Market Access

PURE projects require a better understanding of the local economy, micro enterprise and farm management, and business development opportunities, as opposed to "regular" renewable energy programmes. This is also evident from many rural energy projects in the past that have claimed to contribute to better livelihoods by productive uses but where this has not materialized. There has been a belief that productive uses spontaneously occur. Instead, projects aiming at productive uses activities need to take a much more proactive role.

Increased productivity for MSMEs - derived from access to better energy services - implies the need for access to markets for the new or more refined products. Experiences from programmes that are focusing on SMEs demonstrate that programme design flaws such as insufficient feasibility studies of market potential for increased production have serious negative impacts on the sustainability. Activities that per definition could lead to income generation may not be sufficient to stimulate or catalyse local communities to supplement their incomes if factors such as access to new markets and the quality of products are also not considered. For example if there is no identified market for an increased product volume deriving from production powered by PV, the PV system is likely to become a power source for household appliances - and with that the direct effect on increasing productivity is gone. If the intended increased income was part of a repayment scheme for the energy services (which is often the case in PURE project design) then the project sustainability is greatly at risk.

Analysis of enterprises and their energy choices points towards the fact that many strategies followed by the entrepreneurs are related to the market for their products and services. There are distinctive differences in producing for a distant market as opposed to producing for a local market:

1. Enterprises with local markets

   • The establishment of enterprises with local markets is the most common in enterprise development. The impact of modern energy services on the establishment or growth of small enterprises with products for local markets may be initially significant, but will decrease quickly due to market saturation if:

   • there is low expenditure on goods other than basic necessities,

   • local markets in these areas are small due to low population density and travel time.

   • In areas where customers' ability or willingness to pay extra for improved product quality or improved services is very limited, the advantage of many electrical appliances is much reduced. The main advantage may then be improved comfort of the entrepreneur, and the priority given to this is related to the living standards of the entrepreneur.

2. Enterprises with distant markets

   • The impact of modern energy services on the establishment or growth of small enterprises with products for distant markets is low if networks with or assistance from organisations or persons with knowledge of these markets are lacking.

   • Modern energy services in production enterprises for distant markets create new income generation opportunities for remote areas.

   • In remote areas where the local markets are small due to poverty, the benefit of improved energy services will be mainly for enterprise that are able to access a distant market.

For the establishment and growth of enterprises, markets and access to markets are the key issues. Without the establishment of access to distant markets, the benefits of productive uses of energy depend on the local market. Because the areas where renewable energy projects are typically being planned are remote areas where local markets are small, it seems likely that the impacts of renewable energy will be limited unless access is created to distant markets. These preliminary insights lead to a cautionary remark for renewable energy projects and programmes focusing on productive uses of energy; when discussing access to distant markets, it is also crucial to consider transportation. One could end up establishing a RETs-based enterprise turning out fine products and generating all sorts of product quality, emission reductions and other benefits. But, if transport fuel costs are high, it will add greatly to the end cost of the products at the point of sale. The point is that when one looks at such examples, one must take a holistic view that accounts for 'all' energy inputs and their cost implications along the product to market value chain.