xperday–

1xperweekUGX1,000(US$0.40)

UGX52,000(US$20.80) solarcharger UGX64,500

(US$25.80)½-1year

NationalGrid - - UGX15,400(US$6.16)

UGX800,000(US$320.32) SHS

LocalGrid UGX17,250(US$6.90)

UGX900,000(US$358.80) SHS

Note:Candlesyearlyexpenditurecalculation:UGX500purchasecostsxaverageof3.25purchasesperweekx52weeks=UGX94,000(rounded),Tadoobacalculation:UGX1900perweekonkerosenex52weeksx2tadooba’speryearaverage=UGX100,000(rounded).BankingRelationships&LoansAlargenumberofhouseholdsalreadyhaveabankingrelationship,eveninruralareas.Inruralareas,themost households have an account ormembershipwith a Village Saving and LoanAssociation (VSLA) orSavingsandCreditCooperative(SACCO)whileintheurbanareas,MFIsandSACCOsweremostcommon.Figure50:Left:Question64:‘Doesanyoneinthehouseholdhaveabankingrelationship?’Right:Question65:‘Withwhichkind(s)oforganizationsisthisaccount?’

Atthesametime,alimitednumberofhouseholdscurrentlyhaveanoutstandingloan,particularlyintheruralareas.The12%to34%ofhouseholds thathada loanmostoftenreceivedthemfromSACCOsandVSLAsinruralareas,andfromMFIsandSACCOsinurbanareas.

0% 20% 40% 60% 80% 100%

Rural

Peri-Urban

Urban

Idon'tknow

No

Notatthemoment,butyesinthepast

Yes

Idon'twanttosay

0% 20% 40% 60% 80% 100%

Rural

Peri-Urban

Urban

Bank MFI

ROSCA SACCO

VSLA Cooperative(farmer)


Figure51:Question66:‘Doyoucurrentlyhaveanoutstandingloan?’(left),Question67:‘Withwhichkindororganizationwasyourloanwith?’

3.5.4 AbilityVersusWillingnesstoPayRural households said they arewilling to paymuchmore for the solar product (up to 70% ofmonthlyhouseholdincome),andarecurrentlypayingonly7.5%ofwhattheyarewillingtopaypermonthonlightingcosts.Inperi-urbanandurbanareasthevarianceislessextreme,astheamountrespondentswerewillingtopayrangedfrom37%to46%ofthehouseholdbudget.Figure52:Willingnessversusability(averagemonthlyhouseholdincome)topay.

Householdsindicatetheyarewillingtopayasubstantialamountoftheirmonthlyincomeonasolarsystem.Asseeninparagraph3.4mostoftheirincomeisalreadyspentonschoolfees,foodandhousingandinmostcasestheywouldnotbeabletospendtheindicatedamountallatonce.To study ability to pay, a comparisonwasmade between howmuch people are currently spending onlightingandphonecharging,andwhatthecalculatedpaybacktimewouldbefortheirpreferredsystem.Theaveragepaybacktimeforthepreferredsystem(inallcasesa‘LargeSHS’)is2.7,3.6and3.2yearsforurban,peri-urbanandruralhouseholds,respectively.Notethatbecauseruralhouseholdsspendmoreonphonechargingthanperi-urban,theirpaybacktimeisshorter.

0% 20% 40% 60% 80% 100%

Rural

Peri-Urban

Urban

No,butIhavehadaloaninthepast

No,Ihaveneverhadaloan

Yes

Idon'twanttosay

0% 20% 40% 60% 80% 100%

Rural

Peri-Urban

Urban

Bank MFI

ROSCA SACCO

VSLA Cooperative(farmer)

UGX0

UGX100,000

UGX200,000

UGX300,000

UGX400,000

UGX500,000

UGX600,000

UGX700,000


hhincome lightingcosts(recurrent) willingnesstopay


Table6.Summaryofhousehold’sabilityandwillingnesstopayforsolarproducts*

AreaMonthlyhouseholdincome

Incometype

Monthswithmostincome

Monthlylightingspending

Monthlyphonechargingspending

Preferredsystemandaverageprice

Avg.paybacktimeforpreferredsystem(basedonlighting&mobilechargespending)*

Urban

UGX664,308(US$265.72)

Salariedofficer/smallbusinessowner/trade

Yearround UGX4.870(US$1.95)

UGX4.380(US$1.75)

LargeSHSUGX300,000(US$120)

2.7years

Peri-urban

UGX392,148(US$156.86)

Agriculture/farmer/smallbusinessowner

Partlyyearround(26%)PartlyNov-Dec(16%)

UGX3,550(US$1.42)

UGX3.425(US$1.37) 3.6years

Rural

UGX290,150(US$116.06)

Agriculture/farmer


UGX3.420(US$1.37)

UGX4.400(US$1.76) 3.2years

*These results are basedonquantitative analysis.However, it isworthnoting that consumers often actdifferentlyfromwhatcouldbeexpectedfromsuchachartasthisanalysisdoesnottakeaspirationalvalueintoconsideration.Aspirationoftendrivesconsumerstospendconsiderablymorethattheirincomewouldsuggest.

3.5.5 WillingnessandDemandofNon-solar-ownersAccordingtorespondents,ifhouseholds’accesstoenergysourcesweretoincreaseinthefuture,themainusesofthisadditionalpowerwouldbeforchargingmobilephonesandlightingthehome,particularlyinruralandperi-urbanareas. Inurbanareas,additionalenergysourceswould largelybeused inpoweringotherapplianceslikearadio,refrigeratorandwashingmachine.Figure53:Question24:‘Ifyouhadgreateraccesstoenergy,whatotheractivitieswouldyouusethenewenergyfor?’

ThepotentialdemandofhouseholdsnotowningasolarproductisparticularlyhighforthelargerSHS(20wattsormore)andforthelargermobilesystems(morethanonelightandphonecharger),asillustratedinfigure55.

0% 20% 40% 60% 80% 100%

Rural

Peri-Urban

Urban

Business

Cellphonecharging

Computerusage

Lighting

Poweringotherappliances(likeradio,fridge,washingmachine)TV


Figure54:Question53:‘Whichtype(s)ofsolarproduct(s)wouldyoubewillingtobuy?bydistrict.

Therearesomedifferencesbydistrictwhenitcomestodemandforsolarproductsbynon-solar-owninghouseholds.InMbalethereisacleardemandforSHSof10-20wattscapacity,whileinthedistrictsSoroti,GuluandNebbithedemandismuchhigherforSHSofmorethan20watts.HouseholdsinMasaka,MbararaandNebbishowahighdemandformobilesystemswithmorethan1lightandaphonecharger.Thedemandforthesmallermobilesystemsandsmallerfixedsystemsisratherlow(comparedtotheothersystems)inalldistricts.Thedemandformobilesystems(withmorethanonelightandaphonecharger)ishighestintheruralareas,whilethedemandforfixedSHS(ofmorethan20watts)ishighestintheurbanareas.Forallregions,thereseemstobeatendencytowantlargersolarproducts,whetheritisformobileorfixedsystems.Figure55:Question53:‘Whichtype(s)ofsolarproduct(s)wouldyoubewillingtobuy?’bylocation.

0% 20% 40% 60% 80% 100%

Masaka

Mubende

Mbale

Soroti

Gulu

Nebbi

Kabarole

Mbarara

Centralregion

Easternregion

Northernregion

Westernregion

National

Average







Other

0% 20% 40% 60% 80% 100%

Rural

Peri-Urban

Urban

Fixedsolarhomesystem(morethan20watt)Fixedsolarhomesystem(10-20watt)


Morethanonelightwithphonecharger(mobilesystem)Singlelightwithphonecharger(mobilesystem)Singlelightwithoutphonecharger(mobilesystem)Other


3.5.6 WillingnessandDemandofSolarOwnersOfthehouseholdsalreadyowningasolarproduct,about80%wouldbeinterestedinbuyinganothersolarproduct. This is less relevant for households in the Western region, where between 28 – 36% of thehouseholds indicated no interest in owning another solar product, even though satisfaction levelswithexistingproductsintheWesternregionarenotparticularlylow.Mosthouseholdsthatownasolarproductindicatedesireforlargersystems.Thedemandforsmallermobilesystemsisalmostnon-existentinalldistricts.Figure56:Question50:‘Whatwouldyoubuy?’

3.6 CONSUMERSEGMENTATION

3.6.1 ConsumerSegmentationforOff-gridLightingProductsThesurveyshowedthatdemandforoff-gridlightingproductscanbesegmentedinto4distinctconsumertypes: urban grid-connected, urban underserved, off-grid non-remote (peri-urban) and off-grid remote(rural). The main characteristics are based on the current lighting sources used and their costs, howhouseholdsobtaintheirincome,andwhethertheydosothroughformalorinformalemployment.Inthetablebelow,theurbansegmenthasbeensplitintogrid-connectedandunderservedbecauseoftheirclearlydifferentcharacteristics(energyexpenditure,income,dwellingtype).Table7:Maincharacteristicsoftheidentifiedcustomersegments

ConsumerSegment Description Dwelling

Type

AverageMonthlyEnergySpending(UGX)

Monthswithmostincome

UrbanBased:Grid

Connected

• Gridconnected,• Citybased,• Formalemployment

Brick,Wood,Fibro

UGX36,862(US$14.74)

Yearround

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Masaka

Mubende

Mbale

Soroti

Gulu

Nebbi

Kabarole

Mbarara








UrbanBased:Underserved(Off-Grid)

• Usingbasic lighting sources (likekerosene,fireandcandles),

• Settlementbased,• Informalurbanemployment

MetalSheets,Tin

UGX12,806(US$5.12)


Off-Grid:Non-remote(peri-urban)

• Peri-urban,within10kmofprovincialcentres,

• Farmers,• Formalemployment&

transportation

Wood,traditionalbamboo

UGX14,222(US$5.69)


Off-Grid:Remote(rural)

• Remoterurallocations,• Subsistencefarmers

Traditionalbamboo,mud

UGX18,431(US$7.37)

July-Aug(12%)andNov-Dec(15%)

Sources of lighting currently used differ substantially among the differentmarket segments. Themoreremoteandpoorerahouseholdis,themorelikelyitistorelyonbasicsourcesofenergysuchaskerosene,fireandcandlesforlightingthehome.Foroff-gridhouseholds,agriculturalcashcropsareakeysourceofincome. Because of the seasonal nature of these incomes, household incomes fluctuate. Urban grid-connectedhouseholdsspendmorethantwiceasmuchonenergythanothersegments.MarketCharacteristicsbyCustomerSegmentAll fourmarketsegmentsoffergoodprospects tomanufacturers,distributorsandretailers for increaseduptakeofoff-gridlightingproducts,andspecificallysolarproducts.Thetablebelowhighlightsthetypeofproductsdemanded,mostappealingbenefitsandtheirusesbyconsumersegment.Thisinformationcouldguideatargetedapproachtoeachconsumersegment.

Table8:Marketsegmentcharacteristics

ConsumerSegment

Unawareofsolar/Unawareofwheretobuy

ProductofLikelyInterest

Ownmobilephone(per

hh)

PurchasingPoint

Needforfinancing(loan)

Mostappealingbenefitsofoff-gridlightingproducts

Likelyuseofproduct

UrbanBased:gridConnected

21% /9% LargerSHS

40%owns1,60%owns2mobilephones

Electricalgoodsretailers,employerschemes

MediumCostsavings(28%)&safety(14%)

Lighting&otherappliances(e.g.fridge)&TV

UrbanBased:Underserved(off-grid)

21% /9%

SHS(20watts)


Urbanbasedwholesalersandretailoutlets

MediumCostsavings(28%)&safety(14%)

Lighting&otherappliances(e.g.fridge)&TV

Off-Grid:Non-remote

31% /36%

SHS(20watts),Mobilesystemswithmorethan1light&phonecharger


Urbanbasedretailoutlets,agriculturalinputretailers,tradestores

Medium

Costsavings(29%)&modernlifestyle/timesavings(13%)

Lighting&phonecharging

Off-Grid:Remote

45% /53%

Mobilesystemswithmorethan1light&phonecharger

83%owns1mobilephone

Agriculturesupplychains,CSRinitiativesandtradestores.

High

Costsavings(28%)&modernlifestyle/improvementhealth(15%)

Lighting&phonecharging


3.7 CONCLUSIONSFROMTHEDEMANDANALYSISOff-gridLightingProducts

• Amongthesurveyedoff-gridruralhouseholds,56%usekeroseneastheirprimaryenergysourceforcookingandlighting.Kerosenelampsareusedby28%oftheUgandanhouseholdssurveyedasthemainhomelightingsource,followedbycharcoalorwoodfire(23%)andflashlightsusingdrycellbatteries(15%).Nonetheless,75%ofhouseholdsfindkerosenelampsunreliablewhile90%ofhouseholdsthatownsolarpowerconsideritreliable.

• Theaveragemonthlycostofenergyandfuelarenothighatabout4.6%ofhouseholdbudget.Ofthis,40%isspentonkerosene,withasmallersharegoingtodieselandpetrolinurbanareas.Traveltimestopurchaselightingproductsarenomorethan30minutes.

SolarProducts

• CurrentinstalledbaseshowsahighershareoffixedSHSs,whichconstitute50%ofallsystemssold.• Solarproductsaremainlyusedforlightingthehouse(33%),chargingthephoneathome(26%-

particularly smallermobile and fixed systems) and for children studying (20%). TV watching isparticularlymentionedinconnectionwithSHSs(12%).

• Fifty-fivepercent(55%)oftheSHSsand38%ofthemobilesystemsareboughtatelectric/hardwareshops.Especially in theEastern regiona significantnumberofhouseholds (29%) indicated theyboughtfromafieldagent.

MobilePhones

• ThemajorityoftheUgandanhouseholdsownatleastonemobilephone(86%),andchargetheirmobile phone by purchasing charging timeoutside the home (68%), spending on averageUGX1,000(US$0.40)perweek.

QualityPerception:SatisfactionandWorkingSystems

• Ruralandperi-urbanhouseholdsexpressedhighlevelsofdissatisfactiontowardsthebasicoff-gridlighting sources currently used, 67 and 55%, respectively. Solar energy, on the other hand, isperceivedasveryreliableandtrustworthy.Over92%ofsolarpowerownersstatethattheirproductworkswell.Between78-and82%ofsolarownerswouldwanttoownmoresolarproducts,and90%of all households interviewed say that solarpower canbe trusted.Hence, contrary to theperceptionofsuppliersandotherstakeholdersinthemarket,householdsgenerallydonotseemtoexperiencesolarqualityissues.

Awareness,WillingnessandAbilitytoPay

• Althoughover86%ofthesurveyedUgandanhouseholdsareawareofsolar,35%don’tknowwheretheycanbuytheseproducts.Brandawarenessisverylow,especiallyintheCentralandWesternRegions. SolarNow was most often mentioned (23%), especially in the Eastern Region and inNorthernregion,where38%and34%ofhouseholds,respectively,haveheardofthatbrand.Thenextmostwell-known brand, Ase Solar,wasmentioned only by 7%. Approximately eighty-fivepercentofrespondentscouldn’tnameanybrandatall.

