II. LITERATURE REVIEW
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1 After-sales Servie and Loal Presene: Key Fators for Solar Energy Innovations Diffusion in Developing Countries (This paper is aepted by PICMET in May 2014 and will be presented at the PICMET onferene on 28 th July, 2014 at Kanzawa, Japan) Kassahun Y. Kebede, Toshio Mitsufuji, Eugene K. Choi Graduate Shool of Tehnology Management, Ritsumeikan University, Kusatsu, JAPAN Abstrat--In this study, we have investigated the pratie of an international network of ompanies and organizations whih are engaged in the diffusion of solar home systems in Afria and Asia. This researh looks into a network alled, StS Network for Rural Development in Ethiopia.To investigate the details of the network, loal business managers and governmental offiers were interviewed.our ase study explored that the network (registered first as NGO in Ethiopia through its Solar Energy Foundation) has managed to surpass other ompanies and even MNCs for its relatively unique approah aimed at the diffusion of rural solar home systems in Ethiopia. Furthermore, it is identified why the NGO has managed to diffuse relatively larger volume of solar energy innovations than other ompetitors, whih is mainly related to its effort of building trust among the loal ommunity through its after-sales servie and loal solar enters. This ase study would provide both poliy makers and business managers with pratial impliations. I. INTRODUCTION Aording to the International Energy Ageny (IEA) and UN organizations, 1.4 billion people in the globe still lak aess to basi eletriity servies [8].Most of these people live in Sub-Saharan Afria and South Asia ountries [16]. In the ontext of no aess to the eletriity grid, off-grid energy systems have been promoted by several stakeholders as a remedy for the energy poverty in these regions. One of the potential off-grid renewable energy tehnologies (RETs), partiularly, solar photovoltai tehnologies have been promoted as a potential means of rural eletrifiation in developing ountries [2].Despite several efforts to develop and promote suh tehnologies, uptake remains so low and sluggish [7, 14, 18, 19]. A Lighting Afria report estimated that 40 million households are potential adopters of solar home systems (SHS) 1 in Ethiopia, Ghana, Kenya, Tanzania, and Zamiba alone[13]. However, far less adoption has been ahieved both through market and non-market mehanisms in the region. The diffusion hallenges are numerous in number and shifting from onventional energy soures towards RETs has been an arduous work partiularly in developing ountries [14, 18, 19]. Ethiopia is one of the naturally endowed ountries with a large array of renewable energy resoures. But it remains one of the energy poorest nations in the globe and the main soures of light in homes and small businesses partiularly in the rural ommunity are kerosene lamps and andles. In this study, we investigated the pratie of an international 1 A typial SHS onsists of a photovoltai module, a battery, a harge ontroller and light bulbs. hybrid NGO alled Solar Energy Foundation (SEF) engaged in the diffusion and further development of solar innovations in Ethiopia. Through our lose investigation on the approah of SEF, we explored the relative suess fators in the diffusion of SHS by SEF whih is a member of an international network of ompanies and organizations (StS Network for Rural Development), urrently ative in Afria and Asia. Our findings from this ase study would ontribute to further development of the past and urrent sholarly debates on the fators influening the diffusion of rural energy innovations, espeially in developing ountries. II. LITERATURE REVIEW In literature, different market models are identified as distribution ways of solar energy tehnology to the end users in developing ountries. Aording to [7] the four major ategories of distribution modes inlude institutional partnership; ompany owned branhes; miro- franhises; and traditional distribution models 2 [7].Referene [7] further disussed three essential projet elements in the diffusion of solar PV systems in developing ountries whih inlude tehnial onsiderations, projet enabling struture and support struture. The support struture is emphasized more as the omponents of a solar PV system/shs have short life span, and partiularly the battery is a ritial part of the system and it auses early system/produt failure. From their study, they identified that a system for produt return and maintenane servie network have to be there for suessful diffusion of solar PV systems in developing ountries [7]. Referene [3], putting their study in a relatively ommon marketing terminology, also surveyed and lassified approahes of marketing SHS in developing ountries into four: Cash selling; redit system; leasing system; and fee-forservie 3. Friebe et al. also disussed that maintenane servie was found to be a ritial element in all the four marketing 2 The author defines traditional distribution models as supply from manufaturer to major distributors, who in turn sell to dealers [7]. 