©Azuri Technologies Ltd The Off-Grid Solar Policy Toolkit i THE OFF-GRID SOLAR POLICY TOOLKIT Supporting Inter-Ministerial Collaboration to Advance Energy Access, Digital Transformation, and Financial Inclusion JANUARY 2024 ii The Off-Grid Solar Policy Toolkit Copyright © January 2024 | International Bank for Reconstruction and Development The World Bank 1818 H Street NW, Washington, DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org The material in this work is subject to copyright. Because the World Bank encourages dissemination of its knowledge, this work may be reproduced, in whole or in part, for noncommercial purposes if full attribution to this work is given. Any queries on rights and licenses, including subsidiary rights, should be addressed to World Bank Publications, World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; Fax: +1-202-522-2625; e-mail: pubrights@worldbank.org. Lighting Global/ESMAP, PPIAF, DDP. 2024. Off-Grid Solar Policy Toolkit. Washington DC: World Bank. The World Bank does not necessarily own each component of the content contained within the work and does not warrant that the use of any third-party owned individual component or part contained in the work will not infringe on the rights of those third parties. If you wish to reuse a component of the work, it is your responsibility to determine whether permission is needed for that reuse and to obtain permission from the copyright owner. Examples of components can include, but are not limited to, tables, figures, or images. Disclaimer The conclusions and judgments contained in this report should not be attributed to, and do not necessarily represent the views of the World Bank or its Executive Directors, or the countries they represent. The World Bank does not guarantee the accuracy of the data in this publication and accepts no responsibility for any consequences of their use. The information contained in this publication is derived from carefully selected sources that are believed to be reasonable. Any opinions expressed reflect the current judgment of the authors of the relevant article or features and do not necessarily reflect the opinion of the World Bank. The opinions presented are subject to change without notice. The World Bank accepts no responsibility for any liability arising from the use of this document or its contents. Production Credits Design and layout: einamema@gmail.com The Off-Grid Solar Policy Toolkit iii Lighting Global is the World Bank’s initiative to rapidly increase access to off-grid solar energy for the hundreds of millions of people living without electricity world-wide. Managed by the Energy Sector Management Assistance Program (ESMAP), we work with governments, the private sector, development partners, and end-users, continually innovating to unlock key market barriers and enable access and affordability to those that would otherwise be left behind. Our support has expanded to technologies that go far beyond lighting, including stand-alone solar systems to power the needs of households, farms, businesses, schools, health centers, and more. We operate with funding gratefully acknowledged from ESMAP and their donors. The Energy Sector Management Assistance Program (ESMAP) is a partnership between the World Bank and over 20 partners to help low- and middle-income countries reduce poverty and boost growth through sustainable energy solutions. ESMAP’s analytical and advisory services are fully integrated within the World Bank’s country financing and policy dialogue in the energy sector. Through the World Bank (WB), ESMAP works to accelerate the energy transition required to achieve Sustainable Development Goal 7 (SDG7) to ensure access to affordable, reliable, sustainable, and modern energy for all. It helps to share WB strategies and programs to achieve the WBG Climate Change Action Plan targets. Learn more at https://esmap.org. The Public-Private Infrastructure Advisory Facility (PPIAF) helps developing-country governments strengthen policy, regulations, and institutions that enable sustainable infrastructure with private-sector participation. As part of these efforts, PPIAF promotes knowledge-transfer by capturing lessons while funding research and tools; builds capacity to scale infrastructure delivery; and assists sub-national entities in accessing financing without sovereign guarantees. Donor-supported and housed within the World Bank, our work helps generate hundreds of millions in infrastructure investment. While many initiatives focus on structuring and financing infrastructure projects with private participation, PPIAF sets the stage to make this possible. Digital Development Partnership (DDP) brings public and private sector partners together to advance digital solutions and accelerate safe and inclusive digital transformation in developing countries. It catalyzes support to low- and middle-income countries in the articulation and implementation of digital development strategies and operational work programs across the following key areas: data and indicators, digital economy enabling environment, internet access for all, digital government, and mainstreaming digital services, solutions and platforms. Strategic Impact Advisors (SIA) is a women-owned global consulting firm with expertise in digital financial services (DFS), digital agriculture, off-grid energy, humanitarian assistance and women’s economic empowerment. Our mission is to provide insightful technical assistance to help people overcome barriers and improve their lives through technology and analysis. ACKNOWLEDGMENTS The World Bank’s Lighting Global program, together with PPIAF, with funds gratefully acknowledged from the Energy Sector Management Assistance Program (ESMAP) and the Digital Development Partnership (DDP) commissioned this Off-Grid Solar Policy Toolkit. We would like to acknowledge the following authors and contributors (from Strategic Impact Advisors): Shelley Spencer, Tala Ahmadi, Wisdom Alorwuse, Jeremiah Lwebuga, Joyce Nkuyahaga, Filagot Tesfaye, Emembet Tita, Emma Schwartz, (and from the World Bank): Lindsay (Caldwell) Umalla, Charlie Miller, Bennett Gordon, Raihan Elahi, and Dana Rysankova. We would also like to thank those who reviewed the report: Zhengjia Meng, Jan Kappen, Seth Ayers, Federico Querio, Casey Torgusson, Himmat Sandhu, Max Mattern, Bill Gallery, Johanna Galan, Jennifer Lynch, and Federico Hinrichs. The Consultative Group to Assist the Poor (CGAP) and DDP also generously gave their time to serve as thought partners. Special thanks to governments of Uganda and Ethiopia, who tested the draft version of this toolkit and used it to develop policy roadmaps, providing valuable feedback in the process. These efforts were led by Uganda’s Ministry of Energy and Mineral Development (MEMD) and Ethiopia’s Ministry of Water and Energy (MoWE). In particular, we would like to thank Brian E. Isabirye, Ph.D, Gosaye Mengistie Abayneh, and Adisalem Mebrahtu whose insights have made invaluable contributions to this report. iv The Off-Grid Solar Policy Toolkit CONTENTS Acronyms and Abbreviations........................................................................................................viii Executive Summary..........................................................................................................................1 Chapter One. Introduction: The Toolkit’s Structure.........................................................................7 1.1 A Consumer-Centric Diagnostic Framework for the Enabling Environment...................................9 Chapter Two. How Off-Grid Solar and Pay-As-You-Go Accelerate Access to Electricity............12 2.1 OGS Sector Overview................................................................................................................. 12 2.2 Technologies and Products.......................................................................................................... 15 2.3 PAYG and Consumer Financing of OGS Products....................................................................... 16 2.4 Impact of OGS.............................................................................................................................22 Chapter Three. The Pay-as-You-Go and Digital Economy Nexus.................................................23 3.1 How OGS Uses the Digital Economy..........................................................................................23 3.2 How OGS Enables the Digital Economy......................................................................................25 3.3 Promoting OGS, Digital, and Financial Inclusion Together to Build Resilience.............................33 Chapter Four. Policy Issues and Priorities......................................................................................36 4.1 Signaling Support for OGS Sector Growth..................................................................................38 4.2 Policy Approaches – Mix and Match............................................................................................39 4.3 Issues and Policy Options............................................................................................................43 Chapter Five. Tools to Advance Policy Reform...............................................................................71 5.1 Champion Identification...............................................................................................................73 5.2 Stakeholder Identification and Influence.....................................................................................73 5.3 Stakeholder Capacity Building.....................................................................................................75 5.4 Policy Analysis.............................................................................................................................75 5.5 Roadmap Development...............................................................................................................79 5.6 Planning for Policy Implementation.............................................................................................79 Annex Section..................................................................................................................................82 Annex A: Potential Policy Options, Advantages, and Disadvantages.................................................82 Annex B: Additional Resources....................................................................................................... 104 Annex C: Tools................................................................................................................................. 109 Annex D: Sample Terms of Reference............................................................................................. 128 The Off-Grid Solar Policy Toolkit v List of Figure, Maps, and Tables Figures Figure 2.1: Global annual sales estimates of off-grid solar products, including affiliate and non-affiliate sales (2010-2021)........................................................................................................... 13 Figure 2.2: The PAYG Market Attractiveness Index Structure Pillars.................................................. 14 Figure 2.3: Global affiliate sales volumes of OGS products by category (2017-2021)........................ 15 Figure 2.4: A Typical PAYG Product Cycle.......................................................................................... 17 Figure 2.5: PAYG SHS Cost Breakdown............................................................................................ 19 Figure 2.6: PAYG SHS Value Chain....................................................................................................21 Figure 2.7: Value Chain Participants...................................................................................................21 Figure 3.1: PAYG Data Flows for GSM-Embedded Systems............................................................ 24 Figure 3.2: Estimated Charging Cost of Off-Grid Smartphone Ownership....................................... 26 Figure 3.3: The Relationship Between OGS and Digital Transformation Digital Infrastructure...........27 Figure 3.4: Overlap of OGS, Broadband and Financial Inclusion Policies...........................................35 Figure 4.1: Policymaking Continuum................................................................................................ 40 Figure 4.2: Cost Benefit Analysis of VAT and Duty Exemptions Across Malawi, Rwanda, Sierra Leone..................................................................................................................................... 51 Figure 4.3: E-Waste Management Approaches................................................................................ 69 Figure 5.1: Decision Tree...................................................................................................................72 Figure 5.2: Example of Applying the Stakeholder Mapping Tool to Expansion of Digital Broadband Infrastructure (Tool 6)...................................................................................................... 74 Figure 5.3: Structure of the Sierra Leone Off-Grid Working Group................................................... 76 Figure 5.4: Sample of Different Policy Outcomes for National Product Standards........................... 78 Figure 5.5: Example of Applying the Risk Analysis Tool (Tool 18)...................................................... 78 Figure 5.6: Example of Applying the KPI and Milestones Tool (Tool 21)........................................... 79 Figure 5.7: Example of Applying the Communications Strategy Plan Tool (Tool 22)......................... 80 Figure 5.8: Example of Applying the Budget Forecast Tool (Tool 23)................................................ 81 Maps Map 3.1: Mobile broadband penetration in Africa by country (%), 2018.......................................... 28 Map 3.2: Share of population with access to electricity (%), 2022.................................................. 28 vi The Off-Grid Solar Policy Toolkit Tables Table 1.1: Enabling Environment Components for OGS, Broadband and Digital Financial Inclusion........................................................................................................... 11 Table 2.1: Payment Channels by OGS Company & Partners............................................................. 18 Table 3.1: MNO Benefits from OGS and Investment Areas..............................................................30 Table 3.2: Models of MNO and OGS Engagement........................................................................... 32 Table 3.3: Agent Roles in Digital Inclusion and Literacy....................................................................33 Table 4.1: Policy Issues..................................................................................................................... 37 Table 4.2: Product Availability........................................................................................................... 44 Table 4.3: Product Affordability......................................................................................................... 50 Table 4.4: Accountability: Consumer Protection Across the Sales Cycle.......................................... 59 Table 4.5: Key Elements of the GOGLA Consumer Protection Code and IEC Standard................... 63 Table 5.1: Micro-Level Issues- Across the Enabling Environment Components).............................. 73 Table 5.2: Example of Applying the Stakeholders Concerns Tool (Tool 9).......................................... 74 Table 5.3: Members of the Zambia Off-Grid Energy Task Force....................................................... 75 The Off-Grid Solar Policy Toolkit vii Foreword In just over a decade the number of people around the world living without access to electricity has been cut nearly in half, from 1.1 billion in 2010 to 675 million in 2021. This tremendous achievement, however, still leaves far too many people living without the benefits energy access has on health, education, income, and other measures of well-being. Those still unconnected today are more likely to have lower incomes, to live in more remote locations, and to live in countries affected by conflict, making them harder to reach than those that have been connected to date. Insufficient broadband and digital financial infrastructure further hamper efforts to close the energy access gap, as they have an invaluable role to play in improving the affordability of off-grid solar solutions (OGS). Although OGS products are estimated to be the most cost-effective energy access option for 41 percent of new household connections - only 20 percent of those living without electricity access today can afford to pay the upfront cost of even a Tier-1 OGS product. By using pay-as-you-go (PAYG) these products become affordable for 62-76 percent of those still living without electricity. Thus, to realize off-grid solar’s promise, PAYG is essential to affordability. Efforts to deliver energy access through PAYG both contribute to – and benefit from - digital development and financial inclusion. PAYG providers use broadband infrastructure to accept digital payments, and off-grid solar providers use the same infrastructure to keep the products functioning properly through remote monitoring and support. Meanwhile, electricity access enables broadband and digital payment providers to reach more users for their services. Governments can take advantage of this synergy by coordinating their efforts to accelerate energy access, digital development, and financial inclusion, and through developing bespoke policy/ regulatory frameworks for the PAYG sector. ESMAP’s Lighting Global program has been working to expand access to electricity through off-grid solar devices since 2009 by bringing down costs, building consumer demand, promoting quality and helping solar companies access the finance they needed to build out distribution networks and make products more widely available – continually adapting and fine-tuning efforts to keep pace with technological and sector developments. To develop this toolkit Lighting Global has partnered with PPIAF to assist governments with creating an enabling environment for OGS and PAYG sector growth, through a structured process of policy dialogue and reform. The project was supported by the Consultative Group to Assist the Poor (CGAP) and the Digital Development Partnership (DDP). Field tested in Ethiopia and Uganda, the toolkit guides governments through the process of stakeholder mapping, capacity building, policy analysis and development, all the way through to planning for policy implementation. We hope the guidance and resources provided in these pages will help governments advance policy reforms that help them achieve their energy access, digital development and financial inclusion goals. With less than 10 years to go to achieve our shared goal of achieving SDG7 – universal energy access – working across these sectors in a coordinated way can accelerate progress, and reach more people, faster. Chandrasekar Govindarajalu Practice Manager, Energy Sector Management Assistance Program (ESMAP), the World Bank viii The Off-Grid Solar Policy Toolkit Acronyms and Abbreviations ACE TAF Africa Clean Energy Technical Assistance MLS Multi-Light (Solar Home) System Facility MNO Mobile Network Operators AFI Alliance for Financial Inclusion MTF Multi-Tier Framework ARPU Average Revenue Per User NFIS National Financial Inclusion Strategy CLASP Collaborative Labeling and Appliance Standards Program Non-QV Non-Quality Verified CRB Credit Reporting Bureau OGS Off-Grid Solar DE4A Digital Economy for Africa OTC Over the Counter DECIM Digital and Energy Connectivity for Inclusion in PERFORM Performance, Reporting, and Measurement Madagascar PII Personally Identifiable Information ECOWAS Economic Community of West African States PURE Productive Uses of Renewable Energy ESMAP Energy Sector Management Assistance PVoC Pre-Shipment Verification of Conformity Program QV Quality Verified FOREX Foreign Exchange RISE Regulatory Indicators for Sustainable Energy GIS Geographic Information System SDG Sustainable Development Goal GSMA Global System for Mobile Communications SHS Solar Home Systems HS Harmonized System SMS Short Message Service ICT Information and Communications Technologies ToR Terms of Reference IEC International Electrotechnical Commission UNCTAD United Nations Conference on Trade and IEP Integrated Electrification Plans Development IFC International Finance Corporation UNDP United Nations Development Programme ITU International Telecommunications Union USD United States Dollar KPI Key Performance Indicators WP Watt Peak M2M Machine-to-Machine MFI Microfinance Institutions The Off-Grid Solar Policy Toolkit 1 Executive Summary This Off-Grid Solar (OGS) policy toolkit is Between 2020 and 2022, at least 12 countries designed to assist governments in creating an developed integrated electrification plans enabling environment for OGS and pay-as-you- that include OGS alongside grid and mini-grid go (PAYG) sector growth by establishing policy electrification. In the same timeframe, at least eight reforms determined through a structured process countries either updated or revised their nationally of inter-ministerial policy dialogue. It identifies 12 determined contributions (NDCs) to include OGS key policy issues and considers the advantages solutions, taking the total to 33 countries.2 and disadvantages of different policy approaches to each issue. The toolkit then outlines a step-by- Beyond electricity access, OGS products bring step process that governments can use to facilitate multiple economic, social, and environmental policy dialogue, providing guidance and tools at benefits. Energy access is linked to 125 of the 169 each step. This process envisions a scenario where targets set under the Sustainable Development government ministries and agencies work together Goals (SDGs), highlighting the key role of energy to advance policy reforms that accelerate progress in supporting the broader development agenda.3 in energy access, digital inclusion, and financial OGS enables households to save money on inclusion. traditional energy sources, boosts productivity, job creation, and economic activity. They also This document’s tools, methods, and ideas were improve health, safety, and quality of life and reduce field-tested through inter-ministerial policy carbon emissions.4 OGS also offers opportunities dialogues in Ethiopia and Uganda. The two to close the gender gap, with evidence showing countries were selected for their contrasting policy that increasing women’s participation in the sector environments for off-grid solar. The toolkit was as entrepreneurs, employees, and customers can instrumental in guiding inter-ministerial dialogue lead to market growth, better product uptake, and led by the ministry responsible for energy in both greater consumer satisfaction.5 countries and supported by the firm that coordinated the toolkit’s development. In 2023, the two countries officially launched policy roadmaps created and validated by participating stakeholders. OGS products are essential for achieving universal access to electricity, often providing the most rapid and least-cost electrification solution, particularly in sub-Saharan Africa. In 2020, 733 million people still had no access to electricity, most Between 2020 and 2022, at least 12 countries of them in sub-Saharan Africa. OGS technologies are developed integrated electrification plans the least-cost solution for an estimated 41 percent of new household connections.1 Governments and that include OGS alongside grid and mini-grid their development partners are scaling up efforts to electrification. deliver energy access through OGS. 1 Lighting Global/ESMAP, GOGLA, Efficiency for Access, Open Capital Advisors (2022), Off-Grid Solar Market Trends Report 2022: State of the Sector. Washington, DC: World Bank. 2 Ibid. 3 State of Electricity Access, World Bank, 2017 4 GOGLA, 2022. Providing Energy Access through Off-Grid Solar: Guidance for Governments. Accessible here. 5 ESMAP, 2022. Operational Handbook for Gender Equality in the Off-Grid Solar Sector. Accessible here. 2 The Off-Grid Solar Policy Toolkit The PAYG model is crucial to increasing access At the same time, OGS and PAYG are also to OGS, as it provides a payment scheme helping to build digital economies, supporting tailored to the budgets of bottom-of-the-pyramid connectivity and financial inclusion. The customers. PAYG business models allow users opportunity to purchase a PAYG system incentivizes to pay for their products via technology-enabled, customers to open mobile money accounts and embedded consumer financing. Only 20 percent of regularly use them to pay for the OGS devices, often people living without electricity access today can doubling the frequency of transactions.10 PAYG is afford to pay the upfront costs to purchase a Tier-1 now being leveraged to offer consumer finance on OGS product.6 With PAYG, the product becomes smartphones, electric motorbikes, and many other affordable for 62 to 76 percent of them.7 PAYG devices, as well as to offer additional digital financial makes it possible for more people to afford larger services.11 Governments are increasingly going OGS products, allowing them to benefit from a digital in the delivery of public services, encouraging range of domestic and productive use appliances, citizens to transition to the formal economy through such as radios, fans, televisions, refrigerators, and connected digital technologies and moving tax solar water pumps. Moreover, several higher-tier collection to digital channels — all of which depend OGS products are being sold through PAYG.8 on reliable electricity access. The PAYG business model can scale more This synergy calls for governments to coordinate quickly if mobile and data connectivity and efforts to accelerate the progress in energy digital payment infrastructure are available.9 access, digital inclusion, and financial inclusion. PAYG companies use Short Message Service Governments can pursue a policy reform agenda (SMS) to communicate with customers over mobile alongside the provision of financing and other payment networks and to take payments from programmatic interventions to create an enabling customers at low cost. Mobile data networks environment for sector growth. A process of policy also remotely monitor and control OGS products. dialogue is needed, with strong participation from Therefore, mobile phone usage and mobile phone relevant government ministries and other agencies platform availability have corresponded with the and dialogue between government and the private development of PAYG markets. sector. The toolkit uses a consumer-centric diagnostic framework to explore policy issues and options. Three market conditions are needed for the OGS Only 20% of people living without sector to scale in a sustainable manner: Product Availability, Product Affordability, and Service electricity access today can afford the Provider Accountability (the 3 As). The toolkit uses upfront costs to purchase a Tier-1 OGS this framework to create a shared understanding of issues central to policymakers across government, product. With PAYG, these products including energy access, broadband access, and become affordable for 62 - 76% of them. digital financial inclusion, to lay the groundwork for productive policy change. 6 Tier 1, per the Multi-tier Framework (MTF), enables a household to access a small quantity of electricity for a few hours daily, such as for electric lighting and phone charging. 7 Lighting Global/ESMAP, GOGLA, Efficiency For Access, Open Capital Advisors (2022), Off-Grid Solar Market Trends Report 2022: State of the Sector Washington, DC: World Bank. 8 According to GOGLA’s Semi-Annual Sales and Impact Report of July - December 2022, 90 percent of all OGS products categorized as Solar Home Systems (products of wattage 11 Wp and higher) were sold on a PAYG basis. For appliances (such as TVs, fans, solar water pumps, and solar refrigerators), 60 percent of all sales were on PAYG. 9 Lighting Global, Pay-As-You-Go Market Attractiveness Index 2021, 23. Accessible here. 10 In a 2020 study covering five Mobile Network Operators in five countries, GSMA found that mobile money users increased the frequency of mobile money transactions by 113 percent right after they started using PAYG solar services. 11 Lighting Global/ESMAP, GOGLA, Efficiency for Access, Open Capital Advisors (2022), Off-Grid Solar Market Trends Report 2022: State of the Sector. Washington, DC: World Bank. The Off-Grid Solar Policy Toolkit 3 The toolkit identifies 12 issues of relevance that fall The 3 As Diagnostic Framework within governments’ zone of influence for policy reform. These issues are presented in the diagram below, classified Product according to the 3 As diagnostic framework. Given the focus Availability of this report on OGS, policy issues pertaining to broadband and digital inclusion are not explored in as much detail. For example, policies for improving the affordability of broadband Product Service Provider or accountability of mobile money and broadband providers Affordability Accountability are not covered. Policymakers can use the policy issues and options covered in the toolkit as examples to draw from when evaluating policies in other areas. Twelve policy issues affecting the enabling environment for OGS and PAYG AVAILABILITY 1. Ease of market entry and 2. Quality and reach of digital 3. Mobile money and digital competition broadband infrastructure financial inclusion AFFORDABILITY Consumer Financing 4. Fiscal policies 5. PAYG provider availability and 6. Access to data for 7. Financial cost of capital credit scoring regulation ACCOUNTABILITY Sales Cycle Pre-Sale At-Sale Post-Sale 8. Product standards Pre-Sale 9. Transparency of terms and warranties 11. Customer service and grievance redress 10. Data protection 12. e-Waste The toolkit explores each policy issue and identifies products, and depending on context, policymakers could potential responses across a “continuum of policy pursue a “wait-and-see” approach that would not require any approaches.” There is no single policy approach to create adjustments to current regulatory frameworks. Alternatively, an enabling environment for OGS and policymakers have governments could pursue a “light touch” approach that various options. These are presented ranging from a ‘wait increases access to digital payment or banking agents in and see’ approach requiring the least amount of government rural areas or adopt a more “prescriptive” policy where oversight and resources to ‘prescriptive policy’ requiring government regulations reduce or eliminate transaction fees significant government engagement. For example, when for OGS consumers. it comes to the availability of mobile money to offer PAYG 4 The Off-Grid Solar Policy Toolkit The different approaches enable stakeholders to choose policy options best suited to their country’s contexts. Example of policy approaches to addressing Issue 3 (availability of mobile money and digital payments) Wait & See Light Touch Prescriptive Policy Government relies on private sector Government financial services Government regulation reduces, providers and current regulatory policies regulation increases access to rural removes, or subsidizes transaction to provie adequate mobile money and digital payment agents or banking fees for digital payments made for OGS digital financial services for PAYG agents products and services Advantage Advantage Advantage No need to adjust current regulatory Increases rural mobile money agents and Reduces consumer cost of mobile money framework increases supply and purchase of PAYG payments for OGS services products Disadvantage Disadvantage Disadvantage Poor digital payment infrastructure restricts Requires investment to adjust mobile money Digital payments and banking industry use of digital payments in PAYG offerings agent regulation to expand rural agent may resist fee reduction for payments for networks specific services Finally, the toolkit outlines how governments can facilitate In Step Four, the champion holds meetings and inter-ministerial dialogue capable of creating a conducive workshops for stakeholders to consider the policy issue policy environment for off-grid solar. This process follows and agree on a policy response. six steps, with guidance and tools provided at each step. In Step Five, governments can develop policy ‘roadmaps’ In Step One, the government selects a ‘champion’ from to communicate to the private sector and other within the lead agency responsible for off-grid solar policy stakeholders the policy reforms they are committing to (or to lead the process. considering), and how they propose to proceed. In Step Two, the champion identifies priority policy issues Finally, in Step Six, governments can build implementation to be addressed, and maps key stakeholders relevant to plans to ensure they have the staff time and budget those policy issues. allocation necessary to implement the proposed reforms. In Step Three, the champion assesses stakeholder capacity and if necessary, engages stakeholders to build their knowledge and understanding of OGS and PAYG technologies, business models, and relevant policy issues. The Off-Grid Solar Policy Toolkit 5 Decision tree and overview of tools to advance policy reform. TOOLS 1. Champion checklist 2. Policy diagnostic START Who else in the 3. “As” checklist STEP 1 What policy Who can lead lead agency 4. Charting internal stakeholder Champion issues seem most needs to be this work? engagement pressing? identification involved? 5. Sample ToR Can your ministry solve the policy issue(s) through its own action? Y jump to step 4 N Know the policymaker(s) of influence to engage? 6. Stakeholder map STEP 2 7. Assessment of existing Stakeholder Map the Stakeholders Evaluate concerns initiatives N identification 8. Stakeholder interest and Rank influence Prioritize engagement influence grid and influence 9. Stakeholder concerns Y 10. Priority mapping STEP 3 Do the policymakers of influence understand the issue(s)? N 11. Meeting invite Stakeholder Y 12. Briefing memo/ meeting capacity building agenda Is there political will to act? N Y Determine the method for stakeholder engagement STEP 4 Have a current mechanism for stakeholder engagement? Policy Analysis 13. Meeting planning form Stakeholder engagement plan 14. Workshop Agenda Policy Development Workshops 15. Policy diagnostic (revisited) Set the agenda 16. Policy options worksheet 17. Policy cost/ effectiveness Identify policy options evaluation Evaluate policy options 18. Risk analysis Gather stakeholder input 19. Feedback form STEP 5 Develop a policy development roadmap Roadmap Create a roadmap Roadmap development template 20. Development Validate roadmap Adopt policy 20. KPI and milestones tools STEP 6 21. Comunications strategy plan Planning for Policy Implement policy Monitor and evaluate 22. Policy implementation budget Implementation forecast Develop communications strategy Development measurement framework 6 The Off-Grid Solar Policy Toolkit ©SolarAid The Off-Grid Solar Policy Toolkit 7 CHAPTER ONE Introduction: The Toolkit’s Structure Off-Grid Solar (OGS) products are essential for achieving certain period, typically six months to three years, depending universal energy access. They often provide the most on the product and the PAYG company. Payments are usually rapid and lowest-cost electrification solution, particularly made using mobile money, or alternative methods including in sub-Saharan Africa. OGS systems can provide quality scratch cards, mobile airtime, and cash. PAYG OGS products modern electricity services to those not reached by have lockout technology that locks the products and their traditional grid electrification. They can also bolster the functions when installments are not made. This makes OGS reliability of electricity access for consumers and businesses products a manageable, “as-you-go” experience akin to a in areas where the electric grid is inconsistent. Standalone prepaid mobile phone plan. OGS products are often the most affordable and quickest solution to provide entry-level sustainable energy access PAYG is enabling an increasing number of bottom-of- to consumers in rural communities and areas with low the-pyramid customers to acquire OGS products. More population density. Companies selling OGS products are than 80 percent of the 733 million people still living without addressing the affordability issue by offering financing access to electricity cannot afford an OGS product providing through a model commonly referred to as pay-as-you-go basic electricity access through direct cash payments. The (PAYG). end-user financing option available through PAYG, could reduce the proportion of those unable to afford such basic PAYG solar businesses provide solar energy with a products to between 24 and 38 percent.12 This makes the payment scheme tailored to the budgets of bottom-of- PAYG model an essential financing tool to address the the-pyramid customers. With PAYG, customers pay for OGS affordability gap. products in small daily, weekly, or monthly installments over a 733 million people were still living without access to electricity in 2020, of which 298 million people were in nascent OGS markets where there is little commercial OGS activity. 37 percent of all sales of high-quality OGS in 2021 were through PAYG, a share that has been steadily increasing year on year. PAYG is essential to make OGS systems affordable. It has a critical role to play in achieving SDG 7. For 41 percent of new household connections between 2020 and 2030, off-grid solar technologies are expected to be the least-cost solution on a trajectory to achieve universal access. Source: Lighting Global/ESMAP, GOGLA, Efficiency for Access, Open Capital Advisors (2022), Off-Grid Solar Market Trends Report 2022: State of the Sector. Washington, DC: World Bank. 12 Source: Lighting Global/ESMAP, GOGLA, Efficiency For Access, Open Capital Advisors (2022), Off-Grid Solar Market Trends Report 2022: State of the Sector. Washington, DC: World Bank. The affordability analysis is for multi-light and charging systems providing Tier 1 electricity access, per the definition of the Multi- Tier Framework for Measuring Access to Electricity. 8 The Off-Grid Solar Policy Toolkit PAYG allows OGS customers - including women and policy and regulatory environment to accelerate OGS girls - to access higher levels of energy service. Beyond sector growth, focusing on the PAYG model. It provides the lighting and phone charging made possible by entry- guidance and tools to facilitate policy dialogue between level OGS products referenced above, larger OGS products government agencies and the public and the private sector. can enable customers to enjoy the benefits of radio, fans, This enables the pursuit of policy reforms that contribute to televisions, and appliances that reduce the time needed to energy access, digital transformation, and financial inclusion complete household chores. The overwhelming majority goals. Energy policymakers can use this toolkit to identify of such larger products are sold using the PAYG model. policy issues and options for enabling OGS and PAYG According to sales data published by the Global Off-Grid use, including critical issues that fall outside the traditional Lighting Association (GOGLA), Solar Home Systems (SHS)13 mandate of Ministries of Energy. Policymakers from other sold through the PAYG model made up 84 percent of sectors, including finance and telecommunications, can global sales in 2021.14 In addition, larger OGS systems are use this toolkit to understand how OGS and PAYG can increasingly being used to power productive appliances. contribute to digital transformation and financial inclusion This includes water pumping and refrigeration, a key goals and work with energy sector colleagues to leverage resource for rural communities, increasing crop yields and the opportunity presented by off-grid energy access to help preserving produce. achieve these goals. This toolkit is for government policymakers and development partners interested in creating an enabling This toolkit is organized into five chapters and includes four annexes. Chapter One introduces the diagnostic framework that Chapter Four provides resources for policymakers to examines the three elements that enable consumer identify and prioritize the policy issues that can create purchasing of OGS products: enabling market conditions for OGS consumers. The chapter discusses twelve specific policy issues impacting 1. Product Availability PAYG product availability, affordability, and service 2. Product Affordability provider accountability. It also outlines potential policy 3. Service Provider Accountability. options to address them. Public funding initiatives play Policymakers’ prioritization of action issues for policy an important role in increasing consumer access to action is aligned with these fundamental elements. OGS products. However, they are not considered policy issues in this context and, therefore, not addressed in Chapter Two provides an overview of how the digital this toolkit. The policy options vary in the degree of economy supports the scale of OGS technologies. It government market oversight and are based on existing also describes current market trends in OGS offerings policy practices in the energy sector and potential new and business models and the unique cost components policy opportunities. in the PAYG business model. Policymakers can use this chapter to build a shared understanding of the OGS Chapter Five guides stakeholders seeking to develop sector within the energy authority and across relevant a ‘roadmap’ to build a shared understanding of the government agencies. policy issues and options among ministries and other key stakeholders to agree to key policy reforms and take Chapter Three describes OGS’s role in achieving steps toward policy implementation. national goals for digital transformation and financial inclusion. Policymakers can use this chapter to explore The annexes provide concrete tools for policymakers to the intersection of policies that support OGS use for identify policy issues and select policy options. energy access and to advance broadband access and digital financial inclusion, especially for rural and underserved communities. 