• Households on average spend only 4.8% of their monthly income on energy/fuel. Mainexpendituresarefood(18.5%)andschoolfees(38%).Themainreasonsindicatedwhyhouseholdsdonotconsiderpurchasingsolarpowerarelackofmoney(51%)andotherpriorities(26%).

• Althoughhouseholdsareverywillingtopayforsolarproducts,theirabilitytopayfortheamountsmentioned is very limited. Rural households rely on income from agriculture which fluctuatessignificantly,andincomeishighestinJuly/AugustandNovember/December.Householdsinperi-urbanandurbanareasareinafarbetterpositiontopayforasolarproduct.Solarownersarewillingtopay28%moreforasolarproductthanhouseholdsthatdonotownasolarproduct.Forty-fivepercent(45%)ofthenon-solarowninghouseholdsindicatedtheywouldbe(more)interestedinbuyingsolarifprovidedaloan.

• HouseholdscurrentlyspendonaverageUGX6,000(US$2.40)perweekonlightingproductsandmobilephonecharging.ThisexpenditurecanbeareferencepricepointforSolarpay-as-yougo/


paymentsand/orfeeforserviceschemes.Ifhouseholdswouldinvestinsolarenergy,thepaybacktime(basedonsavedexpensesfromthereplacedfuel)wouldbebetween6and12monthsforasmallsystemthatcomplieswiththeirneed.ForalargeSHSsystemthepaybackwouldbebetween2.7–3.6years.

DemandDrivers

• Themostappealingbenefitofoff-gridlightingproductsforUgandanhouseholds(withoutasolarproduct)isprimarilycostsavings,followedbyimprovementinhealth,modernlifestyleandgreatersafety/reducedfirehazard.Atthesametime,lackoffundsareanobstacletopurchasingasolarproduct.

• Householdsgenerallydonotknowhowtodeterminethequalityofasolarproduct.Thosethatdoconsidertheproductwarrantyasakeyindicator.

• Confidence in solar products is strongly driven by warranty, UNBS mark or governmentrecommendation.ThisisparticularlysointheNorthernandEasternregions.

• Offering incentives to promote solar products promote solar products (promotion by word ofmouth, for instance toneighboursand relatives) is seenasa largedemanddriver tobuy solar.Eighty-onepercentofthehouseholdswouldbewillingtopromotesolarwhenofferedanincentive.

EffectiveDemand

• Theaveragepaybacktimeforthepreferredsystem(inallcasesa‘LargeSHS’)is2.7,3.6and3.2yearsforurban,peri-urban,andruralhouseholds,respectively.Ifthehousehold’saccesstooff-gridlightingsourcesweretoincreaseinthefuture,themainuseswouldbeforchargingmobilephonesandlightingthehome,particularlyinruralandperi-urbanareas.

• Inurbanareas,additionalenergysourceswouldalsobeusedtopowerotherapplianceslikeradio,refrigeratorandwashingmachines.

• Thepotentialdemandofhouseholdscurrentlynotowningasolarproduct isparticularlyforthelargerSHS(20wattsormore)andthelargermobilesystems(morethan1lightandphonecharger).

Table9.Mainchallengeidentifiedfromdemandanalysis

Mainchallengesidentified Findings

Product,Quality,marketing–challengeslimitingthemarketpull

(Lackof)Productawareness;abilitytomakeaninformeddecision;marketing.

Mainlysuppliersanddonors/NGOsmentionedlackofawarenessasachallenge.However,thedemandsurveyshowsthatover85%ofhouseholdsknowwhatsolarIs,awarenessintheNorthernandEasternregionsandinruralareasisonaveragelower.Retailersperceiveawarenesstobelower.Overhalfoftheruralpopulationdoesn’tknowwheretobuysolarproducts.Solarawarenessmightnotbethemajorchallengeasperceivedbythosementioningit.

Qualityissues;reputationofsolarproducts;havingabadname;lackofconfidenceinsolarproducts

Householdsusingsolar findtheirproductreliableandarepredominantlyextremelysatisfiedwithit(74%),incontracttokerosene,drybatterytorch,andcandleuserswhoaregenerallyunsatisfiedwiththeircurrentlightingsource.Ninetypercenttrustsolarproductsandthreequartersseesolarastheintroductiontoamodernhousehold.People are receptive to warranty certificates, and also governmentrecommendationandtheUNBSsignwhenbuyingproducts.

Perceivedhighcostofsolarsystems,andhighexpenditureoncostsotherthanenergy(includingschooltuitions);otherpriorities

Householdsspend lessonenergy thanexpected.Theaveragehouseholdspends less than 2% of their disposable income on kerosene, thereforeenergycostdoesn'tseemtobetheirmainconcern.Householdsspendonaverage38%oftheirdisposableincomeonschoolfees.Hence,energycostsarenotperceivedasbeinghigh,soinvestinginsolarsystemsdoesn’thaveaclearfinancialreturnandare,thus,achallengefortheindustry.


4 SUPPLYANALYSISOFF-GRIDLIGHTINGInformation in thissectionwasgatheredthrough interviewsconductedwith importers,andthroughthesupplysurveyof101retailersinthewholeofUganda.

4.1 SUPPLYCHAINACTORSANDPRODUCTSONTHEMARKET

Uganda,likeotherEastAfricancountries,isstrugglingtomeetexistingenergydemandwith80%-90%ofthepopulationnotconnectedtothegrid.Whilesignificanteffortsareunderwaytoaddadditionalgenerationcapacityandtoextendthegrid,themajorityofthelow-incomehouseholdswillstillneedalternativesourcesofenergyduetothecostofgridpowerortherespectivegovernmentsfindingittoocostlytoextendthegrid. The current supply chain of off-grid products in Uganda can be visually mapped in the followingmanner:Figure57.GeneralrepresentationofUgandanoff-gridlightingproductsupplychain.

• International/localmanufacturer:Themanufacturerdevelopstheproducts,andcanbeeitheralocal

manufacturer (for instancefortadoobaandcandles)oran internationalmanufacturer,which is thecaseforsolarproductsandgenerators.

• Importer/distributor: Ifproductsaremanufacturedabroad, the importer imports theproductsandfurtherdistributes them in-country.Whenproductsaremanufactured in-country, this supply chainactormerelyservesasaproductdistributor.

• System Integrator: System integratorsare theexpertswhoassemble thesolar systemcomponentsbeforeinstalling.Thisactorisnotalwayspartofthesupplychain,dependingonthetechnicalexpertiseoftheimporter/distributers.

• Kampala-based dealer/technical/agent: The Kampala-based retailers are shops that buy theirproductsfromtheimporters/distributors(orsometimesimportthemselves)andselltheseproductstoruralbasedretailers.TheseKampala-basedretailersarenotalwayspartofthesupplychain,asthereareinstanceswheretheimporter/distributorsuppliesdirectlytotheruralbasedretailers.

• (Rural based) dealer/technician/franchise agent: This rural retailer is generally the last link in thesupplychainandsuppliestheoff-gridlightingproductdirectlytotheendconsumer.

Thecompaniesdiscussedinthefollowingsectionareeitherimporters/distributors,systemintegratorsorrural-basedretailers.

International/

local

Manufacturer

Importer/

distributor

(Ruralbased)

dealer/

technician/

(Rural)Consumer

Households

(Small)Business

SystemIntegrator

Kampalabased

dealer/technician/

agent


4.1.1 Importers&DistributorsTherearequiteanumberof(anestimated25companies)importersanddistributorsactiveintheUgandanoff-gridlightingmarket.Theseimportersanddistributorsaregenerallysmallandmediumsizedenterprises(SMEs)thathavebeenactiveintheUgandanoff-gridlightingmarketsince2008(acouplebefore2008).ThemajorityoftheseSMEsarebasedinKampalaandgenerallyoperatefromhere.Somehavebranches(1or2)inotherareasinthecountry,andaremainlyrepresentedinthoseareaswherepopulationdensityishighest(includingMbarara,Mbale,Masaka,Arua,Lira).TheEasternRegionisslightlyunderrepresented.Thecompaniesimportanddistributeavarietyofdifferenttypesandsizesofsolarproducts,rangingfromsmallplugandplaysystems(withasinglelight)tolargesolarhomesystems(ofmorethan20watt).Theseproductsaregenerallysoldtoretailers,agents/dealersandhouseholds.Onaverage,thetotalsalesofeachcompany is5,000unitspermonth(includingbothmobileandfixedsystems)atanaveragepriceofUGX152,000(US$60.80)perunit.Avariationofapproachesisusedinpromoting,marketinganddistributingtheirproductstotheirtargetmarket,generallyinvolvingadditionaldistributors(agents,retailers,financialinstitutions)beforereachingtheendusers.Interviewswereconductedwithapreselectednumberofimporters/distributorsthattradeinmobilesolarsystems, SHS, or both. A selection of key importers in the Ugandanmarket was made based on theirlongevity in the industry (includingbothamixofnewentrantsandestablishedcompanies) andcurrentactivitiesinthedevelopmentofthesolarmarket.Thissectionprovidesanoverviewofsomeofthemainimporter’scharacteristicsandtheirproductsintheUgandanmarket.

• BarefootPowerUgandaLtd.:BarefootPowerUgandaLtdisasubsidiaryofBarefootPowerGlobalandregisteredinUgandain2008.Thecompanyworkstoimprovecommunitylivelihoodthroughthedistributionofaffordablesmallsolarlightingandphonechargingsolutionsforpeopleatthebottomoftheeconomicpyramid(BOP)alloverUganda.

• SolarNow:SolarNowevolvedfrombeinganNGOintheearly2000’stoafully-fledgedcommercialbusinessin2009.Animportanttrendrecognizedbythecompany’sagentsisthatBoPcustomersaremovingawayfrompurchasinglanternstofullywiredsystemstoimprovetheirqualityoflife.Thecompanycurrentlyoffers21solarPVproductsfromverysmall(StartPack)uptomuchlargersystemsthataresoldtoavarietyofcustomersincludinghouseholdsandSMEs.

• GirasolarEastAfricaLtd:Girasolarwasfoundedin2009.ThecompanyisanimporterandsystemintegratorofsolarPVsystems.ThecompanyimportsvarioussolarPVsystemcomponentsincludingsolarmodules;batteries;chargecontrollers;invertersandlights.ItalsoimportsafewpicosolarPVsystems(Fosera)fromGermany.

• Small Solutions Ltd: Small Solutions Ltd started in 2009 as an NGO that provided businessdevelopment technical support to solar PV entrepreneurs but transformed slowly into a socialbusinessin2010.ThecompanystartedoutusingD.lightlanternsbutnowsellstwoGreenPlanetbrands, the Sun King Lamp and the Sun King Pro. These lanterns are designed in theUSA andmanufacturedinChina.

• BBOXX: Bboxx was established in 2010 and designs, manufactures, distributes and financesinnovativeplug&playsolarsystemstoimproveaccesstoenergyacrossAfricaandthedevelopingworld.BBOXXengineersproductsinitsLondonlab,andmanufacturestheminitsfactoryinChina.BBOXXdistributestopartnersin14countriesand30localsubsidiarysalesshopsinKenya,Rwanda,SierraLeoneandUgandawhereseveralkitsaresoldtocustomers.

• ABMatra:ABMatra’ssolardivisionstartedoperationsin2010basedinKampalawithbranchesinJinja, Mbale and Lira. The company trades in quality power generation, agricultural andconstructionmaterials.ABMatraspecializesintheprocurementandsaleofimportedsolarpowersystems,backupinvertersandagriculturalaswellasconstructionmaterials(includingchemicals).

• UltraTec:UltraTecisalocalprivatecompanythatwasestablishedin1999toservetheneedsofthegrowing energy and telecommunications sectors by supplyingproducts and services.UltraTec’sproducts fall into four categories: renewable energy, lightning & power surge protection,telecommunicationsandlightingProducts.UltraTecisthemaindistributorofD.lightsolarproductsinUganda.


• TransAfrican Supply Services (TASS):Founded in 2002,TASS is a leading solar PV company in

Ugandaoperatinginthefieldsofcommunication,power,renewableenergy&environment,health,education,andscienceaswellasthetransportandindustrialsectors.TASSsellssolarproductsthatrange from core solar products to accessories, i.e. solar panels, inverters, batteries, cables,regulators,bulbs,switches,ducts,rooftopandgroundarrays.

• FRESUganda:FRESUganda,asubsidiaryofFRESInternational,wasofficiallyestablishedinApril2010,andbecamefullyoperationalinJanuary2012.FRESUgandahasitsheadofficeinMbarara,andfocusesontheWesternUgandadistrictsofMbarara,Bushenyi,Mpigi,IsingiroandRukungiri.FRESoffersseveralsystemcategoriesdependentonthenumberoflightsandwatthoursrequired.

• Azuri:Azuriservesoff-gridelectricityconsumersinAfricaandstartedoperationsinUgandain2013.Azuridevelops,manufacturesanddistributesIndigo,a2-lightandmobilephonechargingsystem.Indigocustomerspayasmallamounttogetstarted,andthenpurchaseweeklyscratchcards,whichprovideeighthoursperdayoflightinadditiontomobilephonecharging.ASwiss-basedcompanymanufacturesthesolarunitsundercontractattwoassemblysitesinChina.AlargeportionofthecomponentsarealsosourcedinChina.

Thefollowingtablessummarizethemaincharacteristicsoftheinterviewees.Thetablesaresplitintomobilesolarsuppliers,SHSandmixedsuppliers.Table10.MaincharacteristicsoftheinterviewedMobilesystemimporters/distributors.

Importer Customertype Producttypes(mobile)

SmallsolutionsLtd

• MFIs• SACCOs• NGOs

• SunKingLamp(700mw)• SunKingPro(2,5W,lamp+phone

charging)

Azuri

• SMEs• BoPclients• Promotionthough:

distributors,SACCOs.

• IndigosolarPVsystem(2xlightsystemandphonecharging)

UltraTec

• Dealers• Endusers

• D-light(lamp)• D-light(lampwithphonecharger)


Table11.MaincharacteristicsofSHSimporters/distributorsinterviewed.

Importer Customertype Producttypes(fixed)

SolarNow

• Households• BoPcustomers• SMEs

• Startpack–25WPowerPack–50WLEDLightPack

• DCLEDTV/DVD• ACPack

ABMantra • Retailers• Installers

• 2xlightkit• 4xlightkit• 2xlightkit+10x

phonecharging• Solarmodules(wpk)

TransAfricanSupplyServices

• Businesses• Government

departments/ministries• Individualclients

Solarmodules

FRESUganda • Households• businesses

• S1A(2xlights)• S1B(1socket25W)• S2A(3xlights)• S2B(2xlightsand1

socket25W)• S3(3xlightsand1

socket62W)

Table12.MaincharacteristicsoftheinterviewedSHSandmobileimporters/distributors.

