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Produced by the NASA Center for Aerospace Information (CASI)
DOE/NASA/20485-13
NASA TM-83035
(NASA-TA-83035) THE WORLDWIDE MARKET FOR
PHOTOTOLTAICS IN THE RURAL SECTOR (NASA)
15
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HC A02/AF A01
CSCL 10A
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The
Worldwide Market for Photovoltaics
in the Rural Sector
William A. Brainard
National Aeronautics and Space Administration
Lewis Research Center
R
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REC.'S'
NASA
ACCAASS Pff'
Work performed for
U.S. DEPARTMENT OF ENERGY
Conservation and Renewable Energy
Division of Photovoltaic Energy Systems
Prepared for
Sixteenth Photovoltaic Specialists Conference
sponsored by the Institute of Electrical and Electronics Engineers
San Diego, California, Septernoer 27-28, 1982
DOE/NASA/20485-13
NASA TM-83035
The Worldwide Market for Photovoltaics
in the Rural Sector
William A. Brainard
National Aeronautics and Space Administration
Lewis Research Center
Cleveland, Ohio 44135
Work performed for
U.S. DEPARTMENT OF ENERGY
Conservation and Renewable Energy
Division of Photovoltaic Energy Systems
Washington, D.C. 20545
Under Interagency Agreement DE-AI01-79ET20485
Prepared for
Sixteenth Photovoltaic Specialists Conference
sponsored by the institute of E
l
ectrical and Electronics Engineers
San Diego, California, September 27-28, 1982
THE WORLDWIDE MARKET FOR PHOTOVOLTAICS IN THE RURAL SECTOR
William A. Brainard
National Aeronautics and Space Administration
Lewis Research Center
Cleveland, Ohio 44135
ABSTRACT
The NASA Lewis Research Center manages the Stand-Alone Applications
Project for the U.`,. DOE. During the 1980-81 program year, that project
office sponsored tree major studies to determine the worldwide market for
stand-alone photovoltaic power systems in three specific segments of the
rural sector. The three studies addressed the worldwide market for
photovoltaic power systems for village power, cottage industry, and
.y
agricultural applications. The objectives of these studies were to:
o
Assess the market potential for small stand-alone photovoltaic
power system in specific application areas
o
Identify technical, social and institutional barriers to PV
utilization
o
Identify funding sources available to potential users
o
Recommend marketing strategies appropriate for each sector to
American PV product manufacturers.
The studies were prepared on the basis of data gathered from domestic
sources and from field trips to representative countries. This paper
summarizes the results of these three studies. Both country-specific and
sector-specific results are discussed, and broadly applicable barriers
pertinent to international marketing of PV products are presented. Generic
recommendations to American PV manufacturers of appropriate strategies for
the international market in general are also made.
INTRODUCTION
Very early in the National Photovoltaics Program, it was realized that
because of the widespread electrification of the United States and other
developed countries, most of the initial market for terrestrial photovoltaic
systems would be in the developing regions of the world. Such systems, it
was reasoned, were more likely to be cost-competitive with alternative
energy sources especially in rural areas. The basis for this thinking was
the realization that the real cost of supplying small amounts of power
dependably to remote areas is extremely high when one determines true cost
for transmission line installation or generator installation, operation and
maintenance.
The U.S. Department of Energy sponsored several activities designed to
help the establishment of a strong, competitive American photovoltaics
industry. One of these activities was to conduct assessments of the market
for photovoltaics in several sectors. The responsibility for conduct of
market assessments for small stand-alone (i.e., non-grid connected)
photovoltaic systems was assigned to the Stand-Alone Photovoltaic Systei
Project Office managed by the NASA Lewis Research Center. In response
this assignment, that office issued contracts to three organizations to
study the market for stand-alone photovoltaic systems in three specific
rural sectors which were felt to be large potential markets. The market
studied were: (1) the rural village PV power market, (2) the cottage
industry PV power market, and (3) the agricultural PV power market. The
three organizations who conducted these studies under NASA-Lewis-managed
contracts were Motorola, IIT Research Institute and DHR, Inc.,
respectively. These studies had four major objectives:
o
To assess the market for stand-alone photovoltaic power systems in
specific application areas
o
To identify the technical, social and institutional barriers to
widespread photovoltaic utilization
o
To identify sources of financing for potential purchasers
o
To recommend to American photovoltaic manufacturers strategies
appropriate to mar'c tinq photovoltaics in the developing world.
These studies resulted in a series of reports (refs. 1 to 8) that were
distributed to the American photovoltaics industry over the last 18 months.