13 SHS are defined as having a solar panel rated from 11 Wp to usually up to 350 Wp and provide multiple electricity functions, such as lighting and powering a wide range of appliances such as TVs and fans. More details on these definitions are provided in section 2.2. 14 Lighting Global/ESMAP, GOGLA, Efficiency For Access, Open Capital Advisors (2022), Off-Grid Solar Market Trends Report 2022: State of the Sector. The Off-Grid Solar Policy Toolkit 9 Policymakers can use this toolkit to address a specific 1.1 A Consumer-Centric Diagnostic policy issue or develop a comprehensive roadmap to Framework for the Enabling address multiple policy issues to improve the enabling Environment environment for OGS. The governments of Ethiopia and Uganda used a draft of this toolkit to develop off-grid solar policy roadmaps, and feedback from that process was used Using this Section in the Policy-Making Process to improve and finalize this toolkit. Policymakers can also leverage the toolkit at any point in a policy dialogue. For 1. Understand how to apply the “3 As” (Product Availability, Product Affordability, and Service example, if they have identified an issue to focus on, they Provider Accountability) diagnostic framework to can use the toolkit to help them think through policy options. create policy analysis and options that improve the market conditions for OGS. The toolkit does not suggest a particular policy outcome or endorse a regulatory approach. It is designed to help 2. Chart common challenges in Product Availability, policymakers identify and prioritize policy issues, explore Product Affordability, and Service Provider policy options, and develop a roadmap for policy action. Accountability across the energy access, broadband, and digital financial services sectors using the diagnostic framework to promote inter-ministry The toolkit complements other resources in the off-grid dialogue and understanding. energy sector, including indicators for measuring the country-level legal and regulatory enabling environments for OGS and PAYG. Policymakers can use ESMAP’s set We suggest governments use a consumer-centric of regulatory indicators for sustainable energy (RISE) diagnostic framework to identify policy issues and options to benchmark and track their progress in creating an to improve the market conditions for OGS and PAYG enabling environment for energy access and renewable products. Three market conditions are needed for the OGS energy against other countries.15 For PAYG in particular, sector and PAYG providers to deliver sustainable solutions policymakers will find the IFC/Lighting Global PAYG Market for energy access at scale to consumers: Attractiveness Index and the PAYG Performance, Reporting, (1) Product Availability, and Measurement (PERFORM) Initiative’s key performance indicators helpful.16 Policymakers can identify additional (2) Product Affordability, and resources by topic and issue in Annex B. (3) Service Provider Accountability (“the 3 As”). This toolkit also does not include an evaluation of public funding mechanisms, such as results-based financing, credit lines, or demand-side subsidies for OGS and Product PAYG products. ESMAP’s 2022 Designing Public Funding Availability Mechanisms report is an excellent resource for policymakers considering which public funding mechanisms to deploy and how best to design them.17 Product Service Provider Affordability Accountability 15 ESMAP, Rise Regulatory Indicators for Sustainable Energy, Sustaining the Momentum, 2020, 4- 5. Accessible here. 16 The Market Attractiveness Index includes ten indicators to measure legal and regulatory policies that make a market attractive for PAYG offerings. Lighting Global, PAYG Market Attractiveness Index 2021. Accessible here. The PAYGo PERFORM key performance indicators provide metrics to assist investors and others in evaluating the financial performance of PAYG companies and for operational benchmarking. Lighting Global, CGAP, GOGLA, PAYGo Perform: Financial, Operational and Portfolio Quality KPIs for the PAYGo solar industry 2021. Accessible here 17 Rysankova, Dana; Miller, Charlie, Designing Public Funding Mechanisms in the Off-Grid Solar Sector (English). Washington, D.C.: World Bank Group (2022). Accessible here. 10 The Off-Grid Solar Policy Toolkit Defining the 3 As Availability = a market state where consumers can conveniently purchase OGS products, including PAYG products with consumer financing, from competitive OGS providers. Affordability = a market state in which consumers can afford to purchase OGS products with cash or financing at a suitable price for their income levels. Accountability = a market state in which OGS companies are responsible for providing consumers with quality products, clearly communicating their product’s features, performance, and financing terms, protecting consumer data, and managing and ensuring proper disposal of products. Over the past ten years, the OGS sector has grown. However, availability, affordability, and accountability issues limit the sector’s ability to meet “There is a clear relationship consumer needs at scale. In particular, limited broadband and digital between access to electricity payments infrastructure negatively affects OGS PAYG market conditions, and engagement with mobile especially regarding availability and affordability. Policymakers can use the services, as electricity provides 3 As framework to analyze and address issues ranging from product quality the foundation for customers to and durability to PAYG consumer financing and management of e-waste. adopt mobile money. Likewise, connectivity is central to the The diagnostic framework of the 3 As has equal applicability to evaluating market conditions for broadband access and digital financial PAYG business model and is inclusion, as shown in Table 1.1.18 Applying the framework across the a critical enabler of access to three sectors highlights the intersection of energy, broadband, and electricity in the first place.” financial inclusion policies. It also helps to identify areas of opportunity for (Source: GSMA The Value of Pay-as- policymakers to develop coordinated policy strategies and take a whole-of- you-go Solar for Mobile Operators, government approach to empowering inclusive rural communities through p. 41) access to energy, broadband, and digital financial services. There have been significant gains in broadband access and financial inclusion, but issues around affordability (data plans or mobile money transaction fees), trust in services, and service provider accountability are still of widespread concern. Consumers not using mobile phones or mobile internet services often cite the high cost of data plans and mobile money fees as reasons for not being active service users. Women are disproportionately affected by affordability challenges in all three sectors.19 18 Researchers with the World Bank Group have identified three categories of policy enablers for enabling environments for digital financial services: (1) conducive legal and regulatory frameworks, (2) enabling financial and digital infrastructure, and (3) ancillary government support systems (such as national identification policies, access to government data, and migrating government-to-person payments to digital transactions), Ceyla Pazarbasioglu, Alfonso Garcia Mora, Mahesh Uttamchandani, The World Bank Group 2020, Digital Financial Services. Accessible here. 19 GMSA, State of the Industry Report on Mobile Money 2023. Accessible here. GSMA, The Mobile Gender Gap Report 2023. Accessible here. The Off-Grid Solar Policy Toolkit 11 Table 1.1: Enabling Environment Components for OGS, Broadband, and Digital Financial Inclusion Enabling Environment OGS Broadband Digital Financial Inclusion Component Product AVAILABILITY Are off-grid products available Are quality and reliable broadband Are mobile money and other digital to consumers regardless of their services and mobile devices available financial services available to location? to consumers regardless of their consumers to pay for OGS regardless of location? their location? Product AFFORDABILITY Can consumers purchase OGS Can consumers purchase mobile Can consumers afford to pay the fees products within their income devices and broadband services within to use mobile money or digital financial limits? their income limits? services to purchase OGS products or services? Service Provider Are there adequate industry Are there adequate industry standards Are there adequate mechanisms or ACCOUNTABILITY standards or redress or redress mechanisms to ensure industry standards to ensure mobile mechanisms to ensure OGS telecommunications providers are money operators and digital payment providers are accountable to accountable to consumers for delivery providers are accountable to consumers consumers for the products and of broadband services? for processing financial transactions? services they provide? 12 The Off-Grid Solar Policy Toolkit CHAPTER TWO How Off-Grid Solar and Pay-As-You-Go Accelerate Access to Electricity Use this Chapter to build an understanding of: OGS product offerings. The components of the OGS value chain and how companies participate across the value chain. How PAYG incorporates digital technologies and financing to address consumer affordability. The cost components that drive PAYG product pricing. 2.1 OGS Sector Overview Governments increasingly recognize that The Government of Kenya used integrated standalone OGS products constitute the least- electrification planning in developing the Kenya cost solution to providing entry-level electricity National Electrification Strategy in 2018 to transition access to consumers in rural communities from segregated planning for grid and off-grid and areas with low population density. Many coverage.20 In addition to these examples, at least governments are including OGS in their Integrated twelve additional countries have completed their Electrification Plans (IEPs) alongside the national grid IEPs within the last two years.21 and mini grids. For example, Mozambique launched its IEP in 2017 with a target of 50 percent off-grid Global sales of off-grid solar products have electrification by 2030. increased steadily over the past decade, providing access to modern energy to tens of millions of households annually. As shown in Figure 2.1, the market for off-grid solar products has grown significantly over the past decade. While unit sales declined by 22 percent in 2020 compared to Mozambique launched its IEP in 2017 2019, largely due to the COVID-19 pandemic, the period from 2020 to 2021 showed a ten percent with a target of 50 percent off-grid recovery. electrification by 2030. 20 Kenya National Electrification Strategy: Key Highlights, 2018. Accessible here. 21 Lighting Global/ESMAP, GOGLA, Efficiency For Access, Open Capital Advisors (2022), Off-Grid Solar Market Trends Report 2022: State of the Sector. Washington, DC: World Bank. The Off-Grid Solar Policy Toolkit 13 Figure 2.1: Global annual sales estimates of off-grid solar products, including affiliate and non-affiliate sales22 (2010-2021) 50 45 16% -22% 40 10% -1% 35 Total units sales (in millions) 30 79% 25 20 15 10 245% 5 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Affiliate sales est. Non-affiliate mid est. (point estimate) Non-affiliate max. est. Source: Lighting Global/ESMAP, GOGLA, Efficiency for Access, Open Capital Advisors (2022), Off-Grid Solar Market Trends Report 2022: State of the Sector. Washington, DC: World Bank. The private sector drives the sales of off-grid solar products (and PAYG products in particular). Demand, supply, and enabling environment factors must be favorable for OGS markets to thrive. Figure 2.2 provides an overview of the factors that make a market suitable for developing energy services through PAYG. They include market size, ability, and willingness to pay, access to finance, human capital, and the legal and regulatory environment. The PAYG Market Attractiveness Index showcased in Figure 2.2 is a tool developed to provide information to companies, investors and policymakers on market attractiveness for PAYG energy services in several countries. 22 Affiliate products refer to products sold by GOGLA affiliate companies. Affiliate companies are connected to any of the partner organizations involved in the semiannual GOGLA sales data reporting process. 14 The Off-Grid Solar Policy Toolkit Figure 2.2: The PAYG Market Attractiveness Index Structure Pillars DEMAND SUPPLY Market size Access to finance • Population size, density, and demography • Ease of access to finance for companies • Current rate and means of access to energy • Economic risk • Urban and rural populations Operational considerations Ability to pay • Accessibility of rural areas • Income and poverty levels • Reliability of solar yield throughout the year • Affordability of Tier 1 OGS devices • Income volatility Market penetration Willingness-to-pay • Number of active PAYG companies • Cost and quality of alternative energy sources • Volume of supply of solar technologies • Familiarity with credit products Human capital • Coverage of credit bureaus • Local human capital - sales and executive • Access to use of mobile payment • Linguistics diversity ENABLING ENVIRONMENT Information and communication Legal and regulatory Trade and commerce technology • Existence of standards • Ease of doing business • Mobile and data connectivity • Availability of programs to support • Macroeconomic conditions and • Internet use OGS development legal rights • Taxes and subsidies affecting PAYG • Ease of access to credit and business model information Source: IFC, 2021. PAYG Market Attractiveness Index 2021. Rural households’ access to energy and participation Call detail records of consumers in in the digital economy are interdependent. Access to Senegal demonstrated that rural energy promotes higher levels of mobile phone usage and users with access to electricity had mobile banking, and vice versa. The state of mobile and data connectivity and internet use are included in the PAYG higher rates of mobile connectivity, Market Attractiveness Index as key enabling environment especially women. factors based on the finding that “usage of mobile phones Women in households with access and availability of mobile payment platforms has gone hand in hand with the development of PAYG markets.”23 PAYG to electricity subscribed to mobile companies also use SMS to communicate with customers, telephony at a rate of four percent mobile payment networks to take payments from customers higher than those in households at low cost, and mobile data networks to monitor and control without access to electricity.24 SHS remotely. 23 Lighting Global, Pay-As-You-Go Market Attractiveness Index 2021, 23. Accessible here. 24 Source: Houngbonon, G.V., Le Quentrec, E. & Rubrichi, S. Access to electricity and digital inclusion: evidence from mobile call detail records. Humanit Soc Sci Commun 8, 170 (2021).Accessible here The Off-Grid Solar Policy Toolkit 15 2.2 Technologies and Products While off-grid solutions are not new, they are now more are expanding their product offerings to include solar- affordable with a continued reduction in component powered appliances that can be used in income-generating costs and, therefore, more widespread. Consumers can activities. The industry has categorized these solar-powered purchase OGS products in different configurations, including appliances as Productive Uses of Renewable Energy plug-and-play kits and component-based systems, that are (PURE).25 sometimes sold bundled with efficient appliances. Plug-and- play kits include solar lanterns (one-light lantern with one OGS technologies can now provide consumers with LED light), multi-light systems (which include up to three or various services, including Tier 126 energy access and four LED lights with most models including USB charging above. Solar lanterns often provide only partial Tier 1 access, for mobile phones), and solar home systems (which provide yet they dominate global sales of OGS products. In addition, multiple electricity functions, such as lighting and powering a the share of Multi-Light Systems (MLS) and Solar Home wide range of appliances such as TVs and fans). As markets Systems (SHS) providing full Tier 1 energy access and above mature and technology innovation continues, OGS suppliers to households is increasing annually, as shown in Figure 2.3. Figure 2.3: Global affiliate sales volumes of OGS products by category (2017-2021) 3.219 2.995 2018 2.644 2.459 2019 2.263 2.268 2.253 2020 2.013 2021 Thousands 1.466 1.388 1.192 1.178 519 511 420 409 394 387 376 332 306 246 307 220 180 105 67 49 0-1.5 Wp 1.5-3 Wp 3-10 Wp 11-20 Wp 21-49 Wp 50-100 Wp 100+ Wp Lanterns MLS SHS Partial Tier 1 for an Full Tier 1 for an Full Tier 1 for a household Full Tier 2 for a household individual individual Source: Lighting Global/ESMAP, GOGLA, Efficiency for Access, Open Capital Advisors (2022), Off-Grid Solar Market Trends Report 2022: State of the Sector. Washington, DC: World Bank. 25 For more information on these technologies, refer to Lighting Global’s Market Research on Productive Use Leveraging Solar Energy (PULSE), accessible here. 26 ESMAP developed the Multi-tier Framework (MTF) through a consultative process — a framework used to assess energy access that goes beyond the traditional binary count of connections. The MTF categorizes energy access across five tiers, from Tier 0 (no access) to Tier 5 (the highest level of access). 16 The Off-Grid Solar Policy Toolkit In most markets, OGS supply includes a mix of growth (160 percent) in Tier 2 access between 2019 and quality-verified (QV) products, which providers have 2021. Governments are also promoting PAYG as an important manufactured and tested to be in compliance with offering to increase solar adoption in rural communities. View international standards, and those that have not (non- resources for key data points and other trends in OGS and QV). The market for solar lanterns has become more PAYG electrification in Annex B. There is limited data on the commoditized with an influx of lower-quality products that impact of PAYG offerings on women’s access to electricity have contributed to a decline in QV solar lantern sales.27 MLS and empowerment. Additional research with intentional and SHS products that have higher price points are more efforts to collect gender-disaggregated data is needed.31 likely to be QV, and growth in QV MLS and SHS product sales is outpacing QV solar lantern sales.28 PAYG uses consumer financing to make OGS products more affordable by spreading out the cost of ownership Countries are moving toward adopting quality standards of the unit through monthly, weekly, or daily payments. in response to consumer complaints about low-quality These recurring payments are similar to the way people products. Many are choosing to harmonize their standards pay for grid electricity through prepaid meters. Financing with those adopted by the International Electrotechnical terms typically include: Commission (IEC). The unregulated supply of OGS products An initial down payment of 10-20 percent. exposes consumers to risks from the purchase of low-quality or, in some markets, counterfeit products, which may lead Subsequent recurring payments preferably made to market spoilage. Lighting Global developed a series of using digital financing, such as mobile money but also Quality Standards and testing methods for off-grid solar sometimes collected by agents or paid in person. These lanterns, MLS, and SHS up to 350Wp. The IEC adopted these payments are typically spread out for a period of between one and three years. standards as a reference point for quality assurance of off- grid solar products (IEC Technical Specification 62257-9-5) Cessation of service and, eventually, repossession of the in 2021. These standards are now maintained by VeraSol,29 solar unit when payments are not made. an organization that builds on Lighting Global’s work in Transfer of asset ownership to the consumer when all sheparding the ongoing development and maintainance of payments have been made. Most PAYG companies only quality standards. It has also benefited from the foundational offer QV products and include a warranty that covers the quality assurance framework launched by Lighting Global, product for the financing term. CLASP, and the Schatz Energy Research Center in 2020. Government policy options to protect consumers from the PAYG companies use data they collect from the consumer risk of poor-quality products are discussed in Chapter Four, or other institutions, such as mobile network operators Issue 8. (MNOs) or credit bureaus, to assess a consumer’s repayment risk. The companies use this data in structuring their PAYG pricing and may, for example, increase or 2.3 PAYG and Consumer Financing of decrease the initial payment requirement based on the level OGS Products of risk of the market. Fintech companies, like Infibranches in Nigeria, also are offering digital payment services and PAYG is fundamental to addressing the affordability data collection platforms to help expand the reach of PAYG challenge and enabling consumers to access a higher tier companies and empower companies with data analytics.32 of energy service. According to market research, over 60 The wealth of customer data that PAYG companies are percent of off-grid solar customers now purchase energy collecting is creating opportunities to expand the PAYG access that meets or exceeds Tier 1 level access (as defined model to other products and services. While leveraging in the multi-tier framework (MTF)) driven by the increased data is useful to increase access to beneficial products and sales of larger SHS units enabled by PAYG.30 Consumer services, there is also a need to ensure consumer protection access to solar energy kits grew from 420 million people and data privacy. These issues are discussed in Chapter in 2019 to more than 490 million in 2021, with significant Four, Issues 6 and Issue 10. 27 Lighting Global/ESMAP, GOGLA, Efficiency For Access, Open Capital Advisors (2022), Off-Grid Solar Market Trends Report 2022, p. 45. 28 Id, p. 46. 29 Verasol website accessible here. 30 Lighting Global/ESMAP, OGS Market Trends Report, 51. As defined in the MTF Tier 1 access is access to electricity sufficient to use low power devices (below 3 watts) for a minimum of four hours during the day and one hour in the evening. Consumers with this level of access are able to use solar lanterns and charge their phones. ESMAP, “Multi-Tier Framework for Measuring Energy Access.” 31 Kumaraswamy, Sai Krishna, Does PAYGo Solar Improve Women’s Lives? A Look at the Evidence, CGAP. Accessible here. 32 Infibranches’ webiste here: https://www.infibranches.com The Off-Grid Solar Policy Toolkit 17 In Nigeria, Infibranches offers PAYG companies a digital aggregation platform to enhance digital payments. The platform allows customers to buy OGS products from PAYG companies and to make payments through a variety of mobile money providers and financial apps. Most PAYG providers in Nigeria are using the services of Infibranches. PAYG providers may also embed ‘lockout’ technology within the product to deny energy service if a customer’s prepaid balance has been used or expires, similar to pre-paid grid meters or airtime top-ups. Consumers can M-KOPA’s PAYG offerings now regain access by making payments on their accounts. Unlike other forms of include smartphones, televisions, financing (such as loans), PAYG providers typically only use the OGS system refrigeration, cookstoves and loan as collateral, where the system can be collected in case of customer non- and insurance products. payment. Unlike microfinance institutions (MFIs) or other cash-based lenders, PAYG companies do not provide customers with cash that can be used at their Bboxx provides PAYG financing for discretion. Instead, the PAYG financing is directly connected to purchasing the smartphones in partnership the OGS asset. At the beginning of the loan or lease period, the customer with the Government of Togo. receives an OGS product and has a financial obligation to repay it. Some PAYG companies are expanding their services to offer financing for customers to (Source: GSMA) acquire other assets.33 Figure 2.4 depicts a typical PAYG product cycle. Figure 2.4: A Typical PAYG Product Cycle Solar system aquisition Solar system utilization Solar system ownership Customer makes initial down payment Client uses equipment as Lease-to-own: Client owns system after via (1) mobile money or (2) cash to per prepayment successfully completing payments agent for tokens Customer OR Perpetual lease: Client 4 5 continues to lease system 1 2 3 Solar system is from the operator delivered and installed PAYG Company Company regulates usage PAYGo of system within prepaid Company confirms customer days. Company tracks payment and approval repayments for analysis disburses system Source: Vivid Economics and Open Capital Advisors; Lighting Global, GOGLA, ESMAP, Off-Grid Solar Market Trends Report 2020 33 GSMA, The Value of Pay as You Go Solar for Mobile Operators Insights from Customer Journeys in Benin and Cote-dk’Ivoire (2022). Accessible here. 18 The Off-Grid Solar Policy Toolkit PAYG providers integrate digital payments and remote monitoring into PAYG products to drive payment collection and processing efficiencies that can contribute to lower product pricing. A country’s legal and regulatory environment, often governed by central banks and financial regulators, determines the permitted forms of digital payments and the payment provider landscape. When available, and especially in markets in sub-Saharan Africa, PAYG providers typically use mobile money to facilitate customer payments. This helps PAYG providers lower payment collection costs, especially for rural customers. In sub-Saharan Africa, it is not unusual for the MNO to be the mobile money provider rather than the traditional financial services provider. The PAYG companies may use other payment options, including digital payment services offered by banks or the growing sector of FinTech companies that offer mobile wallets, payment apps, and agency banking, taking advantage of the In Pakistan, SHS adoption of smartphone and mobile broadband uptake. companies rely on microfinance institutions In markets where digital payments are not as prevalent or digital networks have to provide financing. The not reached the companies’ service areas, PAYG companies may collect payments companies attribute low in alternative forms including cash, scratch cards, and mobile airtime. They can market growth to a lack of also use a payment process that does not rely on access to mobile devices or digital financial services a mobile network. A non-digital payment channel option can also be important for (specifically mobile wallets) OGS to be inclusive of all segments of the population. For example, people with low that enable high payment levels of digital literacy or physical challenges in using mobile technology may need a non-digital solution to acquire PAYG systems. As shown in the scenario in Table 2.1, flexibility and have proven if the PAYG hardware does not connect with the mobile network, customers pay cash to be critical for SHS to appointed agents for a prepaid energy voucher, credit or scratch card and manually success in other markets. input unique usage codes into the OGS. In a few cases, PAYG companies may partner with financial institutions to provide the consumer financing and only provide the OGS (Source: World Bank 2022) product. Some financial institutions have seen an opportunity in PAYG and created subsidiaries that offer PAYG products.34 Table 2.1: Payment Channels by OGS Company & Partners Payment PAYG Provider Payment Payment Process Channel Technology Approach Mobile Money On-network M-KOPA is a well-known PAYG provider in Kenya. Purchasers of M-KOPA PAYG systems make payments to M-KOPA using mobile money.  Mobile Money On and off- Sunny Money offers customers in Malawi the option to make payments using their network own mobile money account or with cash paid to mobile money agents. Scratch Cards Off-network Azuri prints and distributes energy credit scratch cards through local agents. Customers purchase the scratch card with a unique numeric code and send it via SMS along with their product/customer ID. Azuri sends the customer an SMS with a single- Azuri Technologies  use code, which they enter into a keypad on the solar device to use the product for the prepaid amount of time. Airtime On-network Customers use their MTN mobile airtime to pay for MTN Mobile Electricity service. MTN credits the customer’s Lumos account to receive power for the number of days selected. The SHS automatically shuts off after the credit is exhausted. 34 Waldron, Daniel, Alexander Sotiriou, and Jacob Winiecki. 2019. “A Tale of Two Sisters: Microfinance Institutions and PAYGo Solar.” Focus Note. Washington, D.C.: CGAP. Accessible here. The Off-Grid Solar Policy Toolkit 19 2.3.1 PAYG Pricing Components Consumers who buy an OGS product with financing Upstream costs include materials and component costs pay more to purchase their unit than consumers who (including research and development and product design purchase the same product in cash due to the cost of costs), value-added taxes (VAT), and duty costs applied providing consumer financing in the PAYG model.35 to OGS units and components, as well as operating costs Figure 2.5 provides an overview of the different upstream (logistics, warehousing, sales, marketing). costs (costs to produce products and make them available to consumers) and downstream costs (costs of after-sales A key cost driver for solar products is the materials and service and consumer financing) of OGS products. The components themselves, including taxation. For PAYG finance costs of a PAYG offering reflect the cost of capital companies, in particular, high-quality products - despite and additional operating costs of credit management, credit- higher costs - are important to reduce after-sales and related technology, and mobile money transaction costs, warranty costs, and to decrease risk of consumer non- among others. payment (customers stop paying when their product is not working). Figure 2.5: PAYG SHS Cost Breakdown upstream costs $65-$120 $560-$950 upstream costs $50-$80 $90-$140 $130-$180 $65-$280 downstream costs $20-$30 $10-$45 $130-$200 Materials & Labor Shipping & Taxes (import Sales & Finance (24- After-sales Overheads Consumer components warehousing duties & VAT) marketing mon. plan incl. services (incl. R&D) price cost of capital (incl. reverse & credit logistics) monitoring) Source: Hystra Strategy Consulting, Pricing Quality Cost Drivers, and Value Add in The Off-Grid Solar Sector 2019 35 According to the 2022 Off-Grid Solar Market Trend Report (MTR), a typical PAYG business model features repayment over 12-24 months at a 40 percent annual equivalent rate, helping to spread what would otherwise be an upfront cost of 100 USD or more for a Tier 1 system. 20 The Off-Grid Solar Policy Toolkit Therefore, many PAYG companies invest heavily in research and development and the purchase of quality solar components that meet international quality standards. The Africa Clean Energy A country’s fiscal policies for OGS products influence upstream product costs and Technical Assistance pricing. Recognizing that taxation can add to product costs and reduce affordability, Facility and Open Capital governments are using a variety of fiscal strategies to address these costs, especially for Advisors published a purchasing QV products. We explore policy approaches and options for fiscal policies in tool governments can further detail in Chapter Four, Issue 4. use to assess the impact of varying VAT and duty Downstream costs include after-sales service and consumer finance, with the latter levies on consumer being the most significant. Consumer finance consists of the cost of capital and credit to provide funds for consumer financing over a multi-year term and mobile money access to and purchase of transaction costs. It also covers additional operating costs triggered by consumer standalone OGS products. financing (credit management, after-sales support), and credit-related technology, such as firmware that enables remote lockout or GPS devices. Other costs are covered to manage foreign exchange risks between borrowing by the PAYG company in non- local currency and customer payments made in local currency, and costs of managing consumer non-payment risk through reserves. PAYG companies price their products to cover their after-sales service costs and the risk they assume in financing consumer receivables. Hystra estimates that after- sales service costs for PAYG companies account for 5-15 percent of product pricing for quality SHS.36 These costs cover replacement parts, call center operations, and reverse logistics. PAYG companies’ after-sale service periods may be longer than other OGS providers, especially those not providing product warranties, as PAYG companies offer equipment repair and customer services throughout the financing cycle (often up to 24 months and sometimes longer). When a PAYG company can lower its financing costs, this can translate into lower product pricing for consumers. OGS companies have their capital costs financing, which can represent up to 15-25 percent of the end-consumer price.37 PAYG companies price into their products their cost of funds to supply consumer financing and to create a reserve for bad debt from consumer financing defaults. When a PAYG company can lower its financing costs, this can translate into lower product pricing for consumers. A company’s financing cost can also determine whether it can offer a PAYG product. We explore policy approaches and options to increase the availability and cost of capital to OGS providers in further detail in Chapter Four, Issue 5. 2.3.2 OGS Value Chain and Business Models Companies in the OGS sector adopt various business models, including vertical integration across the value chain and specialization in one or a few parts. The OGS value chain can be depicted in six parts, as shown in Figure 2.6. In vertically integrated business models, one company operates across the value chain, engaging in product design, manufacture, retail sales and distribution, installation and maintenance, payment collection, financing, and customer service. In the early days of the PAYG sector, most companies adopted this vertically integrated business model and had to master all the disciplines in the value chain. Other companies specialize in one or two areas within the value chain. 36 Hystra Hybrid Strategy Consulting, Pricing Quality Cost Drivers, and Value Add in The Off-Grid Solar Sector, 2017. Accessible here. 37 Ibid. The Off-Grid Solar Policy Toolkit 21 Market trends indicate that newer OGS providers are moving away from the vertically integrated business model and becoming more specialized.38 The OGS sector continues to evolve with market participants experimenting with their service offerings and approaches to drive efficiencies, scale, and to reach profitability. Figure 2.6: PAYG SHS Value Chain Hardware Hardware Software Marketing & Consumer After-sales design manufacturing development distribution financing support OGS sector Broadband infrastructure for OGS Device Communication and Customer support Telcoms Digital payment or agent Network for Payment Collections Mobile money providers or MFIs The Off-Grid Market Trends 2022 report captures and categorizes some companies participating in different parts of the value chain, as shown in Figure 2.7. Figure 2.7: Value Chain Participants (Adapted from: Lighting Global/ESMAP, GOGLA, Efficiency for Access, Open Capital Advisors (2022), Off-Grid Solar Market Trends Report 2022) Note: This mapping is not comprehensive of the entire sector, though it is representative of the types of currently operational companies. 38 Consolidation has also begun to occur in some markets, with larger companies such as Engie acquiring early players in the OGS sector and PAYG space, Mobisol and Fenix. Lighting Global, GOGLA, ESMAP, Off-Grid Solar Market Trends Report 2020, p. 11. 