3 Referene [3] defines the approahes as follows: Cash: The onsumer pays for and reeives the SHS, whih is installed by the onsumer himself or by the ompany. On ompletion, ownership is transferred to the onsumer. Credit: The onsumer reeives an SHS and pays regular instalments plus possibly a down payment. The loan may be provided by the ompany that sells the produts or by a finanial institution. Leasing: The onsumer is allowed to use the SHS and pays regular instalments. Initially, the ompany owns the system. Later, one the system is fully paid for by the onsumer, the ownership is transferred. Fee-for-Servie: The onsumer is allowed to use an SHS that is owned by the ompany. The onsumer pays either a fixed fee for the system uptime or a variable fee depending on the kwh used
2 approahes towards SHS diffusion. As part of a solution to the maintenane problem, they reommended poliy makers and development aid agenies to inlude maintenane servies (after-sales servie) into publi programmes or publi private partnership [3]. Be it high-teh or low-teh, top or bottom of the pyramid business, provision of satisfatory servie to ustomers requires the integration of value reating proesses in the manufaturing systems, maintenane and spare parts supply systems, logisti systems, et. [5].A major problem for renewable energy projets in rural ommunities has been a lak of maintenane and proper after-sales servie. And this is worse when the projet is a one-time donation projet by NGOs or other stakeholders. Suh kind of one-shot projets have been reating bad image of some tehnologies among the rural users [12]. The lak of repair or replaement servie enfores the rural users to simply throw repairable and replaeable produts and pollute the environment [7]. After-sales servie, by itself, onstitutes a business opportunity and it is beoming a differentiating fator for resellers and manufaturing ompanies as well [4].Effetive after-sales servie delivery guarantees a strong onnetion between ustomers and the supplier as it does inrease ustomer satisfation and loyalty. Unless a system for return or repair of SHS produts is established, a viious yle of adoption may prevail, i.e. if early adopters fae after-sales problems, they would never reommend for the potential adopters and that would affet further adoption of SHS [15,7]. The supply of SHS to developing ountries, mainly Afrian ountries, is predominantly from Europe and Asia whih made it diffiult to trae the entire supply hain [7]. Experts and poliy makers reommend extended produers responsibilities as part of ombating the short life time of usable solar produts and the sustainable (re)use of suh resoures; however, the implementation requires a huge investment from every stakeholder. Part of the solution reommended inluded loal presene of suppliers loser to the market [6]. In this study, we mainly rely on the oneptual framework developed by Hirmer and Cruikshank who proposed key sustainability riteria along the value hain of PV for sustainable deployment and diffusion of PV tehnology [7]. Besides showing the suess fators for the diffusion, it is also a goal of this study to highlight harateristis of ators and market networks that show relative suess in the diffusion of solar energy innovations. Without emphasizing more on the nature of ators, we explore the type of market networks needed for ahieving faster and wider diffusion of solar energy innovations through provision of after-sales servie and loal presene. As presented briefly, in general, both the reent and the past literature addressed the role of after-sales servie in the market suess of the supply side and its impat on the demand side as well. In this setion, we inluded brief literature addressing the role of after-sales servie in the diffusion of SHS. But, still less emphasis has been given in literature in exploring suess fators in the diffusion of rural energy tehnologies among developing ountries. Hene, following the argument that after-sales servie and loal presene are among the key fators influening SHS adoption in developing ountries, we elaborate our argument in a ase study in Ethiopia. The ase study would reveal how loal presene and after-sales servie provided SEF a ompetitive advantage among other solar ators in Ethiopia. Moreover, added ontribution of this study would be in indiating the nature of market networks made by ompanies or organizations for a ompetitive position through establishing