This paper hriefly summarizes the results of these studies.
MARKET STUDY RESULTS
The Market for Photovoltaics for Rural Village Power
The market for photovoltaics in the developing world for remote village
power systems was studied by Motorola (ref. 1). For the purposes of the
study a remote village was defined to be:
"A grouping of up to 2000 people living in a remote area, but in close
enough proximity to interact with each other on e.. daily basis."
The term remote as used in this definition implies that the village is
located such that it cannot be supplied economically with central station
utility power.
The methodology employed in this study had two major components: a
literature search, and a series of in-country surveys. The literature
search gathered pertinent information such as developing countries' rural
electrification plans, utility rates and costs of power line extension, and
performance and cost data of alternative forms of power generation such as
diesel generators. The information gathered was used to determine the key
regions and countries for further on-site investigation and to determine the
approach to be used in the in-depth in-country surveys. The countries
selected for the surveys were also selected so as to provide a
representative cross section of the developing world. The criteria for
selection included: (1) the country be located in or near the sun belt, (2)
the country possess a possibly sizable market potential, and (3) the country
be accessable to U.S. marketers. Additionally, the countries chosen
represented both the oil importing and oil exporting nations. The
in-country visits accomplished the following objectives:
o
Gathered new data and validated data acquired during literature
search
o
Acquainted local officials with present status and future plans of
U.S. PV industry
o
Determined potential obstacles or barriers to PV market development
o
Assessed the degree of possible penetration of potential market
A total of 23 countries (table I) was surveyed and over 800 key people
were contacted.
Village Power Study Conclusions. - In order to estimate the potential market
for photovoltaics in the village power sector, the power requirements for
representative remote villages were estimated. It was assumed that an
average remote village population would consist of about 500 people living
in 100 homes. Table II shows the assumptions made for village
electrification. It was estimated that about 10.7 kWp per village would be
required. Thus an average of 10 kWp per village was used for calculation
purposes.
Based on the approximate number of unelectrified villages identified
during the in-country survey, an extrapolation was made for the entire
developing world. This extrapolation estimated a total of 2 million
unelectrified villages. Multiplying 10 kWp per village by the 2 million
unelectrified villages results in a total potential market of 20 000 MWp.
This is probably a conservative estimate of the total village power
potential, because the potential for replacement of diesel generators
already installed in to a large number of villages was not included.
Assuming that the 20 000 MWp estimated nn
t
ential is relatively accurate,
the next question is, "How much of it can actually be achieved?" To answer
this requires other important factors pertinent to international PV
marketing be considered, such as availability of financing, existence of
import restrictions, knowledge of photovoltaics in the developing world, and
others. These can he thought of as the barriers to international PV
marketing, and tend to be the same regardless whether the market being
studied is the village power or the agricultural market. A discussion of
these barriers to international PV marketing will be presented later.
When the barriers are considered, the achievable village power market in
the near term (i.e., the next 10 years) was estimated to be not more than 5
percent (1 GWp) of the potential market. The primary reason for this
somewhat pessimistic estimate is that m.^,ving a new technology into a market
having limited financial resources and that is somewhat slow to accept new
ideas will take time. The first 5 years of the period will be devoted to
proving that photovoltaics is truly a viable alternative energy option. The
last 5 years will be the beginning o
f
the true commercial market.
3
also considered that: some rural industries are electrified or soon to be
electrified by a grid network, in some areas hydro or wind
power may be more
appropriate, and some rural areas will have insufficient solar radiation for
effectively utilizing photovoltaics. Th- remainder of the market is assumed
to be the potential market for stand-alone photovoltaic systems,
diesel-driven generator sets or gasoline-driven generator sets. Based on
these factors, the potential market was found to be 70 000 megawatts.
The amount of this potential market that can be achieved
in reality,
however, appears to be very small, at least in the near term. The major
reasons supporting this conclusion are that cottage industries, in general,
are severely capital constrained and are not good candidates for loans or
recipients of significant public sector support. Further, for many of the
most economically significant cottage industries, the power levels required
are high enough that stand-alone photovoltaic systems, at the system cost of
$6-$13/Wp assumed in this study, ma
y
not be the most economical means of
providing decentralized sources of electric power. For example, a barrel
making operation was estimated to require a 30 kW photovoltaic system in
order to fully electrify the "factory". Under the cost scenarios employed
in
this study, a diesel generator set was determined to be a better economic
choice than photovoltaics in the near term. Only those applications
requiring small amounts of electric power, such as lighting and small tools,
would be viable. "ollectively these applications amount to only a very
small fraction of t
►
,- potential market.