22 The Off-Grid Solar Policy Toolkit 2.4 Impact of OGS using the system to support enterprise. The same report highlights health, safety, and quality of life improvements Beyond delivering electricity access, OGS has multiple in transitioning from traditional energy sources, such as economic, social, and environmental benefits. According kerosene and candles. Beneficial climate change impacts to the World Bank’s 2017 State of Electricity Access are also associated with the same transition from fossil fuels Report, a review of all SDG targets indicates that energy to renewable energy. is interconnected with 125 (74 percent) out of the 169 targets, making it crucial for all societies to recognize the OGS also offers benefits for women and girls. OGS key interlinkages of energy and the wider development products can reduce the time it take to complete certain agenda39. A report by GOGLA40 cites household and household chores - tasks disproportionately carried by national savings, and job creation and economic activity women - and be used to generate income.41 Girls also greatly among others. For example, research in East Africa and benefit from electricity access. For instance, girls living in Mozambique found that nearly 60 percent of customers rural areas that have access to electricity are 59 percent who purchased solar home systems reported increased more likely than those without electricity access to complete economic activity due to a household member being primary education by the time they turn 18.42 able to spend more time working, getting a new job, or 39 State of Electricity Access, World Bank, 2017 40 GOGLA, 2022. Providing Energy Access through Off-Grid Solar: Guidance for Governments. Accessible here. 41 Ungari, Barbara; Schomer, Inka Ivette; Rysankova, Dana, Operational Handbook for Gender Equality in the Off-Grid Solar Sector, Washington, D.C., World Bank Group, p. 43. Accessible here. 42 Ibid. The Off-Grid Solar Policy Toolkit 23 CHAPTER THREE The Pay-as-You-Go and Digital Economy Nexus Use this Chapter to: Understand how PAYG contributes to the demand and use of digital payments (including mobile money). Identify how access to OGS supports the five foundations of a digital economy. Explore where governments’ policy initiatives for increasing energy access, digital inclusion, and financial inclusion may overlap and provide an opportunity for inter-ministerial coordination. The OGS sector contributes to and builds on the global typically own and operate mobile money services using transformation toward digital economies. The Global their mobile services brand and contracting local agents to System for Mobile Communications Association, GSMA, provide customer service. Licensed financial institutions, describes the PAYG solar model as the perfect example of a including banks or FinTechs, may provide digital payments or “second wave of inclusive digital innovation.”43 mobile money in some markets. You can find resources with key data points on how inclusive digital economies can use In this Chapter, we explore how OGS integrates digital OGS energy in Annex B. technology and enables the digital economy, and how policymakers can promote common and mutually reinforcing strategies for digital transformation, financial inclusion, and Connected Devices, Customers, and Distribution energy access. OGS companies are designing, prototyping, and programming microcontrollers that regulate the use and functionality of OGS units. In PAYG products, broadband 3.1 How OGS Uses the Digital Economy networks transfer proxy information and data between the consumer device and the OGS company, as shown Digital Payments and Mobile Money in Figure 3.1. OGS companies use this data to analyze Digital payments and mobile money are fundamental to system performance and customer payment trends and off-grid energy expansion and an enabling market factor inform real-time financing and business decisions. OGS for PAYG. Mobile money services are key to the PAYG companies also use machine-to-machine (M2M) connections model. While money mobile is not the only payment option to facilitate remote system activation and deactivation for OGS purchases, most companies use it (or other forms of based on a customer’s payment activity. As the OGS digitally enabled payments) to eliminate direct cash handling industry evolves, solar lanterns and SHS are mature product and the need to establish payment collection points. The offerings catalyzing a market trend toward more customized, specific payment provider may vary. In the case of mobile interoperable, modular, and circular products. money, Mobile Network Operators (MNOs), not banks, 43 GSMA, Mobile for Development Utilities, Lessons from the use of mobile in utility pay-as-you-go models, 2017. Accessible here. 24 The Off-Grid Solar Policy Toolkit These products offer consumers flexibility and choice in purchasing a “family of products” or mixing products from different suppliers.44 In 2021, GOGLA launched an initiative to promote OGS and PAYG systems interoperability. Through its Connect Initiative, GOGLA’s technical working committee defined a set of common, voluntary technical standards for SHS kits and PAYG firmware to promote device and PAYG platform interoperability.45 Leading PAYG software platform providers, Angaza, PaygOps, and Paygee, have embraced interoperability by enabling SHS kits integrated with one of the platforms to be usable with the two other platforms.46 Figure 3.1: PAYG Data Flows for GSM-Embedded Systems PAYG Data Flows for GSM-Embedded Systems Consumer Finance (1) Customer makes regular payments via mobile money or pays agent in cash for Solar Device prepaid tokens. (2) Device unlocked for customer via GMS or Remote Lock-Out & prepaid tokens. Device Performance Unlock Command Tracking via GSM* 8 7 (3) Customers can reach the call center to register new devices and troubleshoot Data Reports or issues as needed. Portfolio, Agent (4) Field agents can also register new Performance customers through an app: company 1 PAYG 5 approves customers for PAYG. Both field 2 Platform 6 PAYG Company and call centre agents can connect to Customer Keycode Third-Party Providers the platform through an app to generate Generation Direct integration and tokens for customers and troubleshoot. data sharing with third- party software providers After-Sales Services 4 4 is possible. Examples 3 (5) PAYG platform aggregates payment history include integrating and usage data* for company. with payment providers Call Centre PAYG Call Centre & to ease collections (6) PAYG company manages portfolio health, Field Sales Agents Support from unbanked PAYG agents’ sales performance, and after-sales customers and sharing support. PAYG data with financiers (7) PAYG platform remotely locks system as a to improve due diligence result of non-payments and unlocks after processes. customer buys credit. (8) Company tracks device health via GMS for repairs and servicing. (Source: Vivid Economics and Open Capital Advisors; Lighting Global, GOGLA, ESMAP, Off-Grid Solar Market Trends Report 2020) Beyond device communication, OGS companies use SMS and other mobile messaging systems to communicate with their customers. Angaza estimates that PAYG distributors send more than 60 SMS messages to customers during the financing period.47 44 Lighting Global/ESMAP, GOGLA, Efficiency For Access, Open Capital Advisors (2022), Off-Grid Solar Market Trends Report 2022: State of the Sector. Washington, DC: World Bank. p. 6. 45 GOGLA, The Connect White Paper, 2021. Accessible here. 46 Ibid. 47 Angaza offers a bulk SMS package to PAYG distributors described in more detail here. The Off-Grid Solar Policy Toolkit 25 We address policy issues and options for promoting the 3.2 How OGS Enables the Digital availability of digital infrastructure and services to support Economy M2M communications and customer communication in Chapter Four, Issue 2. PAYG companies prompt customers to open mobile money accounts and use them regularly. Customers purchasing PAYG products made more mobile money MNO Partnerships for Last Mile Distribution transactions, not only to pay for their SHS but for other Last-mile retail agents play an important role in products as well. In a 2020 study covering five MNOs in five accelerating both OGS sales and adopting digital countries, GSMA found that mobile money users increased payments.48 While some companies operate as wholesalers the frequency of mobile money transactions by 113 percent of OGS products, selling their products to businesses right after they started using PAYG solar services. In 2022, who then take on the business of selling to consumers, GSMA updated its research, collecting data in Benin and others rely on retail agent sales and distribution networks Côte d’Ivoire on how energy access and mobile phone use to facilitate sales. PAYG companies rely on local agents to - including mobile money transactions - influence each other enable mobile money account opening and payments. OGS and create customer behavior change that drives usage.51 companies are adopting retail and last-mile distribution strategies using local agents in a variety of combinations, Consumers’ increased use of mobile money and PAYG also including the following: open the gateway to digital financial inclusion and access to additional financial services. Some PAYG companies have 1. Working through proprietary networks. begun to offer customers access to additional financing 2. Engaging independent retail distributors and sales agents. secured by their systems. 3. Opening mobile money accounts and conducting For example, Engie Energy Access provides school fee transactions for PAYG customers. loans to help their customers manage the discrepancy 4. Partnering with MNOs to recruit agents to serve as both between when school fee loans are due and when farmers mobile money and OGS sales agents. receive payments for their harvests.52 PEG, a PAYG provider in Ghana, acquired by Bboxx in 2022, offered the option In some markets, MNOs partner with OGS providers in to include health insurance premiums to PAYG customer last-mile distribution to reinforce their brand and drive payments. As PAYG provider financing moves beyond customer acquisition and retention.49 In Uganda, Fenix purchasing the solar unit, governments may need to evaluate International and mobile money provider MTN used a how that financing is classified under a country’s financial combined field force of co-branded agents (Fenix and MTN) services regulation. We explore policy issues and options in who serve as mobile money agents and PAYG merchants. Chapter Four, Issue 7. MNOs have wide retail distribution networks with reach and visibility in areas beyond the grid that are providing sales and service channels for OGS. The growth of MNO “Mobile operators provide the basic ingredients for services in rural areas and the saturation in urban markets PAYG — mobile money and connectivity — while PAYG have prompted some MNOs to customize services to meet solar boosts operator revenues from mobile money the needs of rural, off-grid customers.50 By partnering with transactions and other services, aided by reliable MNOs, PAYG providers may be able to share the costs of phone charging.” sales and marketing with the MNO, thereby reducing their costs and in turn customer pricing. (Source: GSMA) 48 In 2019 the Global Distributors Collective published a state of the sector report on last mile distribution. Sixty-five percent of the distributors surveyed for the report sell off-grid solar lighting and appliances. Global Distributors Collective (2019) Last Mile Distribution: State of the sector report, Rugby, UK: Practical Action Publishing, p. 11. Accessible here. 49 Most OGS products today are sold through direct sales agents. Lighting Global, GOGLA, ESMAP, Off-Grid Solar Market Trends Report 2020, p. 77. 3 Jennifer Frydrych and Hege Aschim, GSMA, Extending reach: mobile money in rural areas, October 2014. 50 GSMA, The Value of Pay As You Go Solar for Mobile Operators Insights from Customer Journeys in Benin and Cote-d’Ivoire; GSMA, The Value of Pay-as-you- go Solar for Mobile Operators, 2020. Accessible here; GSMA (Producer) The Value of Pay-as-you-go Solar for Mobile Operators (Webinar), 2020. 51 Emmot, C. Next Billion: Paygo solar industry products, January 2020. Accessible here. 26 The Off-Grid Solar Policy Toolkit Women who acquire PAYG products can also benefit for All: A “Digital Infrastructure Moonshot” for Africa (the from the bridge to financial inclusion paved by PAYG. Broadband Commission Working Group) classifies the Research on the popular Kenyan mobile money platform absence of access to reliable electricity as a significant M-Pesa has shown that access to mobile money constraint to digital infrastructure expansion in Africa. improves the economic lives of women with lower income and members of female-headed households.53 OGS companies are providing energy solutions that Despite the benefits of mobile money, data from the can support inclusive participation in the digital World Bank’s 2021 Global Findex Survey showed that economy — especially by those in rural areas. Digital women globally were six percentage points less likely products and services all need to be powered by to have a formal financial account than men.54 Consumer electricity. This could be the mobile phones used by insights data collected by the firm 60 Decibels show individuals, point-of-sale devices used by entrepreneurs, that gender targeting of OGS products to women may or educational videos viewed by students in a be necessary as men are the primary purchasers of classroom. Mobile phone charging can be expensive solar lanterns and SHSs.55 Women in the study sample for those without energy access at home. Those relying purchased only 38 percent of solar lanterns and 32 on energy kiosk vendors to charge their mobile devices percent of SHS. In 2022, the World Bank published an can face charging costs that add up to a third of the cost operational handbook on gender equality in the OGS of owning an internet-capable device, depending on the sector, which guides stakeholders on approaches for distance to the charging station.57 closing gender gaps at the consumer and enterprise levels.56 GSMA research continues to confirm the deep synergies that exist between mobile and PAYG energy services, “With new energy access, via SHSs, we see all aspects of customer Consumer access to reliable, high-quality energy is essential to creating inclusive digital economies. The behavior shift. These changes reflect the transformation in Broadband Commission Working Group on Broadband peoples’ lives that come with reliable energy access.” Figure 3.2: Estimated Charging Cost of Off-Grid Smartphone Ownership 20 15 Cost ($/month) 10 5 0 India Kenya Rwanda Nigeria Tanzania Vendor charging Calls & SMS Data Handset Source: Bloomberg New Energy Finance, Research ICT Africa, Facebook. Assumes the handset costs are distributed over 36 months. Five battery charges per week. 53 Suri, T. & Jacks, W, The long-run poverty and gender impacts of mobile money, Science 354 (6317), 2016, 1288-1292. Accessible here. 54 Demirgüç-Kunt, Asli et al, 2021 Findex. 55 60 Decibels, Why Off-Grid Matters, Feb. 2020, 26. Accessible here. 56 Ungari, Barbara et al, Operational Handbook for Gender Equality 57 Facebook, Bloomberg New Energy Finance, Powering last-Mile Connectivity, 2018. Accessible here. The Off-Grid Solar Policy Toolkit 27 The World Bank’s Digital Economy for Africa (DE4A) initiative includes a framework that identifies key components of the digital economy ecosystem.58 This includes five foundational elements, as illustrated in Figure 3.3: 1. Digital infrastructure. 2. Digital government. 3. Digital financial services. 4. Digital business. 5. Digital skills. We explore the connection between OGS and digital transformation in the following sections of this chapter. Figure 3.3: The Relationship Between OGS and Digital Transformation Digital Infrastructure Digital Digital Digital Digital Digital infrastructure Governments Financial business Skills Services OGS Powers digital OGS access is powering PAYG increases mobile The OGS sector Local OGS agents and devices and use of digital governments’ move to money accounts, provides opportunities use of PAYG products infrastructure and service digital service delivery active use and digital for new digital is bridging the digital provider revenue and e-performance financial inclusion businesses and online literacy gap. marketplaces. Digital Infrastructure The geographical gaps in consumer use of broadband countries (22 percent) remains far below that of high-income service mirror those for energy, allowing the government countries, which are close to universal usage (91 percent).59 to coordinate policies that can advance digital The gaps in service coverage and use are most acute in rural transformation and increase energy access. Consumers in areas, which are the most expensive for providers to serve. many countries, especially in rural areas, access broadband Mobile network deployment to rural and remote locations services through mobile networks. The quality, reliability, and is adversely impacted by a lack of basic infrastructure, affordability of these broadband services vary widely. This including reliable electricity provision. means that internet access is far from equal or universal, despite the increasing ownership and usage of mobile phones. Globally, only 63 percent of people are connected to internet services. The level of internet use in low-income 58 The World Bank’s Digital Economy for Africa (DE4A) initiative supports the African Union’s Digital Transformation Initiative and sets goals: to double broadband connectivity penetration in Africa by 2021 from 2016 levels; and achieve universal, affordable, and good quality broadband access in Africa by 2030. Broadband Commission Working Group on Broadband for All: A “Digital Infrastructure Moonshot” for Africa, Connecting Africa Through Broadband A Strategy for Doubling Connectivity by 2021 and Reaching Universal Access by 2030. Accessible here. 59 ITU, Global Connectivity Report 2022, 2022. Accessible here. & GSMA, The Mobile Gender Gap Report, 2022, Accessible here. 28 The Off-Grid Solar Policy Toolkit In situations where mobile network coverage does exist, consumers’ uptake of the services is only a fraction of the network coverage.60 Government policies that coordinate broadband service delivery and access to energy can help accelerate the reach of both in rural areas. Map 3.1: Mobile broadband penetration in Africa by country (%), 2018 Source: GSMA,UN,Xalam Analytics data Tunisia 60% Broadband Penetration Morocco 47% in Africa, 2018 Less than 25% Algeria Western Sahara 88% Libya Arab.rep.of 25% to 49% 83% Egypt 50% to 74% 38% 75% and above Mauritania Eritrea Cape Verde 45% Mali 17% 9% Senegal 37% 40% Niger Sudan Djibouti • Regional average: 31% (2018 estimate) 8% Chad The Gambia 53% 35% 17% 11% • Estimates based on GSMA,UN,Xalam Analytics data. Burkina Faso Guinea Bissau Guinea 26% 16% Benin Nigeria • Penetration based on unique users and target population 25% Cote 29% Ethiopia 18% Central African South Sudan aged 10 and above. Sierra Leone D'ivoire Ghana 16% Liberia Republic 5% • Broadband is defined as average download speeds of 256 38% 15% 30% 30% Equatorial Cameroon 14% 17% Somalia Kbps or greater while the target download speeds by 2021 Guinea 3% Uganda Kenya 13% is 3 Mbps. Togo Gabon 14% 35% 25% 65% Dem.rep.of Congo Rwanda 11% Burundi 14% Tanzania 14% Sao Tome And 13% Seychelles Principe Comoros 65% 73% Angola 0% 42% Zambia 13% Zimbabwe Malawi Madagascar Namibia 53% 13% 13% 83% Botswana Mozambique 68% 23% Eswatini South Africa 41% 53% Lesotho 46% Map 3.2: Share of population with access to electricity (%), 2022 Source: IEA % 0 100 60 Per the Global Connectivity Report referenced above, the coverage gap, currently at five percent, is dwarfed by the usage gap: 32 percent of people within range of a mobile broadband network and could, therefore, connect remain offline. The Off-Grid Solar Policy Toolkit 29 ©Freepik In recent years, consumers in the African region have Most countries in sub-Saharan Africa fall short of this target. seen reduced prices for mobile devices and airtime. On average, current prices on the subcontinent represent However, many consumers continue to find that costs for 6.8 percent of income. mobile devices and mobile internet services exceed their purchasing power. Africa has the highest level of broadband By making smartphones more affordable and easier to exclusion in the world. Such high levels of exclusion are charge, PAYG is helping people access the internet. In mostly the result of the cost of broadband services, the cost July 2020, Safaricom, the Kenyan MNO, in partnership with of devices, and insufficient infrastructure to provide reliable Google, launched Lipa Mdogo, a PAYG plan for 4G phones. broadband service to remote and rural populations. Africa Qualified consumers can purchase a 4G mobile device by also has the highest prices globally for mobile broadband making an upfront deposit followed by daily installments services, as measured relative to income. The Broadband until the phone is paid for in full.62 PAYG providers M-KOPA Commission for Sustainable Development defines affordable and Bboxx are offering PAYG financing for smartphones broadband access as two percent or less of the average to customers in addition to their traditional OGS product monthly income for entry-level mobile broadband data.61 offerings.63 61 Broadband Commission for Sustainable Development. 2021. The State of Broadband: People Centred Approaches for Universal Broadband. Accessible here; GSMA, The Mobile Economy in Sub-Saharan Africa 2020. Accessible here. 62 Learn more about Lipa Mdogo here. 63 Learn more about M-KOPA’s financing plans here. Learn about Bboxx’s PAYG offerings here. 30 The Off-Grid Solar Policy Toolkit OGS companies are providing the necessary electricity solutions to support consumer use of mobile services and boost revenues for MNOs. MNOs “By far the greatest impact on set their service provision based on their costs and revenue forecasts driven increased data and voice usage by consumer and enterprise customers’ use of their services. Customers who is that SHS allow users to charge use PAYG OGS products increase their internet and mobile money use. In the 2022 GSMA study, surveys of mobile phone users in Benin and Côte d’Ivoire their phones more easily and, show that voice and data usage jumped sharply for SHS customers compared therefore, use their phones more to those in a control group. The average revenue per user (ARPU) for mobile often.” phone users with PAYG OGS was nine percent higher than for customers without (Source: GSMA The Value of Pay-as- PAYG OGS products.64 The need for OGS solutions will increase as consumers you-go Solar for Mobile Operators, continue to purchase smartphones which require more frequent charging than p.24) feature phones. As discussed in Section 3.1, the OGS sector is also driving the use of mobile services by embedding digital technology in its products for M2M communication and to power its last-mile distribution networks. Table 3.1 illustrates the economic benefits and investment areas needed for MNOs to participate in and benefit from the OGS sector. Table 3.1: MNO Benefits from OGS and Investment Areas PAYG Use of MNO Services MNO Revenue Growth Investment Areas for Expanding Rural Service Signing up new customers Customer use of network services like Internet/ Encouraging expansion of distribution SMS/Voice (revenue from airtime sales), as well networks, mobile money agents and quality as additional digital financial services for which network infrastructure the MNO may receive a revenue share Repayment of PAYG solar product Mobile money transaction fees or charges • Increase in training of agents to advance their own digital literacy and to train customers on digital technologies. • Increase mobile money tiers. Mobile money repayment data used Mobile money fees generated through for PAYG credit scoring and evaluation increased use of complementary financial • Increase agent management structures service offerings (liquidity management) M2M communication for equipment Fees/charges/licenses for SHS metering and Improved technology and expansion of monitoring monitoring and bulk SMS infrastructures in rural areas Policymakers can influence investments in broadband network reach and OGS solutions through coordinated and supportive frameworks, especially in underserved rural areas. Despite growing consumer demand for digital services, MNOs and OGS companies are often challenged to source sufficient service revenue from rural customers to cover their infrastructure and operational costs. Advocates for digital inclusion and universal energy access recognize that they need more than private sector investment to bridge GSMA estimates that MNOs the affordability gap for consumers to acquire off-grid energy solutions and will invest US$52 billion purchase broadband access. GSMA estimates that MNOs will invest US$52 billion in expanding network infrastructure in sub-Saharan Africa between in expanding network 2019 and 2025 to meet growing consumer demand for mobile services.65 We infrastructure in sub- explore policy approaches and options for coordination of broadband and OGS strategies in further detail in Chapter Four, Issue 2. Saharan Africa between 2019 and 2025 to meet 64 GSMA, The Value of Pay As You Go Solar for Mobile Operators Insights from Customer Journeys in Benin and Cote-d’Ivoire, p. 13. growing consumer demand 65 GSMA, The Mobile Economy in Sub-Saharan Africa 2020. Accessible here. for mobile services. The Off-Grid Solar Policy Toolkit 31 Digital Governments 2014).67 PAYG purchases similarly motivate mobile money account opening and active use generating Many governments are converting to digital revenue for MNOs. In Rwanda, about 20 percent technology to deliver public services. This of OGS company Mobisol’s customers were new encourages citizens to transition to the formal MTN mobile money customers. In Uganda, more economy by applying connected digital than 13 percent of Fenix International’s OGS technologies and moving tax collection to digital customers were new MTN mobile money users.68 channels. This all depends on reliable energy PAYG users also made more frequent mobile access. Whether disbursing government support money transactions than non-PAYG users, not only payments, targeting OGS subsidies to enable towards payments for solar products but also for energy access, or managing data to monitor savings, peer-to-peer transfers, merchant payments, government programs, closing the gaps in universal withdrawals, and purchase of airtime.69 In Benin energy access and digital inclusion will be critical to and Côte d’Ivoire, mobile money usage by SHS governments’ success in migrating service delivery customers increased sharply after they started using to digital platforms and driving efficiencies in tax their OGS systems. In Côte d’Ivoire, the average collection. number of monthly transactions jumped by 33.8 percent after OGS adoption versus just 11 percent in In Togo, the government uses SHS subsidies the comparison group and in Benin by 84 percent.70 to also drive electricity access and digital In Ghana, PAYG provider PEG customers generated development. Households in Togo who purchase 122 percent more revenue per active user for the a SHS from authorized providers can access a mobile money provider, Tigo Cash, than non-PEG subsidy of US$ 4 (2,000 FCFA) per month for the customers in CGAP’s research sample.71 We address SHS payment plan. The government pays the policy issues and options for advancing access to subsidy through mobile money. Building on these digital payments and mobile money in Chapter Four, electrification efforts, the government is working to Issue 3. digitally transform the economy. The government plans to provide one solution to improve access In some markets, MNOs recognize the benefits to a variety of public and social services with of participating in the PAYG sector to empower its ambitious E-ID Togo biometric identification inclusive rural digital communities. MNOs and program.66 The government expects that the E-ID PAYG providers are partnering in new ways, such program will facilitate access to services including as sharing customer data for mobile-based credit credit and health and improve administrative scoring. By using data analytics, companies can operations for citizens. structure more appropriate financing products for customers, reduce the risk and costs of managing Digital Financial Services consumer financing defaults, and create potential new revenue streams. Consumers’ use of PAYG products drives active use of digital financial services and mobile money beyond basic money transfers. Excluding Data from the Global Findex showed an PAYG, data from the Global Findex showed an increased use of mobile accounts to pay increased use of mobile accounts to pay utility bills following COVID-19, with 18 percent of adults in utility bills following COVID-19, with 18% of developing economies paying utility bills directly adults in developing economies paying utility from an account (compared to eight percent in bills directly from an account. 66 Alex Irwin-Hunt, Togo ramps up digitalisation development, FDI Intelligence.com, (2020). Accessible here. 67 Demirgüç-Kunt, Asli et al, 2021 Findex. 68 GSMA, Mobile for Development Utilities, Lessons from the use of mobile in utility pay-as-you-go models, 2017, 15. Accessible here. 69 GSMA, The value for PAYG solar for mobile operators, 2020. Accessible here. 70 GSMA, The Value of Pay As You Go Solar for Mobile Operators Insights from Customer Journeys in Benin and Cote-d’Ivoire, p. 27. 71 Daniel Waldron, Michiel Wolvers (CGAP), Daily Energy Payments Powering Digital Finance in Ghana, February 27, 2017. Accessible here. 32 The Off-Grid Solar Policy Toolkit In addition to MNOs, FinTech companies that operate and integrate with mobile networks and sometimes mobile money systems are developing new products to reach underserved markets. Data sharing raises issues with consumers’ right to control the use of their data and policy issues of data privacy and protection. We discuss policy issues and options for data governance of commercial agreements on consumer data sharing and to protect consumers’ rights to data privacy in Chapter Four, Issues 6 and Issue 10. MNOs’ level of engagement in the OGS sector can range from providing merely the digital infrastructure and platform, to partnering with OGS and PAYG companies in sales and distribution strategies, or to leading their own OGS offerings, as illustrated in Table 3.2. Table 3.2: Models of MNO and OGS Engagement Engagement Integrated Partnership Roles MNO PAYG Level of Type Elements Engagement Service as a Connectivity OGS companies use mobile networks for remote monitoring through Low Platform M2M communications, and as a platform for PAYG consumer financing, SMS messaging, and customer service Collaboration Mobile Money Specific mobile money agreements integrate mobile money platforms High to push payment notifications to customers through their mobile phones and to allow OGS providers to track customer payments by integrating data into their customer management systems Mobile Money Merchant accounts set up to accept mobile money for PAYG Low payments Sales and Distribution and revenue-sharing partnership with agents and for High Distribution sales Credit Scoring MNO user data shared to assist PAYG providers in consumer credit High evaluations for financing eligibility Marketing MNO-led marketing of PAYG products to mobile money customers High Solo Offering Value-Added MNO-owned offerings for off-grid sales, such as notification of High Services successful payments, reconciliation and receipts, call center equipment, and services Digital Business million new jobs, ranging from delivery drivers to retail and The OGS sector provides opportunities to build digital hospitality workers, across the continent by 2025.73 During businesses and support entrepreneurs. Reliable access to the COVID-19 pandemic, the United Nations Development electricity is important for participation in online marketplaces Programme (UNDP) in partnership with Jumia Uganda, that facilitate e-commerce. Low levels of access to basic connected with consumers and sold their products and electricity can inhibit participation in e-commerce as noted services. Retail merchants’ acceptance of digital payments in by UNCTAD in its eTrade readiness assessment of market physical marketplaces is another important building block in conditions in Uganda: “Without a proper and reliable a country’s transformation to a digital economy. power system, the development of e-commerce will remain constrained.”72 The Boston Consulting Group estimates Merchants need reliable access to energy solutions and the that the expansion of online marketplaces in Africa, like internet to process transactions online in real time and move e-commerce company Jumia, could create about three away from accepting cash. 72 UNCTAD, Rapid eTrade Readiness Assessment Report, Republic of Uganda, 2018, p. 17. Accessible here. 73 Patrick Dupoux, Lisa Ivers, Amane Dannouni, Zineb Sqalli, and Guy Ngambeket, How Online Marketplaces CanPower Employment in Africa, 2019. Accessible here. The Off-Grid Solar Policy Toolkit 33 Digital Skills Local OGS agents and consumers’ use of PAYG products is helping to bridge the digital literacy gap. As recently as 2021, research continued to show digital literacy as a barrier to digital inclusion, particularly for women.74 Retail OGS agents can play a role in building digital literacy. Customers who purchase OGS products may have limited experience using mobile phones and mobile money or sending text messages. Customer service agents for a PAYG provider in Mozambique addressed this capacity gap by using their first call to customers to ensure they knew how to use mobile money to make payments. The Mozambique PAYG provider also produced visual aids and sales materials to explain the steps in the payment process. PAYG company staff are also building their digital skills, with some PAYG companies developing software platforms and apps to provide agent training and management. Table 3.3 highlights how digitally enabled retail agents can help bridge digital literacy gaps and increase digital inclusion in low-use areas. Table 3.3: Agent Roles in Digital Inclusion and Literacy Retail Agent Role Digital Capacity (Skills/Literacy) OGS Sales/Distribution Digital skills to understand and • Digital technology usage Increases digital literacy and capacity of retail agents interface with PAYG platform for • Digital commerce platform use to participate in the digital economy. sales and service issues • Digital data collection and reporting Registering customers • Digital technology usage Increases the energy-addressable market. • Digital technology agency Educating customers about • Digitally accessed information for • Increases informed decision making on suitable products and services, including customers - credit scoring (pre-sales) finance. usage of digital platforms • Digital recourse and communication • Bridges digital literacy gaps and increases digital support channels for customers inclusion of customers and agents. Facilitating payment transactions Use of mobile money in repayment of PAYG • Bridges digital literacy gaps and increases digital services inclusion of customers and agents. • Increases repayments by PAYG customers, provides more financing channels, and expands credit promotion for customers. 3.3 Promoting OGS, Digital, and Financial Inclusion Together to Build Resilience Governments recognize the growing imperative to As with energy access and digital inclusion, governments transform their economies into digital economies for have set national goals and adopted strategies to individual socioeconomic development, build resilience eradicate barriers to individuals’ access to formal financial to shocks such as the COVID-19 pandemic, and global services. Many countries are adopting or updating national competitiveness. The global COVID-19 pandemic financial inclusion strategies (NFIS) that include promoting highlighted the benefits of equitable access to reliable and using mobile-enabled financial services and agents energy, broadband, and digitally enabled financial services. as new drivers for financial inclusion. As of May 2022, 71 Country policymakers recognize that digital transformation percent of the participants (63 countries) in the financial will generate returns by boosting GDP growth, creating new services regulator peer group run by the Alliance for jobs and income opportunities, and providing tools to reach Financial Inclusion (AFI) have already established an NFIS. socioeconomic goals. You can find resources with more information in Annex B. 74 Matthew Shanahan, GSMA Connected Women, The Mobile Gender Gap, 2022. Accessible here. 34 The Off-Grid Solar Policy Toolkit ©Mobisol The Off-Grid Solar Policy Toolkit 35 National goals for energy access, digital inclusion, and formal financial inclusion intersect. The intersection allows governments to coordinate and align policies to accelerate progress toward the development goals and build resilience in the face of shocks such as the COVID-19 pandemic. For example, in 2023, the Government of Madagascar and the World Bank approved the Digital and Energy Connectivity for Inclusion in Madagascar (DECIM) project to invest in both electricity and digital infrastructure in a coordinated manner.75 Figure 3.4 demonstrates the overlap between national strategies for energy access through OGS, broadband inclusion, and financial inclusion. Figure 3.4: Overlap of OGS, Broadband and Financial Inclusion Policies Framework for standalone home solar systems Key policy makers: Ministry of energy, Solar systems & Solar systems & Rural Electrification Agency, Ministry broadband finacial inclusion of finance, Standards Setting Bodies, Customs Authority Financial Broadband inclusion strategy strategy Key policy makers: Key policy makers: Central Bank, Financial Telecommunications Services Regulator Regulator Across all three strategies Several indexes are used to track and measure the reports on a country’s adoption of financial inclusion plans.77 strength of a country’s legal and regulatory policies Governments can use these indexes and the indicators to support the OGS, financial inclusion, and digital to evaluate how their policies signal support for the OGS sectors. ESMAP developed a set of Regulatory Indicators sector.78 for Sustainable Energy (RISE), which policymakers can use to benchmark and track their progress against other Governments should strive to develop a policy countries. RISE includes specific indicators to evaluate environment that holistically and comprehensively a country’s legal frameworks for renewable energy and addresses consumer needs. Consumers seeking access frameworks for standalone solar systems.76 Lighting Global to electricity are also likely to face challenges participating developed the PAYG Market Attractiveness Index that in the digital economy and accessing financial services. includes ten indicators to measure legal and regulatory By looking beyond sector silos, governments can address policies for market attractiveness for PAYG. The International the needs of consumers through coordinated policies that Telecommunications Union (ITU) tracks countries’ adoption support and accelerate development in these communities. of broadband plans, and the Alliance for Financial Inclusion 75 DECIM project information document available here. 76 ESMAP, Regulatory Indicators for Sustainable Energy, Indicator 5. 77 See ITU’s website, accessible here & AFI’s website, accessible here. 78 Lighting Global, PAYG Market Attractiveness Index 2021. 36 The Off-Grid Solar Policy Toolkit CHAPTER FOUR Policy Issues and Priorities Use this Chapter to: Identify and understand issues that affect availability, affordability, and service provider accountability for standalone OGS products. Explore the twelve policy issues in further detail. Examine the potential policy options to address the twelve issues across a continuum of policy approaches. Evaluate the advantages and disadvantages of the different policy approaches for the government, the OGS sector, and most importantly, the consumer. In this chapter we move beyond understanding the an official rule or law that businesses or other stakeholders OGS and digital sector dynamics covered in Chapters must adhere to.81 An intentional decision not to develop Two and Three. We will identify and analyze the specific policy or regulation is also a viable, and sometimes attractive, issues governments can address through policy reform policy approach.  to create an enabling environment for OGS. We define policy reform as an intentional decision by policymakers Section 4.3 explores each policy issue and identifies to take a given policy approach. Section 4.1 outlines some potential policy solutions across the continuum of ways governments can signal their support for the growth policy approaches. We apply the diagnostic framework of the OGS sector. This includes pursuing policy reform, of the 3 As: product availability, product affordability, and designating a clear lead agency responsible for the OGS service provider accountability to examine options for the sector, undertaking integrated electrification planning, or government to use policy to address consumer needs for providing public funding to support OGS sector growth. OGS products. We have identified twelve issues of relevance that fall within governments’ zone of influence for policy We focus on issues that governments can address reform (see Table 4.1). The list of issues is not exhaustive. We through policy reforms adopted at the ministerial level. encourage policymakers to apply the tools provided in this This toolkit does not provide guidance on additional non- toolkit to identify additional issues for policy action using this policy approaches that governments can take to accelerate framework. OGS growth, such as creating funding mechanisms or technical assistance facilities. ESMAP’s 2022 Designing As with the issues, the policy options we identify are not Public Funding Mechanisms report is a useful resource for exhaustive. Given the focus of this report on OGS, policy evaluating the design of public funding mechanisms for issues pertaining to broadband and digital inclusion are OGS.79 not explored in detail. For example, this section does not cover policies for improving the affordability of broadband In Section 4.2, three broad policy approaches are defined or accountability of mobile money and broadband providers. along a continuum — from ‘wait and see,’ to ‘light touch,’ Policymakers should use the policy issues and options to ‘prescriptive policy.’ A ‘policy’ refers to a set of ideas or included in this section as examples they can draw from in a plan regarding what to do in a particular situation that has their policy evaluation. been agreed to officially by a government.80 A ‘regulation’ is 79 Rysankova, Miller, Designing Public Funding Mechanisms in the Off-Grid Solar Sector. 80 Cambridge Dictionary, “policy,” n.d. Accessible here 81 Cambridge Dictionary, “regulation,” n.d. Accessible here. The Off-Grid Solar Policy Toolkit 37 We include real-world examples to demonstrate where the policy approach is being applied. In the tables in Annex A, we explore additional policy options and identify potential advantages and disadvantages to three key stakeholders: the government, the OGS sector, and the consumers. Table 4.1: Policy Issues Enabling Environment Component AVAILABILITY AFFORDABILITY ACCOUNTABILITY Sales Cycle Policy and 1. Ease of market entry and 4. Fiscal policies 8. Product standards Regulatory Zones competition Policymakers with influence: of Influence, With Policymakers with influence: Pre-Sale Policymakers with influence: • Revenue Authority Policymakers of • Lead Energy Authority Influence • Ministry of Trade • Ministry of Finance • Standards Setting Body • Competition Authority Consumer Financing • Lead Energy Policymaker • Financial Services Regulator 5. PAYG provider availability 9. Transparency of terms and and cost of capital warranties 2. Quality and reach of digital Policymakers with influence: Policymakers with influence: broadband infrastructure • Lead Energy Authority • Lead Energy Authority Policymakers with influence: • Financial Services Regulator • Consumer Protection Telecommunications Regulator 6. Access to data for credit Agency 3. Mobile money and digital scoring • Revenue Authority financial inclusion • Standards Setting Body At-Sale Policymakers with influence: Policymakers with influence: • Lead Energy Authority • Financial Services Regulator • Financial Services Regulator • Data Protection Supervisory 10. Data protection • Central Bank Authority • Lead Energy Policymaker Policymakers with influence: 7. Financial regulation • Lead Energy Authority Policymakers with influence: • Revenue Authority • Lead Energy Authority • Standards Setting Body • Financial Services Regulator • Data Protection Supervisory Authority 11. Customer service and grievance redress Policymakers with influence: • Lead Energy Authority • Consumer Protection Agency Post-Sale • Revenue Authority • Standards Setting Body • Financial Services Regulator 12. E-Waste Policymakers with influence: • Lead Energy Authority • Environmental Regulator We briefly touch on three high-level issues in Section 4.1, given their importance in setting the context for policy development, before turning to twelve issues that can be addressed by policy reforms 38 The Off-Grid Solar Policy Toolkit 4.1 Signaling Support for OGS Sector 4.1.2 Setting Targets for Households to be Electrified with Off-Grid Solutions Growth Governments that set targets for households to be 4.1.1 Integrated Electrification Planning Informed by provided with Tier 1 electricity access through off-grid GIS Data Supports OGS Investment. solutions, encourage OGS providers to enter their markets and invest in their countries. According to GOGLA, “clarity With integrated electrification planning, governments and continuity of government support can improve market can clearly define the role of off-grid solutions in their and investor confidence in a government’s commitment electrification plan. An increasing number of governments to promoting growth in the sector. Setting targets based are engaging in integrated electrification planning and using on the multi-tier framework can send a powerful signal to it to target where OGS can provide the lowest-cost solution companies and investors that a government is committed to for electrification.82 Ethiopia, Kenya, Rwanda, Tanzania, creating the conditions for off-grid solar market growth.”87 and other sub-Saharan countries have used GIS data to develop National Electrification Plans or rural electrification 4.1.3 Public Funding Mechanisms Can Address strategies.83 In 2019, ESMAP and the World Bank launched Financing Gaps and Accelerate OGS Use the Global Electrification Platform, an open access, interactive, online platform tool that provides an overview Governments can use a range of public funding of electrification investment scenarios for a selection of mechanisms to address market barriers and accelerate countries. The platform can be used to explore 216 different OGS sector growth. Funding mechanisms include tax scenarios to meet defined energy access goals.84 exemptions, upfront grants, results-based financing, credit lines, guarantees, demand-side subsidies and public Governments can also leverage the household insights procurement. They address supply and demand issues that available through the MTF surveys to support targeted include inadequate access to capital, high cost of service investment in OGS. MTF surveys have been used to delivery to rural areas, and customer affordability. Analysts inform energy access planning in many countries, including estimate that the global OGS sector will need an estimated Cambodia, Ethiopia, Kenya, Liberia, and Rwanda.85 The US$ 23 billion in funding to deliver Tier 1 OGS products demand side data generated from these surveys explores to all consumers by 2030. This includes people without both the quality and availability of energy available energy access, people with weak grid connections, and the to households, as well as spending, energy use, user replacement of existing SHS. An additional US$ 13.5 billion preferences, willingness to pay, and customers’ satisfaction is needed in the form of debt and equity, and a further US$ with their primary energy source. 9.8 billion in grants and subsidies is needed to bridge the affordability gap.88 To ensure that women receive the benefits of energy access, governments need to establish gender- In addition to energy access, governments may also fund responsive global and national energy sector policies.86 initiatives to expand access to broadband and financial Any data collected on energy access should be gender- services. These parallel efforts provide an opportunity for disaggregated to enable measurement of gains for women. governments to pool resources to address a spectrum of While researchers have found that higher electrification rates rural community needs and drive efficiencies in the use of in a country correlate to greater gender equality, it is not public funds. yet standard for governments to collect and report gender- disaggregated data on access to electricity for women and men. This makes it difficult to measure how women are faring in the gains being made in energy access. 82 Sustainable Energy For All, Integrated Electrification Pathways for Universal Access to Electricity: A Primer, 2019; ESMAP, Regulatory Indicators for Sustainable Energy. 83 ESMAP, Regulatory Indicators for Sustainable Energy; Alexandros Korkovelos, Babak Khavari, Andreas Sahlberg, Mark Howells 1 and Christopher Arderne, The Role of Open Access Data in Geospatial Electrification Planning and the Achievement of SDG7. An OnSSET-Based Case Study for Malawi, Energies 2019, p. 12, 1395. 84 Access the Global Electrification Platform here. 85 For more information, see https://www.esmap.org/mtf_multi-tier_framework_for_energy_access 86 ENERGIA, ESMAP and UN Women, Policy Brief 12 Global Progress of SDG 7 – Energy and Gender, 2018. Accessible here. 87 GOGLA, Providing Energy Access through Off-Grid Solar: Guidance for Governments. Accessible here. 88 Lighting Global/ESMAP, GOGLA, Efficiency For Access, Open Capital Advisors (2022), Off-Grid Solar Market Trends Report 2022: Outlook, Washington, DC: World Bank. Accessible here. The Off-Grid Solar Policy Toolkit 39 Analysts estimate that the global OGS sector will need US$23 billion in funding to deliver Tier 1 OGS products to all consumers by 2030. This includes people without energy access, people with weak grid connections, and the replacement of exisiting SHS. Toolkit Tip: Use Chapters Two and Three to Subsidies, and public funding mechanisms build staff knowledge on the OGS sector and in general, are essential components for PAYG model and help them identify how policies governments to address affordability. However, for the energy, broadband, and financial services these are not included in this toolkit. For policies sector intersect. a thorough discussion of public funding mechanisms, refer to ESMAP’s recent report on “Designing Public Funding Mechanisms in the Off- Grid Solar Sector”.89 4.2 Policy Approaches – Mix and Match In this section, we identify the different policy approaches governments can use to address issues restricting the 4.1.4 The Energy Authority as the Lead Agency use of OGS products. We also explore the advantages and Governments need to designate a lead agency and give disadvantages of each policy approach. Policymakers have them a clear mandate to facilitate inter-ministerial policy a range of options to create an enabling environment for dialogue to advance policy reforms that support OGS OGS. In addition, policymakers often find it advantageous to sector growth. This toolkit is designed to support energy adopt policies with levels of oversight that are proportionate sector policymakers in assuming the leadership role in to the level of risk. Policies should account for the size, facilitating a whole-of-government approach to create an structure, and composition of the OGS market, its importance enabling environment for the OGS sector. Policymakers in reaching national electrification goals, and the consumer can create new policies or work to reform or clarify the risks. When proportionate to the risk, policies can support application of existing policies to improve the enabling confidence, growth, and innovation in a sector. environment for consumer purchase of OGS products. The specific energy authority assigned that leadership role Figure 4.1 identifies three policy approaches commonly and the scope of their authority to direct an interagency available to policymakers through a continuum. This policymaking process may not always be clear. If ambiguity begins at the left, with the least amount of government exists or there is a leadership vacuum, governments may oversight and resources, and progresses to the right, with need to clearly designate and endow the lead energy increasing levels of government engagement. Policymakers authority with the mandate to lead this process. In addition, may find the best approach is to combine policy approaches, depending on the depth of current expertise in the OGS so they are best suited to each different issue. For example, sector, governments may need to build the lead energy policymakers may decide to impose minimal market entry policymaker’s expertise in off-grid technologies and evolving requirements for OGS providers to “wait-and-see” how OGS business models to prepare them for this leadership the market develops but take an active role in developing role. prescriptive policies to expand the reach of mobile services in rural areas to support PAYG offerings. To illustrate these policy approaches, we provide three case studies on the quality standards for OGS products. 89 Rysankova, Dana; Miller, Charlie. Designing Public Funding Mechanisms in the Off-Grid Solar Sector (English). Washington, D.C. : World Bank Group. Accessible here. 40 The Off-Grid Solar Policy Toolkit Figure 4.1: Policymaking Continuum Wait & See Light Touch Prescriptive Policy • Government relies on industry • Government policies • OGS specific policies or self regulation. incentivize enabling regulations shape enabling • Consumer grievances environment factors. environment. addressed through company • Government provides • Exemptions are provided from policy or government redress guidance or clarification of policies that hinder use. mechanisms. sectors. • Policymakers establish a • Government collects data to • Test and learn approaches to policy framework for OGS monitor sector performance. policy and regulation. governance. • Competition frameworks apply. Government oversight and investment of supporting resources Low Medium High Toolkit Tip: Use this continuum to facilitate an inter-ministerial dialogue for possible policy actions. Wait-and-See. In this policy approach, the government exercises Wait-and-see is a low-cost option for governments no central authority or governance over the relevant as there is no need to invest in developing policy market sector; the government lets the market develop frameworks or growing capacity to provide oversight before deciding if and how to intervene. The market and manage compliance. In addition to service providers, is shaped by the behavior of actors in the supply chain governments may rely on other market actors, like industry rather than government regulation. In the OGS sector, associations, to influence market behavior and provide a companies decide what OGS products and services they form of “self-regulation.” One disadvantage of this minimalist offer, how they price their services, and how they respond approach is that governments forbear, at least temporarily, to consumer grievances. Governments using this option the management of consumer risk. The significance of set the lowest policy barrier to market entry. This approach this disadvantage will depend on the level of risk. Another can be especially advantageous for emerging sectors drawback to the wait-and-see approach is that it does not characterized by high levels of innovation. Governments proactively seek to modify existing policies restricting the can adopt this approach as a temporary state to wait-and- enabling environment. see how the market develops and then apply a higher level of government oversight or maintain this policy approach based on the results. © Fenix International (Jjumba Martin) 41 The Off-Grid Solar Policy Toolkit 42 The Off-Grid Solar Policy Toolkit CASE STUDY Wait-and-See: Producer Choice on Product Quality Standards In this scenario, the government plays no active role in setting the quality standards for OGS products. The OGS suppliers have the discretion to sell OGS products that vary in quality. They may have their products tested and certified to meet certain quality standards (including the internationally recognized IEC standard) or choose to offer products that only meet the companies’ own standards. Industry associations and development partners may provide guidance on quality standards and publish data on market offerings which can be used by the government to observe OGS market dynamics. Advantages of Wait & See Disadvantages of Wait & See • Low cost. • No government oversight over counterfeit or low-quality products. • Promotes market entry and free and open • OGS providers offering QV equipment may find it difficult to compete on competition. price with non-QV equipment. • Provides consumers choice in purchasing OGS • Consumers may lose money on sub-standard or counterfeit products. products of different quality and price. • E-waste generated by discarded, low-quality products with short lifespans. REAL-WORLD EXAMPLES: Malawi and Somalia. These countries have not yet adopted quality standards for OGS products allowing OGS companies to offer QV or non-QV products. Light-Touch. In this policy approach, government policymakers Policymakers may also test policy approaches for a limited actively invest resources to guide (not just observe) time or context and evaluate their success. An example is the OGS market. This approach is characterized by a governments adopting fiscal policies that temporarily reduce government exercising limited control and exhibiting the taxation of OGS products. These governments could test flexibility. Policymakers refrain from direct regulation and and learn whether there are gains in consumer affordability rely on incentives, guidance, and clarification to encourage of OGS products before adopting longer term or permanent sector development that aligns with their policy goals. incentives. CASE STUDY Light Touch: Voluntary Compliance with Product Quality Standards The light touch approach is exemplified by governments that encourage (but do not require) OGS providers to sell OGS products that meet established quality standards. Policymakers may incentivize providers to offer QV products through favorable fiscal policies for QV equipment or by making financial support available only to companies selling QV products. The voluntary approach to standards has proven to be advantageous in emerging OGS markets where the sector is still developing and in markets where compliance and enforcement capacity is limited. In addition, policymakers may find value in creating a transitional pathway to adoption of mandatory quality standards. Advantages of Light-Touch Disadvantages of Light-Touch • Government encouragement increases the supply of QV OGS products. • Low-quality OGS products are available. • OGS providers can still offer a diversity of products with variable quality • OGS providers offering QV equipment may find it difficult and pricing. to compete on price with non-QV equipment. • Fiscal incentives can lower the consumers’ purchase price of OGS • Consumers may lose money on sub-standard or products. counterfeit products. REAL-WORLD EXAMPLE: The World Bank’s Lighting Global program designed standards for OGS products up to 350Wp to ensure quality, which have been adopted by the IEC as TS 62257-9-8.90 More than 20 countries have voluntarily adopted national standards harmonized with these.91 90 VeraSol now maintains the quality assurance work for these standards. 91 Efficiency for Access Coalition, Promoting High-Performing Off-Grid Appliances, 2019. Accessible here. The Off-Grid Solar Policy Toolkit 43 Prescriptive Policy In using this most active approach, government policymakers use their authority to adopt specific policies and regulations for the OGS sector. The government’s policy choices directly influence the supply composition of OGS products and services, and the government assumes an active role in managing consumer risk. Policymakers can design policies and regulations to promote OGS supply (such as Policymakers can design favorable fiscal policies) or to restrict or control certain market behaviors. policies and regulations to This approach requires the highest level of government investment in time and resources to develop, implement, and enforce the chosen promote OGS supply or to policy. The relative advantages and disadvantages of this approach on restrict or control certain the OGS sector and consumers will depend on the type and design of the policy. market behaviors. CASE STUDY: Prescriptive: Mandatory National Product Quality Standards In this approach the energy authority and government standards-setting bodies coordinate to adopt mandatory national quality standards for the OGS products sold in the country. The OGS providers are required by law to only offer products that comply with mandatory standards. Countries can develop their own standards or adopt standards harmonized to meet existing international standards such the IEC standard for PICO and SHS kits. The government makes the investment necessary to support implementation of the standards and monitor and enforce compliance. Advantages of Prescriptive Policy Disadvantages of Prescriptive Policy • Government protects consumers from risk of counterfeit or low- • Government investment is required to build staff capacity to quality products. implement and enforce compliance with the standards. • If harmonized standards are adopted, OGS providers can offer • Limits market participation to suppliers of QV OGS products. standard products across multiple markets tested using the • Excludes low-quality OGS products that may be more affordable same verification scheme. to consumers. • QV products include warranties and after-sales service. REAL-WORLD EXAMPLE: ECOWAS. In 2023, the Economic Community of West African States (ECOWAS) adopted a regional approach to SHS quality standards. Nine countries, including Kenya, Rwanda and Tanzania have adopted quality standards for PICO solar products harmonized to the IEC standard.92 4.3 Issues and Policy Options The 3 As Diagnostic Framework In this section, we move to an analysis of the 12 policy issues Product identified in Table 4.1, using the diagnostic framework of the 3 As. Availability For most of these issues, energy policymakers will not have the primary jurisdiction to provide policy solutions and must engage in dialogue with other ministries. We have included guidelines for energy policymakers Product Service to facilitate the inter-ministerial dialogue in our discussion of the relevant Affordability Provider issues. Accountability 92 ECOWAS Centre for Renewable Energy and Energy Efficiency, ECOWAS industry ministers adopt regional standards on standalone solar systems and solar PV Mini Grids. Accessible here. 44 The Off-Grid Solar Policy Toolkit 4.3.1 Product Availability Three common policy issues that impact product availability are shown in Table 4.2. Table 4.2: Product Availability Enabling Environment Factor Policy and Regulatory Zones of Influence AVAILABILITY Ease of market entry and Quality and reach of digital broadband Mobile money and financial competition. infrastructure. inclusion. Reminder: Availability = a market state in which consumers can conveniently purchase OGS products, including PAYG products with consumer financing, from competitive OGS providers. Issue 1: Ease of Market Entry and Competition POLICYMAKERS OF INFLUENCE: Ministry of Trade, Financial Services Regulator/the Central Bank, Competition Authority RELATED ISSUES: Financial Regulation, Product Standards Inter-Ministerial Dialogue Tip: In most countries, the Ministry of Trade sets the rules for commercial companies to do business. If a ministry is unfamiliar with the OGS sector, Chapters Two and Three can be used to improve their understanding of the sector, and variations in the business models. The policy diagnostic tool (Tool 2, available in the Annex section) can also be used to evaluate how current policies may encourage or restrict OGS companies from operating in the market. Toolkit Tip: A country’s approach to applying OGS product standards, and finance and PAYG regulation also influences market entry. Evaluate policy options for Issues 1, 7 & 8 together. Governments have a range of policy options for defining the requirements that OGS and PAYG companies must meet, before being allowed to do business in a country. OGS companies often make a go/no-go decision based on the time and cost of meeting those requirements. The lower the government entry requirements, associated costs, and time for approval, the easier it is for companies to enter a market and compete. If companies find a country’s regulatory requirements complex, costly, or the time for approval uncertain they may forego operating in the market, despite high potential consumer demand. Government rules for entry may differ for domestic and international companies. Creating a neutral business licensing process for both domestic and international OGS companies bolsters competition and supports investment in local companies as well as multi- market providers. Governments, especially in markets with an emerging OGS sector, may find having entry requirements that are easy to meet to be the most effective approach for attracting OGS providers and creating a competitive OGS market. Typically, OGS companies seeking to sell SHS and Pico solar products in a market are not required to meet licensing or registration requirements beyond those that apply to other commercial companies and are not subject to sector specific regulation.93 This has been cited as an important enabling factor in the development of the OGS and PAYG markets.94 93 Governments are more likely to require licensing of mini-grid OGS providers. As discussed in Section 4.3.3, Issue 8, governments may restrict the OGS products to those that meet certain quality standards. While not a restriction on market entry per se, the standards requirements may dissuade some suppliers from providing their products in a market. 94 Lighting Global, PAYG Market Attractiveness Index 2019, p. 23. The Off-Grid Solar Policy Toolkit 45 While keeping entry requirements low, governments can observe the market as they wait-and-see if a need arises that warrants higher standards for approval for market entry. In Kenya, the Central Bank issued a letter of no-objection to Safaricom in 2007 allowing the company to launch its M-Pesa mobile money service without first obtaining a banking license. The Central Bank required that Safaricom submit monthly data on its transaction payment volumes and values providing data to monitor the services’ development.95 M-Pesa spread quickly, and by 2010 had become the most successful mobile-phone-based financial service in the developing world. Governments could take a similar approach to the OGS sector, observing the market and collecting data from OGS providers. Industry associations such as GOGLA, at the global level, or renewable energy associations at the regional and local level, can be a source for industry data.96 Governments can rely on general competition frameworks as a backstop to monitor and restrict behavior, when and if competitive concerns surface, even in sectors they have chosen not to regulate. While market concentration and anti-competitive behavior is not currently a concern in the OGS sector, government regulators have used competition laws to put a check on company behavior and practices in other sectors as they developed and could do the same in the OGS should the need arise. According to the World Bank, more than 100 countries have enacted competition laws.97 In most countries, competition authorities exist to implement the policy framework and many of those provide advice to sector regulators on competition issues.98 For example, in the mobile money sector, the Competition Authority of Kenya reached an agreement with Safaricom to remove exclusivity requirements from its mobile money agents’ contracts, following allegations from Airtel, another mobile network provider, that the practice was anti-competitive.99 Governments seeking to set specific approval standards for the OGS provider market entry can require that OGS providers register or be licensed before they operate in the market, although this is not yet common practice. While this approach provides a high degree of control, governments adopting this approach will need to invest in creating a licensing process and allocate the resources needed to manage the review and approval process. In sectors with high levels of innovation, government requirements and regulations often fail to keep pace with the level of innovation in a sector, creating a risk that prescriptive licensing policies could restrict innovation. POTENTIAL POLICY OPTIONS: Wait & See Light Touch Prescriptive Policy Government applies business Government issues Government licences OGS registration requirements to OGS guidance on OGS company companies. companies. classification. Advantage Advantage Advantage • Promotes market entry and • Prevents conflicting entry regulations • Imposes highest level of government competitive product offerings. and provides regulatory clarity. control and establishes government oversight authority over OGS companies. Disadvantage Disadvantage Disadvantage • Limited control/review of OGS • Requires government determination • Increases cost of market entry and for providers. of regulatory categorization of OGS regulatory compliance. companies. 95 Alliance for Financial Inclusion, Case Study: Enabling mobile money transfer: The Central Bank of Kenya’s treatment of M-Pesa, 2010. Accessible here. 96 GOGLA and The World Bank Group’s Lighting Global program publish semi-annual data on the sales and impact of off-grid solar lighting products sold by GOGLA and Lighting Global affiliates. 97 The World Bank Group. Markets and Competition Policy Website. Accessible here. 98 Ibid. 99 Mazer, R., Pillai, R., Staschen, S., Agents for Everyone: Removing Agent Exclusivity in Kenya & Uganda, CGAP,2016. Accessible here. 46 The Off-Grid Solar Policy Toolkit Real-world Examples: Tunisia and Senegal were the first two Twenty-four OGS companies in Rwanda The Government of Togo, through a public African countries to pass “Startup Acts” have signed MOUs with the Energy procurement process under its CIZO – laws designed to make it easier for Development Corporation Limited, a program, licensed five PAYG companies. 101 local entrepreneurs to start and run a subsidiary of the national utility to sell business.100 OGS and PAYG products. For additional resources on issue 1, refer to: Annex A to evaluate additional policy options and for a deeper analysis. Annex B for a detailed bibliography Issue 2: Quality and Reach of Digital Broadband Infrastructure POLICYMAKERS OF INFLUENCE: Telecommunications Regulator RELATED ISSUES: Mobile Money and Digital Financial Inclusion, Customer Service and Complaint Resolution Inter-Ministerial Dialogue Tip: The telecommunications regulator has policymaking authority over broadband service providers and broadband services. Chapter Three can improve the understanding of the overlapping policy goals for improving broadband and energy access, and how OGS supports digital transformation. Key concerns to discuss are how the telecommunications regulator licenses and defines service coverage requirements for broadband providers, particularly MNOs, and current rural initiatives championed by the telecommunications regulator to support broadband investment in rural areas including use of universal service and access funds. Toolkit Tip: The PAYG Market Attractiveness Index includes indicators on broadband and mobile money use. Consider measuring your country against those indicators or see if your country is among the 24 countries evaluated in the published report. Telecommunications and energy agencies have an opportunity to develop a coordinated policy agenda to meet national goals for digital inclusion and universal energy access. As discussed in Chapter Three, consumers and OGS providers need reliable access to quality digital networks to: 1. Use OGS products that integrate digital 3. Communicate about after-sales service and technologies. payment issues. 2. Process PAYG payments with mobile money OGS companies provide the necessary energy solutions that support use of these digitally enabled services. Many governments recognize digital transformation as a growing imperative to economic growth and for building resilience. Therefore, they are developing digital transformation strategies and taking an active role in promoting broadband investment, network expansion, and digital inclusion. Telecommunications regulators have several policy tools within their authority to advance MNO investment in network infrastructure and to promote digital inclusion. Within their licensing authority, telecommunications regulators can set the requirements for MNOs to provide minimum levels of network coverage and meet service quality standards. Telecommunications regulators can also lead national efforts to build the digital literacy and capacity of consumers to use digital services. 100 Google and IFC, a member of the World Bank Group. e-Conomy Africa 2020, Africa’s $180 billion Internet economy future, Nov. 2020. Accessible here. 101 GOGLA, Case Study: Togo CIZO Cheque Program, 2022. Accessible here. The Off-Grid Solar Policy Toolkit 47 For women, digital literacy is one of the top barriers to mobile phone ownership and the use of the mobile internet.102 Increased use of digital services can support the business case for MNOs’ investment in digital infrastructure, especially in rural areas. Advocates for digital broadband inclusion recognize that the private sector investment alone may not be enough to bridge the investment gap for consumers to have access to adequate digital services. Telecommunications regulators typically have access to and manage public funds, such as universal service and access funds, designated for use to offset the high costs of rural broadband service delivery. This funding can be applied to de-risk MNO investment in network expansion in rural areas that are also priority areas for energy access. POTENTIAL POLICY OPTIONS: Wait & See Light Touch Prescriptive Policy Government allocates universal Broadband providers offer services Government agencies jointly map areas service and access funds to in compliance with their licenses with overlapping need for OGS and improve MNO coverage in areas and business decisions. mobile network infrastructure. with OGS need. Advantage Advantage Advantage • Low cost and effort. • Creates common policy agenda among • Use of universal service energy and telecommunications and access funds de-risks sector policymakers that can promote investment in broadband coordinated efforts to target areas for infrastructure in low density digital transformation and increased areas. energy access. Disadvantage Disadvantage Disadvantage • Can result in poor digital • Requires investment of time and • Requires investment in infrastructure in remote and resources to create and pursue establishing a process to scarcely populated areas, which shared agenda among energy and administer and allocate restricts supply of OGS offerings telecommunications policymakers to universal service and access with remote monitoring and target digital infrastructure and off-grid funds or public funding. PAYG. sector expansion. REAL WORLD EXAMPLES: Licensing of additional MNOs in Telecommunications companies licensed in Nigeria’s Rural Broadband Initiative Mozambique pushed mobile service Cameroon are required to contribute three applied Universal Service Provision prices down and increased network percent of their revenues to the country’s Funds to provide operators investment in infrastructure in rural universal service fund.104 subsidies to invest in network areas.103 infrastructure in rural/semi-urban areas.105 102 GSMA, The Mobile Gender Gap Report, 2022, Accessible here. 103 World Bank Group. 2019. Digital Economy for Mozambique Diagnostic Report. Washington, DC: World Bank. License: Creative Commons Attribution CC BY 3.0 IGO, p. 27. Accessible here. 104 World Bank Group. 2019. Digital Economy for Cameroon Diagnostic Report. Washington, DC: World Bank. License: Creative Commons Attribution CC BY 3.0 IGO, p. 39. Accessible here. 105 World Bank Group. 2019. Nigeria Digital Economy Diagnostic Report. Washington, DC: World Bank. License: Creative Commons Attribution CC BY 3.0 IGO, p. 17. Accessible here. 48 The Off-Grid Solar Policy Toolkit For additional resources on issue 2, refer to: Annex A to evaluate additional policy options and for a deeper analysis. Annex B for a detailed bibliography Issue 3: Mobile Money and Digital Payments POLICYMAKERS OF INFLUENCE: Financial Services Regulator/Central Bank RELATED ISSUES: Quality and Reach of Digital Broadband Infrastructure, Fiscal Policies, Financial Regulation Inter-Ministerial Dialogue Tip: The financial services regulator (often a country’s central bank) has policymaking authority over mobile money operators and other digital payment providers. Use Chapter Three to build an understanding of how PAYG products can provide an entry point for use of mobile money and advance financial inclusion. Key concerns to consider are how the financial services regulator licenses mobile money and digital payment providers, as well as policies that promote rural access to mobile money agents and digital payment services to advance financial inclusion. Government policies influence the availability of mobile money and digital payments that can be used to offer PAYG products. Countries with licensing regimes that promote competitive mobile money offerings, ease of account opening, and low-cost provision of digital payments to service rural communities create an attractive market for PAYG. Mobile money operates within regulatory contexts shaped by banking laws and policies designed to promote financial sector stability, counter risks of money laundering or financing of terrorism, and protect consumers against risk of loss. For some financial service regulators, the concept of mobile money can raise concerns. However, recognizing that lower volume transactions pose lower risks, regulators interested in furthering financial inclusion have found value in adopting proportional risk-based frameworks to ease the requirements for opening accounts to conduct lower value transaction values and volumes. These rules have been important to facilitate the use of mobile money, especially by those whose incomes may be limited and who may not yet be participating in the formal financial sector, as well as to close the gender gap in financial inclusion. In most countries, financial services regulators (often central banks) regulate digital payment services, including mobile money services offered by MNOs. The licensing and regulatory infrastructure for digital or e-money services are often regarded as a platform to advance a country’s goals for financial inclusion. Beyond licensing, the financial services regulator’s governing policies for digital financial services impact OGS consumers’ access to mobile money by: 1. Establishing the rules for mobile money and other digital payments agents including the services they can offer. 2. Validating the legal requirements for proof of identity to open mobile money accounts (know-your-customer rules). 3. Regulating the terms, conditions, and pricing of account and transaction services. Last-mile agent networks can be challenging in rural areas with limited population density. Governments can support agent revenue generation by endorsing agent “interoperability,” and prohibiting providers from signing exclusive agent agreements. This will clear agents to sell multiple services (airtime, mobile money, OGS) and offer competing brands. In addition, having both male and female agents can also help increase use of mobile money by women. In India, for example, women in self-help groups have been trained to be banking agents, as part of the government’s effort to reach women in rural communities with financial services.106 106 Martinez, Cristina; Arora, Amit; Raman, Aanand, Doing Good by Doing Well: Women Banking Agents in India, CGAP, 2023. Accessible here. The Off-Grid Solar Policy Toolkit 49 Financial service regulators also look at broader digital financial services ecosystem issues that can improve services and advance the government’s goals for financial inclusion, such as account-to-account interoperability. When digital payment systems are interoperable, consumers can make payments that cross between accounts on different payment systems, increasing the versatility of their mobile wallets. While initially resisted by digital payment providers, there is a growing movement towards interoperability of digital payment systems.107 Governments can also support interoperability by encouraging commercial agreements such as the agreement between the mobile money providers in Tanzania, encouraged by the Bank of Tanzania.108 Some governments are leading the move to interoperability by developing common settlement platforms such as Ghana’s Interbank Payment and Settlement System.109 For the OGS sector’s purposes, account-to-account interoperability would give consumers flexibility to use the payment modality of their choice to make PAYG payments, regardless of the payment processor used by the PAYG provider. POTENTIAL POLICY OPTIONS: Wait & See Light Touch Prescriptive Policy Government relies on private Government regulation Government financial services sector providers and current reduces, removes or subsidizes regulation increases access to rural regulatory policies to provide transaction fees for digital digital payment agents or banking adequate mobile money and payments made for OGS products agents. digital financial services for PAYG. and services. Advantage Advantage Advantage • No need to adjust current • Increases rural mobile money agents • Reduces consumer cost of regulatory framework. and increases supply and purchase of mobile money payments for PAYG products. OGS services. Disadvantage Disadvantage Disadvantage • Poor digital payment • Requires investment to adjust mobile • Digital payments and banking infrastructure restricts use money agent regulation to expand industry may resist fee of digital payments in PAYG rural agent networks. reduction for payments for offerings. specific services. REAL-WORLD EXAMPLES: Looking at mobile money agents in The Shared Agent Network Expansion During the COVID-19 pandemic, Kenya, Tanzania, Bangladesh, and Facilities Initiative is a joint initiative of many central banks, including the India, consulting firm BCG found that Nigeria’s financial service regulators and Bank of Ghana, suspended fees for approximately 85% of successful rural the financial sector to deepen the reach mobile money transactions.111 agents were in hubs of economic of financial services in Nigeria by adding activity, such as regional markets 500,000 financial access points and shared or fuel stations, with limited reach agents. beyond these hubs which could limit mobile money access and customers for OGS PAYG products.110 107 GSMA, Tracking the Journey Towards Mobile Money Interoperability,2020. Accessible here. Cook, William, Dylan Lennox, and Souraya Sbeih. 