Importer CustomertypeProducttypes(mobile)

Producttypes(fixed)

BarefootPower • Corporatecustomers• Financialinstitutions• NGOs• BoP

customers/households• Schools/hospitals• Independent

entrepreneurs/technicians

Firefly(portablelamp)

Go(1/2lamp,2wpk-5wpk)Connect

GirasolarEastAfricaLtd

• SMEs(particularlyinnichemarket

Picosolar(Fosera)

SolarPVsystems(VictronEnergyandAsantys)

BBOXX

• Installers

• BB5kit(7W,lamps+phonescharging)nolongeronthemarket

• BB7kit(15W,lamps+phonescharging)

• BB12• BB17


4.1.2 RetailersThefollowingsectionprovidesanoverviewofthemainfindingsfromthesupplysurveyconductedamong101retailersacrossUganda.MostretailersrunanelectricalshopTheretailerssellingoff-gridlightingproductsinUgandaareprimarilyelectricalshops.Mostaresmallandhave less than 6 employees. In some districts, includingMasaka (Central region) and Nebbi, (Northernregion)therearealargenumberofsolarspecialistssellingsolarproducts.IntheEasternregion,therearealsomanyfieldagentssellingsolarproducts.Figure58:Question4:‘Whichorganizationbestdescribesthebusiness?’

Retailersaregenerallysmallandhaveexistedforlessthan5yearsTheretailersaregenerallysmallbusinesseswithbetween1and5employees.Themajority(57%)haveatleast1to2techniciansoncall.Over50%oftheretailerssurveyedhavebeeninbusinessforjustashorttime,between2and5years.Figure59.QuestionS7:‘Howmanyyearshaveyoubeeninbusiness?’

Themaincustomersoftheretailersareindividualsandhouseholds(66%).Theleastcommoncustomersarefinancialinstitutions,marketsandcommunityheads/chiefs.

0% 20% 40% 60% 80% 100%

Masaka

Mubende

Mbale

Soroti

Gulu

Nebbi

Kabarole

Mbarara

Central

region

Eastern

region

Northern

region

Western

region

Agriculturalinputstrader

Electricalshop

Fieldagent

Franchise

Hardwarestore

NGO

Solarspecialist

0% 20% 40% 60% 80% 100%

Masaka

Mubende

Mbale

Soroti

Gulu

Nebbi

Kabarole

Mbarara

Central

region

Eastern

region

Northern

region

Western

region

Lessthan2

Between2and5years

Between6and10years

Morethan10years


Figure60:QuestionS33:‘Whoareyourmaincustomers?’

Of thesecustomers,about79%are fromruralareas,and the retailers claimedoverwhelmingly that themajorityoftheirsolarcustomersaremale(95%).Figure61:QuestionS34:‘Wheredoesyouraveragesolarcustomerlive?’bydistrictandregion.

Figure62:QuestionS35:‘Whatisthegenderofyouraveragesolarclient?’bydistrictandregion

44%

20%

17%

9%

4% 4%2% Selldirectlytocustomer

Selltootherbusiness

Selltofamilymemberofcustomer

Selltofieldagent

Selltofinancialinstitutions(likeSACCOs,VSLAs,MFIsetc.)

Selltomarket(farmers',fishers',otherproducts)

Selltocommunityhead/chief

0%10%20%30%40%50%60%70%80%90%100%

Masaka

Mub

ende

Mbale

Soroti

Gulu

Nebb

i

Kabarole

Mbarara

Centralregion Easternregion Northernregion WesternregionGrandTotal

Urban

Peri-urban

Rural

0%10%20%30%40%50%60%70%80%90%100%

Masaka

Mub

ende

Mbale

Soroti

Gulu

Nebb

i

Kabarole

Mbarara

Centralregion Easternregion Northernregion Westernregion GrandTotal

Male

Female

Average

Average

Average

Average

Total

Average

Average

Average

Average


Retailersinall4regionssellsimilarproductsbutregional‘bestsellers’differRetailersprimarilysellsolarlanterns(23%),0-10Wsolarpanels(22%)and10-20Wsolarpanels(22%).Thefigurebelowshowssomeregionaldifferencesinproductssold;retailersintheWesternregionsellrelativelymoresolarplugandplaysystemsthanintheotherregions(16%vs.9%average).About13%oftheretailersindicatedtheyalsosellsolarchargersandbatteries.Figure63:QuestionS10:‘Whattypesofoff-gridlightingproductsdoyousell?’

When asked which products sold best in the previousmonth, some notable regional differences wereevident:retailersintheNorthernregionindicatedthatSHSofmorethan20wattssoldbest(45%),whilesolarlanternsystemssoldwellintheCentralregion(48%).Figure64:QuestionS20:‘Whichproduct(s)soldbestlastmonth?’ProductsthatsoldbestinApril2014bydistrict

MostretailersobtaintheirstockviatheshoppingarcadesinKampalaClose to44%ofall solarproductswere soldvia theKampala shoppingarcades.Hence the supply chaingenerallyhasnotonebutatleasttworetailers,eachrequiringaprofitmargin.

0% 20% 40% 60% 80% 100%

Centralregion

Easternregion

Northernregion

Westernregion

TotalDry-celltorches

Solarlanterns

Solarpanels,solarhomesystems(0-10watt)


Solarpanels,solarhomesystems(morethan20watt)

Solarplugandplaysystems

Dynamopoweredlightingproducts

0% 20% 40% 60% 80% 100%

Centralregion(27)

Easternregion(26)

Northernregion(22)

Westernregion(21)

GrandTotal(96)

Dry-celltorches

Solarlanterns



Solarpanels,solarhomesystems(morethan20watt)

Solarplugandplaysystems


Figure65:QuestionS8:‘Fromwhichsuppliersdoyoucurrentlygetyourproducts?’

Retailers’servicesmightbebetteralignedwithwhatcustomersfindimportantMainservicesprovidedbyretailersareinstallationofsystems;provisionofuserinstructions;andinsomecases,awarranty.After-salesservicesdonotseemtobeprovidedveryoften.Figure66:QuestionS21:‘Whichofthebelowservicesdoyouoffer?’

At the same time, respondents to the demand survey said they see warranty, contact with a salesrepresentativeandgovernmentrecommendationsasthemainindicatorsofthequalityofsolarproducts.Retailerscannotinfluencegovernmentrecommendations,buttheycanaddresstheissueofwarrantiesnotbeingprovidedand/orfolloweduponandthedirectcontactthroughsalesrepresentatives.

Othercompanies

44%

56%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Mobilesystems

Fixedsystems

Delivery Installation Userinstruction

Usermanual(printed) Stickerwithbasicinformation Warranty

AfterSalesService Credit/paymentininstallmetns

ShoppingArcadesKampala


Figure67:Question29:‘Whatconvincesyouofthequalityofasolarproduct?’

4.2 DISTRIBUTIONCHANNELS

Solar companies inUgandause a varietyofmethods topromote,market anddistribute their products.Settingupadistributionnetworkisveryexpensiveandmostofthesolarcompaniesrelyon(i)salesmadeattheheadofficethroughsystemintegrators,or(ii)upcountryentrepreneurswhosellthroughtheirownsmallsolarorelectricalshops.Theseindividualsactasdefactoagentsforamajorityofthesolarcompanies.Theyareindependent,havelittlecapitalandstock,andrelyonthegoodwilloftheclienttopayadepositforsalesandinstallation,sometimeswithoutevenseeingtheequipmenttheyarebuying.

4.2.1 DistributionChannels:ImportersandDistributorsBasedontheinterviewswithimporters,fourdistinctdistributionmodelswereidentified:

• Directsalesmodel• Traditionaldistributionmodel• Franchise/agentmodel• MFI/SACCOmodel

Most suppliers use a combination of distribution models, and sometimes even use all four. The maincharacteristicsandchallengesofeachmodelarediscussedbelow.DirectSalesModelTwenty-ninepercent (29%)of the suppliers intervieweduse thedirect salesmodel. They approachendcustomersdirectly,includingindividuals,corporates,NGOsandfinancialinstitutions.Becauseofthedirectrelationshipwithendusers,payplansandcreditschemesareoftenusedinthismodel.Themainchallengeisthatthismodeliscommunication-andthusresource-intensive,andthereforecostlywithlimitedreach.Figure68.DirectSalesmodel.Directcontactbetweensellerandcustomer,sometimesthrough(local)branchoffices.

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Buyingatthesource Governmentrecommendation JudgebythepackagingPrizewinningproduct Salesrepresentative UgandaBureauofStandardssignWarrantycertificate


TraditionaldistributionmodelThe traditionaldistributionmodel ismainlyused for larger SHSs.One thirdof the intervieweesuse thismodelforatleastpartoftheiroperations,whereinthesupplier/importersuppliesindependentthirdparties–eitherdealers,tradersorsystemintegrators.Onlythesethirdpartiesareincontactwiththeenduser.Theindependent third party often procures products from other suppliers as well. These can be non-solarproductsrequiredfortheinstallation(e.g.batteries,inverters),orsimilarproductsfromcompetitors.Underthismodel,theimporterhaslimitedcontrolovertheendproductandendpriceandisrequiredtomaintainintensiverelationswithalltheiroff-takersortheyruntheriskoflosingthemtothecompetition.Providingafter-saleservicesandwarrantiescanbeachallengebecausetheimporteroftendoesn’thavealocal presence. Quality control can also be an issue as the importer doesn’t control the work of theindependentthirdparty.Figure69.Traditionaldistributionmodel.Onlyindirectcontactbetweenimporterandendcustomer.

Franchise/agentmodelThe franchise/agent model is mainly used for smaller mobile and plug-and-play systems. Twenty-ninepercent (29%)of importers interviewed said theyuse thismodel.Generally the agents/ franchisees arebrandedandworkexclusivelyfortheimporter’sbrand.Theseagentsareoftenmicro-entrepreneurs.Thismodelisoftenusedincombinationwithafee-for-service/pay-as-you-goscheme.Themainchallengeidentifiedwastherateofattritionoffranchisees.Insomeinstances,theimportercouldonly retain10-15%of trainedmicro-franchisees. Theprobable cause for thehighattrition rates are therelativelylowmarginsof10%onthesalespricethattheagents/franchiseesreceive.Thismodelrequireslargeamountsofworkingcapitalbecausetheagents/franchiseesoftenneedcreditfromtheimportertoholdstockand/orneedtoprovideaformofcredittothecustomer.Anotherseriouschallengeisqualitycontrol.Thepublicperceivestheagentsasrepresentativesofthesolarbrand.Misconductbytheagentthusreflectsonthebrandperception.Figure70:Franchise/agentdistributionmodel

MFI/SACCOmodelUnder this model, the importer sells via anMFI/SACCO or closely cooperates with them through jointpromotionschemes.Thismodelisrelativelynewandonly9%oftheimporterssaidtheyusethismodeltype.The importers using the model claimed limited success, mainly due to the limited knowledge of solarproductsonthepartofSACCOsandMFIs.


Figure71.MFI/SACCOmodel.ImportersellseitherviaMFI/SACCOordirectlytoend-usersbasedonjointpromotionschemeswithMFIs/SACCOs

SummaryMostimportersuseacombinationofdistributionmodels,whilesomeimportersuseadistributionmodelthatlookslikethefigurebelow.Importerssupplysolarproductsdirectlyorindirectlythrough(aseriesof)dealersand/orasystemintegrator.Financierscanbeinvolvedinallphasesofthesupplychain.Figure72.Combinationofmodels.

4.2.2 RetailerDistributionChannelsThemaindistributionchannelsusedbyretailersinUgandaissellingdirectlytocustomers(51%)andsellingtofamilymembersofcustomers(24%).Thesearealsothechannelsthatareperceivedtoworkbest(figurebelow).Inaddition,sellingtootherbusinesseshasproveneffectiveforretailers.Althoughsellingtootherbusinessesismentionedasthesecondbestdistributionchannel,by20%oftheretailers,only10%oftheretailersactuallydoit.Figure73:QuestionS22:‘Whattypeofdistributionchannelsdoesthebusinessuse?’

51%

25%

5%

3%4%

10% 2%Selldirectlytocustomer

SelltofamilymemberofcustomerSelltofieldagent

Selltofinancialinstitutions(likeSACCOs,VSLAs,MFIsetc.)Selltomarket(farmers',fishers',otherproducts)Selltootherbusiness

Selltocommunityhead/chief


MainmarketingstrategyThemainmarketingstrategiesusedbyretailersinUgandaarepostersandFMradio(seefigurebelow).Figure74:QuestionS27:‘Whatkindsofmarketingstrategiesdoesthebusinessuse?’

ThelargestnumberofrespondentssaidFMradioisthemarketingstrategythatworksbest.Thoughpostersareoftenused,theyarenotthoughttobeveryeffective.Figure75:QuestionS28:‘Whatkindsofmarketingworksbestforthebusiness?’

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Centralregion Easternregion NorthernregionWesternregion

TV

Promotionthroughlocalnetworks(suchaschurches,communitygroups,associations)Promotionthroughfinancialinstitutions

Newspaper

FMradio

Demonstrationsonsitehomesamples?

Demonstrationsatevents

Communityradio

Brochures

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Centralregion Easternregion NorthernregionWesternregion

PromotionthroughNGOs

TV

Newspaper

Promotionthroughlocalnetworks(suchaschurches,communitygroups,associations)Promotionthroughfinancialinstitutions

Posters

FMradio

Demonstrationsonsitehomesamples

Demonstrationsatevents

Communityradio

Brochures


4.3 BARRIERSTOGROWTHThissectionprovidesanoverviewofthemainchallengesthatbothimporters/distributorsand(ruralbased)retailersfaceintheoff-gridlightingmarket.

4.3.1 ImportersandDistributorsWhileUganda’ssolarPVmarketshowsgreatdevelopmentpotential,therearestillmassivebarriers,bothstructuralandfundamental,thatneedtobeovercomebeforethispotentialdemandcanbetranslatedintoeffectivedemand.• Lackofaccesstocredit(bothforfixedandmobilesystems):Itisnocoincidencethatbusinessmodels

thatpromoteacreditelementforaccesstosolarsystemshavebeenfoundtobequitesuccessfulinUganda.Thisismainlyduetothecostatwhichsolarsystemshavetobesoldtomakeabusinesscaseforentrepreneurs.However,abusinessmodel incorporatingcreditcomeswithacaveat.The initialcapitalfinancingburdeniswiththesupplierandtheoverallcapitalrequirementincreasesastherateofdeploymentgrows.Somecompaniessellsystemsat95%credit,leavingthecompanyinalargecashdeficit.Companiessoonrunoutofworkingcapitalandareunabletoimportmorestock.Atover20%interest,creditfromfinancialinstitutionsisexpensiveandunsupportableformostcompanies.Instead,theyresorttoacash-basedbusinesswhichlimitsthesales.Generallylowmarginsonsales,coupledwithdifficultiesinaccessingfinancialcredit,makesitdifficultforcompaniestogrow.

• Lowerqualitycompetingproducts:DuetolackofimportcontrolsonsolarPVproducts,amyriadof

lowqualitybrandsareavailableinthemarketandaresoldcheaplytotheunsuspectingpublic.Theselowerqualityproducts,bothfixedandmobile,competefiercelyformarketsharewithgoodqualityproductsandintheend,donotmeetexpectationsanderodethepublic’strustinsolarproducts.

• Lowdisposableincome:About25%ofUgandansarelivingbelowthepovertyline.Thismeansthereisgenerallylowdisposableincomeamongthepopulation.WhileitisafactthatruralpopulationsarethemostinneedofsolarPVsystems,mostruralhouseholdsprioritizefood,educationandhealthoverlightinginordertofittheirneedsintotheirlimitedbudget.