loal presene and after sales servie for rural users. This is elaborated in the penultimate setion of this paper, exploring the peuliar nature of SEF and its network in Ethiopia. III. METHODOLOGY This ase study is embedded in a larger researh projet on the diffusion of solar energy tehnology in Ethiopia. Data for the study was gathered from three respetive field researhes in Ethiopia. The seletion of a ase organization and its approah has been through a prior preliminary study of all solar energy ators and networks engaged in Ethiopian solar business/market. Semi-strutured interviews, fous group disussions, and field observations were employed methods for data olletion. In addition, seondary data and arhival douments were used as data soures for study. As proposed in [22] suh a ase study is applied for explorative researh purpose while addressing how and why events happened. For the ase study, we speifially took two villages, Rema and Minjar, two of the most solarized villages in the ountry, where SEF is also very ative in. We interviewed eight villagers from Rema and thirty two villagers from Minjar in two field visits in 2012 and The data olleted inluded how and why the villagers hose the SHS supply option and what problems they faed during the adoption and /or utilization period. This helped us to draw lessons on the approahes of the three solar energy ators in Ethiopia (NGO-SEF, Government- rural eletrifiation programme, and private ompanies/dealers) and the key fators for the relative suess in installing higher number of SHS. While fousing on in depth investigation of the pratie of SEF, we also relied on expert interviews and fous group disussions for addressing the views of other interest groups in the solar market. This helped us to draw mainly the unique position of SEF in addressing the solar market in Ethiopia. IV. CASE DESCRIPTION A. Solar Energy Foundation StS Network for Rural Development is the mother assoiation of all "Stiftung Solarenergie - Solar Energy Foundation" worldwide, based in Europe. It is a hybrid network of for-profit organizations and non -profit
3 TABLE 1.ACHIEVEMENTS OF SEF IN ETHIOPIA (SOURCE: SEF) Period History ( ) Ahievements Ahievements( ) st pilot projet-kehemober nd pilot projet(large sale)-rema 2007 International Solar Energy Shool (ISES) 2008 Revolving Fund-Mirofinane Department 2009 Network of Rural Solar Center 2010 Sun Transfer Ethiopia 154 Primary shools ; 35Health enters; 83 Villages supplied with solar system from SEF; > 300,000 Euros miro-redit provided; 64 Solar -tehniians trained; >400 Short term trainees; 21,580 total solar home systems installed 2011 International Solar Energy Institute (ISEI); Rural Solar Miro Finane Institute (RSMFI) organizations. SEF, part of the network of organizations and ompanies first established in Germany, is urrently operational in Ethiopia, Philippines and Kenya with the aim of alleviating poverty in developing ountries by promoting the use of renewable soures of energy, mainly solar power. Registered as Solar Energy Foundation (SEF), the StS Network has been ative in Ethiopia sine It was registered as an NGO and later as a ompany through its affiliates, works in rural areas eletrifiation through solar innovations. SEF laims its approah as a holisti, ombining produt development, human resoure development, and finaning. The basi philosophy of the foundation aording to the founder, Dr. Harald is balaning finanial and soial sustainability together and the profitoriented enterprises in the StS Network are led by the nonprofit foundation and not vie versa [20]. SEF kiked off its pioneer larger projet with 6, 000 households in the now alled solar village, Rema, 240km away from Addis Ababa. After modelling the Ethiopian experiene, the first solar enter was established in Kenya in SEF has got its own daughter ompany alled Sun Transfer that supplies the solar innovations being diffused to the rural areas of Ethiopia, Kenya and the Philippines. It has also established its own miro finane institute and training shool, whih are independent business units by themselves. Historial paths and major ahievements of SEF in Ethiopia are summarized in Table 1. B. Ethiopia and Its Solar Energy In our exploratory study, it was identified that the main solar energy ators regarding rural energy market in Ethiopia are NGOs and very few private ompanies [10, 11]. There has been very limited partiipation of private ompanies whih are urrently relatively ative in the lower end of the value hain, mainly in importing, retailing and installing institutional 4 solar systems. Only reently at the end of 2012, a solar PV module fatory was established in the ountry. SEF, however, has had a loal assembly plant where they (dis)assemble solar lanterns