2021. “Building Faster Better: A Guide to Inclusive Instant Payment Systems.” Technical Guide. Washington, D.C.: CGAP. Accessible here. 108 GSMA, The Impact of Mobile Money Interoperability in Tanzania, 2016. Accessible here. 109 More information about the Ghana Interbank Payment and Settlement Systems is accessible here. 110 Shalini Unnikrishnan, Jim Larson, Boriwat Pinpradab and Rachel Brown, How Mobile Money Agents Can Expand Financial Inclusion, blog, bcg. com/ (Feb. 2019). Accessible here. 111 GSMA, Mobile Money Recommendations to Central Banks in Response to COVID-19, 2020. Accessible here. 50 The Off-Grid Solar Policy Toolkit For additional resources on issue 3, refer to: public funding mechanisms may be needed to address the affordability gap that remains. Annex A to evaluate additional policy options. Annex B for further reading. Subsidies, and public funding mechanisms in general, are key for governments to address affordability. These are however not examined in 4.3.2 Product Affordability this toolkit. For a thorough discussion of public The target consumer market for OGS products is price funding mechanisms, refer to ESMAP’s recent report sensitive. Even with PAYG financing, consumers’ ability to on “Designing Public Funding Mechanisms in the pay for OGS products remains a significant barrier to their Off-Grid Solar Sector”.112 purchase. It is important to note that, even with favorable government policies that seek to reduce OGS providers’ costs, many consumers may still face an affordability gap. As We have classified the key policy issues that impact with on grid affordability challenges, government provision of affordability into the four categories shown in Table 4.3. Table 4.3: Product Affordability Enabling Environment Policy and Regulatory Issues Factors AFFORDABILITY Fiscal policies Consumer Financing PAYG provider availability and Access to data for credit Financial regulation. cost of capital. scoring. Reminder: Affordability = a market state in which consumers can afford to purchase OGS products with cash or financing at a price that is suitable for their income levels. Issue 4: Fiscal Policies for OGS Products, Services, and Mobile Money POLICYMAKERS OF INFLUENCE: Revenue Authority, Ministry of Finance, Customs Authority RELATED ISSUE: Product Standards Inter-Ministerial Dialogue Tip: Modifying a government’s fiscal policies and tax base requires extensive consultation within the government to evaluate the trade-offs of tax policy in the context of national priorities. As the sector lead for OGS, the energy authority can provide data and analysis on the OGS sector to provide an evidence base for fiscal policy decisions. Governments are often looking for ways to broaden the tax base to support government services, so be sure to model different scenarios for fiscal policies. Governments can use fiscal policy or public funding mechanisms to address affordability issues. While tax reductions or exemptions are untargeted (i.e., all customers in a country benefit equally), other public funding mechanisms can provide a more targeted way of addressing affordability, for example by making products more affordable only in a specific location. In Kenya, UNICEF is using conditional cash transfers to help vulnerable recipients in the government’s national safety net program purchase OGS products.113 Increasingly, governments have begun to evaluate the impact of their fiscal policies on the OGS sector. Governments often struggle to mobilize sufficient domestic tax revenue to fund their budgetary expenditures. 112 Rysankova, Dana; Miller, Charlie. Designing Public Funding Mechanisms in the Off-Grid Solar Sector (English). Washington, D.C.: World Bank Group. Accessible here. 113 Lighting Global, GOGLA, ESMAP, Off-Grid Solar Market Trends Report 2020, p. 176. The Off-Grid Solar Policy Toolkit 51 This challenge is particularly significant for developing countries, where tax-to-GDP ratios are much lower than they are in developed countries.114 For this reason, governments continually look for sources to broaden the tax base to close budget deficits. OGS products are often treated as taxable products. Government taxation of OGS products typically includes import duties or tariffs paid by OGS providers and value-added taxes (VAT) paid by consumers at the point of sale. Mobile money taxes may also apply to consumers’ PAYG payments. Governments using fiscal policy to make OGS more affordable face a loss of tax revenue, but may benefit household savings on energy, as well as increased incomes, job creation and economic growth from the productive use of OGS systems. In a study of the impact of VAT and duties on OGS, the Africa Clean Energy Technical Assistance Facility (ACE TAF) found that the gains to households from accelerated access to stand alone OGS technologies and the environmental benefits outweighed the foregone tax revenues. Applying its tax evaluation tool across three countries, Malawi, Rwanda and Sierra Leone, ACE TAF found that economic benefits from increased energy access through OGS resulted in increased income, government revenue from individual and corporate taxes and reduced carbon dioxide emissions. Figure 4.2: Cost Benefit Analysis of VAT and Duty Exemptions Across Malawi, Rwanda, Sierra Leone (USD Millions) (Source: ACE TAF, Tetra Tech, UKAID report) Cost Benefits 100 2.7 0.6 90 90.0 93.3 80 70 70.0 60 50 40 30 20 10 0 VAT and Duty Income Uplift Income and Economic benefit Total foregone (Household corporation from reduced benefits (Government benefits) tax CO2 emissions cost) (Government (Environmental benefits) benefits) As with other consumer products, government taxation of OGS products increases prices, which negatively affects affordability as well as OGS sector growth rates. Researchers modeling the impact of import tariffs on SHS systems in East Africa estimated that a 20 percent import tariff would reduce sales of smaller systems by 18 percent and larger kits by 32 percent.115 In response to the pandemic, the Kenyan government reintroduced a VAT on solar products which increased the end-consumer cost by up to 40 percent and sales decreased by 11 percent in the first half of 2020. In 2021, Kenya removed the VAT and data suggests the benefits of tax exemption for the government far exceed the tax at 7 to 1.116 114 UNU-WIDER, Government Revenue Dataset, (2019). Accessible here. 115 Rob Fetter, Jonathan Phillips, Duke, Energy Access Project, “The True Cost of Solar Tariff East Africa”, 2019. Accessible here. 116 ACE TAF, 2021. Economic Impact Assessment of VAT and Import Duty on SAS Products. Accessible here. 52 The Off-Grid Solar Policy Toolkit Researchers modeling the impact of import tariffs on SHS systems in East Africa estimated that a 20% import tariff would reduce sales of smaller systems by 18% and larger kits by 32%. There are a variety of policy approaches governments can take to align their fiscal policies with policy goals for increasing OGS use. Governments can choose to reduce the rate of taxation or provide wholesale exemptions for taxes that apply to OGS products. These exemptions can be temporary or permanent. Governments can limit the exemptions to specific items such as solar modules, SHS components, or apply them to bundled products such as SHS kits. Some governments are using fiscal policies, such as incentives, to influence OGS supply. In this case, OGS providers may find they benefit from favorable tax treatment when they import QV equipment or participate in programs that target OGS supply to specific high need areas or customer segments. The PAYG Market Attractiveness Index and ESMAP’s RISE Index include positive indicators such as government fiscal policies that provide duty exemptions for solar modules, SHS components, and bundled SHS systems.117 When governments choose to adjust taxation for OGS products, they need to ensure there is sufficient guidance and capacity for officials to apply and enforce the policies consistently. This requires the government to clearly classify OGS products and components and their tax treatment so customs officials can understand and apply the correct tax treatment when OGS products are imported. For customs officials, this can be particularly challenging when OGS products are taxed based on whether they meet a quality standard, rather than the more familiar Harmonized System (HS) codes they are imported under. In addition, governments may need to invest in building expertise in the tax authorities and customs agencies to understand and consistently apply the tax policies to OGS products. In 2020, a group of renewable energy associations in East Africa published a handbook on solar taxation designed to help customs officials and importers to clearly identify and consistently apply the tax policies for solar products.118 As the use of mobile money has increased, governments have shown interest in taxing mobile money services as an area for domestic revenue mobilization. Some countries, particularly those in sub-Saharan Africa, tax mobile money transactions. Taxes can include excise duties that governments impose on mobile money transaction fees, specific taxes on total mobile money revenue, and direct taxes on the transaction amounts.119 Some PAYG companies are adjusting their payment practices to lessen the impact of fiscal policy on consumer pricing. For example, companies may provide consumers with the option to make smaller, more frequent mobile money payments to minimize taxation. Countries continue to revise their approach to mobile money taxation. In May 2018, the government of Uganda levied a one percent tax on the value of all mobile money transactions. With the mobile money tax, PAYG providers in Uganda saw an average 10-15 percent reduction in mobile money transactions (volume) per customer. In November 2018, the Government of Uganda eliminated the general mobile money tax and chose to tax mobile money withdrawals only, at a rate of 0.5 percent. In 2022, the Government of Ghana introduced a 1.5 percent tax on all electronic and mobile money transactions above 100 Ghanaian Cedis (US$8.45). The GSMA studied the impact of the mobile money tax in Ghana over nine months and concluded that it resulted in a 25 percent reduction in access and use of mobile money services.120 In 2020, GSMA published a study that looked at the motivation and unintended consequences of taxation on mobile money services in four countries.121 117 Lighting Global, PAYG Market Attractiveness Index 2019, Indicators EE11,EE12, EE14; ESMAP, Regulatory Indicators for Sustainable Energy, Electricity Access Indicator 5. 118 USEA, KEREA and UNREEEA, The East African Regional Handbook on Solar Taxation, 2020. Accessible here. 119 UNCDF, Understanding the Consequences of Mobile Money Taxation in Uganda, 2018. Accessible here. 120 GSMA, The E-Levy Impact in Ghana: Economic Impact Assessment, 2023. Accessible here. 121 GSMA, The Causes and Consequences of Mobile Money Taxation, 2020. Accessible here. The Off-Grid Solar Policy Toolkit 53 POTENTIAL POLICY OPTIONS: Wait & See Light Touch Prescriptive Policy Government does not adjust fiscal Government offers limited (by type Government reduces duties or policies that apply to OGS products or duration), fiscal incentives to VAT applied to OGS products or services to promote market incentivize supply of specific OGS without limitation in scope or development. products or services (such as quality- time. verified products). Advantage Advantage Advantage No impact on government revenue. Government allocation of fiscal resources Lowers cost of goods sold and promotes specific market behavior by increases consumer affordability of OGS OGS providers. products. Disadvantage Disadvantage Disadvantage Fiscal policies that add costs to OGS Reduces short-term fiscal revenue from Reduces fiscal revenue from taxes or products are paid by consumers and taxation of OGS products. fees levied on OGS products. reduce consumer affordability. REAL-WORLD EXAMPLES: Governments’ fiscal incentives In Ethiopia, the Ministry of Finance and In 2020, the government of Senegal are typically a part of government Economic Development through a 2010 passed a bill exempting off-grid solar frameworks to support SHS use. In MOU allows OGS products certified products from the country’s VAT of countries that have not yet developed to meet the quality standards to be 18%.124 those frameworks, no specific tax imported duty-free.123 policies are likely to exist.122 For additional resources on issue 4, refer to: Annex A to evaluate additional policy options and for a deeper analysis. Annex B for a detailed bibliography Issue 5: Availability and Cost of Capital POLICYMAKERS OF INFLUENCE: Ministry of Finance, Financial Services Regulator RELATED ISSUE: Financial Regulation Inter-Ministerial Dialogue Tip: The financial services regulator, often the central bank, has policymaking authority over banking practices and influence over the supply of local lending that can address FOREX risk. Financial services regulators can be an ally for building local capacity to lend to the OGS sector and sourcing FOREX. Use Chapter Three to build the financial service regulators’ understanding of the cost factors that go into PAYG pricing including the cost of managing FOREX risk. Key concerns to consider are the financial services regulator’s licensing authority over local lenders, perceptions of the risk of lending into the OGS sector and FOREX risk management. 122 This data is captured in ESMAP’s Regulatory Indicators for Sustainable Energy, Electricity Access Indicator 5. 123 Power Africa, Off-grid Market Assessment Ethiopia, 2019, 23. Accessible here. 124 GOGLA, Policy Alert, Senegal Introduces VAT Exemption for Off-grid Solar Products, July 24, 2020. Accessible here. 54 The Off-Grid Solar Policy Toolkit PAYG business models that combine retail and financing activities have a different cost structure than cash business models. Researchers estimate that the cost of A GOGLA report providing end-user financing under the PAYG model can contribute 15-25 percent of the that included consumer purchase price for PAYG products.125 Government policies can influence the interviews with magnitude of those costs as well as product affordability in key areas including the three policy issues discussed in this section: suppliers of solar powered productive 1. Availability and cost of capital especially FOREX. use products in 2. Access to data for credit scoring to better manage payment default risks. Ethiopia revealed 3. Classification of PAYG providers under financial services regulation. that all suppliers view the lack of Government encouragement of local financing for OGS providers can reduce the access to FOREX as cost of OGS provider financing and FOREX risk. PAYG providers’ cost of financing a major constraint includes managing the cost of foreign exchange risk. PAYG providers have historically to operations and sourced equity investments from foreign investors and secured debt financing from lenders who transact in foreign currencies that do not match the local currency scale-up. consumers use to make payments. To mitigate the foreign exchange risk, PAYG companies are trying to tap into local sources of lending.126 It has been challenging for PAYG companies to access credit support from local lending institutions, which often have limited understanding of the OGS sector, limited experience with SME lending, and/ or limited data to evaluate the opportunities and risks.126 In addition, some lenders are reluctant to accept off-grid products or customer receivables as collateral.127 Some governments are using local currency credit facilities or guarantees to de-risk local currency lending to address PAYG companies’ need to access local capital and currency. For example, in 2017, the Government of Rwanda launched the Renewable Energy Fund. Among several financing mechanisms, the fund provides a credit line for locally registered OGS companies supporting Tier 1 and above solar systems.128 For government-sponsored facilities or localized lending to be useful, PAYG providers need to meet the lending criteria while also offering competitive and flexible terms and pricing. Governments should also structure financing mechanisms to be gender informed given the benefits of energy access for women.129 If PAYG providers find it difficult to meet the lender’s criteria or if the cost of financing is too expensive to profitably offer its products, PAYG companies may limit their financed product offerings or stay out of the market entirely. In countries where access to USD is limited, some governments, such as Ethiopia, have established financing facilities that enable OGS and PAYG companies to access FOREX.130 If a country provides FOREX to aid in the supply of fuels (such as kerosene) or to meet capital needs of the grid energy sector, governments could include PAYG companies within these classifications for access to priority FOREX windows. 125 Hystra Hybrid Strategy Consulting, Pricing Quality Cost Drivers, and Value Add in The Off-Grid Solar Sector 2017. 126 Open Capital Advisors, GOGLA, Increasing local financial institution investment in the off-grid solar sector. Lessons from East Africa, Sept 2018. Accessible here. 127 Ibid. 128 Ibid. 129 Energy Sector Management Assistance Program (ESMAP). 2022. Designing Public Funding Mechanisms in the Off-Grid Solar Sector. Washington, DC: World Bank. Available here. 130 OECD, Chapter 8. Women and SDG 7 – Affordable and Clean Energy – Ensure access to affordable, reliable, sustainable and modern energy for all, Gender and the Environment, Building Evidence and Policies to Achieve the SDGs, 2021. Accessible here. 131 ACE TAF, Unlocking Forex for the Off-Grid Solar Sector: Ethiopia Policy Brief. Accessible here. The Off-Grid Solar Policy Toolkit 55 Local manufacturing and production of OGS products can also ease the pressure of FOREX risk but must be weighed against costs and capacity to serve as a source of units in the supply chain. POTENTIAL POLICY OPTIONS: Wait & See Light Touch Prescriptive Policy Government forebears from Government offers public funding Financial services regulator sets restricting OGS providers sources to de-risk private investments and portfolio target for local bank of financing and from providing the cost of credit for OGS (blended lending to OGS companies. government assistance to access finance). financing. Advantage Advantage Advantage No restrictions on sources of funding. Additional funding sources reduces Increases local financing of OGS cost of financing and increases companies. consumer affordability. Disadvantage Disadvantage Disadvantage High cost of capital for OGS providers Requires investment of government Leadership for financial services regulation contributes to OGS product pricing resources to support investment in is outside the zone of influence of the and reduces consumer affordability. blended finance facilities. energy authority. REAL-WORLD EXAMPLES: Foreign exchange constraints in Bboxx tapped People’s Bank of In Niger two local banks, ONIBANK Burundi are a deterrent to OGS Rwanda’s $2-million debt facility and BSIC, have partnered with the providers entering the market.132 in local currency to grow Bboxx’s Government’s NESAP program to lend to operations in Rwanda. OGS providers.133 Issue 6: Access to Data for Credit Scoring POLICYMAKERS OF INFLUENCE: Financial Services Regulator, Data Protection Supervisory Authority RELATED ISSUES: Data Protection Inter-Ministerial Dialogue Tip: Many countries are setting up specialized supervisory authorities to regulate and enforce data protection standards. The country’s data protection framework may define the boundaries for data sharing and consumers’ right to restrict the sharing of their personal data. Use Chapter Two to help to build an understanding of PAYG companies’ use of consumer data to manage risk and product pricing. Key concerns are consumers’ right to control their data and with whom it is shared, consumer portability of credit scores, and negative credit reporting. Toolkit Tip: The issues of data protection and data sharing are linked. Consider policy options on access to data for credit scoring and data protection and privacy, Issues 6 and 10, together. 132 See Lighting Global’s analysis of the opportunity for OGS in Burundi here. 133 Power Africa Off-Grid Project, Niger Market Assessment, 2018. Accessible here. 56 The Off-Grid Solar Policy Toolkit Access to customer data improves PAYG providers’ ability to assess customers’ ability to pay and reduce default risks. While not currently a major issue, consumer over-indebtedness through PAYG product offerings has become an increasing concern for the PAYG sector and its investors. PAYG companies’ ability to offer customized financing to their customers could be enhanced by improving access to shared data sets and building the capacity of their teams to process available data. With limited customer data, PAYG companies manage risk by using deposits, pricing products to cover potential risk of non-payment or through post-sale interventions such as sending SMS messages to remind customers to make their payments. Companies’ data use and sharing, however, can impact consumers’ rights to data privacy and protection if companies do not manage the data responsibly.134 The issue of data access is tied to the broader set of issues of data protection and privacy discussed in Issue 10. PAYG providers may engage directly in data collection to screen customers for financing, use information shared with other commercial providers, or incorporate data from credit bureaus into their credit models. Shared data can facilitate financing. Researchers studying the impact of information-sharing platforms on loan performance found that platforms that enabled coordination and screening among lenders can lead to more loans, better repayment, and fewer defaults.135 For customers making their first PAYG purchase, data may be limited or non-existent. This may be particularly true for women who often work outside the formal economy and have limited access to the mobile phones that can be used to create data increasingly being used for credit scoring. When customer data does exist, such as a mobile money transaction history, it may be viewed as proprietary. PAYG agents often collect consumers’ data at the time of sale. With time, PAYG companies can use their experience with existing customers to develop credit profiles to inform suitable financing terms and, in some cases, to offer financing for additional products such as appliances or productive use equipment. Through partnerships with mobile money providers, MFIs, or other entities, PAYG companies may receive and share information on customers’ data to inform their financing decisions. With any credit scoring, it is important to be aware if intentional or unintentional gender bias may disadvantage women from accessing credit. Another source of data for PAYG providers to use in credit screening is information reported to credit bureaus. Governments can influence the level of required reporting to credit bureaus by setting standards for reporting. Lighting Global’s PAYG Market Attractiveness Index includes private and public credit bureau coverage and a depth of credit information index as indicators for consumers’ demand and willingness to pay for PAYG products.136 OGS companies may decide to voluntarily report data to a credit bureau or governments may require or restrict that sharing. With the rise of digital credit, researchers have raised concerns that government policies requiring companies to report all consumer credit defaults, especially by first-time borrowers with micro-loans, may negatively influence the availability of credit and present a narrow view of a consumer’s ability to repay future financing.137 In 2020, the Central Bank of Kenya set a minimum threshold for negative credit reporting to credit reference bureaus of KES1,000 and prohibited unregulated digital (mobile-based) and credit-only lenders from providing credit information to CRBs. The Central Bank cited public complaints over misuse of credit information by the unregulated digital and credit-only lenders and their poor responsiveness to customer complaints as the basis for its withdrawal of reporting authority.138 Providing consumers with the right to easily access, correct, and share their financial histories across providers is one solution to empower consumers as digital credit expands.139 134 As a matter of corporate practice, OGS providers and especially PAYG providers should have clear policies on data governance and sharing that incorporate measures and safeguards to protect consumers. This includes corporate procedures for record keeping, negotiating appropriate contractual agreements for data sharing between parties, and providing modes for redress for consumers. Industry associations are leading efforts to develop best practices companies can follow as providers’ use of consumer data to inform financing decisions continues to grow. GSMA, Data Protection in Mobile Money, 2019. Accessible here. 135 Dean Karlan, Jake Kendall, Rebecca Mann, Rohini Pande, Tavneet Suri, Jonathan Zinman, Research and Impacts of Digital Financial Services, 2017. Accessible here. 136 See Lighting Global, PAYG Market Attractiveness Index 2019, Indicators D20, D21, EE17. 137 Juan Carlos Izaguirre, Rafe Mazer, “How Regulators Can Foster More Responsible Credit”, CGAP, November 5, 2018. Accessible here. 138 The Central Bank of Kenya (April 14, 2020) Publication of The Credit Reference Bureau Regulations, 2020 and Additional Measures on Credit Information Sharing [Press Release]. Retrieved from here. 139 Mazer, Digital Credit: Data Sharing Can Improve Product Diversity. The Off-Grid Solar Policy Toolkit 57 POTENTIAL POLICY OPTIONS: Wait & See Light Touch Prescriptive Policy OGS companies are not restricted Government encourages reporting Government establishes and from entering into commercial and provides OGS providers maintains credit bureaus with relationships to share data with access to data from credit data used by OGS companies for third parties (including MNOs) for agencies (private or public) to credit scoring. credit scoring. support OGS financing availability. Advantage Advantage Advantage Provides an opportunity for OGS Access to credit bureau data Reporting of data to credit bureaus providers to prove their ability to increases efficiency of credit scoring facilitates consumers’ access to formal self-regulate without government and supports increased supply of credit beyond PAYG. intervention. PAYG offerings. Disadvantage Disadvantage Disadvantage Consumers bear the risk of OGS OGS providers reporting of data to Credit bureaus may not exist or have providers sharing their data without credit bureaus could create negative limited data on prospective PAYG their consent. credit scores for consumers. customers. REAL-WORLD EXAMPLES: The Government of Sierra Leone is The Government of Ghana added The Central Bank of Brazil manages a one African country that has yet to mobile money providers to those credit registry that financial institutions enact a data privacy or protection law required to report information to can access with a customers’ consent that would define the rules for data credit bureaus.141 in evaluating credit risk. Positive credit sharing.140 bureaus managed by banks also provide a data resource on consumers who can opt out of participation.142 For additional resources on issue 6, refer to: Annex A to evaluate additional policy options and for a deeper analysis. Annex B for a detailed bibliography Issue 7: Financial Regulation POLICYMAKERS OF INFLUENCE: Financial Services Regulator RELATED ISSUES: Ease of Market Entry and Competition, OGS Provider Availability and Cost of Capital Inter-Ministerial Dialogue Tip: Financial services regulators derive their regulatory authority from banking laws that are unlikely to address how to classify PAYG financing. Use Chapter Three to build the financial services regulators’ understanding of how PAYG financing works. Key concerns to consider are how small-value financing is treated, differences and similarities between PAYG financing and micro-credit, regulatory conditions that apply to credit providers, including minimum capitalization and risk management, and how they might affect PAYG product pricing and market participation by PAYG providers if applied. 140 UNCTAD maintains a database to track data privacy and protection legislation by country. Accessible here. 141 The Bank of Ghana requires bank and non-bank financial institutions in Ghana to submit data to licensed credit bureaus on a form specified by the Bank of Ghana. Learn more here. 142 More information about Brazil’s approach to the credit bureau is available here. 58 The Off-Grid Solar Policy Toolkit PAYG providers consider if and how a government classifies lending, and who is eligible to lend under its banking laws and financial services regulations, when evaluating market attractiveness. When PAYG providers offer direct financing of their OGS products, they often choose to enter markets where governments do not regulate their financing offering. This has kept the cost of market entry and regulatory compliance low for PAYG providers. With the rise in innovation in the financial services sector, many countries are reforming their approach to financial sector regulation to address micro-credit, micro- leasing, and digital credit offerings. The evolving policy landscape can create an issue of whether PAYG financing falls within the scope of regulated financial With the rise in service offerings. If financial service regulations are applied to PAYG providers, innovation in the companies can incur significant costs meeting requirements for licensing and ongoing regulatory compliance. For a PAYG provider such requirements can financial services affect decisions around whether to enter a market or whether to offer consumer sector, many financing in that market. countries are The PAYG model of consumer financing is very different from traditional reforming their credit offerings, suggesting a different policy and regulatory approach may be needed. Unlike generalized credit offerings such as those of MFIs, or the digital approach to financial credit offerings of M-Shwari in Kenya and M-Pawa in Tanzania, PAYG providers sector regulation tie their consumer to the OGS unit being purchased and are not offering savings products. There is no general flow of funds (or lending), and the PAYG company to address micro- is not holding savings deposits for its customers.143 A PAYG company’s recourse credit, micro-leasing, when a consumer fails to pay is limited to de-activation and for some providers includes repossession of the OGS unit. When consumers miss payments, they do and digital credit not incur further costs from accruing interest. Unlike digital credit offerings, PAYG offerings. providers offer financing at the time of purchase of the retail OGS product from a retail product sales agent providing an individual channel, rather than a purely digital channel. Finally, PAYG companies are not deposit-taking institutions; they collect payments for the product’s use that either lead to its purchase or fund its servicing costs and do not hold the funds for return to the customer. Since the company is not holding consumer deposits or savings if the PAYG company goes out of business, any loss is borne by the company’s shareholders, rather than its customers. Energy policymakers need to take a leadership role in working with financial sector regulators to help them understand the PAYG lending model and how it differs from traditional credit offerings, and to consider policy/regulatory options accordingly. With some PAYG companies beginning to provide more conventional forms of digital and micro-credit, existing policies and regulations for these sectors may become applicable. PAYG companies have begun to diversify their offerings to provide consumers financing that they can use to purchase non-energy assets such as mobile phones or agriculture inputs, or to pay other expenses such as school fees. If the continued use of the solar unit is conditional on repayment, regardless of how a consumer uses the financing, these offerings could arguably still be considered ‘energy services’ rather than ‘consumer loans.’ 143 Michelle Kaffenberger and Edoardo Totolo, with Matthew Soursourian, Working Paper: A Digital Credit Revolution Insights from Borrowers in Kenya and Tanzania, 2018. Accessible here. The Off-Grid Solar Policy Toolkit 59 POTENTIAL POLICY OPTIONS: Wait & See Light Touch Prescriptive Policy Government forebears from Government offers guidance Government issues rules on oversight of OGS companies’ through clarification or letters classification of OGS financing consumer financing and does not of no-objection on regulatory that determines level of oversight require government licensing or classification of OGS providers and minimum entry requirements. pre-approval. offering financing. Advantages Advantages Advantages Eases market entry and no minimum Reduces risk of regulatory Establishes regulatory framework for the capital requirements. uncertainty for OGS providers consumer financing of OGS products. providing consumer financing. Disadvantage Disadvantage Disadvantage Limits government oversight over OGS Continued innovation in financing Increased compliance costs may financing. models may continue to raise issues increase cost of goods sold, increasing of classification. product pricing, and reducing consumer affordability. REAL-WORLD EXAMPLES: PAYG providers in Ethiopia are not The Central Bank of Kenya issued In Tanzania the OGS providers filed a allowed to issue financing and must a no-objection letter to Safaricom request with the Central Bank of Tanzania to collaborate with a licensed financial for its initial mobile money offering. clarify if the regulations it adopted for Tier institution. FinTech companies in Senegal face 2 non-deposit taking MFIs are applicable to challenges from a lack of clarity PAYG providers. of their legal classification. The regulator classifies some FinTechs as “technical operators.”144 For additional resources on issue 7, refer to: Annex A to evaluate additional policy options and for a deeper analysis. Annex B for a detailed bibliography 4.3.3 Service Provider Accountability Across the Sale Cycle We have classified the key policy issues that impact accountability across the sales cycle into five categories shown in Table 4.4. Table 4.4: Accountability: Consumer Protection Across the Sales Cycle Enabling Environment Policy and Regulatory Zones of Influence Factors ACCOUNTABILITY Sales Cycle Pre-Sale At-Sale Post-Sale Product Standards Transparency of terms Data protection Customer service and e-Waste and warranties grievance redress Reminder: Accountability = OGS companies are responsible for providing consumers with quality products, clearly communicating about their products features, performance, and their financing terms, protecting consumer data and managing and ensuring proper disposal of products. 144 World Bank. 2019. “Information and Communications for Development 2018: Data-Driven Development.” Overview booklet. Information and Communications for Development. World Bank, Washington, DC. License: Creative Commons Attribution CC BY 3.0 IGO, p. 61. 60 The Off-Grid Solar Policy Toolkit Governments play an important role in holding service GOGLA code includes six core principles. GOGLA created providers accountable, especially when an OGS a self-assessment tool of 37 indicators for OGS providers to provider’s own policies and self-regulation fail to protect assess and track their performance against the Consumer consumers. OGS providers should be accountable to Protection Code’s principles. More than 25 OGS providers customers for their products and services across the sales have committed to following the GOGLA code. It is important cycle. Consumers that report facing challenges using OGS to note that while the GOGLA’s Consumer Protection Code products and consumers over-indebtedness resulting from provides a framework for industry self-regulation, there PAYG purchases is a small but growing concern.145 As the are no enforcement mechanisms in the code for GOGLA OGS sector has grown, stakeholders have recognized a or governments to require the companies comply with the need to develop cross-cutting standards and principles on principles. consumer protection. Some standards and principles already exist to manage pre-sale and at-sale consumer risks; these Toolkit Tip: Consider collecting data or engaging include the international quality standard IEC TS-62257- in market surveillance to assess the level of 9-8 that includes standards for truth in advertising and customer satisfaction and seek input from OGS minimum warranty coverage, and the industry association providers to inform your evaluation of the need led consumer protection code developed by GOGLA.146 The for consumer protection policies. Issue 8: Product Standards POLICYMAKERS OF INFLUENCE: Standards Setting Body RELATED ISSUES: Transparency of Terms and Warranties, Customer Service and Grievance Redress Inter-Ministerial Dialogue Tip: Government standards setting bodies’ authority extends to OGS products. In developing standards, inter-ministerial coordination between the government’s standard setting body and energy authority is essential. Ideally, the standards setting process should also be structured to include input from non-government stakeholders including the OGS sector. Consumer complaints and government concerns about low-quality products have prompted many governments to evaluate whether to adopt national standards for OGS products.147 There are several contextual factors policymakers may consider in evaluating the need and impact of adopting quality standards. These include the state of the OGS market, a government’s institutional capacity to manage the standards adoption process, the availability of government resources to implement the standards once adopted, and the impact on consumer product choices and affordability. As discussed in Section 2.2, consumers often have a choice in the quality of OGS product they purchase. OGS providers may compete in offering consumers non-QV OGS products and offering QV OGS products that have been tested for compliance with national and/or international standards. Consumers may find that QV products cost more than non-QV products reflecting the costs suppliers incur to produce and test QV products. Researchers have dubbed this pricing differential a “quality premium.”148 Some consumers may opt out of purchasing QV equipment if the quality premium is beyond their ability to pay. A consumer’s willingness or ability to pay is one factor she may apply in purchasing OGS products.149 145 60 Decibels, Why Off-Grid Matters, p. 15. 