• Poorinfrastructureandthecostofsettingupadistributionnetwork:Settingupadistributionnetwork

isexpensive. Solarcompanieshavefound itdifficult to findreliable franchisees,andthesemustbetrainedon the job,which isquitecostlygiven thepoor infrastructureand transport tomanyareas.Agentsinplaceinalocalareaareakeyrequirementforacontinuouslocalpresencetoprovideafter-salesserviceandcarryoutpromotions.Lackofwidedistributionnetworks,especiallyinruralareas,impacts theability toofferafter-salesservicesand limitscapacity tosupplyproductswhendemandpeaks.

• Lackofinterestoffinancialinstitutionsinsolarloanproducts:SolarPVcompanieshavestruggledto

convincefinancialinstitutionsthattheycanmakecredibletechnicalpartners.AmajorityofMFIsandSACCOsarenotinterestedintheprovisionofasolarloanproductforeitherfixedormobilesystems.Outofthe40thathavebeenapproachedbySolarNowforexample,only2havebeeninterestedenoughtofollowupandmakesomesales.Ontheotherhand,MFIsandSACCOshavealsonotbeenabletoconvince solarPVcompanies theyhave thenumbers thatwouldmeritadditional investment in theregionsservedbythefinancialinstitutions.SACCOsfoundupcountryespeciallylacksadequatedepositsto finance the largeupfront costsof solar systems and loans. This couldbeoneof the reasons thefinancialinstitutionsarereluctanttoengageinprovidingthesolarloanproductaspartoftheirportfolio.In addition, service andmaintenance is out of reach due to inadequate rural presence of solar PVequipmentandserviceproviders.Consumerscontinuetocomplainaboutlackoftechnicalsupportonthe ground, and this provides additional cause for financial institutions to be sceptical about thesustainabilityofasolarPVportfolio.

• Theftofsolarpanels:Theftofpanels,especiallyfixedandSHS,hasbeenreportedonseveraloccasions.

Thishasscaredoffsomepotentialcustomers,whilecausinglossofinvestmentforothers.Thereexistsno standard insurancepackage for solarPV systems, andhence theft is a risk forboth lenders andbuyers.


4.3.2 RetailersThemain growth barriers perceived by retailers in Uganda are the customers’ lack of money and lowawarenessofthebenefitsofsolarproducts(seefigure80).


Figure76:Question45:‘Whichofthebelowfactorsarethemostimportantobstaclestogrowingsalesofsolarproducts?’

Figure77:Question45:‘Whichofthebelowfactoraremostimportantobstaclestogrowingsalesofsolarproducts?’byproducttype

Growthbarriers experiencedby retailers liemainlyon the customer sideandhave little todowith theinternaloperationsof thebusiness. Interestingly,maingrowthbarrierscitedby retailersdonotentirelycorrespondwithwhathouseholdsreport.Householdrespondentsbelieveawarenessofsolarproducts isfairlyhigh,retailersbelieveitisoneofthemainbarrierstogrowth.Possibly,householdawarenessofthebenefitsofsolarareinfactrelativelylowonapopulation-widebasis,andthushamperingsales.Inaddition,13%oftheretailersbelievedthecustomers’lackofconfidenceinsolarproductshamperssales.However, fromthehouseholddemandresults,wehaveseenthat94%ofthehouseholds feel thatsolarproducts can be trusted and the reason for not purchasing a solar product is primarily linked to thehouseholds’lackoffinancingorcompetingfinancialpriorities.

0%

20%

40%

60%

80%

100%

Centralregion Easternregion Northernregion Westernregion

Customersarenotaware Customerscannotaccesscredit

Customersdonothaveconfidenceinsolar Customerslackmoney

Ineedmoresalesstaff Ineedcredittogrowthisbusiness

Mystockisinsufficienttokeepupwithdemand

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Mobile

Fixed

Customersarenotaware Customerscannotaccesscredit

Customersdonothaveconfidenceinsolar Customerslackmoney

Ineedmoresalesstaff Ineedcredittogrowthisbusiness

Mystockisinsufficienttokeepupwithdemand


4.4 FINANCE

Retailers in the central region are predominantly self-financed (93% said ‘There is no external capital’,‘Businessisfinancedthroughprivatecapital’or‘Loanfromfriend/family/localconnection’).Ofretailersinterviewed,68%are self-financed.Thirty-fourpercent (34%)of the retailers inNorthern region receivesuppliercredit.Figure78:QuestionS40:‘Howisyourbusinessfinanced?’Multipleanswerspossible.

Seventy-fivepercent (75%)of the retailersdon’thavea loanoronlyhada loan in thepast.Only in theNorthernregiondidretailershavealoanwithaSACCO.Ninepercent(9%)oftheretailershavealoanwithabank. Figure79:QuestionS41:‘Doyoucurrentlyhaveanoutstandingloanforyourbusiness?’Multipleanswerspossible.

Whenaskedwhytheyneverhadaloan,amajorityofretailersintheNorthernandWesternregions(59%and48%respectively)saidtheyneverthoughtcreditwasanoption.Thirty-twopercent(32%)oftheretailersclaimtheydon’thaveaneedforcredit.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Centralregion(29)

Easternregion(62)

Northernregion(47)

Westernregion(37)

Overall(175)

Other/Idon'twanttosay

Governmentsupport

Bankloan

MicrocreditfromMFI

SupplierCredit

Cooperativemembershavepaidup(incaseofSACCO)Loanfromfriend/family/localconnectionFinancedthroughprivatecapital

Thebusinessisself-financed

Privatelyfinanced(aggregateofoptions1,2and3)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Centralregion(27)

Easternregion(28)

Northernregion(24)

Westernregion(24)

Overall(103)

Other

Yeswithabank

YeswithinMFI

Yeswithasacco

No,Ihadaloaninthepast

No,Ineverhadaloan


Figure80:QuestionS42:‘Whyhaveyouneverhadaloan?’Multipleanswerspossible.

4.5 MARKETSIZEANDGROWTH

4.5.1 CurrentHouseholdUseofSolarLightingproductsAsmentionedinChapter3,householdsingeneralusefixedsolarsystemsmorethanmobilesolarsystems,particularlyfixedsolarhomesystemsofmorethan20watts(see14&15).Thehouseholdsurveyshowedthatproductinterest,useandmostappealingbenefitsdiffersomewhatbycustomersegment(seeTable8).Ifthehousehold’saccesstoenergywouldincreaseinthefuture,themainusesofthisenergywouldbeforchargingmobilephonesandlightingthehome,particularly inruralandperi-urbanareas.Inurbanareas,additionalpowerwouldlargelybeusedinpoweringotherapplianceslikeradio, refrigeratorandwashingmachine. This indicatesa clearpotential for growth in salesofproductsprovidingthesetypesofusesandbenefits.Over50%ofthehouseholdspurchasedtheirsolarproductlessthan6monthsago,suggestingadoublingofthemarketinthatsameperiod(seefigure20).Householdsboughtrelativelymoremobilesystemsinthelastyearthansolarsystems(49%vs38%).

4.5.2 EstimatedSalesbyImporters.The10importersinterviewedestimatedtotalsalesof5,000unitspermonth(bothmobileandfixedsystems)atanaveragepriceofUGX152,000(US$60.80)perunit.ThisamountstoanaverageannualturnoverofUGX9,110million(US$3.64k).Weestimatethatoursampleconstitutesroughly40%9oftheentireUgandanmarket (or 50% of the official market, given a rough estimate of 20% illegal imports entering fromneighbouringcountries).Thus,thetotalwholesalemarketsizewouldbeUGX23billion(US$9.2million)peryear,andthetotalretailmarketsizewouldbeUGX32billion(US$12.8million),assumingretailersmakea40%margin.

9The40%estimateisbasedontheinterpretationofquestion8ofthesuppliersurveyandquestion37ofthedemandsurvey.Basedonsuppliersurvey,theestimatedmarketshareofinterviewedsupplierswasapproximately37%(NOTE:Basedonsuppliersurveyquestion37andnottakingintoaccountthatproductssoldthroughtheshoppingarcadesinKampalacouldbebrandedbyoneoftheimporterbrands).Basedonthedemandsurvey,theestimatedmarketshareofinterviewedsuppliersisapproximately48%.(NOTE:Thereisaverybigdifferencebetweeneachsupplier’sshareoflastmonthsalesandinstalledbase)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Centralregion(45)

Easternregion(34)

Northernregion(34)

Westernregion(33)

Overall(146)

Idon'twanttosay

Other

Ihaveneverthoughtaboutcreditasanoption

Idonotqualifyforcredit

Idonothavetheneedforcredit

IdonottrusttheFI


4.5.3 MarketGrowthBasedonAverageAgeofRetailersMostbusinessesarebetween2and5yearsold(53%).Justover17%oftheretailershavebeeninbusinesslessthantwoyears.Thissuggeststhattheincreaseinretailersislessthan10%peryear(seefigure59).EstimatedSalesbyRetailersThe101retailerssurveyedindicatedtheysold2,050systemspermonth,dividedalmostevenlybetweenmobilesystemsandSHSs.Thisamountstoatotalof25,000unitsperyear.TheweightedaveragepriceofamobilesystemwasUGX55,000(US$22)andtheweightedaveragepriceofaSHSwasUGX230,000(US$92)10. Hencethetotal turnoverofall retailerswasUGX3.8billion(US$1.52million;averageofUGX37millionorUS$14.8kperretailer).Thegraphbelowshowsthattheretailersinthenorthsoldrelativelymoremobilesystems,whiletheretailersintheCentralRegionsoldrelativelymoreSHSsystems.However,theaverageprice of a SHS is higher in theNorthernRegion, hence retailers in this regionhave thehighestaverage turnover. The 101 interviewed retailers are estimated to constitute less than 10% of the totalnumberofrelevantretailersactiveinUganda.Figure81.QuestionS18andS19:‘Howmanyfixed/mobilesolarunitsdidyouselloveralllastmonth?

Notably,despite the fact that solarunitsare relativelymoreexpensive in theNorthernRegion, retailerstherealsosellthemostunits.AveragepricesintheCentralRegionarelowest.Figure82.QuestionS12:‘Atwhatpricedoyouselltheproducts?’AggregatedintomobilesolarunitsandSHSsandsplitretailersperregion(andaggregatedfornationalaverages).

10Todetermineaverageprices,theaveragepriceofeachtypeofsystemwasmultipliedbythequantitysoldpertype.Thisgivesaweightedaveragepriceformobileandfixedsystems.

UGX0

UGX1,000

UGX2,000

UGX3,000

UGX4,000

UGX5,000

UGX6,000

UGX7,000

UGX8,000

Centralregion(27)

Easternregion(28)

Northernregion(24)

Westernregion(24)

TotalSHSsystems(peryear)

Totalmobilesystems(peryear)

UGX0

UGX50,000

UGX100,000

UGX150,000

UGX200,000

UGX250,000

UGX300,000

UGX350,000

UGX400,000

Centralregion(27)

Easternregion(28)

Northernregion(24)

Westernregion(24)

Average(103)

Averagepricemobilesolar

AveragepriceSHSs


Figure83.TotalAnnualTurnoverofInterviewedRetailers.

Figure84.AverageTurnoverperRetailer.

4.5.4 MarketSizeandAbilitytoPayIngeneral,solarownersarewillingtopay28%moreforasolarproductthanhouseholdsthatdonotownasolarproduct(seeFigure41).Interestingly,bothtypesofhouseholdsarewillingtopaysignificantlymorethantheactualaverageretailprice,except inthecaseofasingle lightwithoutphonechargerforwhichownersarepreparedtopaylessthantheactualprice.Theverybigdifferencebetweentheretailpriceandthepricehouseholds areprepared topay for larger SHSs (<20W) canmean that peoplewish for largersystemsbutendupwithsmallerones.Basedon the input from importers, suppliers and retailers, the total annualmarket size is estimatedatbetween150,000and250,000unitsandbetweenUGX32and37Billion(US$12.8and14.8million)inretailsales,ofwhich74%isattributabletotheSHSmarket.

UGX0

UGX200,000,000

UGX400,000,000

UGX600,000,000

UGX800,000,000

UGX1,000,000,000

UGX1,200,000,000

UGX1,400,000,000

UGX1,600,000,000

Centralregion(27)

Easternregion(28)

Northernregion(24)

Westernregion(24)

TotalrevenueSHS(peryear)

Totalrevenuemobilesystems(peryear)

UGX0

UGX10,000,000

UGX20,000,000

UGX30,000,000

UGX40,000,000

UGX50,000,000

UGX60,000,000

UGX70,000,000

Centralregion(27)

Easternregion(28)

Northernregion(24)

Westernregion(24)

Average(103)

Averagetotalannualturnoverperretailer(UGX)


Figure85.MarketSizeforSolarHomeProductsinUganda.

Table13:AverageEstimatedSalesperYear,byProductType,fromImportersandRetailers

Marketsizeestimate mobileunits/year

SHSunits/year

totalunits/year UGX/year US$/year

Basedonretailerssurveyandimporterinterviews

120,000 130,000 200,000 34.5billion 13.8million

The salesnumbersof retailers grewnomore than10%per year,butover50%of surveyedhouseholdsindicatedtheyboughttheirproductwithinthelast6months,whichsuggestsadoublingofthemarketinthatsameperiod.

4.6 FACTORSINFLUENCINGDECISIONMAKERS

WhenaskedwhetherornottheywerewillingtoalsosellproductsthatmeettheLightingGlobalQualityStandards,abouthalfofthesuppliersinterviewedconfirmedtheywerewillingtodoso.Theotherseitheralreadyhadproductsthatmetthestandards,saidtheyhadspecialistproducts,orwerewillingtohavetheirproductstestedandcertifiedundertheprogram.Thosethatwerewillingtoconsiderincludingqualityproductsintheirportfoliossaidthefollowingfactorsinfluencetheirdecisiontointroducenewproducts:• Customer feedback and field intelligence: After an initial product offering is made to a potential

market,companiesassesssatisfactionlevelsinmeetingcurrentenergydemandsoftheirclients.Thisisnot standardized and more often than not occurs by default. If customer feedback is positive,companieswillthenordermoreoftheproductandinvestalittlemoneyinthepromotionandmarketingoftheproduct.

• Fundingforinnovationandsubsidies:Sometimescompaniespromoteacertainproductlinebecause

oftheincentivesandsubsidiesavailable.Thedangerwiththisapproachisthelikelihoodthatgrowthinthesubsidisedproductlinewillnotbesustainable.CompanieswereopenenoughtosaythatifthereweresubstantialsubsidiesandincentivesinpromotingproductsthatmeettheLightingGlobalQualityStandards,thentheywerepreparedtopromoteandselltheseproducts.

• Marketinterestinproductsandprojectedsales:Marketinterestforparticularproductsisakeydriver

inaddingthemtotheproductportfolio.Ifaparticularproducthasahugepotentialdemandandislikelytoleadtoprofitablesales,companieswerepreparedtoaddittotheirproductportfolioaslongasitmadegoodbusinesssense.