Market for Photovoltaics for Agricultural Applications
The market for photovoltaics in the agricultural sector was studied by
DHR, Incorporated (refs. 3 to 8). This study was conducted in a manner
similar to the other previously discussed studies. First, a domestic
literature search was conducted to characterize the agricultural sector of
developing countries and to develop an approach to be used during in-country
visits conducted under the second part of the study. Five countries were
selected for detailed in-country surveys: Nigeria, Morocco, Colombia,
Mexico and the Philippines. These countries were selected on the basis of
several factors including: economic importance of agricultural sector,
energy situation, extent of electrification, solar resources, and geographic
representation.
These surveys included a series of meetings with the country's energy,
agriculture, economic, financial, business and policy experts to obtain
current agricultural and energy development and policy data and an
evaluation of factors important to introducing PV power systems into the
agricultural sector. Site visits were made to obtain power requirements and
energy use profile data for several agricultural applications. The
information gathered provided a data base to characterize the environment in
which PV systems would be marketed and used. Data on applications were used
to identify cost-compet
i
tive end uses by year of competitiveness. An
example of the cost-competitiveness end uses for a specific country, Mexico,
is shown in table III. Similar end uses were identified for the other four
countries in which the surveys were conducted.
The results obtained for the five countries surveyed in-depth were used
to prepare a projection for the photovoltaic market in the agricultural
sector worldwide. The methodology employed in that projection is detailed
i
in reference 8 and essentially involved quantifying the photovoltaics market
on the basis of the factors which were determined to be the most important
based on the in-country case studies: The estimates produced by the
methodology, while useful in drawing broad conclusions, should, because of
uncertainties in data accuracy, and the influence of nonquantifiable factors
such as distrust of new technology, be treated as only first order estimates.
Agricultural Study Conclusions. - The study estimated that the real
worldwide agricultural sector market ranges from 14 to 55 help between 1981
and 1986. These projections assumed that the DOE 1982 and 1986 cost goals
for both modules and systems were achieved. Clearly significant delays in
achieving the projected selling costs will cause reductions in the real
market. The countries which are projected to account for over 90 percent of
the regional market are shown in table IV.
In addition to the quantitative market estimates, the study made several
conclusions regarding the technical and economic feasibility of stand-alone
photovoltaic systems in the agricultural sector which are noted below.
o
In the next 2 to 3 years only small power needs can
economically
supplied by PV systems. They include battery charging, small field
irrigation and livestock watering from shallow depths, small
grinding mills and small produce coolers.
o
By about 1985-86, PV applications requiring 4 to 6 kW of power will
be economically feasible. The feasible applications expand to
include irrigation and livestock watering from deeper wells, larger
grinding/milling operations, produce coolers and freezers, and
aquicultural uses.
o
The relatively maintenance-free operation of PV systems may swing
the balance in favor of PV systems and away from diesel and
gasoline generators, even if PV power is more expensive, in
countries which have poor equipment-servicing facilities.
o
Except for livestock watering under open range conditions, the
ability of PV systems to operate unattended is not a significant
advantage in agriculture.
o
In the next 4 to 5 years the ultimate purchaser of larger PV
systems (through direct purchases or financing by development
banks) in developing countries will be ti;e government. Thus, PV
must be shown to be economically feasible when compared to its
nearest competitor.
o
The private sector may be able to afford (through outright
purchases or with commercial bank loans) small power systems since
capital investment is much less.
o
In countries where farmers are faced with high fuel prices, in 1982
a PV system will be cheaper to operate, on an annual cash flow
basis, than a gasoline powered generator of about 1 kW,
,
o
Although only small power needs can be economically served by PV
systems in agricultural applications, the market is significant.
