Case Study: Kiribati



Case Study: Kiribati

CASE STUDY SUMMARY

The use of photovoltaics for rural electrification in Kiribati is particularly interesting because it shows the sharp contrast in success between an institution designed around selling solar systems to rural users and an institution oriented toward selling electrical service generated from solar energy. The Solar Energy Company was originally formed in 1984 to sell systems to rural households but in spite of doing everything considered necessary to provide users with information, after sales service and spare parts support, the company lost its market due to customer dissatisfaction and within five years was bankrupt. Its reorganization in 1989 into a solar utility company emphasizing the sale of electrical services instead of solar hardware took the failing company from bankruptcy to its present position, eight years later, as the most successful government owned company in Kiribati with literally thousands of households on the waiting list for service as capital becomes available for expansion.

Lessons Learned in Kiribati

1. That customers want electrical service not solar equipment.

2. A high percentage of rural households in one of the least developed countries of the world is willing to pay a premium for a solar installation that includes full service where the customer has no installation or maintenance responsibility.

3. That a properly operated solar utility organization can sustain itself and make a profit.

4. That a solar sales company has a much smaller rural electrification impact than a solar utility company because of higher first cost and customer dissatisfaction due to a high percentage of problems with systems that are sold.

5. That solar PV installations which meet the desire for electrical service and ability to pay of rural developing country households are possible, practical and cheaper than small grid systems powered by diesel.

BACKGROUND

The Republic of Kiribati is a former British Colony, the Gilbert Islands, which gained independence in 1979. It consists of 33 atoll type islands. which straddle both the equator and the international date line in the Pacific Ocean. Kiribati's population is approximately 75,000 persons with over 25,000 persons on the southern part of Tarawa which is the capital island. The rural population is spread over 21 atolls islands. The land elevation does not exceed 5 metres and is composed primarily of coral sand and rocks. Droughts often occur due to irregular rainfall patterns. The soil is poor and vegetation is mainly limited to coconut palms, breadfruit and pandanus trees. Except for the cultivation of baibai (a variety of taro), casava and sweet potato on a limited, personal basis, conventional agriculture is virtually non-existent. Other local food sources are coconuts, pandanus and breadfruit plus the resources of the sea.

The I-Kiribati people are Micronesian, with some resident Polynesians and Europeans. The level of literacy exceeds 90% and the 1990 GDP was estimated at US$525 per capita.

Kiribati is one of the world's least-developed countries. Because almost all manufactured commodities must be imported, the government is trying to develop small-scale import substitution industries, handicrafts, tourism, and commercial fishing. Recently, seaweed farming for the European market has grown to a significant export level.

The capital island, South Tarawa, is electrified by a grid with power from Diesel engines. A short extension of that grid into rural Tarawa (North Tarawa) was completed in 1992. Small Diesel or petrol generators power outer island government offices and larger secondary schools but there is no grid based electricity provided outside of Tarawa other than a small local grid developed on Christmas Island.

Evolution of Photovoltaic Usage in Kiribati

Kiribati utilized PV for some small communication purposes and a few private lighting and pumping systems were present in the country in the late 1970s and early 80s. However, the first national involvement with PV for general rural electrification began in 1984 with the formation of the Solar Energy Company of Kiribati (SEC).

The SEC was established as a private enterprise by the Foundation for the Peoples of the South Pacific (FSP), a U.S. based NGO. The SEC was established using USAID funding and was organized as a private corporation. The initial private shareholders were FSP and the Bank of Kiribati with shares also held by the Ministry of Works and Energy.

Its original charter was to act as a retail outlet for solar PV systems and to provide technical assistance where needed for their installation and maintenance. The company was organized to provide installation and maintenance services on demand by customers.

The SEC, 1984-1989

With technical assistance and training from the UN Pacific Energy Development Programme (PEDP) and the South Pacific Institute for Renewable Energy (S.P.I.R.E.), the SEC developed a competent technical staff and a stock of components suitable for Kiribati including PV panels, batteries, high efficiency lights and charge regulators. These items were available for sale individually or as a system. Graphically intensive installation manuals and maintenance manuals were prepared in the local language and were provided with items sold. The staff was available to customers for free consultation in the office. For site visits, a charge was made which covered the labor, travel and subsistence of the technician.

Analysis of other solar village electrification projects in the Pacific Islands indicated a number of significant barriers to sustainable PV rural electrification. Each of those problems were addressed in the design of the SEC sales and service effort. They were:

1) Environmental Conditions are harsh with salty air, high humidity and high temperatures so lights, controllers and batteries had to be selected carefully for long life.