UGX0

UGX500,000,000

UGX1,000,000,000

UGX1,500,000,000

UGX2,000,000,000

UGX2,500,000,000

UGX3,000,000,000

UGX3,500,000,000

UGX4,000,000,000

Centralregion(27)

Easternregion(28)

Northernregion(24)

Westernregion(24)

Total(103)

TotalrevenueSHS(peryear)

Totalrevenuemobilesystems(peryear)


• Lead-timeformanufactureofproducts:Akeyfactorindeterminingadditionstotheproductlinewas

thelead-timerequiredformanufacturing.IfaproductwasgoingtotakealongtimeformanufactureandshippingUganda,thisdidnotinterestthesolarcompaniesverymuchsinceitwaslikelytotieuptheiroperatingcapital.

4.7 CONCLUSIONSFROMTHESUPPLYANALYSISSupplychain• Mainproductssoldaresolarlanterns(35%),solarpanels(0-10watts)(23%)andsolarpanels(morethan

20watts)(30%).• The supply chain consists of international manufacturers, importers, distributors, importer/

distributor),systemIntegrators,andKampala-basedorregionally-baseddealers,technicalservices,andagents.Theinterviewedimporters/distributorstogetherhavereasonablecoverageinthemoredenselypopulatedareas.IntheEasternRegiontheyareslightlyunderrepresented.

• Themajority (65%) of the 103 surveyed retailers run a small electrical shop and 52%havebeen inbusinessbetween2-5years.Seventeenpercent(17%)havebeeninbusinessforlessthan2yearssoannualgrowth isnomore than9%.Forty-fourpercent (44%)of retailers say they supplydirectly toindividualcustomers.Theyclaimthat95%of theircustomersaremaleandthat79%are fromruralareas.

• MainsuppliersoftheruralretailersaretheshoppingarcadesinKampala(44%).Hencethesupplychaingenerallyconsistsofnotonebutatleasttworetailers,eachrequiringaprofitmargin.

• Main services provided by retailers are the installation of systems (24%), the provision of userinstruction(21%)andinsomecasesawarranty(17%).After-salesservicesdonotseemtobeaserviceprovidedoften(6%).However,customersindicatetheyvalueawarrantycertificateanddirectcontactconvincesthemofthequalityofsolarproducts,soretailerscouldconsiderputtingmoreemphasisontheseservices.

Distributionchannelsimporters/distributorsSupplyandretailofsolarproductsisdonethroughavarietyofchannels.Thefourmostprevalentdistributionmodelsidentifiedwere:• Directsalesmodel(29%)–mainlyforB2Bcustomers/NGOs/Institutions• Traditionalmodel/Thirdpartydistributor(33)–mainlyforlargerSHSs• Franchise/agentmodel(29%)–mainlyformobilesystems.Agents/franchiseesarebranded• MFI/Saccomodel(9%)–relativelynewandwithmixedsuccess.Mostdistributors/importersuseacombinationoftheabove,andsometimesevenallfourmodelsatthesametime.Distributionchannelsofruralretailers• ThemaindistributionchannelsusedbyretailersinUgandaaresellingdirectlytocustomersandtheir

families(75%).• Themain marketing strategies used by retailers in Uganda are posters and FM radio. FM radio is

consideredthemosteffective.PricesandMargins• Verylargepricerangeshavebeenmentionedininterviews;suggestingarelativelyimmaturemarket.• Theaveragemarginretailersmakeonthesalesofsolarproductsis40%.HoweveronSHSof10-20watts

theyonlymake13%onaverage.Noclearreasonforthelowmarginonthisproductgroupcouldbedetermined.


• Themarginscitedaregrossmarginsrequiredforretailerstobearallcoststheyincur.Distributioncostsareincludedinmostcasesasretailersmostlypickupthegoodsattheirsuppliersthemselves.

GrowthBarriers• Keybarrierstogrowthexperiencedbyimporters/distributorsare:lackofaccesstocredit,lowerquality

competingproducts,lowdisposableincome,poorinfrastructureandthecostofsettingupadistributionnetwork,lackofinterestfromfinancialinstitutionsinthesolarloanproduct,andtheftofsolarpanels.

• End-users,however,generallyfindsolarreliable,saidmostsolarproductsworkwellandthattheytrustsolarpower.Thus,qualityconcernsarenotconfirmedbyend-userinterviews.

• ThemaingrowthbarriersperceivedbytheretailersinUgandaarecustomers’lackofmoneyandlowawareness of solar products. These growthbarriers however donot entirely correspondwithwhathouseholdrespondentsreported.Householdawarenessofsolarproductsisseentobeveryhigh(94%)saidtheyknowwhatsolar is.However,householdawarenessofwheretobuysolar is indeedlower,55%didnotknowwheresolarproductscouldbebought),thushamperingsales.

Finance• Sixty-eightpercentoftheretailersself-financeand75%havenoloan.• Themajorityindicatetheyneverconsideredloansasanoption.Marketsizeandgrowth• Sales of SHS and mobile systems are about equal in terms of units. The fact that the majority of

householdsthathavesolarproductshaveSHS(60%)suggeststhatmobilesystemshaveenteredthemarketlater.

• CurrentcustomerspredominantlyhavelargerSHS(>20W)• Solarownersaregenerallypreparedtopay28%moreforasystemthannon-solarowners.Bothare

preparedtopaymorethantheaverageretailprice.• Ifhouseholdswouldinvestinsolar,theiraveragepaybackperiodwouldbe6-12months.• ThemarketsizeisestimatedatbetweenUGX32and37billion(US$12.8and14.8million)andgrows

at10-50%peryearInfluencingfactorsofdecisionmakers• The key factors influencingmarket players to introduce new products are the following: customer

feedbackandfieldintelligence,fundingforinnovationandsubsidies,marketinterestinproductsandprojectedsales,andleadtimeformanufactureofproducts.


Table14.Mainchallengesidentifiedfromretailersurveyandinterviewswithsuppliers.Challenges Keyfindings

(Lackof)Maintenance;(lackof)aftersalesservice;

Only15%ofretailersofferwarrantiesand6%aftersalesservices.

Limiteddistributionnetwork;limitedinfrastructure

Distance to end-user is very large. Retailers offer limited services. Nomaintenance network. Suppliers/franchise concepts (notably Barefoot)sufferfromhighattritionratesoftrainedfranchisees.Mostretailersaresmallelectronicshopsoragents(Easternregion).Close to 45% of all solar products are sold indirectly – via the shoppingarcadesinKampala–increasingtheend-usermarketprice.SmallSolutions’regionalwarehousemanagersgaveoutunapprovedcredit,henceregionaldistributioncentreswereclosed.Nowthereisonly1centreinKampala

High(perceived)costofsystems/Highexpenditureoncostsotherthanenergy(schooltuitions!);otherpriorities

Energycostdoesn'tseemtobehouseholds’mainconcern.Householdsspendonaverageover50%oftheirdisposableincomeonschoolfees.Azuri and FRES offer fee-for-service (‘pay-as-you-go’). FRES had a 90%paymentrateafterthefirsttwoyears.Despiteendusersclaiminglimitedinterestinsolarlanterns,retailersindicatethatthesesellbest–togetherwiththe>20Wpsystems.

(Lackof)Accesstoworkingcapitalthrough-outthedistributionchain

Many suppliers indicate that lack of working capital limits their growthprospects. Financial institutions acknowledge this aswell. Franchisees andagentsoftencannotpayforrequiredstock.

(Lackof)Accesstocash;highcostsofloanorunfavourableloanterms

Loanconditionsareunfavourableandinterestratesarehigh.Retailersclaimuserslackcashordonothaveaccesstoloans.MFIsandSACCOsarehardlyinterested in solar product loans (only 2 in 40 approached by SolarNowfollowed-up andmade sales). Retailers believe lack ofmoney is themainreason customers are not buying. Non-solar owners indicated the mainreason for not purchasing a solar product has to do with not having themoney.

Defaultingcustomers/defaultingretailers;(Perceptionof)Solarbusinessbeingahighriskbusiness

Some suppliers (e.g. AB Matra and BBbox) have had major issues withdefaultingretailers.Thishascausedmarketpenetrationtoslowdownandsupplierstoshrinktheirdistributionnetworks.Defaultingalsohappenswhenproductsmalfunctionasusersarereluctanttopayremaininginstalmentsinthatthecase.FREShasa10%defaultrateattheendoftheirfirst2yearsofoperation.SolarNowonlyhasa1%defaultrate,mainlyduetocarefulduediligencebytheiragentsofnewcustomers.HighdefaultratesarecommoninB2B,withlowerratesofdefaultbyB2Ccustomers.


5 INSTITUTIONANALYSISInUganda,thereareseveralmarketactors,bothpublicandprivate,thatareactiveandhaveinfluencedthesubsectorfromthepolicytotheretaillevel.Thispartofthereportidentifiessomeofthesekeyactorsandanalysestheircurrentroleinthesubsector.

5.1 GOVERNMENTPOLICIESANDINSTITUTIONS

Increasing access to modern energy services through alternative and renewable energy developmentremainsakeypriorityfortheUgandangovernmentandenergyministry.TheGovernmentofUgandahasdeveloped an energy policy (2002) and renewable energy (RE) policy (2007) that both fall under theElectricity Act of 1999. In addition, the government established the independent Electricity RegulatoryAuthority (ERA) in 2000 to regulate the generation, transmission, distribution, sale, export& import ofelectrical energy inUganda, and to guide the liberalizationof theelectricity industry,manage licensing,rates,safetyandothermattersconcerningtheelectricityindustry.TheRuralElectrificationAgency(REA)wasestablishedtopromotebothoff-gridandgrid-connectedelectricitythroughprivatesector-ledinitiativesinruralelectrification11.AsperthenewRESP2013-2022,theoverallresponsibilitylieswithUNREA.REAoversees and coordinates the implementation of this policy by various stakeholders and ensures theeffectivenessoftheseactivities.WithintheMinistry,theRenewableEnergyDepartment isresponsibleforthepromotionofREandRETs(RenewableEnergyTechnologies)andanEnergyEfficiencyandConservationDepartmentisresponsibleforthepromotionofEnergyEfficiencyandConservation.Since2005,thegovernmentofUgandahasremovedtaxesonsolarproductsandequipment,aninitiativeaimedtoreducepricesofsolarPVproductsandincreaseaccesstosolarenergyforUganda’spopulation.TheUgandaNational Bureau of Standards (UNBS) has played an important role in the development ofstandardsforsolarproductssincetheUNDPsolarpilotprojectin2001.Currently,UNBSisabletoproduceauniquemark12,whichisonalltestedandcertifiedproducts.However,usersneedtobeeducatedtolookforthismark.Whilestandardshavebeendeveloped,enforcementisthebiggerconstraintduetothelimitedfinancialandhumanresourcesofUNBS.Furthermore,theGovernmentofUgandahasinitiatedaprogrammetotestandcertifyproductsatsource,ratherthanrequiringthemalltobetestedinUganda.Theprogrammeisworkingwiththreeinternationalcompanies,whichhave aworldwidepresence and can ensureproducts are certified in their country oforigin,whichwillincludesolarproductswhicharemadeinChina.Finally,throughfundsprovidedbytheOfficeofthePresidentofUganda,theCentreforResearchandEnergyConservation (CREEC) is constructing a solar PV laboratory that will be furnished with state-of-the-artequipment.ThislaboratorywillbeusedtotestvarioustypesofsolarPVequipmentrangingfrompanelstoinverterstolamps.Thisshouldbecomeanindependenttestingandcertifyinglaboratoryforprivatesectorimportation,marketingandsalesofsolarPVsystems.

5.1.1 UgandaEnergyCreditandCapitalizationCompanyThegovernment-ownedUgandaEnergyandCreditCapitalizationCompany(UECCC)facilitatesinvestmentsin Uganda’s renewable energy sector. UECCC’smandate is to provide a reliable framework for poolingresources from various sources like government, investors and development partners and channellingresourcestorenewableenergyprojects.

11REA-TheRenewableEnergyPolicyforUganda2007.www.era.or.ug;12Informationaboutthemarkwasnotfoundontheinternet,indicatingthatUNBSshouldmakeitmorereadilyavailablesothemarkcanbeusedmoreeffectively.


The company’smain objective is to provide financial, technical and other support to renewable energyinfrastructuredevelopmentinUgandawithparticularfocusonenablingprivatesectorparticipation.UECCCprovidestechnicalassistancetoprojectstoovercomebarrierstoinvestmentaswellasfinancingoptionslikeapartialriskguaranteeduringtheconstructionphaseofprojects.Thisfacilityenablesprojectstoinitiallyaccess guaranteed cover for cost overruns beyond 15% of the total project cost. UECCC also works tointroducenewandinnovativefinancingmodalitiesincludingcreditenhancementinstrumentsdirectedatreductionofrealorperceivedrisksfacedbyprimarylendersandfinancialintermediaries.Inaddition,UECCCoffers transaction advisory services and various forms of technical assistance to independent powerproducersandfinancialinstitutions.UECCCoffersasolarrefinancefacilitytoparticipatingandregulatedmicrofinanceinstitutions(MFIs)foron-lendingtoruralbeneficiaries,bothhouseholdsandSMEsacquiringsolarPVsystems.Thisfacilityhasaceilingof$300,000perparticipatinginstitution.Currentlythefollowingthreefinancialinstitutionsusethisfacility:CentenaryBank($250,000seealsoparagraph2.2.2),PostBankandFinanceTrustBank.UECCCisnegotiatingwithafourthinstitution.UECCCcurrentlyprovidesrefinancingfacilitiestoPFItomitigatethehighcostoffundsforenergyloans.Thisinitiativehasreceivedsupportfromparticipatingfinancialinstitutionsandthereisongoingworktochangethecurrentlegislationtosupportsolarcompaniesdirectlywithoutgoingthroughfinancialinstitutions.Thecompanycurrentlyhason-goingpartnershipswiththeMinistryofEnergyandMineralDevelopment,MinistryofFinanceanddevelopmentpartners(BTC,GIZandKfW).Inaddition,itcoordinatestheOrioMinihydropowerandruralelectrificationproject.UECCCisfacedwithnumerouschallengesasthefinancialinstitutionslackguaranteesforonlendingtosolarcompanieswhileborrowerslackcollateraltoincreasetheirborrowingcapacity.

5.1.2 MinistryofEnergyandMineralDevelopment(MEMD)TheMinistryofEnergyandMineralDevelopmentwasestablishedin1995withavisionofensuringthatthepopulation of Uganda use inexhaustible and environmentally-friendly renewable energy for social andeconomicdevelopment.ThemissionofMEMDistoincreasetheuseofmodernrenewableenergyinthenationalenergymixtodevelopandsustaintheeconomy.KeyfunctionsoftheMinistryinclude:• Toestablishandimplementpolicies,strategies,legalandinstitutionalframeworksgoverningrenewable

energyresources;• To promote and develop renewable energy technologies (solar, wind, small/mini/pico hydro,

geothermal,andbiomassresources);• To develop technical and managerial capacities to develop and promote renewable energy

technologies;• Tosetupdemonstrationsandpilotsofrenewableenergytechnologiestoencourageadoption;• TocollaboratewiththeUgandaNationalBureauofStandardstoestablishandimplementstandardsto

ensurehighqualityrenewableenergyproductsandsystems;• To collect, assess, andmanage renewable energy data and recommend the appropriate renewable

energysystemstocustomers;and• Toestablishlocal,regional,andinternationalcooperationinrenewableenergyresources.TheMinistryiscurrentlyactiveinthefollowingareas:biomassenergytechnologiesdevelopment,biofuels,gasification,biogascogeneration,hydro(picoandsmall/minihydro),windforwaterpumpingandelectricitygenerationnationwide.WithspecificfocusonsolarPV,theMEMDiscurrentlyinvolvedinpolicyformulation,SolarPVpromotion,nationalstandardsdevelopmentandmonitoringofstakeholderactivities.


