Engie’s acquisition of Mobisol this month and a $50 million investment in BBOXX in August have highlighted the massive potential of Africa’s off-grid power market. But rural electrification is also a significant opportunity in Latin America.
In Mexico, for example, a handful of companies are rushing to bring solar power to the estimated 450,000 families, or around 2 percent of the population, living in areas too remote to warrant a grid connection.
Almost as many people have such poor grid access that they may go weeks or months without power, said Ana Lucia Coll Guzmán, chief information officer and innovation and strategy manager at Iluméxico, one of the leading rural electrification players in the country.
For these families, solar is an important source of energy, she said.
Since its foundation in 2009, Iluméxico has installed more than 20,000 solar home kits serving around 90,000 people in the states of Campeche, Chiapas, Chihuahua, Coahuila, Durango, Guerrero, Nayarit, Nuevo León, San Luis Potosí and Yucatán.
The company manages around 2.5 megawatts of off-grid solar capacity on behalf of customers who earn an average of just 2,450 pesos (around $125) a month and who in 90 percent of cases don’t have a grid connection for at least a kilometer.
The shift to solar-as-a-service
Iluméxico started out offering 25-watt kits, assembled in Mexico, under a lease-to-own model. Households were given PV systems on credit and customers ultimately bought the equipment by making regular small repayments. But the model had a number of flaws, said Coll.
One was that while Iluméxico provided free corrective and preventive maintenance during the repayment period, once the PV systems were fully owned most customers stopped contacting the company for upkeep.
A second problem was that even though the PV systems could continue running for many years, families often found it hard to save for the lead-acid batteries that are an integral part of the off-grid system and that needed replacing on a regular basis.
Finally, said Coll, once families had paid for a basic 25-watt system there was little incentive for them to invest in larger systems that could deliver greater value, for example by powering fridges and other devices.
As a result, in 2017 Iluméxico switched to a solar-as-a-service model. The company retains ownership of the PV systems and sells the electricity to rural communities at tiered rates depending on the power required by the community.
The fees, which range from 150 to 250 pesos ($8 to $13) per month, cover maintenance and battery upgrades and can be increased if the community needs more power. “It also allows us to provide a much better electrical installation,” said Coll.
So far, 8,000 customers have been enrolled in the solar-as-a-service scheme and Iluméxico expects to hit 10,000 by the end of the year.
Building a local workforce
Iluméxico has customer service offices and depots in each of the 10 states that it operates in and relies heavily on local employees and contractors for installation and maintenance work. Coll said 25 percent of Iluméxico’s field engineers are former customers.
“This is important for us because many of our customers do not speak Spanish,” she said. “We need a workforce that can speak to them in their local language.”
Iluméxico has traditionally gained customers via this network of field agents.
But it has also benefited, along with other off-grid providers, from a government-backed rural electrification financing program called the Universal Electric Service Fund (Fondo de Servicio Universal Eléctrico or FSUE in Spanish).
Launched by Mexico’s Federal Electricity Commission in 2017, FSUE was due to fund solar installations for more than 135,000 people across Mexico last year.
The AMLO effect
However, Coll said there have been no new tenders under the program since left-wing populist Andrés Manuel López Obrador was elected President in December 2018. López Obrador’s administration surprised observers by cancelling renewables auctions in February this year.
Given López Obrador’s commitment to rural communities, it remains unclear if the halt on FSUE activity represents a temporary pause or a permanent stop. “The program fits in with López Obrador’s politics,” said Coll.
“It’s in line with the objectives being pursued by the current administration. I think it’s just taking a while to refocus on this issue.”
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