146 GOGLA, Consumer Protection Code. Accessible here. 147 African Clean Energy Program Technical Assistance Facility, Standards for Stand-Alone Solar: Guidance for Governments, 2020. Accessible here. 148 Global Distributors Collective, HYSTRA Hybrid Strategy Consulting, Verasol, Finding the sweet spot: identifying affordable quality solar products for the last mile. 149 Lighting Global, GOGLA, ESMAP, Off-Grid Solar Market Trends Report 2020, p. 83. The Off-Grid Solar Policy Toolkit 61 Another factor in consumer purchasing is whether the consumer has information or awareness to distinguish between QV and non-QV products and reduce her exposure to financial risk from products with short life cycles. In the absence of quality standards and adequate information, consumers may also be exposed to counterfeit products that enter the market. Counterfeit products have the look and feel of quality, branded products but are sold at a lower price point. In some countries, such as Ethiopia, consumers have high levels of awareness of counterfeit products and can spot the products.150 In other markets, governments may need to invest in building consumer awareness and capacity to identify counterfeit products. When a government decides to move toward adoption of national standards, key decisions include: (1) when to adopt standards, (2) what standards to adopt, and (3) how to implement and enforce those standards. When to adopt standards: The maturity of the OGS sector and the capacity of the government to enforce standards is relevant to a government’s approach. Governments may find mandatory standards prove useful in more mature markets where the risk of counterfeit and inferior products is high, and they have the capacity to implement and enforce the standards. In emerging markets, governments may find it preferable to start with voluntary standards that are recommended or only applied by the government in its own procurements or programs for OGS products. Some level of industry self-regulation may already exist. For example, OGS providers may limit their product offerings to QV products as a matter of business practice and to comply with requirements from their investors and creditors, or to meet eligibility criteria for participating in donor-funded programs. Governments may also find voluntary standards more useful in markets where their compliance and enforcement capacity are limited, and they need time to structure and complete an inclusive standards-setting process that features a range of stakeholders and industry participation. The standards adoption process requires an investment of time and resources governments must consider in the timeline for adoption of national standards. Which standards to adopt: Countries may choose to develop their own standards, adopt standards harmonized with other countries in their region, and harmonize or align those standards with the IEC standard IEC TS-62257- 9-8. Several countries have developed national standards for SHS kits that align with the IEC standard. Rwanda’s standards for SHS kits align with the IEC standard and include additional requirements. Ethiopia has adopted mandatory pico-solar standards and voluntary SHS kit standards aligned with the IEC standard. The Economic Community of West African States (ECOWAS) validated draft regional standards for SHS kits.151 Government adoption of internationally harmonized standards can produce economies of scale for OGS producers who can sell standardized products across markets and centralize product testing for quality verification. How to implement and enforce those standards: Governments’ adoption of standards will only prove effective if governments make the necessary investment to support consistent application and enforcement of compliance with those standards. Effective standards enforcement requires investment in coordinated planning across government authorities, clear communication with the OGS sector, development of capacity for market surveillance, and ongoing investment in capacity to monitor and enforce compliance. Government strategies for compliance with quality standards can be multi-faceted and applied at various points in the supply chain. At importation, governments can conduct conformity assessments by requiring pre-shipment verification of conformity (PVoC). Governments can engage in market surveillance to check current supply, including field testing, laboratory testing, or visual inspections. Governments also need to have enforcement processes in place to intervene against suppliers whose products are found non-compliant and to require the suppliers to take corrective action.152 150 Ibid., p. 55. 151 Ibid. 152 Ibid. 62 The Off-Grid Solar Policy Toolkit POTENTIAL POLICY OPTIONS: Wait & See Light Touch Prescriptive Policy Government forebears from Government develops a road map Government adopts national placing any restrictions on or for standards adoption starting quality standards for OGS promoting minimum quality with adoption of voluntary quality products. standards for OGS components or standards for OGS products. configurations. Advantage Advantage Advantage Promotes market entry and free and Increases supply of quality OGS Government protects consumer from risk of open competition. products. counterfeit or low-quality products. Disadvantage Disadvantage Disadvantage No government oversight over Low-quality OGS products are Requires investment to build staff capacity to counterfeit or low- quality products. available. implement and enforce compliance. REAL-WORLD EXAMPLES The governments of Malawi and Lighting Africa is working Rwanda included quality standards for SHS Somalia have not yet adopted quality with government agencies of systems in its Ministerial Guidelines on standards for OGS products allowing Madagascar — particularly Minimum Standards Requirements for SHS. OGS companies to offer QV or non-QV the Bureau of Standards — in products. developing and adopting national quality standards for off-grid solar products that are appropriate for the Malagasy context.153 For additional resources on issue 8, refer to: Annex A to evaluate additional policy options and for a deeper analysis. Annex B for a detailed bibliography Issue 9: Transparency at Sale: Disclosure of Fees, Terms of Services, and Warranties POLICYMAKERS OF INFLUENCE: Standards Setting Body, Consumer Protection Agency RELATED ISSUE: Product Standards Inter-Ministerial Dialogue Tip: Some governments have consumer protection ministries or bureaus within a ministry that have the mandate to enforce consumer protection standards for truthful marketing and transparency at the point of sale. The policymakers enforcing those laws may not be familiar with the OGS sector or PAYG. Use Chapter Three to build their understanding of how the OGS and PAYG offerings work as well as the current practices in disclosure of fees, terms of service, and inclusion of product warranties. Toolkit Tip: Look for existing consumer protection policies that may apply to OGS products and service providers before creating new policies. 153 Explore more about this work here. The Off-Grid Solar Policy Toolkit 63 Consumers rely on OGS providers to be transparent about the quality and terms and conditions of their products to make informed purchasing decisions. Consumer sentiment towards the OGS industry and/or solar products can sour if they receive inadequate, false, or unclear information about products. Consumers purchasing PAYG products also need to receive clear and adequate information about the terms and conditions of the consumer financing. If they are unable to understand the terms, consumers are at risk of default and loss of energy access if their OGS units are shut off or repossessed due to non-payment. Inadequate assessment of a customer’s ability to pay not only hurts consumers, but it also hurts the financial performance and long-term viability of OGS providers and the reputation of the sector overall. Truth in advertising is a key component of the international OGS product quality standard, IEC TS-62257-9-8. Transparency, consumer information and warranties, as well as responsible sales and pricing, are covered by GOGLA’s voluntary Consumer Protection Code. Governments seeking to improve service provider accountability can evaluate the OGS sector’s performance in these areas, in their market, before considering policy/regulatory responses. Table 4.5: Key Elements of the GOGLA Consumer Protection Code and IEC Standard GOGLA CODE INDICATORS RELATED TO AT-SALE IEC STANDARD TRUTH IN ADVERTISING AND WARRANTY DISCLOSURES STANDARDS (IEC TS-62257-9-8) Transparency Indicators Consumer Information Consumers are informed of key terms and conditions of All product descriptions are truthful and accurate and available to contract. customers prior to sale. All fees and charges are clear and included in total price The PAYG system should be capable of accurately metering (financed or cash). service to customers so they reliably get the service they paid for. Consumers are advised on all available products and If there are both PAYG and non-PAYG versions of a product, each options. must be truthfully advertised. Communication is in clear, simple and appropriate Information is presented clearly and legibly. language consumers can understand. Sales and marketing materials accurately reflect the Product accurately specifies manufacturer, product name, and product’s features and performance and customers unique model no. are given a manual, warranty, and customer service Product packaging and labeling meets performance reporting information. requirements and is accurate. Responsible Sales and Pricing Indicators Warranties The company insures consumers understand the key Warranties of at least one year are provided for Pico products, terms and conditions of any payment plan. at least two years for SHS kit systems, and one year for included appliances. If additional products are bought with the OGS product User manuals are included with SHS kits. as collateral this is done with the informed consent of Information is provided on component specifications and consumers. replacement methods for SHS kits. Consumer research conducted around the GOGLA Consumer Protection Code found that consumers were familiar with the terms and conditions of PAYG service offerings and had adequate information to compare the costs of purchasing with cash and PAYG financing.154 Researchers found that consumers thought marketing and sales materials were generally clear but contract language for PAYG services was more challenging for them to understand. In addition, consumers reported that agents who sold products were not always transparent in providing full and accurate information about product pricing or terms.155 154 GOGLA, Consumer Protection Insights: Learning and Recommendations from the GOGLA Consumer Protection Code, 2019. Accessible here. 155 Ibid. 64 The Off-Grid Solar Policy Toolkit Beyond industry self-regulation, countries may also have existing consumer protection frameworks that establish standards for company product and service disclosures that may apply to the OGS sector, including in areas like consumer financing.156 If those protections are inadequate, governments may find they need to create specific standards for the OGS sector which they can capture in setting national quality standards or by issuing industry specific directives. In its Ministerial Guidelines for SHS, Rwanda describes what SHS providers should include in their product purchase agreements.157 Consumers who purchase OGS products with warranties are purchasing a commitment to after-sales service and repair that should protect them from financial loss if an OGS product fails to perform as represented at the time of sale. The IEC standard requires that OGS products certified to meet the standard include a warranty of one year for Pico products and two years for SHS kits, with one year for included appliances. Most PAYG companies include a warranty for the duration of the financing term. Rwanda set its own warranty requirements for SHS.158 The value of warranties to consumers is dependent on a company’s commitment to honoring those warranties and providing after-sales service. Governments may need to consider how to support consumer redress if OGS providers do not honor the warranties and fail to repair or replace the product, for example through a grievance redress mechanism (see Issue 11). POTENTIAL POLICY OPTIONS: Wait & See Light Touch Prescriptive Policy Government relies on OGS Government encourages PAYG Government sets and enforces providers to set their own policies providers to follow GOGLA’s minimum standards for disclosure for disclosure of terms. Consumer Protection Code principle of terms and conditions of OGS for responsible sales and pricing. products and services Advantage Advantage Advantage Provides an opportunity for OGS Consumers have adequate information Consumers have adequate information providers to prove their ability to to make informed decisions in to make informed decisions in self-regulate without government purchasing OGS and PAYG products, purchasing OGS and PAYG products at intervention. increasing consumer satisfaction and the point of sale. reducing over-indebtedness. Disadvantage Disadvantage Disadvantage Consumers bear the risk of OGS OGS providers differ in their disclosure Requires government investment to providers providing incomplete or practices and create reputational risk for build staff capacity to implement and inaccurate product information. the industry. enforce compliance. REAL-WORLD EXAMPLES: Companies who have committed to Rwanda’s Ministerial Guidelines for SHS the GOGLA Consumer Protection Code identify terms that must be included are listed on GOGLA’s website. The in SHS purchase agreements and list includes companies that provide includes detailed responsibilities of the products in multiple countries.159 purchaser and the supplier. 156 In Tanzania, Part XI of the Electronic Money Regulations requires mobile money issuers to “display and disclose charges and fees for their services to customers and any changes thereof” and “inform consumers of their referral rights on unresolved complaints”. Alliance for Financial Inclusion, Digital Credit Regulation in Tanzania, 2020. Accessible here. 157 Republic of Rwanda Ministry of Infrastructure, “Ministerial Guidelines on Minimum Standards Requirements for Solar Home Systems,” 2019. Accessible here. 158 Ibid. 159 Find the list of companies here. The Off-Grid Solar Policy Toolkit 65 For additional resources on issue 9, refer to: Annex A to evaluate additional policy options and for a deeper analysis. Annex B for a detailed bibliography Issue 10: Data Protection POLICYMAKERS OF INFLUENCE: Data Protection Supervisory Authority, Consumer Protection Agency RELATED ISSUES: Access to Data for Credit Scoring Inter-Ministerial Dialogue Tip: Many governments have created specialized authorities to implement and enforce compliance with data protection laws. Enforcement may also reside within agencies with broader mandates, such as financial service regulators or consumer protection agencies. A determination of where this authority lies will be an important first step in working to address data privacy and protection issues that impact the OGS sector enabling environment. Toolkit Tip: A country’s approach to data protection also sets the boundaries for permitted data sharing. Evaluate policy options for these two issues, Issues 6 and 9, together. Countries are creating or updating their data protection laws and establishing supervisory authorities to enforce compliance. UNCTAD tracks data protection and privacy legislation by country and shows the growing trend towards government adoption of data protection and privacy frameworks. Thirty-three countries in Africa have adopted data protection and privacy laws and legislation is pending in six countries.160 Many governments are designing data protection and privacy laws that follow the approach of the European Union in its General Data Protection Regulation that takes a rights-based approach to data protection.161 This approach establishes standards and provides consumers the right to consent and opt out of data sharing. How OGS providers and PAYG companies use and protect customer data raises important issues of consumer protection, specifically around consumers’ rights to data privacy and protection. PAYG companies need to gather and use customers’ personally identifiable information (PII) to qualify them for suitable financing. Data generated by customers’ payment patterns for PAYG products is also valuable for its use in creating a deeper profile for the customer, which can be used by the PAYG company or the customer to qualify for opportunities for additional financing. As discussed in Issue 6, PAYG companies may have commercial agreements to share some level of customer data with third parties for credit scoring. Governments and donors may also require companies to report data in some form (perhaps anonymized or aggregated) to show company performance as a condition of their financing, as part of participation in donor-led programs or at the request of government policymakers. With the advance of the digital economy, companies are making data-driven decisions. In addition, many governments are addressing data privacy with updated laws anchored in a rights-based approach that empowers consumers but makes companies responsible for data protection. PAYG companies are likely to collect and manage customer data that must be handled in compliance with the law. As a matter of corporate practice, companies are adopting data governance policies that control how they use and manage data. Company policies include requirements to comply with governing laws in countries where they operate and collect data. The GOGLA Consumer Protection Code, while voluntary and therefore not enforceable, includes a data privacy principle with three components, including compliance with local laws and regulations: 1. Apply good practices and comply with relevant laws and regulations governing consumer data privacy. 160 UNCTAD, Data Protection and Privacy Legislation Worldwide. Accessible here. 161 General Data Protection Regulation, Regulation (EU) 2016/679. Accessible here. 66 The Off-Grid Solar Policy Toolkit 2. Only collect, use, retain, and share personal information that is necessary for the stated consumer service and legitimate interests of the business. 3. Ensure consumer data is kept secure and confidential. Policymakers need to consider how to balance PAYG providers’ need for customer data, the cost of compliance to companies, and government enforcement in developing frameworks providing consumers’ right to data privacy and protection. Common principles in data protection frameworks include consumer consent to data collection, a company’s lawful and legitimate need for the data, minimization of data collected, locations where PII can be stored, rules on data sharing, and security and accountability. Some countries have requirements on data localization which prohibit cross-border data flows and require investment in local data storage. For the OGS sector and PAYG companies some of these restrictions may make service delivery in a country prohibitive. POTENTIAL POLICY OPTIONS: Wait & See Light Touch Prescriptive Policy Existing government data Government provides Government adopted policies privacy laws and regulations guidance on how existing data and directs specific application apply to the OGS sector without protection policies apply to the of policies for protection of data modification. OGS sector. collected by OGS companies. Advantage Advantage Advantage No additional regulation on data use by Guidance informs data use. Data policies specific to the OGS the OGS sector. increase OGS and PAYG supply and suitability of financing terms. Disadvantage Disadvantage Disadvantage Current data privacy laws and Not all OGS providers may choose Inadequate government enforcement regulations may limit OGS companies’ to commit to industry principles for of standards does not protect use of data or increase cost of protecting data privacy. consumers against improper use and compliance. disclosure of their data. REAL-WORLD EXAMPLES Togo’s data protection law (No. 2019- The European Data Protection Board 014), enacted in October 2019, regulates issues general guidance to promote a the collection, processing, transmission, common understanding of European storage and use of personal data data protection laws, both across by public or private entities, as well the European Union and around the as automated or non-automated world. processing of data. For additional resources on issue 10, refer to: Annex A to evaluate additional policy options and for a deeper analysis. Annex B for a detailed bibliography The Off-Grid Solar Policy Toolkit 67 Issue 11: Customer Service and Grievance Redress POLICYMAKERS OF INFLUENCE: Standards Setting Body, Consumer Protection Agency RELATED ISSUES: Product Standards Inter-Ministerial Dialogue Tip: Some governments have established positions such as that of an ombudsman to help customers get commercial companies to address grievances about their products and services. If such dynamics exist, use Chapter Three to build the Ombudsman’s understanding of how the OGS and PAYG offerings work as well as the role of standards and product warranties. Toolkit Tip: Look for existing consumer protection policies that may apply including minimum customer service standards that apply to licensed mobile money and payment providers. When company customer services processes fail, consumers may need to have access to a government process to hold OGS providers accountable. Governments can choose to set standards for customer service and rely on existing complaint mechanisms or establish new mechanisms consumers can use to seek redress for grievances against OGS suppliers. Countries may have consumer protection frameworks that set standards for responsiveness to consumer complaints and sector specific regulations may apply. For example, mobile money regulations often impose specific timelines for mobile money operators to respond to consumer disputes and require the staffing of customer response teams. Companies should be responsive to consumer complaints about their products. OGS providers that offer warranties with their products commit to providing after-sales service. This after-sales service can include the repair or replacement of faulty equipment, resolution of customer complaints, and management of payment- related disputes in the case of PAYG financing. In 2020, in consumer research conducted by the firm 60 Decibels, more than one-third (34 percent) of OGS customers surveyed reported challenges using their OGS product or service. Challenges included technical faults but also mismatched expectations and/or misuse. The report recommends that OGS companies create a culture and operating model for strong after-sales service.162 Many OGS companies have established customer support service centers and customer service procedures. These include hiring field staff or agents to provide technical support to address equipment issues at the customer’s location and staffing of centralized call centers to respond to customer inquiries. Some companies also actively seek customer feedback by contacting customers about system performance and their product experience. Consumer research shows there is room for companies to improve in providing after-sales support, and best practices are beginning to emerge.163 Companies can choose to but are not required to follow the Consumer Protection Code. GOGLA also includes a principle on good customer service that includes the following four requirements: 1. Ensure availability of technical and after-sales service support, including warranty and post-warranty service for a reasonable period. 2. Provide accessible, effective, and timely mechanisms for complaints and problem resolution. 3. Instruct consumers on proper use, care, and any health and safety risks related to the product usage or disposal. 4. Consider measures to enable continued operability of the product in the event of the failure of the company. 162 60 Decibels, Why Off-Grid Matters, p. 24. 163 Ibid., p. 73. 68 The Off-Grid Solar Policy Toolkit POTENTIAL POLICY OPTIONS: Wait & See Light Touch Prescriptive Policy Government relies on OGS Government develops voluntary Government sets and enforces providers to establish consumer quality standards for OGS products standards for minimum levels of post- complaint processes to resolve that include warranty coverage sale consumer service and warranty product and service issues and requirements and standards for coverage for OGS products. comply with product warranties. post-sale services. Advantage Advantage Advantage Provides an opportunity for OGS Increases choice of OGS products Highest level of consumer protection. providers to prove their ability to with warranties that include self-regulate without government after-sales service for repair and intervention. replacement. Disadvantage Disadvantage Disadvantage Consumers bear the risk of poor after- Requires government investment in Requires government investment to build sales service for OGS products and evaluation of standards. staff capacity to implement and enforce failure to provide warranty coverage. compliance. REAL-WORLD EXAMPLES Consumers purchasing Engie Energy For companies to be eligible to Rwanda’s Ministerial Guidelines for SHS Access products get a three-year participate in the KOSAP program in require that SHS provide a minimum three- warranty and access to a customer Kenya their SHS systems must meet year warranty and technical service for a service line operational 7 days a the IEC QV standards. minimum five years after the installation of week and providing answers in 60 the system. languages.164 For additional resources on issue 11, refer to: Annex A to evaluate additional policy options and for a deeper analysis. Annex B for a detailed bibliography Issue 12: E-Waste POLICYMAKERS OF INFLUENCE: Environmental Regulator, Consumer Protection Agency RELATED ISSUES: Product Standards Inter-Ministerial Dialogue Tip: Many governments are addressing e-waste generated by electronic equipment, including mobile phones and appliances. Jurisdiction over e-waste management may fall within ministries with supervisory authority over specific industries or be led by the country’s environmental regulator. Look to see who has jurisdiction and what frameworks may be in place to address e-waste management from products with higher volumes than OGS. As the use of solar products has increased, governments are confronting policy issues on how to manage e-waste generated at the end of the lifecycle of OGS products. An in-depth exploration of the policy issues and options for e-waste management are beyond the scope of this toolkit but are covered in detail in other resources, including the African Clean Energy Technical Facility’s E-waste Policy Handbook165 and GOGLA’s e-waste Toolkit.166 164 Engie Energy Access advertises these product features on its website accessible here. 165 Africa Clean Energy Program Technical Assistance Facility, e-Waste Policy Handbook. Accessible here. 166 GOGLA, E-waste Toolkit. Accessible here. The Off-Grid Solar Policy Toolkit 69 We present a brief overview of policy considerations in this section to help policymakers determine if this is a policy priority and potential pathways to approach e-waste management. In general, OGS products have a variety of components with different levels of environmental risk and longevity. The proper disposal of lithium batteries (with a defined lifespan of two to six years) is the OGS product component that is posing the greatest challenges and raising concerns about proper e-waste management. Governments are considering a variety of models for e-waste management. These include creating policy frameworks, often accompanied by financial incentives and technical support, to promote product takeback and reverse logistics, before either repairing, recycling or safely disposing of products at end-of- life. Policymakers need to determine who will bear the costs, be it consumers, taxpayers, or participants in the supply chain who assume the responsibility for e-waste management. In parallel with creating a policy framework consumer awareness, education, and incentives for managing e-waste from OGS products are critical. Figure 4.3: E-Waste Management Approaches Water-holder financing: the Consumer financing: the consumer individual disposing of the pays direct to the e-waste fund waste pays. upon purchase of a new product. Producer financing: the producer, Hybrid model: Waste management defined as the original equipment costs are split (or shared) between manufacturer or importer, pays. taxpayers and producers. (Source: Africa Clean Energy Technical Assistance Facility, e-Waste Policy Handbook) POTENTIAL POLICY OPTIONS: Wait & See Light Touch Prescriptive Policy Government relies on OGS Government encourages OGS providers to develop and follow providers to properly dispose of Government adopts a financing their own policies to manage e-waste by publishing data on effects structure to manage e-waste that e-waste and recycling of OGS of e-waste and giving suggestions of covers OGS products. products. programs such as takeback programs and schemes. Advantage Advantage Advantage Low cost. e-waste management and recycling Government framework produces framework is tested on higher responsible e-waste management and producing e-waste streams. reduces environmental impact of improper disposal of e-waste generated by OGS products. 70 The Off-Grid Solar Policy Toolkit Disadvantage Disadvantage Disadvantage Adverse environmental impact Limited government support or Imposition of fees could increase product of improper disposal of e-waste oversight for management of e-waste price and reduce consumer affordability. generated by OGS products. generated by OGS products. REAL-WORLD EXAMPLES: The Democratic Republic of Congo The Uganda Ministry of Information and The Rwandan government has created a has no regulations that govern the Communication Technology developed legal and policy framework for e-waste, management of e-waste from OGS and published e-waste management that includes solar products in the scope. products.167 guidelines to provide clarity on It is based on the principle of producer stakeholders’ roles in the lifecycle of responsibility, specifying the role and electronic and electric products.168 responsibilities of various stakeholders involved.169 For additional resources on issue 12, refer to: Annex A to evaluate additional policy options and for a deeper analysis. Annex B for a detailed bibliography 167 Power Africa Off-Grid Project, Off-Grid Market Assessment: Democratic Republic of Congo, 2019, 43. Accessible here. 168 The guidelines are accessible here. 169 Access the Rwanda e-waste regulations here. The Off-Grid Solar Policy Toolkit 71 CHAPTER FIVE Tools to Advance Policy Reform In this final chapter, we provide a decision tree and tools a broader approach that considers the universe of policy for energy policymakers to use in addressing the issues issues. While both approaches can use the same tools constraining the scale of OGS through policy reform. The and process, the latter, broader approach can benefit decision tree is broken down into six steps as illustrated in from the formulation of a roadmap to policy adoption and Figure 5.1. This toolkit includes 23 tools we have aligned implementation. A policy roadmap can support a complete to the six steps. The six steps to advancing policy reform reform agenda by identifying: (1) the landscape of policy help guide policymakers through champion identification, issues and their associated policy options, (2) discrete stakeholder identification, stakeholder capacity building, steps to implementing each policy option, and (3) the policy analysis, identifying policy options, and policy action. feasibility, timelines and specific stakeholders required for The complete set of tools can be found in Annex C. A few of implementation. The policy roadmap can be used to secure the tools are highlighted as examples in this chapter. buy in and validation with relevant actors across ministries or government agencies and can serve as the foundation of Policymakers can pick and choose which steps and a government’s policy agenda to support the scale of PAYG associated tools are relevant for their context. The tools enabled OGS. can be used to address one policy issue or can be used in The six steps to advance policy reform are identified below. In Step 1, users of this Toolkit can use Tool 1 to identify the government authority who can lead the work applying the Toolkit and select an individual within the authority to champion the work. Once selected, the champion can use Tool 2 to complete an initial analysis of policy areas that impact consumer purchase of OGS products. Tool 3 is a checklist to quickly look across the 3As and where issues in a market may be most salient. With these issues in mind, the champion can use Tool 4 to build support for the work across the hierarchical structure of their organization. Tool 5 provides a sample ToR that can be used and adapted to seek experts to help the champion work through the process of applying the toolkit to address market specific issues. In Step 2, the champion expands its analysis to look beyond its own organization and identifies relevant stakeholders to select for the inter-ministerial dialogue. Policymakers can use Tools 6-10 to select the participants in the inter-ministerial, policy development process. In Step 3, the stakeholder capacity building phase, the champion can use Tool 11 and Tool 12 to conduct initial outreach to other external policymakers focusing on how OGS and PAYG relate to issues within that ministry’s realm of influence and concern. In Step 4, the policy analysis phase, policymakers can adapt Tools 13-19 (and revisit Tool 2) in a series of workshops that focus on evaluating policy options and designing approaches to implementation. The OGS industry and industry-level associations are particularly important stakeholders to include in this phase. In Step 5, informed by the work completed in the inter-ministerial workshops, the champion can develop a draft roadmap for policy action. Tool 20 provides a template for structuring a roadmap. In Step 6, the policy adoption and implementation phase, Tools 21-23 are designed to help government actors take policy action. 72 The Off-Grid Solar Policy Toolkit Figure 5.1: Decision Tree TOOLS 1. Champion checklist 2. Policy diagnostic START Who else in the 3. “As” checklist STEP 1 What policy Who can lead lead agency 4. Charting internal stakeholder Champion issues seem most needs to be this work? engagement pressing? identification involved? 5. Sample ToR Can your ministry solve the policy issue(s) through its own action? Y jump to step 4 N Know the policymaker(s) of influence to engage? 6. Stakeholder map STEP 2 7. Assessment of existing Stakeholder Map the Stakeholders Evaluate concerns initiatives N identification 8. Stakeholder interest and Rank influence Prioritize engagement influence grid and influence 9. Stakeholder concerns Y 10. Priority mapping STEP 3 Do the policymakers of influence understand the issue(s)? N 11. Meeting invite Stakeholder Y 12. Briefing memo/ meeting capacity building agenda Is there political will to act? N Y Determine the method for stakeholder engagement STEP 4 Have a current mechanism for stakeholder engagement? Policy Analysis 13. Meeting planning form Stakeholder engagement plan 14. Workshop Agenda Policy Development Workshops 15. Policy diagnostic (revisited) Set the agenda 16. Policy options worksheet 17. Policy cost/ effectiveness Identify policy options evaluation Evaluate policy options 18. Risk analysis Gather stakeholder input 19. Feedback form STEP 5 Develop a policy development roadmap Roadmap Create a roadmap Roadmap development template 20. Development Validate roadmap Adopt policy 20. KPI and milestones tools STEP 6 21. Comunications strategy plan Planning for Policy Implement policy Monitor and evaluate 22. Policy implementation budget Implementation forecast Develop communications strategy Development measurement framework The Off-Grid Solar Policy Toolkit 73 Subject matter experts may be needed to support STEP 1 the champion. Tool 5 provides a sample of the terms of reference (ToR) that can be used and adapted to seek 5.1 Champion Identification experts to help the champion work through the process of applying the toolkit to address market specific issues. The Toolkit includes three tools for use in selecting the government authority who will lead the work and helping them get buy-in throughout their organization. Tool 1 provides a checklist to identify the individual or STEP 2 team within the lead agency that can lead this work. This is 5.2 Stakeholder Identification and likely someone at the technical staff level but with sufficient authority to manage the process. Influence Stakeholder mapping helps to identify participants to The champion can use the policy diagnostic tool, Tool 2, engage in the policy development process. In general, to do a first-order assessment on possible policy issues stakeholders will fall into three categories, as shown in the that could affect the market conditions for OGS and PAYG Stakeholder Map (Tool 6) used in Figure 5.2. Government applying the consumer centric lens of the 3As. Tool 3 (3 As policymakers with decision-making authority over policy form checklist) can also help with this assessment. the core stakeholder group. Key influencers are those whose input is important but not decisive to policy decisions. This The champion will need to garner support across the group includes OGS companies, their investors, creditors, ministry in which they work. The champion can use Tool 4 and donors funding initiatives to expand OGS use. The to identify stakeholders within the lead ministry that need to public and consumers are the ultimate stakeholders as the be aware and supportive of the work and identify pathways target beneficiaries of policies that seek to improve the for continued engagement. This may include capacity enabling environment for OGS use. In Annex C we include building as was shown in the testing of this Toolkit in Ethiopia suggestions of stakeholders that fall into each stakeholder and Uganda. Establishing a baseline understanding of the category based on their roles. Not all stakeholders will have value chain is a crucial first step in facilitating productive an equal interest in engaging in the policy development policy dialogue.  