Further,theMinistryrunsprogrammesacrossallsectorsincludingagriculture,health,communicationandwatersupply,andsupportsprivatesectorenterprisedevelopmentthroughCivilSocietyorganizations,theUgandaNationalRenewableEnergyAssociation (UNREA),UgandaNationalAlliance forCleaningCooking(UNAAC),andtheFocalPointfortheInternationalRenewableEnergyAgency(IRENA).Finally,theMinistrycoordinates RE activities within the East African Community (EAC) and the Energy and EnvironmentalPartnership(EEP)ProgramofEasternandSouthernAfrica.TheUgandaRenewableEnergyPolicyof2007setsouttheGovernment’svisionforrenewableenergy inUgandawiththeaimofincreasingtheuseofmodernrenewableenergyfromthecurrent4%oftotalenergyconsumption to 61% by the year 2017. The policy defines renewable energy as those sources that arereplenished continuously by natural processes, including solar energy, hydro power, biomass,wind andgeothermalaswellasthesustainableuseoforganicwastes.Under the Renewable Energy Policy, there are specificmeasures to support the promotion of solar PVpower.TheseincludesupporttosolarPVmarketdevelopment,financingforhouseholdsandinstitutionsacquiring solar PV systems, and the introduction of a curriculum to train solar PV technicians throughtechnicalinstitutes.TheoverallresponsibilityforpolicyimplementationlieswithMEMD.TheMinistryoverseesandcoordinatesthe implementation of policy by various stakeholders and ensures the effectiveness of these activitiesthroughmonitoring.WithintheMinistry,aRenewableEnergyDepartmenthasbeencreatedtospecificallyfocusonthepromotionofrenewableenergyandrenewableenergytechnologies.Due to the support being provided to the energy sector by the Ministry, a multiplier effect has beenstimulated in thedevelopment andadoptionofRE technologies. SolarPVgrowthhasevolved fromanestimated capacity of over 10MW, compared to 2MW10 years ago. Adoption of improved stoves hasincreasedfrom170,000in2007to700,000currently.13

5.1.3 UgandaNationalBureauofStandardsThe Uganda National Bureau of Standards (UNBS) is a statutory organization established by an Act ofParliamentinJune1983.Itbecameoperationalin1989.UNBSisamemberoftheInternationalOrganizationforStandardization(ISO)andalsoamemberoftheAfricaRegionalOrganizationforStandardization(ARSO).UNBS is a leading institution of international repute in provision of sustainable standardization serviceswhosemission is toprovidestandards,measurementsandconformityassessmentservicesfor improvedqualityoflife.ThemainobjectivesofUNBSaretoformulateandpromotetheuseofnationalstandardsandtodevelopquality control andquality assurance systems thatwill enhance consumerprotection,publichealth andsafety,industrialandcommercialdevelopment,andinternationaltrade.UNBSiscurrentlyundertakingthefollowingactivities:• Developingandissuingnationalstandards;• Provisionofimportinspectionservices;• Provisionofqualityassuranceservices;• Testingandcertificationofimportedandlocallymanufacturedproducts;• Calibration,checkingandmeasuringequipmentintrade;• DevelopingstandardsonICT,power-linesandpoles,petroleumstandardsandagriculturalstandards.Whilestandardshavebeendeveloped,UNBSisfacedwithnumerouschallenges,suchas:• porousborderswhichallowimportofpoorqualityproductswithoutnecessarychecksandcertification;• lackofadequatestaffingtocopewiththedemandforservices;

13DatafromtheMinistryofEnergyandMineralDevelopment


• numeroussectors/areaswithoutstandards,sincestandardsareproducedondemand;and• theneedtotrainusersonthestandards,whichisperceivedasacostlyexercise.ManytimesUNBSstaffresorttorelyingonlabelsandsamplestocertifyproducts.Labelshavebeenknowntobecounterfeitedandpoorqualityproductshavebeenimportedintothecountry.FurtheruseofE-Tax(internet based tax) services pressurizes UNBS staff to sometimes release products without adequatechecks.

5.1.4 RuralElectrificationAgency(REA)TheRuralElectrificationAgency (REA)wasestablishedasa semi-autonomousagencyby theMinisterofEnergy and Mineral Development through Statutory Instrument 2001 no. 75, to operationaliseGovernment's rural electrification function under a public-private partnership. REA is responsible forexecutingthegovernment’sRuralElectrificationProgrammeandfunctionsasthesecretariatoftheRuralElectrificationBoard(REB),whichcarriesouttheMinister'sruralelectrificationresponsibilities,asdefinedintheElectricityActof1999.REAismandatedtofacilitatethegovernment’sgoalofachievingaruralelectrificationrateofatleast22%bytheyear2022, from1%atthebeginningof thedecadeas indicated inREA'sstrategyandplan2013-202214.REA'smissionis"tofacilitatetheprovisionofelectricityforsocial-economicruraltransformationinanequitableandsustainablemanner".REAisspearheadingtheenergysectortransformationfromtheuseoftraditionalenergysources(firewoodandotherbasicformsofbiomass)totheadoptionofmodernenergyservices(e.g.electricity,petroleumfuels,bio-fuelsandimprovedstoves).REAdevelopedaRuralElectrificationMasterPlantoguideprojectdesignandsequencingtoprovideappropriateenergyservices.ThisMasterPlanprioritisesprojectsonthebasis of their value in financing the economy (economic growth centres), social well-being, education,health,watersupply,andsupporttolocaladministration.REA’smajorresponsibilitiesinclude:planningandpackagingprojectsforpublicorprivateinvestmentinruralelectrification and renewable energy power generation; implementation of priority rural electrificationprojects;administeringcapitalsubsidiesforprivateinvestments;maintaininganationaldatabaseforruralelectrification; and advising the Ministry of Energy and Mineral Development on policy issues in ruralelectrification. TheAgencyhas been able to procureprivate operators tomanage7 rural electrificationdistributionconcessions.

5.2 FINANCIALINSTITUTIONS

5.2.1 CentenaryBankLtdCentenaryBank,foundedin1983,hasover60branchesacrossthecountry,withbranchlocationsinmostofthekeyurbancentresaswellasavastruralandurbanclientele.In2011CentenaryBanksignedaMemorandumofUnderstanding(MoU)withtheGovernmentofUgandatofacilitatetheEnergyforRuralTransformationProgram(ERTP)intheruralsectorthroughaccesstocredit.Under the partnership, REA pre-qualifies technical providers and provides the bank with a subsidycomponentforqualifyingruralborrowers.Asmentionedinparagraph2.2.1,aSolarRefinancefacilityofUS$250.000wasalsosignedwithUECCCinJuly 2012 to access on-lending funds to be applied exclusively to the provision of solar loans to ruralhouseholds.CentenaryBankhasalsopreviouslypartneredwithGlobalVillageEnergyPartnership (GVEPInternational) to access a 50% energy-product loan guarantee fund. The latter was aimed at partiallycoveringlossesonloanstopurchasecookstoves.

14http://rea.or.ug/phocadownload/rural%20electrification%20strategy%20and%20plan%202013-2022.pdf


Demandforsolarproductshasbeenquiteextensive.Accordingtothebank’srepresentative,thetypicalsolarloancustomerlivesinanoff-gridarea,hasanincomefromfarmingorpettytrade,andhastheabilitytospendatleastUGX5,000(US$2.00)onenergy(nowkerosene)perweek.Typicalsolarloansarecharged24%interestrateperyearwithmonthlypaymentsonadecliningbalancesystem. Othercosts inaccessingasolar loanincludeapplicationfees(UGX15,000;US$6.00), insurance(0.45%ofloanamount)andachargeof1%oftheloanamountasaprocessingfee.TheBankrepresentativeidentifiedvariouschallengesinprovidingsolarloanstoclients.ThebankhasformalworkingrelationshipswithseveralvendorsincludingBarefootPower,SolarNow,NacoSolar,SolarSenseandMatrix.Thesevendors/technicalprovidersaremainlybasedinurbanareasandquitefarfromtheirclients,thusmakingitdifficultforclientstoaccesspromptafter-salesservices.Inaddition,thesetechnicalprovidershavelittlecapitalandthereforearesometimesunabletofundrequiredsysteminstallations.Poorqualityproductsonthemarketareaseriouschallengetoloanrepaymentsinceclientswillattempttostopmakingpaymentsiftheinstalledsystemsmalfunction.The risk of lending to households, dealers, retailers, and importers by thebank isminimizedby carefulappraisalofclientspriortoloandisbursal.However,thesestringentappraisalsmeanthatfewerandfewerclientsareabletoaccessloansfromthebank.Atotalof95solarloanclientshavebenefitedfrombankfinancing,withuptoUGX128,8million(US$51.52k)drawndownwhich isapprox.48%of theUGX269million (US$107.6million)UECCCon-lending facility.CurrentlyCentenaryBank’soutstandingenergyportfolioisapproximatelyUGX151million(US$60.4k)withabout87clients.

5.2.2 FINCAFINCAwasestablishedin1992asalegalentityandcurrentlyhas25branchesacrossurban,peri-urbanandruralareas.Withinitsnewtechnologiesportfolio,FINCAUgandaLtdofferssolarhomesystems(since2008)andisactivelyconsideringintroducingbiogasandenergyefficientcook-stoves.Thelatterarecollectivelycategorizedundertheinstitution’srenewableenergyportfolio.ProductdevelopmentwasfundedthroughFINCA’sownresourceswithexternaltechnicalsupportfrompartnerssuchasMicroEnergyInternational(whohelpeddesignandpilotthesolarenergyproduct).TheorganizationhasalsobenefittedfromtheRuralElectrificationAgencyprogram(forsolarenergyproductsubsidy)bydisbursingthesubsidyonbehalfoftheGovernmentandusingthisasaplatformtogiveoutloans.Besidesclientappraisalandloandisbursement,loanofficersareresponsibleformarketingandsalesofthenewtechnologyproductstopotentialclients.Lendingmethodologyandrequirementsaresimilartotheirotherbusinessorassetfinanceloans.TechnicalProviders(TP)arecurrentlypre-screenedundertheRuralElectrificationAgency’ssubsidyprogrampriortoengaginginaformalpartnershipwithFINCA.ThemostnotableTPpartneratthemomentisBarefootPower(U)Ltd.TechnicalProvidersareresponsiblefordistribution,installationandafter-salesservicestoFINCAcustomersthathavebeenqualifiedforloans.Inselectedcases,TPswillalsoundertakejointmarketingactivitieswithFINCAstaff.FINCAindicatesover2.600clientshavepurchasedasolarproductthroughthisprogram.Energyloans(underwhichsolar loansaredisbursed)arechargedataninterestrateof2%permonthor26.8%compoundedforloanvaluesuptoUGX2.5million(US$1000).Loansabovethisamountarecharged2.5%permonth.Loanrepaymentsaretypicallyupto12monthswiththesolarsystemservingascollateral.ThetypicalFINCAenergyloancustomerlivesinanoff-gridlocation,canspendbetweenUGX5,000((US$2.00)toUGX10,000(US$4.00)perweekonkerosene,andisgenerallyafarmerwithseasonalincome,oratraderorsmallbusinessowner.


FINCAreduceddefault riskofon-lending tohouseholds, solardealersand importersof solarequipmentthrougharigorousappraisalprocessforborrowers. FINCAbelievesthatreducingtheloanrequirementswouldincreasetheriskofdefaultingonloans.Six solar installers (NacoSolar,Powercom,BareFootPower,SolexandPhoenix)are thecurrent installingpartnersofFINCA.FINCAindicatedtheyaresettingupanewinitiative,FINCAPlus,toboosttheenergyloanproduct.Underthisinitiative,FINCAwillbepositionedtoimportsolarsystemsinbulk,setupadistributionnetwork,recruitparticipatingentrepreneursandprovidebusinesssupportservices,suchasmarketingandtechnicaltraining,totheseentrepreneurs.Thisnetworkofentrepreneurswillserveasthemaindistributionchannelforthisnew initiative. FINCA also plans to venture into biogas, briquettes and improved cookstoves, aswell assanitizationandcleandrinkingwaterinthenearfuture.FINCA representatives identified unfavourable loan terms for clients and limited marketing budget asconstraintstotheprogram.

5.3 DONOR/NGOPROGRAMMES

5.3.1 SEMAprojectTheSEMAproject(SustainableEnergyMarketAcceleration)isafour-yearproject(2011-2015)activeinUganda,KenyaandTanzania.TheprojectisfundedbytheEUEnergyFacilityandHIVOS,andisimplementedbyEnclude(formerlyTriodosFacet),FriendsConsultUgandaandIntegralAdvisoryKenya.TheoverallobjectiveoftheSEMAprojectistoincreaseaccesstoaffordableandsustainableenergyservices(solar,biogasandcleancookstoves)forrurallow-incomepeopleinUgandaandKenyathroughsmallloans.Todothis, theprojectpromotesbusinesspartnershipsbetweenrenewableenergyenterprisesandruralfinancialinstitutions.Thestartingpointoftheprojectistherealisationthat,whileend-userfinancingforenergyaccesscanbecriticalforensuringproductaffordability, italsointroducescomplications.Companiesprovidingend-userfinanceneedtodevelopnewskillsandback-officestructures,andtheymusthaveappropriatelystructuredcapitalbackingthem.Energycompaniesthatpartnerwithfinancialinstitutionsneedtoagreeonproductspecifications, prices, payment conditions, terms of delivery and after-sales services. Also, roles in thepartnershipneedtobeclear:whowillmarketandselltheproducts,whowillcompleteinstallations,andwhowill provide repair services?Toaddress these issues, theSEMAproject facilitatespartnershipsandprovidestechnicalsupporttoruralenergycompaniesandfinancialinstitutionstoovercometheseobstaclesandmakeenergysolutionsmoreaccessibletoruralhouseholds.In Uganda, the project is active in particularly the northern areas in the country, and has partnershipsestablishedwith7solarcompanies,includingBarefootPower,IncafexSolarSystems,KirchnerSolar,NACOSolar,SolarEnergyUgandaLtd,MOSETInvestmentsandSolarEnergyDistributors.Inaddition,SEMAworkswithover35financialinstitutions,particularlySavingsandCreditCooperativeSocieties(SACCOs)andMicroFinanceInstitutes(MFIs).PartnershipsbetweenSACCOsandsolarcompanieshaverequiredmoremaintenanceandattentionthananticipated, resulting in sloweruptakeand limitedsuccess.Somepartnershipshave takenmore timetobuildthanothers.ParticularlyintermsofthecapacitybuildingneedsoftheSACCOs,significanteffortswererequiredtoraiseawarenessofsolarproducts,thebenefitssolarcanbringtohouseholds,andthebenefitsofprovidingsolar(loans)asaSACCO.OtherSACCOswereslowinfollowinguponpartnershippossibilitiesduetoselectionofnewSACCOboards.TheparticipatingsolarcompanieswerechallengedintheirabilitytoquicklyrespondtosolarproductneedsfromSACCOslocatedintheruralareas,duetolimiteddistributioncentresandafter-salescapabilities.


