Chapter 6. Policy Measures and Programs
6.3 RE Technology Deployment Program
6.3.1 Rural Area RE Deployment Program: RESCO
The ownership structure of RESCO is divided as follows: publicly owned, investor-owned, cooperative- owned and community-owned.20 The appropriate form of RESCO ownership for Cameroon should be determined later, depending on the direction of the establishment of the RE organization and its governance structure. Specific alternatives are as follows.
Alternative 1) Operating RESCO in the form of a regional public enterprise and absorbing RESCO under the Renewable Energy CNREC once it is set up
Alternative 2) Operating RESCO as a separate regional community organization
In the initial phases of the RESCO project, demonstration projects should be carried out to allow for the transfer of technological and operational knowledge from firms with overseas project experience21 and, based on the track-records of such projects, RESCO must expand its operating regions.
MINEE must prepare a separate qualification standard for selecting contractors for RESCO, and select qualified contractors accordingly. However, if the specialized company program (to be explained in detail later) is introduced, only registered companies should be permitted to provide services to the RESCO program.
MINEE must review legal systems and permitting standards to enable the flawless execution of the RESCO program. In addition, it should introduce incentives, such as tax benefits and low-interest loans.
The specifics of governmental support, such as the selection criteria for the contractors, tax benefits, and low-interest financing, must be determined separately.
6.3.1.2 RESCO Business Models
Model for Basic Living Project – Cameroon Solar Home Program
RESCO business operators conclude rental contracts concerning solar lanterns and cookers with consumers and hire out lanterns and cookers to them for fee. The business operators of RESCO are responsible for the maintenance of lanterns and cookers. The types of projects can be categorized as the lease model and the pay go model.
○ Lease (owned by suppliers) model: consumers pay a monthly equipment rental fee without the burden of initial charges. RESCO business operators have ownership of equipment even after the contract period ends. However, consumers can purchase equipment if desired.
20 Refer to Wikipedia article on suitable RESCO for Cameroon
21 Korean energy firms
○ Pay go model: consumers pay a certain fee (burden charge) at the beginning of the contract period and a monthly instalment afterwards. After the contract period expires, the equipment will be the property of the consumers.
RESCO business operators can 1) enter contracts directly with individuals or 2) with individual town committees. The town committee contracts with individuals and takes responsibility for collecting rental fees or instalments.
[Figure 6-9] RESCO business operational method: home rental model (proposed)
Source: KEEI
[Figure 6-10] Solar lantern and solar cooker
[ Solar Lantern] [Solar Cooker]
Source: Photo by the author
Source) http://mnre.gov.in/schemes/,
decentralized-systems/solar-systems/solar- cooking-steam-generating-systems/Date of last visit 2016.7.22
Source) http://www.sunlabob.com/solar-, date of last visit
O&M Model (Fiji model)
The focus of the O&M model is on maintaining and operating solar home systems supplied through donation from international donors or the free installation program of the government, instead of the RESCO’s own installation of RE facilities. Many LDCs pursue RE projects, such as solar home systems, that are funded by foreign aid because of local financial hardship. The poor condition or unsatisfactory performance of the installed facilities after installation is often a problem, as they are not maintained properly because of financial constraints and a lack of A/S organizations and manpower. In the O&M model, the RESCO provides the operation and maintenance services of the RE facilities installed for communities by donations, and is compensated by the government, who charges O&M fees to community members, in turn.
Standards for selecting the RESCO companies and fee-collection agents, as well as the appropriate level of charge considering facility replacement and reinvestment on other regions should be decided separately.
[Figure 6-11] RESCO business operation method – Operation/maintenance business model
Source: M. Dornan, 2011, Solar-based rural electrification policy design: The Renewable Energy Service Company (RESCO) model in Fiji, Renewable Energy 36 (2011) 797–803
Energy Supply Business Model
RESCO business operators conclude energy supply contracts with consumers, install facilities and supply energy through incentives offered by the government based on the relevant contracts. As regards the category of business, it is considered either as a “home supply project” that supplies energy to households by installing equipment on rooftops or in gardens individually, or a “community supply project” that supplies energy to a whole community. The initial solar PV and biogas implementation projects will expand gradually to include small hydropower, forestry biomass, and the like.