process. Policymakers can use Tool 8 (Stakeholder Influence and Interest Grid) to evaluate the interest and The sponsor of the work, if outside the government, influence of stakeholders before moving forward to inform including donors like the World Bank, can also play a role the engagement strategy and assess the likelihood that in empowering the champion and generating high-level a stakeholder will be willing to participate in the policy buy-in for the work at the state minister level. This early development process. To illustrate the use of the stakeholder endorsement can be key to building momentum with the mapping tool, we used it below for the issue of expanding authority in charge and other ministries. the reach of quality digital broadband infrastructure to support PAYG product offerings in rural areas. Table 5.1: Micro-Level Issues- across the Enabling Environment Components AVAILABILITY Other issues Ease of market entry and Quality and reach of digital Mobile money and broadband infrastructure Local owership competition digital inclusion requirements AFFORDABILITY Consumer Financing Taxation OGS provider cost of capital Access to data for Financial regulation credit scoring Policy and regulatory zones ACCOUNTABILITY of influence Sales Cycle Pre-Sale At-Sale Post-Sale Enabling Product standards Transparency of terms and warranties Customer service and complaint resoluion environment Data protection e-Waste component 74 The Off-Grid Solar Policy Toolkit Figure 5.2: Example of Applying the Stakeholder Mapping Tool to Expansion of Digital Broadband Infrastructure (Tool 6) General public and consumers Rural community NGOs leaders Key Influencers Digital entrepreneurs Women's groups GSMA MNOs Decision makers Ministry of Communications Financial Donors Services Universal Service Access for Digital Fund Administrator Regulator Development Rural Electric Agency Ministry of Gender Many of the policy issues that affect PAYG offerings Tool 9 is designed to help energy policymakers anticipate are dependent on the maturity of the digital economy possible points of resistance from other policymakers and and financial services offerings. There may be existing develop strategies for addressing those concerns. Using initiatives or policies in place to address those issues. Rather the example of the policy issue of exempting SHS products than assume that nothing has been done, the champion from VAT, the Stakeholder Concerns Tool could be used to should canvas existing initiatives to address those issues. map stakeholders’ concerns as shown in Table 5.2. Tool 7 is designed to help the champion conduct an inventory of existing initiatives or policies that may affect the approach to engagement on the policy issues. Table 5.2: Example of Applying the Stakeholders Concerns Tool (Tool 9) Policy Issue: Exemption of SHS systems sales from VAT Stakeholder Possible Concerns Priority Response to Concerns (Low-Medium- High) Finance Ministry Decrease in tax revenue High Point 1: Projections on how energy access will increase income collection generation and economic activity producing new tax revenue. Point 2: Suggested test and learn timeline for VAT exemption to monitor impact and conduct cost/benefit analysis. Point 3: Engage Ministry of Trade to show impact of VAT exemption on flow of products and market suppliers Tool 10 (priority mapping) is designed to plot the urgency and importance of policy issues to determine priority issues to address. The Off-Grid Solar Policy Toolkit 75 STEP 3 STEP 4 5.3 Stakeholder Capacity Building 5.4 Policy Analysis In some cases, there is need for capacity building to Once the lead energy policymakers have developed facilitate a multisectoral approach to policymaking. This political will among other policymakers to engage in will ensure each ministry understands the relevance of the the policy process, it is time to activate a coordinated OGS sector and PAYG products to their own policy goals policy development process. The vehicle of engagement and in achieving national goals for energy access. It may will depend on whether there are pre-existing relationships not be immediately apparent to policymakers who do not between relevant policymakers. Some countries may already regulate the energy sector why they should engage or have have established inter-ministerial or multi-stakeholder an interest in supporting the scale of OGS. If this is the case, mechanisms to address issues in the OGS sector. Tool 13 energy policymakers will need to work to build the case for (Exploratory Meeting Planning Form) provides resources these policymakers to engage in an inter-ministerial dialogue for the preparation of such multi-stakeholder discussions. If through an initial exploratory meeting or workshop. current engagement mechanisms do not exist, policymakers can use the Stakeholder Engagement Plan, Tool 14, to Policymakers may want to consider being strategic in who identify strategies for engagement. issues the invitation for this engagement. Should the meeting be requested by the energy minister? Do staff-level working The Zambia Ministry of Energy created the Zambia Off-Grid groups exist on other issues that would make staff-level Energy Task Force in 2018 to coordinate and oversee OGS communication more effective? Policymakers can use initiatives and increase energy access particularly in rural Tools 11 and 12 to think through how to request the initial areas in line with government objectives. The task force has engagement. six government representatives as well as eight cooperating partners, and five members representing the private sector as seen in Table 5.3.170 Table 5.3: Members of the Zambia Off-Grid Energy Task Force Government Cooperating Partners Private Sector Permanent Members Department for International Solar Industry Ministry of Energy (MOE) Development (DFID) Association of Zambia (SIAZ) Ministry of Finance (MOF) Swedish International Zambia Renewable Energy Development Cooperation Association Ministry of National Development Agency (SIDA) Planning (MNDP) Mini Grid Cluster College of Eastern Europe Office of the Vice President (OVP) Bioenergy Cluster (EU KEW) Rural Electrification Authority (REA) Finance Cluster Sub-Committees: International Finance Energy Regulation Board (ERB) Land Rights, Corporation (IFC) Consumer Affordability, Fiscal African Development Bank Incentives Others (AFDB) Zambia Bureau of Standards (ZABS) World Bank (WB) Zambia Environmental Management Agency (ZEMA) Ministry of Local Government (MLG) Ministry of Community Development & Social Services (MCDSS) 170 Africa Clean Energy Program Technical Assistance Facility, Coordination in Africa’s off-grid sector is accelerating progress towards universal energy access, 2020, p. 4. Accessible here. 76 The Off-Grid Solar Policy Toolkit Sierra Leone has an off-grid working group that includes multiple government ministries as shown in Figure 5.3. Led by the Ministry of Energy, functions of the working group include serving as a platform for addressing policy issues affecting rural electrification and supporting the Ministry of Energy’s result-based approach to rural electrification.171 Figure 5.3: Structure of the Sierra Leone Off-Grid Working Group Ministry of Energy Office of the President Donors and Investors Off-Grid Working Groups Rural Electrification Agency Renewable Energy Association • Ministry of Finance • Standards • International Companies • Academic Research • Central Bank • Customs • Local Companies • Non- governmental • Revenue Authority • Port Authority • Association Members organizations Energy Planners Once the engagement mechanism is established, we policymakers to ground truth the influence of current policies suggest policymakers schedule a series of workshops and market conditions and explore policy solutions. with different stakeholders and sub-working groups to analyze specific policy issues and options. Given the It is important to factor in that policymakers may be complexity of the issues and the need to solicit input from at different levels of decision making and at different stakeholders outside the government, we suggest spacing starting points. Some policymakers may have already the workshops out over a three-to-four-month period to allow identified policy priorities, in which case they may be ready time for reflection, additional fact finding, and evaluation. move ahead to the policy development and implementation. Those who are just starting the process can use Tools 2 and Workshops should be adopted with a test and learn 10 to identify the key policy issues. For example, in Chapter approach, knowing it may take a few rounds of engagement Four, Tool 2 is applied and uses the 3 As framework to to identify the stakeholders best suited for the subsequent identify 12 issues. This can serve as a good starting point. policy dialogues. It is important to allow the first workshop to serve as a foundation for later discussions around policy After the priority policy issues are identified, it is options. important for policymakers to define the desired policy outcome. We suggest four potential policy outcomes: Beginning the policy option discussions too soon can create (1) policy coordination, (2) policy modification, (3) policy resistance and it will likely take time to identify the right adoption, and (4) policy enforcement. A policymaker’s ministry representatives to be engaged in those discussions. preferred outcome will depend on the current state of the As the policy focus narrows, small workshops on the priority policy on the priority issue. Using the example of the issue of issues work better. We provide a sample Workshop Agenda, national product standards of SHS products, we explore in Tool 15, that includes activity-based approaches and policy Figure 5.4 how different contexts could lead a policymaker option scenarios. These workshops can be used to engage to select a different outcome as its policy goal. 171 Id., 5. The Off-Grid Solar Policy Toolkit 77 ©Mobisol 78 The Off-Grid Solar Policy Toolkit Figure 5.4: Sample of Different Policy Outcomes for National Product Standards Policy coordination Policy enforcement A good choice if the energy policymaker wants to A good choice if national product standards for promote consumer purchase of SHS products that SHS exist but the energy policymaker believes meet international quality standards through policy that limited understanding or enforcement of the coordination with a rural development agency standards is leading to low-quality products entering allocating funding to support residents purchase of SHS the market. equipment. Policy adoption Policy modification A good choice if national product standards for SHS A good choice if national product standards for SHS exist have not been established and the energy policymaker but the energy policymaker wants the standards setting wants the standards setting body to set national product body to modify those standards to harmonize with standards for SHS equipment to reduce the supply of international standards. low-quality products. The Policy Options Worksheet, Tool 16, can be used to being considered. Stakeholders will also need to consider plot policy options across the policymaking continuum the risks that accompany each policy option. The Risk applied in Chapter Four: (1) wait-and-see, (2) light-touch, Analysis, Tool 18, is designed to help policymakers identify and (3) prescriptive. Facilitators of the workshop can use and measure the magnitude of risks of pursuing each Tool 16 to help workshop participants assess the benefits policy option. For example, rules for e-waste management and disadvantages of specific approaches through the lens may increase the costs of SHS units and reduce consumer of different stakeholders including the government, OGS purchasing, as shown in Figure 5.5. Tool 19 provides a providers, and consumers. questionnaire to collect and track feedback from participants after each policy dialogue. We also included a tool, Tool 17, to gather stakeholder input on the cost and effectiveness of the policy options Figure 5.5: Example of Applying the Risk Analysis Tool (Tool 18) Policy Risk E-waste management fees assessed on the consumer at the time of purchase may increase the costs of SHS units and reduce consumer purchasing Likelihood of Happening Increase Cost of SHS units Reduce Consumer Purchasing High X Medium X Low The Off-Grid Solar Policy Toolkit 79 publish the roadmap with endorsement by all the associated STEP 5 ministries. It is important to generate commitment to move forward on the actions in the roadmap. 5.5 Roadmap Development If the toolkit is being used to pursue a broader policy STEP 6 dialogue process and associated reform agenda, toolkit users can design a policy roadmap. Once the stakeholders 5.6 Planning for Policy Implementation through the consultations have reached a point of general agreement on priority policy issues and possible policy It is likely that the roadmap will present a pathway to options the champion can draft a roadmap for policy action. policy adoption, but it may fall short of reaching policy Based on use of the toolkit in Ethiopia and Uganda we adoption. The policy adoption process will be driven by the developed a template that can be used to generate buy-in governing administrative rules of the ministry with jurisdiction on policy approaches and activities to be taken to address to adopt the policy. It will also depend on the policymaker’s the issues identified as impeding the growth of the OGS and choice of policy instrument. Adopting a new policy will likely PAYG market. This template is provided in Tool 20. take longer than modifying a policy or developing a strategy for policy enforcement or coordination. When the champion and lead agency have approved the draft roadmap, the champion should engage in a round Effective policy implementation is the end goal — of validation of the roadmap. Testing of the toolkit revealed not policy adoption. One way to measure a policy’s this is best conducted by the champion through individual effectiveness and incentivize implementation is to establish discussions with policymakers identified as owners of the a set of Key Performance Indicators (KPIs) and milestones activities in the roadmap. These one-on-one consultations, during the policy development process. This can be done as opposed to the setting of a multi-stakeholder workshop, using the KPI and Milestones Tool, Tool 21, designed to provide an opportunity for more candid feedback on help policymakers set KPIs and assign responsibility for selected approaches and the stakeholders’ willingness providing data to analyze market performance against those to assume ownership of the process or policy activities KPIs. Figure 5.6 uses an example of the policy issue on identified as within its jurisdiction in the roadmap. reducing duty tax on OGS to support access to lower cost Stakeholders may suggest a shift in ownership of the issues PAYG product offerings to show how the tool can be used to or prioritization in these meetings that can lead to revision of monitor a policy’s effect. the roadmap. As a final step the government should Figure 5.6: Example of Applying the KPI and Milestones Tool (Tool 21) KPIs and Milestones Policy: Desired Indicators Data Source Data Analysis Publicly Milestones Outcome (Who/ (Owner) Available Frequency) (Y/N) (Market Shift to QV Products) Year 1 Year 2 Year 5 Increased Unit sales Industry/semi- Rural Electric Y 15% market 25% market 90% market supply and annually Agency shift to QV shift to QV shift to QV use of QV OGS products products products products Import data Customs Office/ monthly Customer Rural Electric complaints Agency/semi- annually 80 The Off-Grid Solar Policy Toolkit As part of the policy implementation, a communications strategy should be developed to announce and build support for the policy action. The communications strategy should outline key messages designed to reach the target audience and identify the messengers who will lead the communications. Communications channels should also be identified, as well as the frequency of communications by channel. Tool 22 can be used to identify these key components of the communications strategy. Figure 5.7 uses the example of policies to accelerate consumer awareness of how to recycle OGS product components to show how the communications plan tool could be used to communicate the policy change and incentivize consumer behavior. Figure 5.7: Example of Applying the Communications Strategy Plan Tool (Tool 22) Why Increase recycling of OGS product components Purpose What What can be recycled and how to recycle the components Information Target Audience Target Consumers; OGS retailers; E-waste handlers group Who Lead Renewable Energy Assoc. Partners Ministry of Environment Ministry of Energy Rural Electric Agency How Flyers; Radio spots; Posters; Newspaper Type When Constant; Weekly; Annually Timeframe and frequency Evaluation Recycling volume COMMUNICATIONS BUDGET (5,700) Type of Communication Per Unit Cost Quantity Subtotal Funder Flyers (Design and Printing) .10 5000 500 Renewable Energy Association Radio spots 100 12 1200 Ministry of Environment Posters 25 1000 25000 Rural Electric Agency Newspaper 75 20 1,500 Ministry of Energy Social Media .02 1000 200 Renewable Energy Association As part of the planning for policy implementation we recommend policymakers create a budget forecast to determine the resources needed to support effective implementation and to identify the mechanism and source of revenue to pay for those resources. If you consider the cost and effectiveness of the policy in the policy analysis phase using Tool 18 you can use that analysis as the starting point for the budget. Depending on the level of detail, you might want to supplement that analysis to build a more specific budget with line items. Use Tool 23 to identify the implementation resources needed, quantify the costs, and identify the funding source. The Off-Grid Solar Policy Toolkit 81 Figure 5.8: Example of Applying the Budget Forecast Tool (Tool 23) POLICY IMPLEMENTATION BUDGET (TOTAL) Resource Need Per Unit Cost Quantity Subtotal Funding Source Additional staff: Monitoring and evaluation Industry liaison staff member Data analysts Market surveillance/data collection Staff Travel costs Policy trainings Staff Meeting costs Inter-ministerial/task force semi- annual meetings Staff Meeting costs Communications strategy Consultants 82 The Off-Grid Solar Policy Toolkit Annex Section Annex A: Potential Policy Options, Advantages, and Disadvantages Issue 1: Ease of Market Entry and Competition A government’s requirements for market entry to do business will impact the composition of OGS product suppliers. Policymakers have options across the policymaking continuum to establish market entry requirements for companies to do business. Enabling ISSUE: EASE OF MARKET ENTRY AND COMPETITION Environment Component: Wait-and-See Light-Touch Prescriptive Availability Policymakers Ministry of Trade, Lead Energy Ministry of Trade, Lead Energy Ministry of Trade, Lead Energy with Influence Policymaker, Competition Authority Policymaker, Financial Services Policymaker Regulator POLICY OPTIONS • Government allows OGS companies • Government issues guidance on • Government issues rules that require OGS to do business after meeting general regulatory classification of OGS/ companies to register. business licensing requirements. PAYG companies that provides • Government issues rules that require OGS • Government requires OGS to submit clarity on sector regulation. companies to be licensed. quarterly data on OGS sales and use. • Government becomes a • Government issues rules that require • Government uses its competition purchaser of OGS products and licensing of OGS companies’ consumer policy framework to address services and selects specific OGS financing activities. allegations of anti- competitive providers as suppliers through a • Government grants OGS companies’ behavior. procurement process. exclusivity to serve certain areas in exchange for incentives. ADVANTAGES Government: Government: Government: • Low cost and effort. • Prevents imposition of entry • Establishes government authority to • Promotes free and open competition regulations beyond those approve OGS companies or specific among OGS providers. determined as appropriate for activities. the sector. • Establishes government authority to • Enables informed decision making for future policy decisions. • Controls OGS purchasing exercise ongoing oversight over OGS process and selection of companies. • Increased visibility from sector data preferred vendors. • Establishes government authority to enables monitoring to determine if and when additional entry penalize OGS companies or rescind their requirements are needed. authorization to operate. • Enables targeting of OGS service delivery to specific areas. OGS Sector: OGS Sector: OGS Sector: • Speeds up market entry. • Prevents conflicting entry • Provides regulatory clarity. • Low cost, no additional regulatory regulations and provides • Increases investors’ confidence in OGS burden to do business. regulatory clarity. companies who value government • Government bulk purchasing approval in due diligence. reduces cost and associated risk of individual sales. The Off-Grid Solar Policy Toolkit 83 • Government targeted incentives subsidize consumer purchase costs for OGS units and increase sales. Consumer: Consumer: Consumer: • Competitive offerings increase • Regulatory clarity increases • Government vetted OGS supply chain consumer choice of OGS products sector investment and choice of reduces consumer risk. and pricing. OGS products and pricing. • Government incentives increase OGS • Government purchasing reduces supply in target areas and reduce or eliminates consumer cost of consumer cost of OGS purchase. OGS purchase. DISADVANTAGES Government: Government: Government: • Limited control/review of OGS • Requires government • May limit OGS sector supply and providers by energy authority. determination of regulatory competition. • Incomplete information for future categorization of OGS • Requires investment to implement policy decisions. companies. registration or licensing regime and • Competition framework and • Requires investment to cover provide ongoing oversight. competition authority may not exist cost of OGS bulk purchases. • Requires investment to define optimal or be under-resourced to address competition level. anti-competitive market behaviors. OGS Sector: OGS Sector: OGS Sector: • OGS providers offering counterfeit • Moves OGS sector towards • Increases cost of market entry and or low-quality products can enter the potential regulation, increasing regulatory compliance. market and hurt consumer sentiment effort and cost to comply. • Lowers speed of market entry. toward quality providers. • Government purchasing could • Restricts market opportunity to select • Adds burden of data submission. distort the market for consumer number of providers. purchasing and benefits • Restricts competitive offerings in preferred vendors. exclusive distribution territories. Consumer: Consumer: Consumer: • Consumers could buy counterfeit or • Restricts product supply or • Limits competitive OGS providers and low-quality products. increases product pricing. product offerings. • Delays consumer access to • Increases product prices to recover OGS products until government regulatory compliance costs. purchases and distributed • Restricts number of OGS providers and products. product offerings. • Increases product prices • Delays distribution of products to areas for consumers not receiving not targeted for priority distribution. government purchased products. Issue 2: Quality and Reach of Digital Broadband Infrastructure Consumers and OGS providers need reliable access to broadband services. Policymakers have options across the policymaking continuum to address expanding the quality and reach of broadband infrastructure. 84 The Off-Grid Solar Policy Toolkit Enabling ISSUE: QUALITY AND REACH OF DIGITAL BROADBAND INFRASTRUCTURE Environment Wait-and-See Light-Touch Prescriptive Component: Availability Policymakers with Telecommunications Regulator Telecommunications Regulator Telecommunications Regulator Influence POLICY OPTIONS • MNOs provide services in • Government agencies share data • Government requires data reporting compliance with their licenses to map areas of need for OGS on mobile network coverage and and business decisions. and improved mobile network customer penetration. infrastructure. • Consumers rely on existing • Government creates a multi-agency • Government allocates universal service redress mechanisms provided and stakeholder working group to and access funds and public funding to by the telecommunications collaborate on improving access to improve broadband coverage in areas regulator and provider energy and mobile services. with high OGS need. to address poor service • Government offers access to public • Government sets rural network availability. funding and universal service and coverage targets for mobile network • Competition authority access funds to support mobile service providers as a condition of their investigates and monitors network upgrades in rural areas. spectrum licenses that support OGS market concentration and use. anti-competitive behavior in the telecommunications market. ADVANTAGES Government: Government: Government: • Low cost and effort • Government creates common • Use of universal service and access • Government relies on policy agenda among energy funds de-risk investment in broadband telecommunications regulators and telecommunications sector infrastructure in low density areas. to address grievances. policymakers. • Increased digital inclusion and energy • Access to public funding de-risks access enable broader participation in investment in mobile network the digital economy. infrastructure and increasing mobile network coverage in OGS priority areas. • Improved access to broadband services and PAYG products enables participation in the digital economy OGS Sector: None OGS Sector: OGS Sector: • Government data informs marketing • Government data informs marketing and distribution strategies for OGS and distribution strategies for OGS products. products. • Government investment in digital • Government investment in digital infrastructure supports offering OGS infrastructure supports offering OGS products with remote monitoring and products with remote monitoring and PAYG. PAYG. • Reliable digital infrastructure supports • Reliable digital infrastructure supports use of digital platforms across use of digital platforms across distribution channels and with sales distribution channels and with sales teams. teams. • Reliable digital infrastructure and • Reliable digital infrastructure and mobile phone use allow SMS push mobile phone use allow SMS push messaging to customers and support messaging to customers and support call center customer service. call center customer service. Consumer: None Consumer: Consumer: • Improved access to broadband • Improved access to digital services and services and PAYG products enables PAYG products enables participation in participation in the digital economy. the digital economy. The Off-Grid Solar Policy Toolkit 85 • OGS products are used to power • OGS products are used to power digital mobile devices and digital services. devices and digital services. • Increased opportunities to create • Increased opportunities to create digital businesses. digital businesses. DISADVANTAGES Government: Government: Government: • No influence over investment in • Requires investment of time and • Requires investment of universal mobile network infrastructure. resources to create and pursue shared service and access funds or other • Service complaints may not agenda with telecommunications public funding. prompt additional investment in policymakers. • Requires investment in establishing broadband infrastructure. • Requires investment in establishing a process to administer and allocate • Grievance mechanism is a process to administer and allocate universal service and access funds or outside the zone of influence of universal service and access funds or public funding. the energy authority. public funding. • Modifying MNO licenses may not be • Competition framework and • Requires investment of universal feasible. competition authority may not service and access funds or other • Telecom regulation is outside the zone exist or be under-resourced public funds. of influence of the energy authority. to address anti-competitive • Telecommunications regulation is market behaviors. outside the zone of influence of the energy authority. OGS Sector: OGS Sector: None. OGS Sector: None. • Poor digital infrastructure restricts offering of OGS products with remote monitoring and PAYG. Consumer: Consumer: None. Consumer: None. • Poor digital infrastructure restricts supply of OGS offerings with remote monitoring and PAYG. • Service complaints may not prompt additional investment in digital infrastructure. • Cost to consumers to seek redress through formal channels. Issue 3: Mobile Money and Digital Payments PAYG offerings have accelerated in markets where mobile money is available. Policymakers have options across the policymaking continuum to support the availability and consumers’ use of mobile money. 86 The Off-Grid Solar Policy Toolkit Enabling ISSUE: MOBILE MONEY AND DIGITAL PAYMENTS Environment Wait-and-See Light-Touch Prescriptive Component: Availability Policymakers with Financial Services Regulator, Financial Services Regulator, Central Bank Lead Energy Authority, Financial Influence Central Bank Services Regulator, Central Bank POLICY OPTIONS • Government relies on • Government conducts consumer education • Government regulation private sector providers campaign to raise consumer awareness on OGS reduces, removes, or and current regulatory products and increase digital financial literacy. subsidizes transaction fees for policies to provide • Government financial services regulation increases digital payments made for OGS adequate mobile money access to rural digital payment agents or banking products and services. and digital financial agents. • Government refrains from services for PAYG. taxation of digital payments • Government financial services regulation allows • Consumers rely on redress tiered KYC that increases consumer’s ability to transactions made for OGS mechanisms provided meet the identity requirements to open a digital products and services. by the financial services payments account. • Government programs reduce regulator to resolve cost of mobile phone purchase • Government regulations promote interoperability grievances for transaction and airtime. of mobile wallets including open APIs to expand errors. payment options for PAYG consumers. ADVANTAGES Government: Government: Government: • Low cost and effort. • Consumers increased understanding of and • Reduces consumer cost of • No need to adjust to capacity to use digital financial services, like mobile mobile money payments for the current regulatory money, increases PAYG purchases and energy OGS services. framework. access. • Improves digital inclusion • Government relies on • Increase in rural mobile money agents increases through mobile phone financial services regulators supply and purchase of PAYG products. ownership and increased to address consumer • Tiered KYC increases consumers with mobile affordability of mobile services. grievances on payment money accounts used for payments for PAYG transactions. products. • Investment may be • Interoperability and open APIs increase consumers needed to adequately digital payment options for PAYG products. resource consumer redress mechanisms to ensure consumers’ grievances are resolved efficiently. OGS Sector: OGS Sector: OGS Sector: • Consumer grievances on • Consumers increased understanding of and • Reduces consumer cost of payments are directed capacity to use digital financial services, like mobile mobile money payments for to the regulator with money, increases PAYG purchases. OGS services. jurisdiction over payment • Increase in rural mobile money agents increases • Improves digital inclusion providers for resolution. PAYG distribution and payment points and purchase through mobile phone of PAYG products. ownership and increased • Increase in mobile money account openings affordability of mobile services. increases purchase of PAYG products. • Digital payments interoperability provides efficiencies and reduces consumer financing costs. Consumer: Consumer: Consumer: • Protected by existing • Access to additional information increases • Reduces consumer cost of financial services regulation consumer capabilities to use digital financial mobile money payments for on transaction disputes. services including for PAYG purchases. OGS services. The Off-Grid Solar Policy Toolkit 87 • Increased mobile money agents improve • Improves digital inclusion convenience of making PAYG payments and PAYG through mobile phone purchases. ownership and increased • Tiered KYC requirements provide more options to affordability of mobile services. meet identity requirements for opening a mobile money account. • Increases payment options for PAYG products. DISADVANTAGES Government: Government: Government: • Limited control/review of • Requires investment of resources to build, create • Requires investment in OGS market conditions. and administer education campaigns to increase financial services regulation to • Consumers may prefer consumer awareness of OGS and improve digital adjust transaction pricing. government mechanisms financial literacy. • Digital payments and banking that provide redress • Requires investment to adjust mobile money agent industry may resist fee against the PAYG provider regulation. reduction for payments for not the payment provider. • Digital payments and banking industry may resist specific services. • Grievance mechanism interoperability for cost and competitive reasons • Preferred taxation of specific is outside the zone of transaction types may be influence of the energy challenged. authority. OGS Sector: OGS Sector: None. OGS Sector: None. • Poor digital payment infrastructure restricts use of digital payments in PAYG offerings. Consumer: Consumer: None. Consumer: None. • Poor digital infrastructure restricts use of digital payments in PAYG offerings that may provide convenience and cost savings. Issue 4: Fiscal Policies for OGS Products, Services, and Mobile Money Governments can use fiscal policy to support OGS affordability and provide incentives to OGS providers. Policymakers have options across the policymaking continuum to use fiscal policy to support OGS use. Enabling ISSUE: TAXATION Environment Wait-and-See Light-Touch Prescriptive Component: Affordability Policymakers Revenue Authority, Ministry Revenue Authority, Ministry of Finance Revenue Authority, Ministry of Finance with Influence of Finance POLICY OPTIONS • Government does not • Government publishes guidance clarifying the • Government uses fiscal policy to adjust fiscal policies that fiscal policies that apply to OGS products and reduce fees and taxation to promote apply to OGS products services to address inconsistent application affordability and use of OGS: 1. Exempts or services to promote and confusion. OGS products from duties, value market development. added tax (VAT); 2. Reduces duties or VAT applied to OGS products without limitation in scope or time. 88 The Off-Grid Solar Policy Toolkit • Government studies the impact of adjusting • Government refrains or exempts from fiscal policy for the OGS sector including taxation mobile money and other increased fiscal revenue. payment transactions for OGS products • Government offers limited (by type or and services. duration) fiscal incentives to incentivize supply of specific OGS products or services (such as quality-verified products). ADVANTAGES Government: Government: Government: • No impact on government • Fiscal policies are applied consistently to • Changes to fiscal policy prompt OGS revenue OGS products. providers to reduce product pricing, • Research quantifies potential impact and increasing consumer affordability and trade-off of different fiscal policies for the use of OGS products. OGS sector. • Increased use of OGS products • Government allocation of fiscal resources generates additional economic promotes specific market behavior by OGS activity that contributes to government provider. revenue. OGS Sector: None OGS Sector: OGS Sector: • Government fiscal policies are consistently Government fiscal policy adjustments applied eliminating uncertainty of fees and reduces cost of goods sold. taxes applied to OGS products. • Government fiscal incentives reduces cost of goods sold. Consumer: None Consumer: Consumer: • Lower cost of goods sold lowers product • Lower cost of goods sold increases prices and increases consumer affordability consumer affordability of OGS products of OGS products. DISADVANTAGES Government: Government: Government: • Fiscal policies are • Requires investment in fiscal authorities, • Requires investment in development of not used to increase custom office, and lead energy policymaker new fiscal policy and to build capacity consumer affordability or to build government understanding of OGS for consistent application. use of OGS products. products and capacity to consistently apply • Reduces fiscal revenue from taxes or fiscal policies. fees levied on OGS products. • Requires investment to study impact of fiscal • Reduces fiscal revenue derived taxes policy alternatives. or fees levied on mobile money or • Reduces short-term fiscal revenue from other payment transactions. taxation of OGS products. OGS Sector: OGS Sector: OGS Sector: None • Fiscal policies that apply • Limited adjustment of fiscal policy may not to OGS products and be enough to impact consumer affordability services may reduce and demand. consumer affordability of OGS products. • Inconsistent application of fiscal policies to OGS products and services are not addressed. Consumer: Consumer: Consumer: None • Fiscal policies that add • Limited adjustment of fiscal policy may not costs to OGS products be enough to impact consumer affordability are paid by consumers and demand. and reduce consumer affordability of OGS products. The Off-Grid Solar Policy Toolkit 89 Issue 5: Availability and Cost of Capital Governments can influence the supply and cost of funding available to OGS providers. Policymakers have options across the policymaking continuum to influence OGS providers’ cost of capital. Enabling ISSUE: AVAILABILITY AND OGS COST OF CAPITAL Environment Wait-and-See Light-Touch Prescriptive Component: Affordability Policymakers with Lead Energy Authority, Lead Energy Authority, Ministry Lead Energy Authority, Ministry of Finance, Financial Influence Ministry of Finance, of Finance, Financial Services Services Regulator Financial Services Regulator Regulator POLICY OPTIONS • Government forbears • Government encourages sources • Government establishes public credit facility with from restricting OGS of local funding for OGS companies concessional rates for OGS providers. providers sources of in collaboration with financial • Government provides subsidies to consumers to financing and from services regulators. offset financing costs incurred by OGS providers. providing government • Government offers public funding • Financial services regulator sets portfolio target for assistance to access to de-risk private investment and local bank lending to OGS companies. financing. the cost of credit for OGS (blended finance). ADVANTAGES Government: Government: Government: • Low cost. • Increases OGS supply. • Increases OGS supply. • Additional funding sources reduce • Additional funding sources reduce OGS provider cost cost of financing and increasing of financing and increase consumer affordability. consumer affordability. • Consumer subsidies offset OGS provider financing costs and increase consumer affordability. • Increases local financing of OGS companies. OGS Sector: OGS Sector: OGS Sector: • No restrictions on • Government support of blended • Additional funding sources provide lower cost sources of funding. finance reduces financing costs. financing. • Access to local funding reduces • Access to local funding reduces foreign exchange foreign exchange costs. costs. Consumer: None. Consumer: Consumer: • Lower cost of financing reduces • Lower cost of financing reduces OGS product OGS product pricing and increases pricing and increases consumer affordability of OGS consumer affordability of OGS products. products DISADVANTAGES Government: Government: Government: • No oversight over • Requires investment to collaborate • Requires investment of government resources to ownership or with financial services regulator. establish, support and administer credit facilities that financing sources of • Requires investment of government offer competitive pricing. OGS companies. resources to support investment in • Requires investment of government resources to blended finance facilities. establish, support and administer subsidies. • Leadership by financial services regulation is outside the zone of influence of the energy authority. 