and SHS omponents in the viinity. Ethiopia while possessing one of the highest solar radiations in sub-saharan Afrian ountries remains one of the poorly eletrified nations. Like many other developing ountries, major barriers to the diffusion of solar energy tehnology in Ethiopia inludes market struture problems, infrastrutural problems, institutional problems, finanial problems, and apabilities problems [18]. Finanial problem prevails on both sides of the supply hain as users demand loans and private ompanies also need high start- up apital to engage in solar business [10, 11]. However, exploring the approah of solar ators, it was revealed that a relatively atypial and sustainable approah for the diffusion of solar innovations is emerging in the ountry. Rather than dwelling on exploring the problems, we foused more on finding key suess fators for this relatively better performane of SEF in terms of diffusion of SHS in Ethiopia. V. KEY FACTORS FOR SOLAR ENERGY TECHNOLOGY DIFFUSION: LOCAL PRESENCE AND AFTER-SALES SERVICE We had first asked respondents to nominate a model ompany or organization, relatively suessful in the diffusion of SHS in Ethiopia. Among the respondents, 42% mentioned SEF as a suessful solar ator in Ethiopia. Through suh iterative and 'snowballing' approah of researh, 4 Institutional systems refer to large-sized solar systems installed in publi institutions (organizations) suh as primary shools, health and ommunity entres.
4 we investigated the uniqueness of SEF in its SHS diffusion approah in Ethiopia. Next, we disuss the two differentiating fators for SEF among the solar ators in Ethiopia. A. Loal Presene Although it is generally aepted that end-users are entitled to hoose the best solutions for their own needs, this is not normally the ase in SHS market in Ethiopia and other developing ountries [21]. There has been a onventional thought that both the tehnology and the finaning mehanism should ome from the supply side while ignoring the purhasing apaity of potential adopters who are kept away from the tehnology for lak of awareness and unavailability of loal supply. Also ooften NGOs and ompanies (both national and international) in developing ountries like Ethiopia address the rural market through their establishments (partners) loated in the major ities. In some ases, suppliers may not have loal presene at all exept through on and off loal importers.a business manager of a multinational ompany in Japan mentioned that his ompany found it expensive and hallenging to have loal presene and effetive distribution hannel to reah the rural ommunity in sub-saharan Afria. SEF, however, first established its training, maintenane and after-sales servie enter( all in one shopping model ) right at the users area in Rema. The enter was a warmly welomed move by the Ethiopian rural ommunity as they would have easy aess to make any laim related to the produt they purhased or they were offered, in some instanes. As it happens quite often in developing ountries, other NGOs only throw their gadgets and do not ome bak again [12].Credibility and trustworthiness through loal presene are essential riteria in the diffusion of innovation among the rural ommunity [1]. SEF ould manage to earn trust by the loal ommunity through its loal presene, as learnt from our informants in the rural villages. The solar enters established by a team of solar entrepreneurs and tehniians nearby the rural ommunity is a major step taken by SEF. The solar enters are by themselves business units whih are run by the graduates from the foundation s solar institute. The enters form a business network and they promote their solar business, install solar systems, provide maintenane servies, and also deal with the miro-finaning issues. SEF laims that it has launhed 14 solar enters loated throughout the ountry as depited in Fig. 1. A missing link in tehnology development and diffusion efforts has been the inability to address the demand of the users [15]; hene, the setup of solar enters loser to the demand side gave SEF a ompetitive advantage in ustomizing new produt and servie designs up to the requirements of the users. SEF through its daughter ompany has been produing and supplying from a 1.5 Wp(Watt peaks) lantern to a 60Watt solar TV to the Ethiopian market 5, depending on the needs of loal users. A similar ase in point worth mentioning is a reent marketing approah of a Japanese MNC whih is urrently supplying innovative solar solutions /solar tehnology pakage/ addressing both the lighting needs and malaria problems of Afrian villages after a thorough loal needs assessment, residing and testing its produts in the villages. Loal presene, hene, equips the supply side with the right knowledge to address the loal market whih in