Sustainable business model for off-grid PV electrification in developing country

Abstract

The electrification ratio of Sumba Island has been increased in the past five years from about 24.5% in 2010 to about 43% 2015 in which 55% of the share supplied by renewable energy resources (Hivos, 2015). Despite the progress on electrification ratio, there are still about 238 out of 433 villages which do not have electricity access (PLN, 2017). It is because some of these villages are located in remote areas which have limited access to infrastructures, such as roads and grid access. Currently, the rural households in Sumba Island use fossil fuel to provide their electricity needs. However, the use of fossil fuel is considered polluting, noisy, and expensive. Thus, renewable energy-based power generation needs to be introduced. While wind and hydropower could be very attractive for grid-connected options, off-grid solar Photovoltaic (PV) Systems stand out as the best solution for off-grid electrification because of Sumba’s dispersed population and limited infrastructure. Several off-grid PV projects have been carried out by the government as well as private institutions. However, the adoption of off-grid PV technologies for Sumba’s rural areas remains very slow. From the literature, it is known that the role of business model to overcome challenges of the adoption of off-grid PV electrification in rural areas is considered important. However, there is still no literature which explains how a sustainable business model helps to overcome the barriers faced by PV projects in the rural energy market. An exploratory study using desk research and cases study from seven different PV companies are used to understand how PV companies choose types of business models to address the challenges in the rural energy market. Then, this insight will be used to develop advices on business models for PV companies who want to operate their business in the rural energy market in Sumba Island, Indonesia. In this study, We developed a framework which explains the linkage between the barriers faced by PV companies in rural areas in developing countries and how the business model could help the companies to overcome these barriers. By using this framework, we discovered suitable business models which could be implemented by PV companies in rural areas in Sumba Island. Firstly, it is the distributor model which offers various PV products. Secondly, it is the distributor model which offers electricity services delivered by a microgrid. Finally, study limitations and recommended future studies were offered to improve the framework developed from this study.