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Solar Home Systems in Laos

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Solar energy is part of the Lao government’s and the World Bank’s off-grid electrification scheme. In total 15.000 households in 380 villages around Laos get their electricity from solar home systems (SHS). The panel users pay monthly fee that depends on the size of the solar panel and pay-back time. The usual monthly fee is 30.000 kip (about 3 USD) for 10 years. After the payment scheme is completed the user owns the panel.

DREAM research project team from Finland Futures Research Centre conducted interviews in six villages in two provinces which have been electrified by solar home systems. In order to get variation in the collected data, half of the visited villages were in very remote areas, whereas the other half situated close to the roads. There was also variation in terms of how long SHS had been used. In some villages the panels had been installed very recently, and in others they had been already more than seven years in operation. In the villages both users of SHS and those who did not use solar energy were interviewed to find out what positive and negative – expected and unexpected – impacts SHS had on users’ lives, and whether or not the program had any impact on those villagers who did not have a solar panel.

In the visited remote areas, the panels had been very recently installed. The villagers had poor access to services and markets, and mostly people lived in a subsistence economy. The users said they were happy with the quality of light, smokeless house and the possibility to work and study during the evening. The panels were working fine, but there were problems related to finance, maintenance and received information. The installation of SHS did not have significant positive impacts on income generation, because electricity was not used for income generation activities. Some SHS users had difficulties to pay the monthly fee because they lived in subsistence economy with little cash income. They often had to sell a chicken or a pig to pay the SHS monthly fee. As a result, even though the SHS made the life easier, it did not ameliorate livelihood. As the family wealth depends on the livestock, selling animals to pay the monthly fee is not sustainable in the long run. Unless they can develop other cash sources, paradoxically the electrification can lead to deterioration of their livelihood.

Another problem in remote villages was that many users had the impression that the battery change and other maintenance costs would be covered by the monthly fee, at least as long as they are in the paying scheme. This is not the case, and as the batteries can be very expensive, (700.000-800.000 kip, about 70-80 USD) many low income families will probably have problems in finding money for the new battery every two to five years.

In the so called easy access villages, i.e. villages which have some kind of road connection and are relatively close to markets and services, the situation was different. The households had more cash income and therefore usually less problems to pay the monthly fee. In some villages the light was used for making handicrafts in the evenings. The handicrafts were sold in the market nearby.

The challenge in the easy access villages related to the quality of the panels, not so much to the payment scheme as in the very remote areas. In one village the panels were no longer working properly after seven years’ use. The users could get only about an hour of light per day, despite of the new battery. They still had to pay the monthly fee and were worried that in three years time, when the payment scheme would end, the panels would be completely useless. The promoters of SHS had said that the panels would work for 50 years, but now it seemed that they wouldn’t last even for ten years when the payment would be completed. Villagers said that they had believed the promoters as they were officials and should know about these things. The villagers also told that they did not have a chance even to read the contract before signing it.

Besides the economic and quality difficulties that seem to relate to the SHS scheme, another challenge is that very often SHS are first installed to areas were the electricity grid will likely come within few years. For Provincial Energy Service Companies (PESCOs) that are making the panel installations, it is less profitable to install them in the very remote areas. It takes more time and money to install and collect the monthly fee from the very remote areas than in the areas with good road connections. Therefore, the main goal of the whole off-grid program, i.e. to provide electricity to areas which are not likely to get grid connection for the next 5-10 years, is not achieved.

According to the preliminary results of the DREAM project’s fieldwork, most solar panel users felt that the solar energy had made their life more comfortable. The energy was used mainly for lighting, but also for television and stereos. The challenges related to payments, quality of the panels and information flow. In the poorer areas, where people were living in subsistence economies with very little cash income, the users felt that the monthly fee was expensive and the payment scheme long. Especially battery replacement is expensive. In some cases the panels will not last even for the whole payment scheme, even though they have been said to last for as long as 50 years.

In order to improve the SHS program, it would be necessary to guarantee the quality of the solar panels and to make sure the information provided about the maintenance and the replacement of the batteries is accurate. Furthermore, the installation should start from the remote areas where the electricity grid is not likely to come, at least not for a long time. At the moment, the panels easily spread to areas where installation and fee collection is easy and economically feasible.