Barriers to International Photovoltaics Marketing
All of the studies identified barriers that must be overcome by American
photovoltaic product manufacturers before successful international marketing
in the developing world can be achieved. These barriers tend to be the same
regardless of the application sector. The most significant barriers are
summarized below.
o
Lack of awareness of PV technology and its applicability is a major
barrier to market development. Compounding the awareness problem
is the attitude that photovoltaics is an "energy source of the
future." This problem pervades all decision-making strata ranging
from government officials, financiers, dealers and distributors,
and users.
o
Other than the oil-exporting nations, most potential customers have
limited access to long-term financing. In addition, photovoltaics
will most lii,ely take a lower priority in the allocation of
government long-term capital financing particularly if other
renewable energy sources are judged to be economically superior.
o
Many developing nations are establishing government energy policies
that stress self-sufficiency. The import of U.S. photovoltaic
systems may be viewed as contradictory to that policy.
o
Consumer buying behavior in the developing nations is characterized
by high discount rates and consequently very fast payoff times on
investments. The high init
4
11
price of photovoltaic systems will
not be appealing to potential purchasers unaccustomed to life-cycle
cost decision making.
o
Many nations subsidize domestic fuel costs. This has the effect of
greatly restricting the market in the private sector when the
decision to purchase photovoltaics in contrast to a conventional
powered system will be made on a financial basis rather than an
economic basis.
o
German, French and Japanese photo
v
oltaic companies, through
demonstration projects supported by their governments and by
aggressive marketing, are establishing a strong presence in many
countries worldwide. Furthermore, some countries (e.g., Mexico,
Brazil, India) are developing indigenous PV industries.
o
The generally poor state of the world economy is severely affecting
the ability of developing countries to carry out rural development
plans which could have provided sources of financing for many
photovoltaic sales. Additionally, many developing countries are
imposing import restrictions, many of which may hinder
photovoltaics marketing efforts. Also the very strong U.S. dollar
relative to many developing countries' currency means increased
cost of imported photovoltaic products to consumers.
Recommendations to American PV Manufacturers of Strategies for
International Marketing
The three studies summarized in this paper made several strategy
recommendations to the U.S. manufacturers who wish to market their products
in the developing world to help overcome some of the barriers noted above.
These recommendations are summarized below and should be considered generic
suggestions to PV manufacturers and dealers based on field work. The actual
market strategies employed would depend significantly on the market
characteristics of the individual nations concerned.
Advertising/Information Dissemination. - A significant barrier to marketing
photovoltaics abroad is tie lack of information and awareness on the
technical and economic advantages of PV systems. To effectively reach the
potential customer and to create demand for PV products, demonstrations may
be the single most effective tool. With low literacy rates in developing
countries, information is often disseminated by word of mouth based on one
person's experience.
Financing and Pricing. - Customer financing of PV purchases may be the most
important factor in a developing country PV market. Low per capita income,
the lack of available long-term capital in some countries, and the high cost
of capital combine to severely restrict the ability of the customer to pay
for a Nigh first cost PV system. Some development banks will offer
long-term loans at low interest rates but only for cost-effective PV
systems. However, the total amount of money available may be small.
Focusing ,marketing efforts on corporations or government agencies that have
the money to buy PV systems will solve the financial problem, but the market
may be limited.
Another approach in overcoming difficulties is leasing the PV equipment
to -_he customer. Although leasing arrangements are generally not used in
developing countries, there are some advantages of leasing that make it an
attractive financial alternative. First, leasing a PV system will spread
costs over a period of years. Second, leasing programs can be operated by a
local distributor who would purchase systems from a U.S. manufacturer and in
turn rent systems to users. Thus the user does not have to make a 20 year
commitment, the U.S. PV manufacturer sells the PV panels outright, and the
healer realizes a substantial profit. Furthermore, it could be financed by
short-term working capital loans which are easier for users to obtain.
Distribution and Service Infrastructure. - Dealers and distributors are an
essential and costly component of any successful overseas marketing effort.
In the case of photovoltaics, the market to date is too small to support an
extensive distribution system within any developing country.
There are, however,a number of ways in which a distribution network
could be established: (1) piggyback onto existing pumps, electrical
generators, diesel and gasoline engine distributors; (2) establish a new
exclusive dealership within a country with a local entrepreneur; and (3)
8
develop an exclusive distribution system within a country by the PV
manufacturer.
Closely tied to the development of a distribution infrastructure is the
necessity of offering the customer quick and quality service for all
products sold plus maintaining r,dequate supplies to meet PV demand. As a
marketing tool, service availability is exceptionally effective.
Product-Market Fit. - In offering PV systems to the ThirL World community,
the PV manufacturer should initially offer small units that are economically
and financially viable as compared to other alternative energy sources.
Later as costs drop, the manufacturer may expand product lines to include
larger power outputs, offering an entire line. It is critically important
that complete systems as opposed to components be offered for sale. For
example, a PV-powered pump should be produced for sale rather than a PV
power supply for use with an electric pump.