turn is refleted in the diffusion volume of the tehnology. Fig.1 Rural solar enters for ustomer servie of SEF [20, p.41] The relative suess of SEF an partly be refleted in the solar tehnology diffusion in Ethiopia from 30 SHS installations in the first projet in 2005 to 22,000 SHS installations in 2012 as depited in Fig.2. Fig.2. Cumulative SHS installation by SEF in Ethiopia (Soure: SEF) B. After-sales Servie Loal presene alone may not guarantee delivery of servie to the rural user of SHS. One of the omplaints we 5 The main produts of SEF inlude: Sun Transfer-1(ST-1):1.5Wpmodule with a high power LED and easily transportable; ST-2: 2.0 Wp module with a high power LED, 3 light settings; ST-5: 5.0Wpmodule with three portable solar lamps; ST-10:10Wpmodule, inluding 4LED lamps, onnetor for optional radio/assette reorder; ST-20:20Wpmodule, inl.24cfl and LED lamps, onnetor for optional radio / assette reorder (Soure: SEF).
5 heard from the majority of the reent government eletrifiation programme benefiiaries in the village of Minjar was that they do not know who to ontat and where to get maintenane servie when something goes wrong(inluding very minor problem) in the system. The government rural eletrifiation programme was arried out as a one-time bulk purhase and installation projet whih did not well onsider the after-sales servie for the installed systems. As part of the exploratory researh, it was found that among the respondents, inluding business managers and solar energy experts, 60% mentioned lak of aess to maintenane servie is a ritial problem in the diffusion of SHS in Ethiopia. Also during our field researh in Rema village, a solar tehniian working for SEF mentioned that three to four people daily visit the maintenane enter in Rema for onsulting even minor problems. As shown in Fig. 3(a) a small kid was arrying and taking a malfuntioning harger ontroller to the Rema solar enter (Fig. 3b) while we were in the field researh in February Among the surveyed villagers, at least three of them hanged battery during the three year servie period. Some also mentioned that they never over utilize (over disharge) the system to avoid early damage of the battery. This is partly a manifestation of a relative awareness level reated by the advie they get from the nearby solar tehniians. The loal presene and its after-sales servie, in general, provided SEF a ompetitive advantage in earning the trust of the loal residents. One of our informants (a housewife) in Minjar mentioned that her family did not want to adopt SHS either from SEF or the government REF projet 6 for several months due to the high upfront ost; later, they purhased a heaper solar lantern from the market and it, however, failed in a short period of time. They were still keeping the malfuntioning lantern at home for they annot return or get maintenane servie from the dealer. The environmental impat of end of use or end of life of SHS also needs due attention. The availability of maintenane or olletion point would lessen suh long term impat on the environment. Our study, in general, agrees with the generi oneptual proposal of Hirmer and Cruikshank, while our study emphasizes the pratie of an organization in diffusion rural energy innovations to developing ountries. In the following setion, we disuss possible elaborations of why SEF ould be in a better position to have a loser attahment to the demand side (rural ommunity) and manage to take a larger share of the SHS installation in Ethiopia. The disussion may also shed light on the nature of ators and networks who may be fit to address the SHS diffusion in developing ountries. VI. IS SEF IN A UNIQUE POSITION? Fig.3 (a). A small girl arrying a harger ontroller in Rema The approah of SEF, first through donation and pilot projets, and later turning into solar business through its affiliate business units (solar enters) is unique in that donation alone is not sustainable and the rural marketis untapped market if support institutions are in plae. The nonprofit and profit mixed approah of NGOs like SEF, however, is not welomed by some ators. One of the interviewees laimed that NGOs should pursue only what they are established forand they have to ompete on equal ground with the private ompanies. However, as far as there is free market and legal institutions allow suh ases, the omplaints on the establishment proess of business affiliated units of NGOs like SEF remains less onvining. As per our lose investigation, SEF has got unique positions in at least three different market networks as disussed below. Fig. 3(b). A maintenane enter of SEF in Rema 6 REF is a rural eletrifiation funding projet managed by the Ethiopian government; Its finane is soliited from World Bank and other donors/finaning institutions.
