Insights from the Solar Industry in Rural Peru

In the mountains of rural Peru, solar power organizations are finding footholds. Their experiences may illuminate the challenges of electrifying remote areas. The Clean Energy Solutions Center hosted a webinar on Nov. 18 in which solar organizations in rural Peru described their practices.

Peru has just announced a national contract to leverage solar power for universal access to electricity. The experiences of these solar organizations may provide valuable insights for businesses in Peru and in other countries.

“In the jungle and the very high Andes, in areas that are very far away from different cities… there is a great amount of people without energy.” said Rafael Escobar, energy program manager at the nonprofit Practical Action.

50 million people in Latin America lack electricity, Escobar said. The population of rural Peru is around 7 million. In the area where Practical Action operates, 93.4 percent of the population lacks electricity.

“The government of Peru just in the last week has announced plans to award a large contract to Ergon Power SAC to bring renewable power to those who do not have access,” said Richenda van Leeuwen, executive director of the United Nations Foundation’s Energy Access Initiative.

“We are working in more than 100 little villages in an area with a lot of difficulties in transportation and communication,” said Carmen Becerril Martinez, president of ACCIONA Microenergia Peru.

Peru has a very dispersed population, van Leeuwen said. Solar companies there cannot take a regular commercial approach because there are very low profit margins. Affordability can also present a challenge.

Several of the presenters said the new contract should be implemented in a way that is community-oriented and appropriate for local homeowners.

In Peru, unlike some other nations, decisions about solar power appear to be made on a community basis. ACCIONA Microenergia held community discussions about distributed solar.

“Some people were a little bit skeptical,” Martinez said.

The communities that were interested in solar power created three-person photovoltaic electrification committees.

“One of the members of the committee has to be a woman,” Martinez said. “This is a way to enhance the role of women in these areas.”

Communities in rural Peru face substantial difficulties when they consider introducing renewable energy, so partnerships with businesses and other organizations are necessary.

“There is a lack of capacity for local governments to promote energy development,” Escobar said. “These governments are not able to foster these energy projects. There is a lack of support for technical issues and maintenance.”

“Operation and maintenance are key elements of this project,” Martinez said. She said ACCIONA Microenergia has committed to operate in Peru for at least 20 years to make sure the solar systems remain in good shape.

ACCIONA Microenergia’s program, Luz en Casa, broke even at the end of 2013. Default rates for this program have been lower than 1 percent, Martinez said.

“The Luz en Casa Program has proved that rural electrification with solar home systems can be economically sustainable and affordable to the very poor people,” Martinez said.

Luz en Casa focuses exclusively on home lighting and does not provide any other electrical amenities.
“The standard system we are installing includes three lamps and one socket,” Martinez said.

ACCIONA Microenergia is structured as a social microcompany, not as a foundation. The solar lighting is partly funded by a social tariff. Profit margins have been tight. “We need around 2,500 clients to ensure that the economics works,” Martinez said.

“This has to be economically feasible to ensure the project can become bigger and can cover all the needs we can identify,” Martinez said.

Martinez said the company works with AMP, a public provider of electricity, to supply basic electricity service to almost 4,000 households in poverty and extreme poverty via solar home systems with a fee-for-service model.

The households pay around $3.50 USD monthly, Martinez said. Previously, they spent 50 percent more to buy candles, kerosene, and mobile charging.

“The important thing is that these people are now having an income after managing their own energy systems,” Escobar said.

Practical Action has a training center that is working with technicians and politicians to plan renewable energy projects.

The organization is developing financing plans for a long list of renewable energy projects including wind, solar and hydropower. It is in the process of securing financing and collaborating with local communities.

This article was originally published by Clean Energy Finance Forum, a news website sponsored by Yale University. To subscribe to our newsletter, please visit our website.