The advantage of the model is that the burden of high initial cost and maintenance cost on consumers are alleviated, as they only pay the charges indicated in the contracts with the RESCO business operators. There are two forms of facility ownership in the RESCO energy supply business model, as follows:
- Lease (supplier-owned) model: consumers pay monthly rental fees without needing to pay the initial (burden) charges. However, the RESCO business operators retain the ownership of the renewable energy facilities even after the expiration of contracts. If desired, consumers can purchase these facilities at agreed prices.
- Pay go model: consumers pay an initial fee (burden charge) and monthly instalment fees, and the facilities become the property of the consumers after the expiration of contracts.
[Figure 6-12] RESCO business operation method: Energy supply business model
Source: KEEI
Roadmap
The ownership structure, business model, and implementation plan for the RESCO program must be finalized before 2018. After finalization, a suitable foreign firm for technology transfer must be selected and the specific business model should be confirmed with the cooperation of this foreign partner. Subsequently, the demonstration project site must be selected. The demonstration project is scheduled to run until 2020, after which the RESCO program could be implemented in full-scale based on the performance of the demonstration project.
❙ Table 6-9 ❙ RESCO project roadmap
2017 2018 2019 2020 2025 2025~
Feasibility study and implementation plan Preparation for program,
demonstration project
Financing Plan
The RESCO program is supported by an initial investment into the first demonstration project, after which the project is expanded by utilizing the profits from the demonstration project. There are two methods to acquire the initial investment. The first is to utilize foreign capital, such as ODA. As the RESCO program utilizes appropriate technologies, the track-record could help to acquire foreign capital. The second method is to acquire the initial investment through local funding. If access to foreign capital is limited, MINEE should set aside a separate budget to carry out the demonstration project.
Cases on introducing RESCO program in foreign countries
M-KOPA Solar, a Kenyan small and medium enterprise (SME), sells solar PV kits (panel, three bulbs, with radio and mobile phone charger included) as a pay go option to low-income households. An advance deposit of 10% of the kit cost is required, and the rest is paid in instalments.
[Figure 6-13] M-KOPA solar power system
Source: Impact Business Review homepage, (http://ibr.kr/ibr,accessed on 2016.6.13)
The Sunlabob Company of Laos runs a solar home-system (SHS) rental business and solar-lantern rental business without government support. Under the SHS system, mainly 20~120 Wp solar panels are leased to consumers at a monthly rental charge of approximately 1.75 pound sterling for 20 Wp. Under the solar lantern system, consumers rent/return 2~4 W lanterns after charging them at a solar PV plant. The initial purchase cost of solar lanterns is covered by public funds, which is reinvested through rental income (Appropriate Technology Foundation, 2011, Appropriate Technology and International Cooperation and Development, 3rd Appropriate Technology Forum Sourcebook).
[Figure 6-14] Sunlabob solar lantern rental system
The Department of Energy (DoEF) of Fiji runs a SHS RESCO project. The DoEF owns the equipment, provides a portion of the maintenance costs that are levied on households to RESCO business operators, and investigates the conditions of maintenance service provided by RESCO business operators (Urmee and Harries, 2012). RESCO business operators maintain the DoEF-owned equipment and are remunerated by the DoEF for the work done.
The Ministry of New and Renewable Energy (MNRE) of India operates a RESCO solar-power generation. The project is carried out under a PPA contract between the site (roof) provider, power distributor, and solar PV supplier.
Source: http://www.undp.org/content/dam/uspc/docs/SPC%20Sunalob%20Renewable%20Energy.pdf, recent access on September 15, 2017.
<Overview of Indian RESCO Project>
RESCO model shall mean where the bidders intend to take a rooftop owned by some other entity on mutually agreed terms and conditions, including lease agreement from the roof top owner(s), and enters into the PPA with rooftop owner/distribution company/others for supply of solar PV for 25 years at a tariff as per request, for selection from the date of commissioning of project.
(Source: http://solarrooftop.gov.in/notification/Notification05052016-2.pdf, accessed on 2016. 7. 14)