However,theprojecthasbeensuccessfulintakingonathirdpartyroletoeffectivelyfacilitatelong-termpartnerships between financial institutions and solar companies,which has resulted in 3,515 units soldthroughfinancialinstitutionsand1,090energyloans.

5.3.2 GIZ/ENdevThePromotionofRenewableEnergyandEnergyEfficiencyProgramme (PREEEP) is implementedbyGIZ(GesellschaftfürInternationaleZusammenarbeit)onbehalfoftheGermanFederalMinistryforEconomicCooperationandDevelopment(BMZ). Theprogrammeofferssupportindevelopingskills,resourcesandcapacities in the fields of energy policy, disseminatingmodernbiomass energy technologies, promotingenergy efficiency and rural electrification. This work includes capacity development activities for theMinistryofEnergyandMineralDevelopment,forstakeholdersatthenationalanddistrict levels,andforselectedcommunity-basedenergysuppliers.GIZcurrentlyoffersspecificsectorsupporttoruralelectrificationthroughgriddensification,microhydroinstallations and promotion of solar PV to households, social institutions, government centres and forproductive use in the Lango andWest Nile regions (solar PV) and Kiboga,Masaka, and Lwamata (griddensification).Theresponsetosupportforruralelectrificationactivitieshasbeenverypositive.Griddensificationhasbeensupportedwitha70%subsidyaswellascoordinationandtechnicalassistancefromGIZ.SolarPVactivitieshavebeensupportedbyofferingsolarinstallersalocalsubsidycontractwithfinancialsupportfromGIZ.AsaresultofPREEEP,morethan120social institutions(schools,healthcentresandothers)havegainedaccesstoelectricitythroughconnectiontothenationalelectricitygridoroff-gridphotovoltaicsystems.Inaddition,over2,800householdsandsmallandmedium-sizedenterprises(SMEs)havebeenabletopurchaseasolarsystemthatgeneratesenoughpowertolightahouse,rechargemobiletelephonesandpoweraradioor television. These systems are also being used for commercial purposes to run hair trimmers, chargemobiletelephonesandpowersmallshops,forinstance.Theadventof LED lightinghasmade it possible to increase thenumberof lights a solarPV systemcanaccommodate.Despitethispositivetrend,PVsystemsinstalledwithGIZsupportstillrequiredonorfundingtostayfunctionalsincethesupportedinstitutionsareunabletosustainablymaintainthem.In the original plan, GIZ project partners would provide co-funding. But during implementation thishappenedonlytoalimitedextent.Wheninstitutionalsupportprogramswerebeingdesigned,partnersintheprogramwererequiredtocontributetothefundingoftheprogram,whichwasreferredtoascounter-partfunding.However,thiscounter-partfundinghasbeenslowincontributingtoprojectcostsandhasonoccasion resulted in delays in project implementation. As a response to this particular challenge, GIZprovided the necessary financing to overcome the funding gap that was slowing down projectimplementation.Other problems faced by the program include unreliable equipment, with batteries and lights of thesponsoredsystemsoftenfailing,leadingtoabadreputationforquality.

5.3.3 WWFWWFUgandaCountryOffice (WWF-UCO)wasestablished in2009byWWF-International topromote itsmissioninthecountryasanintegralpartofWWF’sGlobalmissioninEastAfrica.TheGoalofWWF-Easternand Southern Africa Regional Programme (WWF-ESARP) is to ensure that biodiversity and biologicalprocesses in Eastern Africa are conserved in harmony with the aspirations of the East African people,throughtheactivitiesofWWF-UCOandothersectorplayers.WWF’ssectorsofoperationincludefreshwater,forestrybiodiversity,andenergyandclimate.Undertheenergyandclimateprogram,WWFisrunningtheCleanEnergyChampionDistrictprogram.Inthisprogram,


WWF-UCO is supporting the Government of Uganda in increasing access to clean energy alternativesthroughadistrictledapproachdubbedthe“ChampionDistrictInitiative”.TheinitiativeispilotedintheKasesedistrict,whereWWFisshowcasingtoolsandapproachesforengagingwithlocalstakeholdersatthedistrictlevel,whichisWWF’spreferredapproachtoincreasingenergyaccessforoff-gridcommunitiesinUganda.Focusareasincludecleanenergyforhouseholdcookingandlighting,anddocumentingandsharinglessonslearned.WWF has provided technical assistance, linkages to pre-qualified suppliers and seed funding under theinitiative.KaseseDistricthascooperatedwiththeprivatesectortoprovideanenablingenvironmentforsolarlightingcompaniestoworkintheDistrictbywaivingtaxesthatwouldotherwisehavebeenpaidbythecompaniestooperateintheDistrict.PartnersinthisprogramincludeMEMD,REA,GIZ,CREEC,BareFootPower,BBOXXandUgastove.Marketplayershavewelcomedfinancialinitiativesthatsupportcreditbothatanindividualandgrouplevel,whichhavegreatly increasedaccesstogoodquality lightingproducts. Markettrends indicateagrowingneedforportablelightingforBaseofthePyramid(BoP)customersasgridextensionwillnotreachallareasoftheDistrictinthemediumterm.Therehavebeenafewchallenges,however,limitingtheimpactoftheinitiative.Uptakeofproductswasslowuntiltheprogramintroducedplanswitha30%upfrontpaymentforlightingproductsand4,6or12monthly payments thereafter.WWFhas also noted thatmultiple actors are trying to provide the sameservices,whichleadstoinefficiencies.Forgrowthandefficiency,WWFbelievesconsolidationinthesectorisneeded.

5.4 PRVATESECTOR

5.4.1 KilembeInvestmentsLimitedKilembeInvestmentsLtd(KIL)isapublicLimitedLiabilityCompany,locatedinKaseseDistrictwithbranchesinMpondweandKatererathathas12staffmembersand1,217shareholders.Thecompanyhasavisionofbeingacompetitivecleanenergyproviderforacleanerenvironmentandamissionoflightingvillagesforruraltransformationtoimprovethequalityoflife.KILisengagedinthedistributionandsaleofpowerfromthenationalgridona10-yearconcessionthatrunsuntil2017withacurrentcustomerbaseof3,481customersundertheprepaidmeteringsystem.KIL iscurrentlyworkingonanewprojecttoextendthepowernetworktotheruralareasofKaseseandsurroundings,whichisunderconstruction.KILworkswiththelocalgovernmentinKaseseandwithBelgiumTechnicalCooperation.StakeholdersinKampalainclude:ElectricityRegulatoryAuthority(ERA),UgandaElectricityTransmissionCompanyLimited(UETCL),RuralElectrificationAgency(REA)andtheGovernmentofUganda,throughtheMinistryofEnergyandMineralDevelopment.

5.5 POTENTIALACTORS

Anassessmentofpotentialactorsinterestedinenteringandscalingupcommercialactivitiesintheoff-gridsectorwasundertakenincollaborationwithREA.SourcesforidentifyingtheseorganizationsincludedtheindustryknowledgeofREAstaffandtheresearchteam,whowerefamiliarwithsectoractors, initiatives,trendsandorganizationswithanappetiteforinvestingintherenewableenergysectorinUganda.Theteamassesseddifferentpublicandprivatesectoractorsontheirinterestandcapacitytoundertakeoff-gridcommercialactivitiesatscale.Specificcriteriatoassesscapacitywerebasedonthefollowing:

• astrongmanagementteaminplace;• local/regionalpresence;


• capabletechnical/operationsteam;• historyofgoodservicedelivery;• strongsupportstructureswithincommunitiestoprovidecustomercare;and• demonstratedabilitytodeliveroncontractedservices.

Interestonthepartoftheseorganizationswasestablishedbycontactingthemdirectly,orbythefactthatthey had previously voiced their interest to or were alreadyworkingwith REA.When contacting likelycandidates,theresearchteamaskedifparticipationinlargescaleSHSbusinesswasaninterestingareaforthem.Theorganizationsstudiedcanbedividedintothreecategories:a) thosethathadinterestandcapacitytoengage, includingWenreco,FerdsultandBundibugyoEnergy

Cooperative;b) thosewithcapacitybutnointerest,includingUmemeandKalangalaInfrastructureServices;andc) thosewithinterestbutnocapacity,including.TheorganisationslistedbelowbelongtoCategory‘a’above.Theresearchteamhasfoundthemtohavetheinterestandcapacitytoundertakeoff-gridcommercialactivitiesatscale,andthusdeemsthemthemostsuitablepotentialactors.Theseorganizationshaveauniquestanding in thecommunitiesandregions inwhichtheyoperate.Theyhavegoodmanagementteamsinplace,havecapabletechnical/operationsteams,have a history of service delivery, have strong support structures within the community that providecustomercare,andhavebeenabletodeliverontheservicesforwhichtheyhavebeencontracted.Themost important attribute these organizations possess,which is very important in undertaking solaractivitiesonacommercialscale,istheirpresenceonthegroundandthegoodreputationthattheyenjoywithinthecommunitiesinwhichtheyoperate.Theseorganisationsalsomentionedtotheresearchteamthat they are currently in discussion with the Rural Electrification Authority about engaging in solardistributionactivitiesinthenearfuture.

5.5.1 WestNileRuralElectrificationCompanyLimited(WENRECO)WestNileRuralElectrificationCompanyLimited (WENRECO) is anelectricitygeneratinganddistributioncompany in the West Nile sub-region, in Northern Uganda. WENRECO is a subsidiary of IndustrialPromotionalServices,theindustrialdevelopmentarmoftheAgaKhanFundforEconomicDevelopment,andamemberoftheAgaKhanDevelopmentNetwork.WENRECO,throughcompetitivebidding,wonaconcessiontogenerate,distributeandsellelectricityinWestNile,whichconsistsofeightdistrictsandishometoanestimated2.3millionpeople.WENRECOoperatestwo power stations: WENRECO heavy fuel thermal plant with capacity of 1.5 megawatts, located inEwuata, Arua District; and Nyagak I Power Station, a 3.5 megawatt mini-hydropower station, locatedinPaidha,ZomboDistrict.ThesetwofacilitiesarecurrentlythemainpublicelectricpowersourcesavailabletotheWestNilesub-region,whichisnotyetconnectedtothenationalgrid.ConnectiontothenationalgridisexpectedfollowingthecompletionofKarumaHEParound2018.WENRECOhasa20-yearconcessiontosupplypowertotheWestNilesub-region.WENRECO is the implementer and co-funder of the West Nile Rural Electrification Project, which wasinitiatedin2013.TheProjecttargetedelectrificationof30healthcentres,60schools,250businessesand6,000householdsbetween2013and2015throughhydropoweranddieselgensets.Fundingfortheprojectwasprovidedby theGovernmentofUganda, theGermanDevelopmentBank (KfW),WENRECOand theEnergyFacilityPoolingMechanism.Lastyear,WENRECObeganswitchingthe4,000customerstopre-paidmeteringservice. Theadditionof2,500newcustomersincreasedthenumberofcustomersservedbythecompanyto6,500.


5.5.2 FerdsultEngineeringServicesLimitedFerdsultEngineeringServicesLimited(FESL)wasestablishedin1999andisoneoftheleadingorganizationsinmaintainingandconstructingthehigh-voltageelectricitytransmissionsysteminUganda.Thecompanyinitially provided engineering services, ranging from construction of tower bases, building & civilengineering,electricalandmechanicalworkstoconstructionofpowerlinesrangingfrom132kVto0.415kVandinstallationofopticfibres.Thecompanyhassincebroadeneditsservicestoincludepowerdistribution.FESLhassuccessfullyexecutedseveralprojectsfundedbythegovernmentofUganda,theWorldBank,SIDA,NORAD, and JICA. As part of the rural electrification effort being undertaken by both the Ugandangovernmentandtheprivatesector,FESLisinvolvedinmaintainingandoperatingruralpowerdistribution.Asadistributionutility,thecompanyisactiveinthefollowingelectricitydistributionconcessions:Kakumiro–Kibaale–Kagadi, Rukungiri–Kanungu, Ntugamo–Kitwe–Isingiro, Kyotera–Mutukula–Kansensero, Masaka–BukakataandRugombe–Kyenjojo–Katooke.Todate,thetotalnumberofconsumers(bothhouseholdsandSMEs)connectedtoFESLpowerdistributionnetworkisover5,000,allofwhichareonapre-paymentmeteringsystem.

5.5.3 BundibugyoEnergyCooperativeSociety:BundibugyoEnergyCooperativeSocietyisa2000-member-strongcooperative.TheBundibugyoEnergyandCooperativeSocietywontheconcessiontomanagethenewlyconstructedpowerlineinthedistrictandwasthefirstcooperativetomanageelectricitydistribution,maintenanceofpowerlinesandrevenuecollectionfromconsumers.Ithas1,700registeredmembers,ofwhich1,500havebeenconnectedonthenationalgrid.

Accordingtotheconcession,thecooperativehasresponsibilityforpowerdistribution,maintenanceofthepower lines,andmanagingtherevenuefrompowerconsumers. Thecooperativeconnectselectricitytolocalsatasubsidizedfee.Asownersofthecooperative,allmembershavetherightofownershipoftheincomefrompowertariffscollectedfromthepowerlinemanagedbythecooperative.

5.6 CONCLUSIONSFROMTHEINSTITUTIONALANALYSIS

Keyinstitutionalchallenges• Thekeychallengesintheoff-gridlightingmarketinUgandaidentifiedbyfinancialinstitutionsare:

o vendors/technicalprovidersaremainlybasedinurbanareas,quitefarfromtheirclientsthusmakingitdifficultforclientstoaccesspromptafter-salesservices;

o technical providers have little capital and therefore are not always able to fund systeminstallations;

o poorqualityproductsonthemarketareaseriouschallengetoloanrepaymentsinceclientswillattempttostopmakingpaymentsiftheinstalledsolarsystemsmalfunction;

o availableloantermsareunfavourabletoclients;ando lowmarketingbudgetsconstrainfinancialproductpromotionanduptake.

• Thekeychallengesintheoff-gridlightingmarketinUgandaidentifiedbydonors/NGOsare:o needforcapacitybuildingoftheprivatesector(retailers)andfinancialinstitutionsinvolvedin

theprovisionofoff-gridlightingproducts;o lowawarenessofsolarproductsandbenefitsforhouseholds;o badqualityreputationofsomesolarsystemsonthemarket;ando theneedfordonorsandNGOstoprovidefinancialandtechnicalassistanceinmaintainingsolar

systems.• PrivatesectorchallengesidentifiedintheUgandanoff-gridlightingmarketinclude:

o underdevelopmentofthesolarmarket;o needforsubstantialinvestmentinmarketawarenesscampaigns;ando lowconsumerpurchasingpower.