6 A. Supplier User network SEF has got its solar enter established and serving inside the ommunity. They promote, sell, install, and provide maintenane servie living within the ommunity. The provision of suh servie has provided onfidene to the loal users as they get in touh with a losely available and aountable body for their bought produt/servie. As stated in literature, potential adopters would like to see the experiene of early adopters about the reliability of the innovation [9]. SEF, having hands on both side of the supply hain, an address the demand of the rural market. It has got a ompany supplying the tehnology and it has got solar enters listening to the demand. B. International- Loal network As previously disussed, loal presene alone, unless supported by a strong international value hain, may not suffie to diffuse a tehnology in developing ountries as lak of resoures prevails in this part of the world. SEF gets its main solar tehnology supply from Europe and Asia while it also owns a loal assembly plant in Ethiopia. The international-loal network of SEF strething from Europe down to the rural villages in Ethiopia might have uniquely ontributed to its relative suess in Ethiopia, while both pure loal or pure foreign ompanies and organizations ould find it hallenging to address the market (See pitorial depition in Fig.4). SEF in this perspetive as a network of many international ompanies and organizations inluding donors ould be in a unique position in the solar market in Ethiopia. Rural Community (Users) SEF Finane and Tehnology from Abroad (StS Network for Rural development) * Fig.4 International and Loal links of SEF (as drawn by authors) Solar enters (Ethiopia) C. NGO-Private network SEF has got a soial apital due to its unique nature as an NGO baked by international network of business ompanies and organizations. The onnetion it has had and its unique position working both as NGO (inluding through donation) and partnering with its daughter ompanies might have also ontributed for having the higher share of solar innovations diffusion in Ethiopia. As neither pure NGOs nor pure ompanies ould not address the rural SHS market in Ethiopia in a full-fledged manner, this hybrid nature of SEF might be the other uniqueness and bak up for its relative suess. In general, the intention here is not to hastily onlude that SEF or its alikes are the only ones to address the SHS market but to support our argument that loal presene and after sales servie might require networking and addressing the supply hain omprehensively. VII. CONCLUDING REMARKS In this exploratory study, we tried to identify both from literature and a ase study in Ethiopia that loal presene and after-sales servie are among the key fators in the diffusion of SHS. The disussion on the pratie of SEF in Ethiopia may shed more light on the nature of partnership and strategy required to have a wider diffusion of rural energy innovations through loal presene and provision of after-sales servie to the rural ommunity. Large multinational ompanies and organizations have limited aess to their end lients in the developing world, whih in turn affets the development and diffusion of tehnologies in this potential market. Hene, partnership with the loal firms (organizations) that an easily aess the rural ommunity ould be a better way to go for rather than establishing a (sales) branh in the ities whih often stays far from the rural users. Loal government and poliy makers, in this regard, may also have to give due attention to the availability of effetive after-sales delivery as equal as their attention to the provision of physial produts through bulk purhase suh as in government prourement mentioned in our ase, Ethiopia. With due understanding that a ase study has its own shortomings, this study tried to reflet on the two key fators urrently affeting the diffusion of SHS in Ethiopia and other developing ountries. With this aspet, the study affirmed the sustainability riteria proposed by previous researhers for sustainable deployment and diffusion of solar PV. Further study on the impat of loal presene and after-sales servie on the diffusion of SHS and other rural tehnology in other ontexts would be essential. ACKNOWLEDGMENTS We would like to thank Ritsumeikan University Kokusaiteki Offie for providing researh grant for the field trips of this researh projet.
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