2) Poor quality installations were common in other projects so clearly written, illustrated manuals and personal instruction were provided to customers along with professional installation services at cost.

3) A lack of trained personnel to provide maintenance and repair services was common in other projects so foreign sponsored training was provided periodically for SEC staff.

4) Inadequate stock of replacement parts kept many other projects from being properly maintained, so the SEC was provided with adequate funding and resources to maintain a full set of replacement components for those sold.

5) High initial investment for a PV system was a consistent problem for low income users. For customers with known credit or who could provide guarantees of payment, systems were sold under credit terms. Components were purchased in bulk to obtain the best prices and those savings were passed on to customers.

During the period 1984-1989, about 270 PV lighting systems were sold to private customers throughout rural Kiribati. Additional sales of larger systems were made to schools and government agencies.

In 1986, the FSP relinquished all its shares in the SEC to the Ministry of Works and Energy (MWE), making the MWE the 99% owner of the corporation with the Bank of Kiribati retaining the remaining 1% ownership. Since then, the Board of Directors has been selected by the Minister of Works and Energy and has consistently been a mix of influential persons working in both public and private enterprise. The corporate charter was not changed and the SEC continued to operate as a private, commercial sales organization with no financial support from the government.

Despite the USAID grants supporting the operation of the SEC and a rational approach to the private sale and support of PV RE systems, by 1989 when the shares were turned over to the MWE, the SEC was effectively bankrupt. Annual sales had dwindled to the point where even salaries could not be covered let alone providing money for reinvestment in inventory.

In an attempt to determine the reasons for the dwindling sales and to provide data on how to proceed with further PV implementation, the MWE requested the Forum Secretariat Energy Division (FSED) to fund a country wide survey of rural PV system purchasers.

The Outer Island PV Survey

Purpose and Goals

The purpose of this survey was to determine the number, quality and history of existing household solar PV installations in Kiribati, most of which were sold by the SEC.

All villages of all islands in the Gilbert Group (18 atolls) were visited for the survey representing over 90% of the rural Kiribati population and almost 100% of the private PV installations. The presence of a solar panel constituted the primary reason for an interview.

Survey Results

Of the 270 PV systems found in Kiribati, Approximately 90% were only marginally operational or not in use at all. The major problems were:

Virtually 100% of the systems had not been maintained other than to replace components which failed. Battery life was found to have been much shorter than should be the case and components had not been kept free of dirt and insect damage.

50% of the systems had been installed without a charge or discharge controller, a requirement for satisfactory battery life with these small systems.

48% of the installations had serious wiring deficiencies, usually in the form of twisted connections or wires that were too long for their size.

43% of the systems had replaced the original deep discharge batteries with automobile batteries having inadequate capacity and a short life expectancy.

16% were oriented toward the sun so poorly as to provide insufficient output for battery charging.

13% had panels placed in locations where excessive shade was present.

Many system owners had replaced the original high efficiency fluorescent lights with automobile head lights or tail lights when the fluorescent bulbs failed. Others added CB radios and other appliances. Both actions resulted in a daily energy demand which was greater than the capability of the panels and batteries to reliably provide.

Since the average age of the systems surveyed was less than three years, the concept of providing for PV based rural electrification through dependence on the private marketplace was determined not to be a sustainable and appropriate concept for the conditions in Kiribati.

The end result was unreliable systems, a high rate of expensive battery failures and general customer dissatisfaction. This translated into general distrust of PV as an electrical supply source and reduced sales to the point where the sales company could not stay in business.

Kiribati Rural Electricity Utility Concept

In 1989 when the SEC faced bankruptcy and it was clear that the private market oriented approach to PV rural electrification was not a success in Kiribati, assistance was sought from S.P.I.R.E. to advise the government and the Board of Directors of the SEC as to what should be done. The result was a recommendation to convert the SEC from a sales oriented organization to a service organization based around a rural electricity utility concept.

The recommendations were:

1) Systems would be owned and maintained by the utility. Appliances and house wiring after the battery connection would be owned and maintained by the homeowner.

2) Rural electrification districts would be set up under the utility. Each district would be of a sufficient size to be properly serviced by a single SEC employee who would be designated as a field technician. This means that no installations would be made until at least fifty households agreed to accept service. A single technician can properly maintain about 125 systems and this would be the maximum size of a district. If more than 125 systems were installed in a district, it would be split making two districts on that island.

