Solar energy pricing: Evidence from Off-Grid Solar Power Providers

Abstract

The global development made energy as a humanity basic need. Thus, leads to the united nation in 2005 to adopt the global goal of electrification by 2030. The enforcement of global electrification is due to that energy is a backbone of poverty reduction, climate change, job opportunity and general population welfare (International Energy Agency, 2017). Through, differences in global relief and economic instability, international energy agency advised that renewable energy mainly solar will be the sustainable solution for both electrification and global climate emissions. Unfortunately, Africa is the continent with a big number of populations without having access to electricity. This hinders the goal of achieving global electrification by 2030 due to in 2013 only 43% of African has access to electricity (Bernard, 2012). It can be understandable by comparing Africa financial stability and require investment for Africa electrification. International energy agency report highlighted that Africa requires an annual investment of 31 billion USD for achieving 2030 global electrification (International Energy Agency-IEA, 2017). As shown by IEA (2017), highly population growth in sub-Saharan countries affects economic stability in the region, roughly 600 million of the 674 million people express 0.89 without having access to electricity. It sudden to hear that most of them are located in rural areas. Consequently, the low access to electrification leads to the used of fossil fuel coal and others unfriendly climate energy resources which still raise the crisis of global emission. Favretto et al., (2018) highlighted that, the consequence of global emission causes other inquiries such as climate change hazard as it faces some part of Eastern Africa like droughts in Ethiopia and Somalia. Rwanda is one of the developing countries that faces a problem of electrification mainly for rural population. Thus, the Government of Rwanda has the target of achieving the global electrification by 2024 by using renewable energy resources as well as off-grid connection. By this, there is attraction of off-grid companies, which will enhance the level of electrification. Solar energy uses

vii solar panels and batteries, obviously has different price to solar energy customers. The most common solar pricing is PAYGO (Pay-as-you-go), this pricing model allows customers to pay by daily basis. This pricing model settled by considering various factors affecting the pricing for solar energy was very useful and important in the setting of price for solar panel. In solar energy industries relies on the predicting of price through how much amount of money should charge to solar panel and their accessories before providing to the beneficiary, the following factors are mostly important: Cost of solar panel, Solar Radiation, Inflations and Seasonality, those factors are potential in the prediction and settling accuracy and affordable price Milanés-Montero, Arroyo-Farrona and Pérez-Calderón (2018) on how government can raise the number of populations with access to electricity mainly those in rural areas, recommended that government incentives, tax exemptions, offering of low interest loans to solar power providers are the best methods can be used. Advantageously, the above approaches outcome the setting of solar energy price. Wong (2012) and Panwar, Kothari, and Kaushik (2013) seen that the more the affordability of solar energy the more the inclination in of reduction in carbon emissions, reduction of energy costs and the more in improvement of job opportunity which leads to the sustainable social welfare and improvement of living of standard to the population. The Feed- in –Tariffs (FITs) policy and Pay-As- You-Go (PAYGO) are the important based method in setting solar energy prices. The significant of FITs is to promote sustainable access to renewable energy mainly solar and wind. Milanés-Montero, Arroyo-Farrona and Pérez-Calderón (2018) noted that the role of FITs in energy are to guarantee grid access for solar power providers, offering of long-term contract almost between 15 to 25 years and offer guarantee cost based purchase prices which means solar power providers are paid in proportion to the resources and capital expended in order to produce the energy. The PAYGO as a financial technology allows end-users to pay for solar energy in settlement mainly weekly installment and solar power providers sells services to end-users through a prepaid model. Opportunely, by this methods power providers financing to the end users and the end

viii users become an able to get solar energy, when the customers receive the solar panel at affordable price and good installment payment, this will increase the number of the population use the solar energy. The overall existing literatures emphases on solar pricing as one segment and solar energy pricing as another segment on African countries study based. Therefore, apart from other existing studies which used other analysis methods rather than econometrics price and prediction method, this study come up with econometric analysis method which emphasis on solar energy pricing and prediction as evidence from off-grid solar power providers for a case study of Rwanda. Henceforward, both solar service end-users and solar power providers will benefit on the study outcomes. Bimenyimana et al., (2018) mentioned that Rwanda is approximately 5peak hours per day while Heeten et al., (2017) witnessed that the peak time of Cambodia is about 2 hours from 19:00 and 21:00 with the work of Adeoye and Spataru (2019) who looked on modelling and provision hourly electricity demand also shown that the peak hour of Ghana is between 17:00 and 22:00, this evening peak hour time is different with that of Rwanda morning hours’ peak time. Therefore, we conduct the study on solar energy pricing with evidence from off-grid solar power providers for a case study of Rwanda.