Trade Relationships. - Finally, the PV manufacturer should b^ flexible in
considering the benefits offered by a developing country in terms of
tariffs, license, taxes, trade allowances, etc. In a virgin PV market and
with possible heavy Japanese and Europe!n competition, the early loss of
market share to competitors by not taking aggressive advantage of financial,
tax and other incentives offered by a developing country may hinder market
development later as competitors establish themselves in the marketplace.
REFERENCES
1.
C. Ragsdale and P. Quashie, "Market definition study of photovoltaic
power for remote villages in developing countries," Motorola, Inc.,
FDR-1110, NASA CR-165287, Oct. 1980.
2.
T. M. Philippi, "International market assessment of stand-alone
photovoltaic power systems for cottage industry applications," IIT
Research Inst., IITRI-JO6519, NASA CR-165287, Nov. 1981.
3.
R. A. Cabraal, D. Delasanta, and G. Burrill, "Market assessment )f
photovoltaic power systems for agricultural applications in the
Philippines," Rural Development, Inc., C4100-50, NASA CR-165286, Apr.
1981.
4.
W. Steigelmann, and I. Asmon, "Market assessment of photovoltaic power
systems for agricultural applications in Mexico," NASA CR-165441, July
1981.
5.
H. Steingass, and I. Asmon, "Market assessment of photovoltaic power
systems for agricultural applications in Morocco," DHR, Inc., C4100-50,
NASA CR-165477, Sept. 1981.
g3
r^
6.
D. Staples, H. Steingass, and J. Nolfi, "Market assessment of
photovoltaic power systems for agricultural applications in Nigeria,"
DHR, Inc., C4100-50, NASA CR-165511, Oct. 1981.
7.
W. Steigelmann, and S. Neyeloff, "Market assessment of photovoltaic
power systems for agricultural applications in Colombia," NASA
CR-165524, Nov. 1981.
8.
A. Ca5raal, D. Delasanta, J. Rosen, J. Nolfi, and R. Ulmer, "Market
assessment of photovoltaic power systems for agricultural applications
worldwide," DHR, Inc., C4100-50, NASA CR-165541, Nov. 1981.
Table I - Countries Surveyed
Africa
Arab and Mideast
Senegal
Jordan
Ivory Coast
Egypt
Nigeria
Sudan
Cameroon
Yemen
Gabon
United Arab Emirates
Togo
Pakistan
Mali
Tanzania
Kenya
Latin America
Southeast Asia
Mexico
Philippines
Brazil
Thailand
Peru
Malaysia
Colombia
Indonesia
t
10
Table II - TYPICAL VILLAGE POWER REQUIREMENTS
[Village size: 500 people, 100 homes]
FUNCTION
Water Pumping
i_iters/person/day
50
Wh/oay (5 hr/day)
4700 (1/2 hp)
Li hting - Indoor
Wh/day
Lights/home
hr/day)
16 OOC
Lighting - Outdoor
Lights village
5
Wh/day (12 hr/day)
2400
Television
Sets/village
LO
Wh/day (4 hr/day)
1600
Refrigerators
Refrigerators/village
10
Wh/day
10000
Grain Grinder
rain required/person
1 Kg
Wh/day
6000
Communications
Emergency radio ,ets/village
1
Wh/day
400
TOTAL kWh/day
41.1
TOTAL kWp Required*
1.0.7
* - Based on sunlight equivalent of 5 hr of
noonday sun.
s
ORIGINAL PAGE 19
OF POOR QUALITY
TABLE III - SUMMARY OF APPLICATION
ASSESSMENT FOR MEXICO
F
easible A ricultural
Size,
Year PV Can
"pp rations
Rppp
Compete
Cattle Watering
0.8
1982
Rural Potable Water
1.8
1984
Small Grain Loaders
2.0
1984
OTHER RURAL SECTOR PV APPLICATIONS
Radio - Telephones
0.3
1982
Lighting
.3
1982
Educational TV
and Tape Recorders
.3
1982
Private TV
.3
1982
Refrigerators
.3
1986
Irrigation
7 - 20.0
1986
Ice Making
73.0
1986
Crop Processing
10 - 300.0
1986
TABLE
T
V
-
COUNTRIES ACCOUNTING FOR 90 PERCENT
OF MARKET IN EACH REGION
Asia and Australia
Europe, North Africa and
Australia
Egypt
India
Greece
New Zealand
Italy
Pakis"an
Portuoal
Philippines
Spain
Thailand
Yugoslavia
Sub-Sahara
Central and South America
Ghana
Argentina
Kenya
Brazil
Nigeria
Mexico
Mozambique
12