6 CONCLUSIONSDemandforOff-gridLightingProductsThe solarmarket is dominated by several relatively small companies. Hardly any larger (multinational)corporationsareactive.However,thedemandsurveyindicatesthattheendusersaregenerallymoreawareandmoreconvincedofthequalityofsolarenergythanmarketplayers,institutionsandNGOs/donorsthink.Endusersarealsoquiteconvincedofthebenefitsofsolar.Theneedtochargecellphonesisbecomingmorewidespread.Eighty-threepercent(83%)ofthehouseholdsownoneormorecellphonesandspendonaverage1000UGX(US$0.40)forphonechargingperweek.Sixty-eightpercent(68%)oftheintervieweesindicatedtheypurchasechargingtimeoutsidetheirhome.Urban-basedhouseholdswhoaregrid-connectedpayonaverage2to3timesmorefortheirelectricitythannon-grid connected households. Eighty percent (80%) of (local) grid connected households use acomplementarylightingsource,mainlykerosene.Thisimpliesthateventhegridconnectedmarketmaybeaninterestingoneforsolarlightingproducts.Eightypercentofhouseholdsthatownasolarproductwould liketohavea largesystem(morethan20watts peak). Demand for mobile systems is practically non-existent in this group. The demand of thehouseholdswhodonotownasolarproductismorediverse,buttheypredominantlydemandlargeSHSandmobilesystemswithchargerandmorethanonelight.MainChallengesRevealedbySurveysandInterviewsFourteenmainchallengescanbedistilledfromthequantitativeandqualitativedatacollected,whichinturncanbegroupedinfourcategories:

1. Challenges related to the solar products themselves, namely product quality, marketing andpositioning;

2. Challengesrelatedtothemarketandthosethatcustomersface;3. Challengesrelatedtofinancing;and4. Institutionalchallenges.

Belowwediscuss themain typesof challenges ingreaterdetail, noting thatour research refuted somechallengesidentifiedbymarketplayers.

Mainchallengesidentified

Findings Howtoaddress

Product,quality,marketing–challengeslimitingthemarketpullLowproductawareness;lowcapacitytomakeaninformedpurchasingdecision;insufficientorineffectivemarketing.

Mainlysuppliers&donors/NGOsmentionedthis,thoughover85%ofhouseholdssurveyedknowwhatsolaris.AwarenessintheNorthernandEasternregionsandinruralareasisonaveragelower.Retailersperceiveawarenesstobelowerthanitprobablyis.Overhalfoftheruralpopulationdoesn’tknowwheretobuysolarproducts,butinterestinglybrandawarenessishigher.SolarNowisknownby70%ofthoseintervieweeswhoknewabrand.Awarenessmightnotbethemajor

GovernmentInstitutions:Awarenesscampaignsinremoteareasarestillrequiredtoincreaseawareness.Radiocanbeagoodchannel,aswellasbelowtheline(BTL)marketingcampaigns,e.g.demonstrationsatruralfairs,festivals,andmarkets.Suppliers/retailers:providereferralincentivesandstimulatewordofmouth;havelocalrepresentation;advertisebyradio.


challengeperceivedbydistributorsandothermarketplayers.

Qualityissues;reputationofsolarproducts;havingabadname;lackofconfidenceinsolarproducts;lackofqualitycontrol;lackofcertification;unevencompliancewithstandards

Intervieweesdofindtheirsolarenergysourcereliableandforthemostpart,areextremelysatisfiedwithit(74%),incomparisontokerosene,drybatterytorchandcandleuserswhoaregenerallyunsatisfiedwiththeircurrentlightsource.Ninetypercentofrespondentstrustsolarproductsandthreequartersseesolarastheintroductiontoamodernhousehold.Peoplearereceptivetowarrantycertificates,governmentrecommendationsandtheUNBSsealwhenbuyingproducts.However,UNBSissaidtobeunderstaffed.Suppliers/importerscomplainaboutlaxtaxcontrolandhenceamyriadoflowqualityproducts.Limitedcustomsinspections.

GovernmentInstitutions:strengthenqualitycontrolandenforcement.Retailers:offerwarranties,provideafter-salesandreturnservice.NGOs/donors:supportsupplierswithproductcertification.Financialinstitutions:onlyprovideloanswhenproductscomplywithstandards.

Lackofmaintenanceandaftersalesservice

Only15%ofretailersofferwarrantieswhile6%offeraftersalesservices.PREEEPrequiresdonorfunding.

GovernmentInstitutions:Guaranteefunds,warrantylegislation,Suppliers/retailers:offerwarranties/extenddistributionnetwork;specializeinmaintenance;NGOs/donors:Technicalsupport&trainingtoretailersanddonorfundingtohelpset-uptheinfrastructure

Customer&marketplace–challengeslimitingtheproductpushLimiteddistributionnetwork;limitedinfrastructure

Distancetoend-usersisverylarge.Retailersofferlimitedservices.Nomaintenancenetwork.Suppliers/franchiseconcepts,notablyBarefootPower,sufferfromhighattritionratesoftrainedfranchisees.Mostretailersaresmallelectronicshopsoragents(Easternregion).Closeto55%ofallsolarproductsaresoldindirectly–viatheshoppingarcadesinKampala–increasingtheend-usermarketprice.SmallSolutions’regionalwarehousemanagersgaveoutunapprovedcredit,henceregionaldistributioncentreswereclosed,nowonly1centreinKampala

Stimulatedeepdistributionnetworks.Suppliers/franchisers:improvebusinesscase/incentivesfortrainedfranchisees.

High(perceived)costofsystems;highcompetingexpenditures(school

WWFprogrammeintroducedinstalments.KeroseneisstillthemainenergysourceusedbyUgandanhouseholds.However,

Stimulatepaymentsininstalment;Government/institutes/NGOs/donors:devisepaymentschemes


tuitions);otherpriorities

theyspendlessonenergythanexpected.Theaveragehouseholdspendslessthan2%oftheirdisposableincomeonkerosene,muchlessthanthe12-17%generallyassumed.Energycostthereforedoesn'tseemtobetheirmainconcern.Householdsspendonaverageover50%oftheirdisposableincomeonschoolfees.AzuriandFRESofferfee-for-service(‘pay-as-you-go’).FREShada90%paymentrateafterthefirsttwoyears.Despiteendusersclaiminglimitedinterestinsolarlanterns,retailersindicatethatthesesellbest–togetherwiththe>20Wpsystems.

viatheschoolfeebudget.Stimulatefee-for-service,pay-as-you-gomodels.Retailers:continueofferingsmallersystems&solarlanterns.

Financialchallenges Accesstoworkingcapitalthroughoutthedistributionchain

Manysuppliersindicatethatlackofworkingcapitallimitstheirgrowth.Financialinstitutionsalsoacknowledgethis.Franchiseesandagentsoftencannotpayforrequiredstock.

NGOs/Donors:pilotprojectswithworkingcapitalforretailerssotheycanofferpaymentininstalmentsandcreditlines

Accesstocash;highcostsofloansorunfavourableloanterms

Loanconditionsunfavourable;interestratesarehigh.Retailersclaimuserslackcashordonothaveaccesstoloans.MFIsandSACCOsarehardlyinterestedinsolarproductloans(only2in40approachedbySolarNowfollowed-upandmadesales).Retailersbelievelackofmoneyisthemainreasoncustomersarenotbuying.Non-solarownersindicatedthemainreasonfornotpurchasingasolarproductisnothavingthemoney.

Financialinstitutions:easierappraisal/duediligenceforloansNGOs/Donors:trainMFIsandSACCOstoprovideTAonsolarproducts.Thereclearlyisaneedforinvestigatingthefinancingopportunitiesforsolarproductsforhouseholds.

Accesstofinancingmechanisms

MarketstimulatingorganisationssuchasUECCCandPREEEPlackguaranteesforon-lending.

Provisionoftheseguaranteesforonlending.

Defaultingcustomers/defaultingretailers;perceptionofsolarbusinessashighrisk

Somesuppliers(e.g.ABMatraandBBbox)havehadmajorissueswithdefaultingretailers.Thishascausedmarketpenetrationtoslowdownandsupplierstoshrinktheirdistributionnetworks.Defaultalsohappenswhenproductsmalfunctionasusersarereluctanttopayremaininginstalments.Onecompanyhada10%defaultrateattheendoftheirfirst2yearsofoperation.Anothercompanyonlyhasa1%defaultrate,mainlyduetotheiragents’thoroughduediligenceonnewcustomers.HighdefaultratesexistinB2B,andlowerratespertaintoB2Ccustomers.

Retailers/financialinstitutes:learnfrompreviousmistakesmadebysupplierswhen(re-)introducingasolarproductusingcredit.Retailers:increaselocalpresence,after-salesserviceandmaintenanceservices

Institutionalchallenges


Lackofbusinessmanagementskills;limitedtechnical&institutionalcapacity;enforcementofstandardsandquality

Institutionsstruggletoimproveskillsoftheirteams.

Technicalassistanceandtraining,specificallyonproductuse,maintenanceandproductqualityawareness.

Lackofinsurance Retailersnotethattheftisariskforbothlendersandbuyersofsolarsystems

Thesechallengesidentifiedabovecannotbeseenasisolatedfromeachotherandseemtobelinkedinaviciouscycle:financialinstitutionsarereluctanttoprovideloans,thereforecash-poorsuppliersandretailerscanonlysellonacashbasisandcanonlyprovidelimitedserviceandmaintenance;thereforecustomersdonotbuy,limitingthemarket;thereforeitisperceivedasahighriskbusinessandfinancialinstitutionsarereluctanttoprovideloans.Figure86.Identifiedviciouscyclehamperinggrowthofthesolarmarket.

Thismarketdynamicscyclehasalsobeenidentifiedbyothersandthereareanumberofinitiativesseekingtobreakthecycle:- PREEEP,byGIZ/ENdev, isprovidingcapacitybuildingatdifferent levels inthemarketandproviding

subsidiestoinstitutionsworkingtoexpandthemarket- FINCA Plus, together with installers, REA and MEMD, is importing systems in bulk, setting up a

distributionnetwork,providingtrainingandmarketingtoentrepreneurs.- SEMA,managedbyEnclude, FriendsConsult,Hivos,EUEnergyFacilityand IntegralAdvisoryKenya,

brings financial institutions and energy companies together in official partnerships and deliverstechnicalassistancetofinancialinstitutions.

- ChampionDistrictInitiative,runbyWWF,MEMD,REA,GIZ,CREEEC,andcommercialpartners,providestechnicalassistance,seedfunding,andlinkagetopre-qualifiedsuppliers.

FIsreluctanttoprovideloans

Supplierscashpoor

Salesonlyoncashbasis

Limitedserviceprovided

Noinfrastructure

Customersdonot/cannotbuy

Marketsize/growthlimited

Highrisk


7 RECOMMENDATIONSFor LightingAfrica toachieve itsobjectiveof improvingaccess toenergy in theSub-Saharan regionandacceleratingthedevelopmentofcommercialoff-gridlightingmarkets,specificinterventionsarerequired.ThiscanbeachievedbyprovidingsupporttospecificactorsinthelightingmarketinUganda.Outlinedbelowis a set of recommendations informing the design andmarket development ofmodern off-grid lightingproductsdeploymentactivitiestospurdemand.Basedondeskandfieldresearch,threedifferentbusinessinterventionswereidentifiedthatcouldachievesocialimpact,financialsustainabilityandpotentiallyscale.Theseinterventiontypeswillbefurtherdiscussedwiththeclient,LightingAfrica,anduponapprovalfurtherdetailedandresearched.RecommendedInterventionsTobreaktheviciouscycledescribedabove,werecommendsupporting,creatingandfundingfee-for-servicebusinessmodels,workingwithfinancial institutions,suppliersandretailers. Belowwesuggesttargetedinterventionsforspecificmarketactorsthatwillstrengthenthesolarmarketandfurtherbuildconsumertrust.

InterventionsRelatedtoSolarCompanieso Further improve management skills in business development, marketing, promotions and

technicalskills.o Focusonsetting-upandstrengtheningdistributionandafter-salesnetworks.Createbusiness

models which include servicing, thereby adding additional revenue streams beyond initialsales.

o Increasecustomercareandcustomersatisfactionbysettingupcustomerfeedbacksystemsandimprovingabilitytoimplementcustomerserviceprograms.

o Increase informalmarketing through incentive offers such as coupons anddiscountswhenfamilymembersbuythesameproduct.

o Provide or facilitate warranties, which are demanded by end-users and will improverelationshipsbetweenretailerandcustomer.

InterventionsRelatedtoFinancialInstitutions

o ProvidetechnicalassistancetoFIs intrainingof loansofficersondifferent lightingproductsandthebenefitsofsolarenergyvs.kerosene(lesscontaminating,healthier, lower lifetime/operationalcosts,increasedproductivityofthehousehold).

o Improvingknowledgeofsolarproductswillmakeloanofficersmoreconfidentinpromotingfinancial products to fund purchases of solar equipment. Further technical assistance isrequiredinthedevelopmentofarea-andorganization-specificmarketingprogramstoimprovepromotionanduptakeofloansforlightingproducts.

o ProvidealoanguaranteefundtoparticipatingFIs.Usethisfundtoreduceinterestratesforsolarloans,thusmakingthemmoreaffordabletoamajorityofcustomers.Limitsuchloanstoprequalified suppliers and to products that complywith the solar product standard of theUgandanNationalBureauofStandards.

o Providepartialriskguaranteetoallowfinancial institutionstofinancesolarcompanies.Thiswill also improve the solar companies’ position in accessing finance for import of solarproducts.

o Providetechnicalassistanceondefaultandbaddebtmanagement.o Provide TA, seed money and/or guarantees to standardised and simplified loan appraisal

systems.

Thesemeasureswilladdmorecapitaltothesupplychain,thusallowingittoaccelerategrowth.Defaultriskscanbecontainedassomemarketplayershaveproven.


InterventionsRelatedtoInstitutions

o Government institutions: Radio awareness campaigns promoting solar vs. kerosene tostrengthenthesolarmarket.

o MEMD(supportedbyLightingAfrica):Enforcestandards,strengthenUNBStofurtherincreasemarkettrust.

o LightingAfrica(supportedbyUECCCandMEMD):Createguaranteefundtoincreaseworkingcapitalthroughoutthesupplychain.

o MEMD(supportedbyLightingAfrica):Createwarrantylegislation.o Extendworkingcapitaltosolarcompanies.o Promotesolarthroughschoolprograms.Schoolfeesarehigh,asisawarenessthatsolarlight

stimulatesandsupportsstudying.Distributesolarlanternsthroughschoolprojectsorreduceenergycostsofschoolsbyprovidingloanstoinstallsolarsystems.Reducedenergycostswilllowerschoolfees,andchildrenwillspreadknowledgeofsolarproductstotheirhouseholds.


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Documents

Uganda Off-Grid Lighting Market Assessment · 2019. 4. 24. · Final Report MARKET ASSESSMENT OF MODERN OFF GRID LIGHTING SYSTEMS IN UGANDA Produced for Lighting Africa December 2014