Solar Home System – SHS

Solar Home System

SHS Background

The Solar Homes System (SHS) project is the first component of the projects based Access to Sustainable Energy Project (ASEP) grant agreement supported by $12.8 million from the European Union (EU) and $3 million from the Global Partnership on Output-Based Aid (GPOBA). ASEP is in line with and supports the PV Mainstreaming (PVM) component of the Republic of the Philippines strategy for achieving full electrification within the next ten years or so.

PV Mainstreaming is a DOE initiative, supported by the WB’s ASEP, in turn a part of the larger DOE-EU Access to Sustainable Energy Programme. PVM is the provision of SHS as a utility service in which utilities own the systems and provide for operations, maintenance, parts replacement, and other customer services; while households pay a flat, monthly, regulated fee to the local Electric Cooperative (EC). Regulation is provided by the Energy Regulatory Commission (ERC).

There are 120 electric cooperatives serving over 11 million households, which is over half of all connected households nationwide. The Philippines is on-track to achieve 90% electrification by 2017, but up to 3 million households will need to be connected into the next decade to essentially complete the electrification of the country. The Department of Energy (DOE) estimates, in its Household Electrification Development Plan, that at least 400,000 of those households will be most economically connected with modern solar home systems. The EU, GPOBA and the World Bank (WB) are now collaborating via the ASEP that includes output-based subsidy support of the PVM program.
The National Electrification Administration (NEA), through its Office of Renewable Energy Development (ORED) will play a leading role in coordination of ECs and implementation of the program. Philreca is the EC industry association and could also play a facilitating role. The LGUGC has been appointed as the Subsidy Program Manager, and will conduct subsidy allocation competitions on behalf of participating ECs. Following competitive allocation of subsidy, LGUGC will monitor installation progress, verify connections when claims for subsidy payments are made, and instruct the World Bank, as trustee of the grant funds, to make direct payments to the Supply & Installation contractors. Installations will be done with the participating ECs and once the installations are made, ECs will provide the O&M and replacement services that underpin the sustainability of the systems.
PVM, in keeping with global best practice, is a service-oriented program. Solar home system packages are anticipated to include panels, lithium ion batteries, LED lights, and low voltage, DC appliances like TVs, radios, and fans, depending on the level of service provided (the higher level of service will include a TV, the lower level, a radio). Specifications will focus not on watt-peakage but rather on the hours of service, per night, that customers can expect from their lighting and appliance array. All products that are eligible to be subsidized in PVM will be quality certified by Lighting Global (www.lightingglobal.org).

A key challenge of PVM will be the creation of supply chains that link the global manufacturing capacity for solar home systems and appliances to the rural Filipino household. Supply & Installation contractors will compete for the subsidy payments. After receipt of a relatively modest down-payment directly from one or more participating ECs, the contractors would be expected to install systems and then receive the subsidy payment at regular milestones, following verification. A contract package might, for example, call for 5,000 to 10,000 solar home system installations, with subsidy claims allowed for every 1,000 installations. These contractors will then not have an on-going After Sales Service responsibility; that will fall to the participating EC. With a total of about 40,500 systems to be installed, the initial round of PVM will involve 4 different ECs. Contract packages will cover one EC with installations ranging from 1,000 to potentially up to 10,000 systems. Bidders will be allowed to bid on multiple packages. The output-based subsidy payment is expected to pay all costs, including the profit element for the winning bidder.

Contractors could be local or international firms. There are already many interested Filipino companies, including current members of the Philippines Solar Power Alliance (PSPA), an industry group. International firms have also started to express intent, including firms that currently participate in Lighting Global and its associated regional vehicles. The PVM program will encourage joint ventures and other forms of association or partnership that bring together manufactures, non-governmental organizations, other donors, private energy companies (potentially through their Corporate Social Responsibility units), solar power suppliers and service providers, and electric cooperatives.