3) Users would be required to sign a contract in which they agree to pay an installation fee of $50 and after installation not to tamper with any of the utility owned equipment, to maintain the panel area free of shade, to pay the levied fee monthly and to use the system in accordance with published guidelines — which includes not attaching any appliances to the system without prior approval of the utility. In return, the utility would keep the electrical supply in satisfactory repair, replacing all failed parts at no added cost except for the user owned lights and appliances.

4) Monthly fees would be set based on the actual cost of operation and maintenance which is the sum of the costs of battery replacement after an estimated life span of 4-7 years (according to the type of battery and its service requirements), the cost of replacing the controller at the end of its useful life and the operating cost of the utility organization. Fees would be different for different types and sizes of installations ranging from about A$10 for basic lighting to over A$50 per month for a full system with capacity to operate a refrigerator and video as well as lights.

5) A utility employee who acts as the field technician (and lives in or near the district) would visit each installation once a month to check the equipment and to collect the fee.

6) Twice a year, a senior technician from the Tarawa (home) office would visit each district and audit the field technician's performance. Additionally, a senior technician would be available on call to assist field technicians in troubleshooting and repairs which are beyond the level of the field technician's training and experience.

7) Each rural electrification district was proposed to have a user's committee consisting of five to seven users elected by the rest of the users in that district. It would be the responsibility of that committee to carry complaints and requests from users to the utility management and to communicate utility matters (mainly reasons for fee and service changes) to the users. The committee would also arbitrate in the case of proposed disconnects due to customer failure to pay fees.

These recommendations of the consultant were accepted by the Board of Directors of the SEC and a new management team was selected in late 1989 to implement the PV based utility concept for the SEC.

The JICA Pilot Project

In 1990, JICA agreed to support the new institutional structure of the SEC through a pilot rural electrification project. The site chosen was nearby North Tarawa. Although only 55 homes were to participate in the pilot project, the fees and institutional structure of a full scale solar utility were imposed with the added cost of a full organization serving such a small number of households borne by JICA as part of the project cost. The project was completed in 1992 and monitored directly by JICA for one year and indirectly for the years following. The results were very favorable with surveys showing a high level of customer satisfaction, technical inspections showing a continuing good level of maintenance and with fee collections at a high on-time level.

At the end of the project period in 1994, both JICA and the Kiribati MWE reported that the solar utility concept was working well and that the concept was ready for larger scale implementation with the next step expansion to more remote islands.

The EU Follow-Up Project

In 1992, the European Union agreed to fund the next stage of PV based rural electrification in Kiribati with 250 additional systems. This allowed the SEC to begin trials of its capability to provide service on more remote islands where operational control would be more difficult. The same institutional concept of a solar based utility company which sells electrical service, not solar systems, was used for the EU expansion project.

The EU systems were installed in 1994 and follow up inspections by the EU held in 1995. The systems were divided among three islands with 100 systems added to the JICA project on North Tarawa in an attempt to fill at least part of the added demand generated by the JICA project, 75 systems on the island of Nonouti and 75 systems on the island of Marakae. The follow-up inspections concurred with the results of the JICA project in that (a) installations were all functioning well; (b) customer satisfaction was high; and (c) technical maintenance was being properly carried out.

Current Status

Following the successful implementations on Marakae and Nonouti, the MWE began seeking assistance for full electrification of rural Kiribati through solar photovoltaics. In 2000, the EU agreed to fund approximately 1400 additional systems in Kiribati and in late 2001, the project commenced and is expected to be complete in 2003. When completed this will represent approximately 17% of rural households being provided with solar electrification.

The SEC currently charges A$9.50 per month for 110Wp system for lighting only. For A$10 per month, customers can also connect radios or cassette players through a converter supplied by the SEC. Since there is no broadcast TV and the cost of video systems very high, there is little demand for larger systems at this time although systems of any size can be provided by the SEC at monthly rates commensurate with the added system cost. Approximately half of the received fees are deposited in an interest bearing account solely for the purpose of replacement of failed components. Of the 55 systems installed by JICA in 1992, the average battery life was over seven years. Of the 250 systems installed by the EU in 1994 one battery had to be replaced after six years. Controllers are manufactured locally and have proven to be of high reliability also with less than 1% having been replaced since installation. Light bulbs and light fixtures have been the main items which have failed but the necessary spare parts are kept in inventory and the cost of replacement low.

After 10 years of operation as a solar utility, the SEC has been financially successful as well as being successful as a provider of rural electrification. Interestingly, though strictly a sideline to the utility operation, direct sales of solar systems to individual households on islands not yet electrified has been steadier and greater than was the case during the years the SEC was specifically a sales organization. This is attributed to the good reputation solar and the SEC has achieved through the high level of customer satisfaction in its service system.

................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download