90 The Off-Grid Solar Policy Toolkit OGS Sector: OGS Sector: None OGS Sector: None • No government support for increasing access to local sources of financing or public funding. Consumer: Consumer: None Consumer: None • High cost of capital for OGS providers contributes to OGS product pricing and reduces consumer affordability. Issue 6: Access to Data for Credit Scoring PAYG providers use data to qualify consumers for PAYG financing. Policymakers have options across the policymaking continuum to support OGS providers access to data for credit scoring. Enabling ISSUE: DATA FOR CREDIT SCORING Environment Wait-and-See Light-Touch Prescriptive Component: Affordability Policymakers with Lead Energy Authority, Data Protection Lead Energy Authority, Data Lead Energy Authority, Data Protection Influence Supervisory Authority Protection Supervisory Authority Supervisory Authority POLICY OPTIONS • Government does not regulate use of • Government provides guidance • Government adopts policies on data consumer data for credit scoring. on how existing data regulation sharing between OGS companies • OGS companies are not restricted from and data protection policies and third parties (permissive or entering commercial relationships to apply to use for credit scoring in restrictive). share data with third parties (including the OGS sector. • Government requires OGS providers MNOs) for credit scoring. • Government encourages to report consumer repayment data • Government relies on OGS companies reporting and provides OGS to credit bureaus. to self-regulate by endorsing and providers with access to data • Government establishes and following the GOGLA Code of from credit agencies (private or maintains credit bureaus with data Consumer Protection principle on public) to support OGS financing used by OGS companies for credit personal data privacy. availability. scoring. ADVANTAGES Government: Government: Government: • Low cost and effort. • Increased responsible use of • Data policies specific to the OGS • Consistent application of data data. sector increase PAYG supply and protection framework across sectors. • Access to credit bureau data suitability of financing terms. • Commercial data sharing may increase increases supply and demand • More consumers qualify for suitable availability of PAYG and consumer for PAYG. PAYG financing. financing. • Provides an opportunity for OGS providers to prove their ability to self-regulate without government intervention. The Off-Grid Solar Policy Toolkit 91 OGS Sector: OGS Sector: OGS Sector: • No additional regulation on data use • Guidance informs data use for • Exemption from regulation allows by the OGS sector. credit scoring. efficient data management for credit • Flexibility to develop data policies. • Access to credit bureau data scoring. • Commercial data sharing increases efficiency of credit • Data sharing informs PAYG financing arrangements can inform PAYG scoring and supports increased decisions. financing decisions. supply of PAYG offerings. • Credit bureaus reduce OGS providers’ • Provides an opportunity for OGS data collection costs and improve providers to prove their ability to credit scoring. self-regulate without government intervention. Consumer: Consumer: Consumer: • Company data policies provide • Increases consumer protection • Increases access to PAYG products sufficient protection against risk. through some level of and suitable OGS financing. • Data collection and sharing government oversight over OGS • Increases consumer protection arrangements may increase availability providers’ use of data for credit from government oversight over of PAYG financing. scoring. OGS providers use of data for credit • Increased access to PAYG scoring. financing. • Reporting of data to credit bureaus facilitates access to formal credit beyond PAYG. DISADVANTAGES Government: Government: Government: • Consumers bear the risk of OGS • Data protection policies and data • Data protection policies and data providers sharing their data without scoring fall outside the expertise scoring fall outside the expertise and their consent. and zone of influence of the lead zone of influence of the lead energy • Industry self-regulation is not effective energy authority. authorities. in protecting consumers. • Credit bureaus may not exist or • Tailoring data policies to the OGS have limited data on prospective sector creates inconsistency in PAYG customers. application of national data policies. • Credit bureaus may not exist or have limited data on prospective PAYG customers. OGS Sector: OGS Sector: OGS Sector: • Access to shared data is limited • Government guidance may • Government policies for the sector to negotiation of commercial restrict optimal use of data for may restrict optimal use of data agreements. credit scoring and reduce PAYG for credit scoring and reduce PAYG offerings. offerings. • OGS providers may find limited • Rules that restrict data sharing with value in data from credit bureaus. third parties could eliminate access to • OGS providers lose a competitive valuable data for PAYG offerings. advantage in reporting data to • OGS providers may find limited value credit bureaus. in data from credit bureaus. • OGS providers lose a competitive advantage in reporting data to credit bureaus. Consumer: Consumer: Consumer: • Consumers’ redress for grievances on • Policies could reduce PAYG • Policies could reduce PAYG offerings. misuse of data is limited to commercial offerings. • OGS provider reporting of data to practices of OGS provider. • OGS providers reporting of credit bureaus could create negative data to credit bureaus could credit scores for consumers. create negative credit scores for consumers. 92 The Off-Grid Solar Policy Toolkit Issue 7: Financial Regulation PAYG providers permit consumers to pay for products over time; how that financing is classified under a country’s banking laws can affect PAYG providers costs and product offerings. Policymakers have options across the policymaking continuum on how they classify that financing. Enabling ISSUE: FINANCIAL REGULATION Environment Wait-and-See Light-Touch Prescriptive Component: Affordability Policymakers with Lead Energy Authority Lead Energy Authority, Financial Lead Energy Authority, Financial Influence Services Regulator Services Regulator POLICY OPTIONS • Government forbears from oversight • Government publicly signals its • Government issues rules on of OGS companies’ consumer support for consumer financing for classification of OGS financing that financing and does not require OGS purchases. determines level of oversight and government licensing or pre- • Government offers guidance minimum entry requirements. approval. through clarification or letters • Consumers rely on current consumer of no-objection on regulatory protection laws and processes to classification of OGS providers resolve complaints on OGS product offering financing. and service financing. ADVANTAGES Government: Government: Government: • Low cost and effort. • Increases PAYG product supply and • Establishes regulatory framework • Promotes PAYG market entry and competition. for the consumer financing of OGS competition. • Clarifies policymakers with products. oversight authority over PAYG companies. OGS Sector: OGS Sector: OGS Sector: • Flexibility in structuring financing. • Reduces risk of regulatory • Reduces risk of regulatory • No minimum capital requirements. uncertainty for OGS providers uncertainty for OGS providers providing consumer financing. providing consumer financing. • Easier market entry. • Low cost of regulatory compliance. Consumer: Consumer: None Consumer: Increases choice of sources of • Government oversight of the consumer financing. consumer financing in the OGS sector provides highest level of consumer protection. DISADVANTAGES Government: Government: Government: • Limited oversight. • Requires investment in • High cost requires investment to • Requires investment to adequately collaborative efforts with non- develop and implement regulatory resource consumer redress energy policymakers. framework and different models of mechanisms to ensure consumers’ • Continued innovation in financing consumer financing. grievances are resolved efficiently. models may continue to raise • Regulation may not keep up with issues of classification. sector innovation. • Increased compliance costs could impact consumer affordability of OGS products. • Could pose a barrier to market entry. The Off-Grid Solar Policy Toolkit 93 OGS Sector: OGS Sector: OGS Sector: • Regulatory uncertainty could inhibit • Regulatory classification could • Regulatory compliance costs may market entry. result in additional regulation or exclude some providers. oversight. • Increased compliance costs increase cost of goods sold, increasing product pricing, and reducing consumer affordability. • Reduces the models for providing consumer financing for OGS products. Consumer: Consumer: Consumer: • Limited government oversight of • Regulatory classification could • Regulatory classification could financing practices or terms increase sector regulation and increase sector regulation and • Grievance mechanism may not exist. compliance costs, reducing market compliance costs, reducing market entry and consumer financing for entry and consumer financing for • Cost to consumers to seek redress OGS products. OGS products. through formal channels. • Regulatory classification may limit • Regulatory classification could limit government oversight of financing government oversight of financing practices or terms. practices or terms. Issue 8: Product Standards Governments can influence the quality of OGS products sold in their markets. Policymakers have options across the policymaking continuum to address OGS product quality. Enabling ISSUE: QUALITY STANDARDS Environment Wait-and-See Light-Touch Prescriptive Component: Accountability Policymakers with Lead Energy Authority, Standards Lead Energy Authority, Standards Setting Lead Energy Authority, Standards Influence Setting Body Body Setting Body POLICY OPTIONS • Government forebears from • Government conducts sensitization and • Government adopts national placing any restrictions on or awareness campaigns for consumers to quality standards for OGS promoting minimum quality assess product quality. products. standards for OGS components • Government conducts market surveillance • Government develops monitoring, or configurations. to monitor mix of quality product offerings verification, and enforcement • Government relies on industry to and consumer complaints. framework for compliance with offer quality OGS products and • Government develops a roadmap for national quality standards. services. standards adoption starting with adoption • Consumers rely on current of voluntary quality standards for OGS consumer protection laws and products. processes to resolve complaints • Government offers fiscal incentives for on low-quality OGS products or quality-verified products that meet specific services. standards. 94 The Off-Grid Solar Policy Toolkit ADVANTAGES Government: Government: Government: • Low cost. • Government encouragement of supply and • Government protects consumers • Promotes market entry and free purchase of quality OGS products increases from risk of counterfeit or low- and open competition. supply of high-quality OGS products. quality products. • Provides an opportunity for • Government does not have to invest in • Quality standards can be OGS providers to prove their standards-setting and capacity to enforce harmonized with international ability to self-regulate without compliance with product standards. standards and those of other government intervention. • Government creates a transitional path countries in the region, to the adoption of national OGS quality eliminating the need to invest in standards. local testing. OGS Sector: OGS Sector: OGS Sector: • Flexibility in designing OGS • Consumers increase demand for high- • OGS providers do not have to products. quality OGS products. compete with lower quality • No testing or certification • OGS providers retain discretion in products. required. determining the quality of their OGS • If harmonized standards are • Easier market entry. product offerings. adopted, OGS providers can offer • OGS providers who offer quality products products across multiple markets • Low cost of regulatory may be eligible for government incentives and use the same verification compliance. not available to lower-quality products. scheme. • Provides an opportunity for • Industry can participate in OGS providers to prove their standards setting process to ability to self-regulate without inform standards. government intervention. Consumer: Consumer: Consumer: • Access to a range of OGS • Consumers have more information to make • Highest level of consumer products with different quality informed purchasing decisions on quality of protection against counterfeit and and variable pricing. OGS products. low-quality OGS products • Some level of government • Increased supply of quality OGS products. • Quality OGS products may protection and redress when • Fiscal incentives could lower the price of include warranties and after-sales OGS providers misrepresent OGS products. service. OGS product and service quality. • Quality OGS products may include warranties and after-sales service. DISADVANTAGES Government: Government: Government: • Low-quality OGS products are • Low-quality OGS products are available. • Requires investment in standard available. • Requires investment to run consumer setting process. • Investment may be needed to awareness campaign. • Limiting the supply of OGS adequately resource consumer • Requires investment to fund fiscal products may impact consumer redress mechanisms to ensure incentives for high-quality products. affordability of OGS products. consumers’ grievances are • Requires investment to build • Requires investment to conduct market resolved efficiently. staff capacity to implement and surveillance. • E-waste generated by discarded enforce compliance. • E-waste generated by discarded low-quality low-quality products with limited • If not harmonized with regional or products with limited lifespans. lifespans. international standards requires investment in local testing. OGS Sector: OGS Sector: OGS Sector: • No government oversight • Fiscal incentives may benefit only providers • Limits market participation to over counterfeit or low-quality of certified quality products. suppliers of quality-verified OGS products • OGS providers offering quality-verified products. • OGS providers offering quality- equipment may find it difficult to compete • If not harmonized with regional or verified equipment may find it on price with non-quality verified international standards, suppliers difficult to compete on price with equipment. have to manufacture bespoke non-quality verified equipment. • Companies have to pay testing fees to products and use customized prove compliance. testing for verification. The Off-Grid Solar Policy Toolkit 95 • Counterfeit or low-quality providers may hurt consumer sentiment toward solar products in general, since consumers are unlikely to be able to distinguish quality products. Consumer: Consumer: Consumer: • Redress for grievance on low • Potential impact on consumer pricing and • Exclusion of lower-quality OGS quality OGS products is limited affordability. products has the potential to to commercial practices of OGS • Consumers may lose money on sub- impact consumer pricing and provider. standard products. affordability. • Consumers may lose money on sub-standard products. • Consumers may have limited awareness of the technology and an inability to distinguish quality products. Issue 9: Transparency At Sale: Disclosure of Fees, Terms of Services, and Warranties Consumers purchasing PAYG products need to receive adequate information to evaluate the terms and conditions of the consumer financing and can be protected against product failure when OGS providers include warranties with their products. Policymakers have options across the policymaking continuum to set minimum standards for disclosure and to encourage product warranties. Enabling ISSUE: TRANSPARENCY OF TERMS AND WARRANTIES Environment Wait-and-See Light-Touch Prescriptive Component: Accountability Policymakers Consumer Protection Agency, Lead Energy Authority, Revenue Authority, Lead Energy Authority, with Influence Lead Energy Authority Standards Setting Body, Consumer Protection Financial Services Regulator, Agency Consumer Protection Agency POLICY OPTIONS • Government relies on OGS • Government conducts an information campaign • Government sets and providers to set their own to increase consumers’ capacity to evaluate enforces minimum policies for disclosure of terms. terms and conditions of OGS products and the standards for disclosure • OGS providers are not required suitability of PAYG financing terms. of terms and conditions to offer warranties. • Government encourages PAYG providers to of OGS products and follow GOGLA’s Consumer Protection Code services. • Government relies on industry self-regulation such as OGS principle for responsible sales and pricing. • Government requires providers’ commitment • Government conducts market surveillance warranties for OGS to the GOGLA Consumer to monitor consumer complaints about products. Protection Code principles for misrepresentation of products and defaults on • Government sets and transparency and responsible PAYG financing. enforces minimum sales and pricing decisions. • Government offers fiscal incentives or standards for disclosure of • Consumers rely on existing conditions access to public funding to products terms and conditions for consumer protection laws that include warranties. PAYG financing. and processes to redress • Government develops voluntary standards grievances regarding false for OGS products that include standards for representation of OGS disclosure and inclusion of product warranties. products and PAYG financing terms. 96 The Off-Grid Solar Policy Toolkit ADVANTAGES Government: Government: Government: • Low cost and low effort. • Consumers make informed decisions in • Government protects purchasing OGS and PAYG products, increasing consumers by prescribing consumer satisfaction and reducing over- the minimum level of indebtedness. information consumers • Increased warranty coverage increases after must receive on OGS sales service and repair by OGS providers. products and PAYG financing. • Government has data to analyze risk to consumers and need for government oversight. • Warranty coverage of increases after sales • International quality standard (IEC TS-62257-9- service and repair by OGS 8), if adopted as voluntary, signals government providers. expectation for product disclosure, truth in advertising and warranty coverage. • International quality standard (IEC TS- 62257-9-8), if adopted as mandatory, sets government standards on product disclosure, truth in advertising and warranty coverage. OGS Sector: OGS Sector: OGS Sector: • Flexibility in design of • Consumers make informed decisions in • Government’s warranty disclosure policies purchasing OGS and PAYG products, increasing requirement reduces • OGS providers have discretion consumer satisfaction and reducing over industry reputational to include warranties. indebtedness. risk and eliminates cost • Fiscal incentives can offset costs of after advantage of not offering • Low cost of regulatory sales service from warranties reducing costs warranties. compliance. of goods sold and contributing to consumer • Provides an opportunity for affordability. OGS providers to prove their ability to self-regulate without government intervention. Consumer: Consumer: Consumer: • Low cost of compliance lowers • Informed decision making in purchasing • Highest level of consumer product prices and increases OGS and PAYG products increases consumer protection. consumer affordability. satisfaction and reduces over indebtedness. • Adequate information is • Access to a range of OGS • Access to a range of OGS products sold with provided at the point of products sold with and without and without warranties at variable prices. sale to make an informed warranties at variable prices. • Increased choice of OGS products with purchasing decision. • Some level of government warranties that include after-sales service. • All OGS products include protection and redress when warranties for after-sales OGS providers misrepresent service. product and service quality. DISADVANTAGES Government: Government: Government: • Consumers bear the risk of • Requires government investment in consumer • Requires government OGS providers providing awareness campaign. investment in standard incomplete or inaccurate • Requires government investment in market setting. product information. surveillance. • Requiring warranties • Investment may be needed to • Requires government investment to fund fiscal for all products may adequately resource consumer incentives for products with warranties. increase cost of goods redress mechanisms to ensure sold and reduce consumer • Requires government investment in evaluation consumers’ grievances are affordability. of standards to apply as “voluntary”. resolved efficiently. The Off-Grid Solar Policy Toolkit 97 • Requires government investment to build staff capacity to implement and enforce compliance. OGS Sector: OGS Sector: OGS Sector: • OGS providers differ in their • OGS providers differ in their disclosure • Cost of compliance may disclosure practices and practices and create reputational risk for the increase cost of goods create reputational risk for the industry. sold and reduce consumer industry. • OGS providers offering warranties incur costs affordability. • OGS providers offering of after-sales service and may find it difficult to warranties incur costs of after- compete on price with products offered without sales service and may find it warranties. difficult to compete on price with products offered without warranties. Consumer: Consumer: None. Consumer: • Redress for grievances for • Cost of compliance may misrepresentation of OGS increase product prices products and service is limited and reduce consumer to commercial practices of affordability. OGS providers. • Inadequate government enforcement of standards does not increase availability of product information. Issue 10: Data Protection OGS and PAYG companies gather and use customers’ data in selling their products and qualifying customers for financing. Policymakers have options across the policymaking continuum to address data protection. Enabling ISSUE: DATA PROTECTION Environment Wait-and-See Light-Touch Prescriptive Component: Accountability Policymakers with Lead Energy Authority Lead Energy Authority, Consumer Lead Energy Authority, Consumer Influence Protection Agency, Data Protection Agency, Data Protection Supervisory Authority Protection Supervisory Authority POLICY OPTIONS • Existing government data privacy laws • Government provides guidance • Government adopts policies and regulations apply to the OGS sector on how existing data protection and directs specific application without modification. policies apply to the OGS of policies for protection of data • Government relies on OGS providers to sector. collected by OGS companies. establish data protection policies. • Government encourages • Government adopts policies • Government relies on OGS providers voluntary adherence to industry to monitor and enforce to self-regulate by committing to and data protection standards compliance with data protection following the GOGLA Code of Consumer such as GOGLA’s Consumer policies by OGS companies. Protection principle on personal data Protection Code principle on privacy. data privacy. 98 The Off-Grid Solar Policy Toolkit • Consumers rely on existing consumer data protection laws for rights and to resolve consumer grievances about OGS and PAYG providers for data privacy infringements or violations. ADVANTAGES Government: Government: Government: • Consistent application of data privacy • Increased responsible use of • Data policies specific to the laws and regulations across commercial data in the OGS sector. OGS increase OGS and PAYG sectors. • Industry self-regulation of data supply and suitability of • Low cost and low effort. practices protects consumers. financing terms. • Industry self-regulation of data practices protects consumers. OGS Sector: OGS Sector: OGS Sector: • Flexibility to develop data protection • Guidance informs data use. • Exemption from regulation policies to meet business needs. • OGS providers can evaluate allows for efficient data • No additional regulation on data use by their data protection management. the OGS sector. against industry developed • Customer data sharing • OGS providers can evaluate their data principles for responsible data increases access to funding. protection against industry developed management. • Data use informs PAYG principles for responsible data financing decisions. management. • Provides an opportunity for OGS providers to prove their ability to self-regulate without government intervention. Consumer: Consumer: Consumer: • Company data policies may provide • Government guidance provides • Increased access to OGS sufficient protection against risk. some level of government products and PAYG products • Data collection and sharing oversight over OGS providers with suitable financing. arrangements may increase availability use and protection of customer • Government exercises of PAYG financing. data. oversight over data practices • Some level of government protection • OGS providers follow industry of OGS companies increasing and redress of grievances when OGS principles on data privacy. consumer protection. providers fail to comply with data protection laws. DISADVANTAGES Government: Government: Government: • Consumers bear the risk of OGS provider • Data protection policies fall • Data protection policies fall misuse of data. outside the expertise and zone outside the expertise and zone • Requires government investment to of influence of the lead energy of influence of the lead energy adequately resource consumer redress authorities. authorities. mechanisms to ensure consumers’ • Not all OGS providers may • Tailoring data policies to grievances are resolved efficiently. choose to commit to industry the OGS sector creates principles for protecting data inconsistency in application of privacy. national data policies. OGS Sector: OGS Sector: OGS Sector: • Current data privacy laws and • Government guidance may • Government policies for the regulations may limit OGS companies restrict optimal use of data and sector may restrict optimal use of data or increase cost of reduce PAYG offerings. use of data and reduce PAYG compliance (data localization). offerings. • Rules restrict data sharing and eliminate access to valuable data for PAYG offerings. The Off-Grid Solar Policy Toolkit 99 Consumer: Consumer: Consumer: • Consumers’ redress for grievances on • Guidance may reduce OGS • Policies could reduce OGS misuse or improper disclosure of their supply and PAYG offerings. supply and PAYG offerings. data is limited to commercial practices of • Level of government oversight • Inadequate government OGS provider. may not be sufficient to protect enforcement of standards does • Costs borne by consumers to seek consumers against improper not protect consumers against redress through formal channels. use or disclosure of their data. improper use and disclosure of their data. Issue 11: Customer Service and Grievance Redress Policymakers have options across the policymaking continuum to address how consumers can seek redress for their grievances and receive after sales services for OGS products that fail. Enabling ISSUE: POST-SALE SERVICE AND COMPLAINT RESOLUTION Environment Wait-and-See Light-Touch Prescriptive Component: Accountability Policymakers with Lead Energy Authority Lead Energy Authority, Consumer Lead Energy Authority, Consumer Influence Protection Agency, Standards Setting Protection Agency Body POLICY OPTIONS • Government relies on OGS • Government conducts an information • Government sets and enforces providers to establish consumer campaign to increase consumers’ standards for minimum levels complaint processes used to capacity to evaluate post-sales service of post-sale customer service resolve product and service and warranty coverage. and warranty coverage for OGS issues and comply with product • Government encourages OGS products. warranties. providers to commit to following • Government develops policies • Government relies on OGS industry standards such as GOGLA’s to “blacklist” OGS companies providers to self-regulate by Code of Consumer Protection principle or require them to discontinue committing to and following on good customer service. market operations. the GOGLA Code of Consumer • Government conducts market Protection principle on good surveillance to monitor consumer company service. complaints on post-sales services and • Consumers rely on current warranty coverage. consumer protection laws and • Government develops voluntary processes to resolve consumer quality standards for OGS products grievances of inadequate that include warranty coverage post sales service or warranty requirements and standards for post- coverage. sale services. • Government offers fiscal incentives or conditions access to public funding to OGS providers that include warranties and commit to minimum post-sales service levels. ADVANTAGES Government: Government: Government: • Low cost and low effort. • Consumers make informed decisions • Government protects • Industry self-regulation and in purchasing OGS products that consumers by prescribing the commitment to established includes consideration of post-sale minimum level of customer principles for providing post- customer service and warranty service and warranty coverage sale customer service protects coverage. for OGS products. consumers. 100 The Off-Grid Solar Policy Toolkit • Promotes market entry and • OGS providers’ post-sales service • Warranty coverage of OGS competition. and warranty coverage improves products increases after sales increasing consumer protection. service and repair by OGS • Government has data to analyze providers, contributing to a risk to consumers and need for longer product lifecycle. government oversight. • International quality standard (IEC TS-62257-9-8), if adopted as mandatory, sets standard for warranty coverage. OGS Sector: OGS Sector: OGS Sector: • Flexibility to develop post-sale • Consumers consider post-sale • Government’s standards reduce customer service policies. customer service and warranty industry reputational risk and • OGS providers can assess their coverage in purchasing OGS products eliminate cost advantage of not post-sales servicing against increasing consumer satisfaction. providing post-sale service or industry developed principles • Fiscal incentives can offset costs offering warranties. and indicators for good company of after sales service and warranty service. coverage, reducing costs of goods • Ease of market entry. sold and contributing to consumer affordability. • Low cost of regulatory compliance. • Provides an opportunity for OGS providers to prove their ability to self-regulate without government intervention. Consumer: Consumer: Consumer: • Low cost of compliance reduces • Informed decision making includes • Highest level of consumer cost of goods sold contributing to consideration of OGS provider protection. consumer affordability. commitment to post-sale service • All OGS products include • Access to a range of OGS and warranty coverage increasing warranties for after-sales products sold with and without likelihood of product and service service. warranties at variable prices. repair. • Some level of government • Increased choice of OGS products protection and redress when with warranties that include after-sales OGS providers misrepresent OGS service for repair and replacement if product and service quality. OGS products fail. • Access to a range of OGS products sold with and without warranties at variable prices. DISADVANTAGES Government: Government: Government: • Consumers bear the risk of • Requires government investment in • Requires government poor after-sales service for OGS consumer awareness campaign. investment in standard setting. products and failure to provide • Requires government investment to • Requiring warranties for all warranty coverage. fund fiscal incentives for post-sale products may increase cost • Investment may be needed to services and warranties. of goods sold and impact adequately resource consumer • Requires government investment to consumer affordability. redress mechanisms to ensure conduct market surveillance activities. • Requires government consumers’ grievances are investment to build staff • Requires government investment in resolved efficiently. capacity to implement and evaluation of standards. enforce compliance. The Off-Grid Solar Policy Toolkit 101 OGS Sector: OGS Sector: OGS Sector: • OGS providers differ in their • OGS providers’ investment in good • Cost of compliance may post-sales customer service customer service increases cost increase cost of goods sold and and warranty coverage creating of goods sold, making it difficult to reduce consumer affordability. reputational risk for the industry. compete on price with OGS providers • Limited government oversight who don’t invest in post-sale customer over counterfeit or low-quality service or warranty coverage. products. • OGS providers differ in their post- sales customer service and warranty coverage creating reputational risk for the industry. Consumer: Consumer: None. Consumer: • Redress for grievances on • Cost of compliance may poor post-sale OGS product increase cost of goods sold and service and to enforce warranty reduce consumer affordability. coverage is limited to commercial • Inadequate government practices of OGS providers. enforcement of standards • Cost to consumers to seek does not increase delivery of redress through formal channels. post-sales service or warranty coverage. Issue 12: E-Waste Policymakers have options across the policymaking continuum to address the management of e-waste generated by OGS products. Enabling ISSUE: E-WASTE Environment Wait-and-See Light-Touch Prescriptive Component: Accountability Policymakers with Lead Energy Authority Lead Energy Authority, Environmental Lead Energy Authority, Environmental Influence Regulator, Consumer Protection Agency Regulator, Consumer Protection Agency POLICY OPTIONS Government relies on OGS • Government encourages OGS providers • Government classifies OGS products in providers to develop and to properly dispose of e-waste by its e-waste regulatory framework and follow their own policies publishing data (advisories/circulars) requires mandatory take-back. to manage e-waste and on effects of e-waste and giving • Government adopts a financing recycling of OGS products. suggestions of programs such as take structure to manage e-waste that back programs and schemes. covers OGS products that could include: • Government provides incentives • Extended Producer Responsibility and /or subsidies for proper e-waste (EPR) where the OGS equipment management and recycling of OGS manufacturer or importer pays a fee products. for e-waste and recycling. • Government creates permitting process • Consumer fee at the time of purchase for private sector companies to create of OGS products. and manage e-waste and recycling • Waste dumper pays fee at disposal. facilities. • Government taxation to cover • Government adopts quality standards e-waste disposal costs and facility for OGS that increase supply of durable management. OGS equipment with longer life cycles (thereby reducing e-waste). 102 The Off-Grid Solar Policy Toolkit Government: Government: Government: • Low cost. • E-waste management and recycling • E-waste management framework • Low volumes of e-waste framework is tested on higher producing clarifies responsibility and funding pose low environmental e-waste streams. for management of OGS generated risk. • Reduced environmental impact of e-waste. improper disposal of e-waste generated • Reduced environmental impact of by OGS products. improper disposal of e-waste generated by OGS products. OGS Sector: OGS Sector: OGS Sector: • Low cost of regulatory • Fiscal incentives offset the cost of • Government framework produces compliance. e-waste management. responsible e-waste management • No mandatory fees for • E-waste facilities exist to receive and and reduces environmental impact of e-waste management. manage e-waste responsibly. improper disposal of e-waste generated by OGS products. • Provides an opportunity for OGS providers • Government fee structure provides to prove their ability source of funding for responsible to self-regulate e-waste management. without government • Consistent e-waste management across intervention. the OGS supply chain. Consumer: Consumer: Consumer: • No mandatory fees for • More OGS providers have e-waste • Government framework produces e-waste management management and recycling programs. responsible e-waste management paid by the consumer. • Fiscal incentives offset the cost of and reduces environmental impact of e-waste management. improper disposal of e-waste generated by OGS products. • E-waste facilities exist to receive and manage e-waste responsibly. • Fee structure provides source of funding for responsible e-waste • Increased quality of OGS products management. purchased reduces volume of e-waste. DISADVANTAGES Government: Government: Government: • No government • Requires government investment • Requires government investment to oversight over to develop e-waste guidance for incorporate OGS e-waste into e-waste management of OGS products which may not be framework. e-waste generated by proportionate to contribution of OGS • Requires government enforcement OGS products. products to e-waste stream. of fee structure and possible • Adverse environmental • Requires government investment administration of e-waste funding flows. impact of improper to fund fiscal incentives for e-waste • Imposition of fees could increase disposal of e-waste management. product price and reduce consumer generated by OGS • Requires government to commit to affordability. products. establish and implement e-waste management permitting process. • Requires government investment in setting quality standards for OGS products. OGS Sector: OGS Sector: OGS Sector: • No government support • Companies may follow different e-waste • E-waste fees may increase product for management of practices creating inconsistency in the pricing and reduce consumer e-waste generated by supply chain. affordability. OGS products. • Logistics and facilities may not exist to receive and manage e-waste. The Off-Grid Solar Policy Toolkit 103 • Companies may follow different e-waste practices creating inconsistency in the supply chain. • Adverse environmental impact of improper disposal of e-waste generated by OGS products. Consumer: Consumer: Consumer: • No government • Limited government support or oversight • E-waste fees may increase consumer support or oversight for management of e-waste generated pricing and reduce consumer for management of by OGS products. affordability. e-waste generated by • Adverse environmental impact of • Logistics and facilities may not exist to OGS products. improper disposal of e-waste generated receive and manage e-waste. • Adverse environmental by OGS products. impact of improper disposal of e-waste generated by OGS products. 104 The Off-Grid Solar Policy Toolkit Annex B: Additional Resources In this Annex we provide additional resources that users the goal of SDG7: to ensure access to affordable, reliable, of this toolkit can use to deepen their understanding of and sustainable energy for all. the OGS sector and PAYG products and to support their exploration of specific policy issues. We have organized SE4All, 2020. Data Standards for Integrated Energy the resources by chapter and by the 12 issues examined in Planning, Workshop Report. The report synthesizes Chapter Four. the improvements and standardization of data used by governments and their partners for integrated energy planning. CHAPTER TWO: OFF-GRID SECTOR DATA SOURCES, INDICATORS, TRENDS, AND INSIGHTS SE4All, 2020. Energizing Finance: Understanding the Landscape. The report tracks the energy access financing Data Sources and Indicators landscape of 2020 considering the COVID-19 pandemic and provides recommendations for developing countries to Lighting Global, IFC, 2018. PAYG Market Attractiveness increase their resilience to future challenges and inclusive Index. This index provides 70 indicators that can be applied growth for the energy sector. at the country level to measure the market attractiveness for PAYG. Indicators are divided into three pillars: (1) demand, (2) supply, and (3) the enabling environment. Trends Lighting Global/ESMAP, GOGLA, Efficiency for Access, Ten of the indicators relate to a country’s legal and regulatory Open Capital Advisors (2022). Off-Grid Solar Market environment. Trends Report 2022: State of the Sector. This report measures the pulse of the off-grid solar market and includes Energy Sector Management Assistance Program comprehensive sales and impact data as well as an in-depth (ESMAP), 2020. Regulatory Indicators for Sustainable analysis of current market dynamics and an outlook on the Energy (RISE) Sustaining the Momentum. This publication future of the industry. provides an analysis of a set of 31 indicators to compare the policy and regulatory frameworks of countries and 60 Decibels, 2020. Why Off-Grid Energy Matters. This support the achievement of Sustainable Development Goal report provides consumer insights from data collected from 7 on universal access to clean and modern energy. The 35,000 OGS customers across 17 countries. indicators are cast across three pillars: (1) electricity access, (2) renewable energy, (3) energy efficiency. PAYG Business Model IEA, IRENA, UNSD, World Bank, WHO. 2022. Tracking IRENA, 2020. PAYGO Innovation Landscape Brief. This SDG 7: The Energy Progress Report. This report provides brief analyzes key factors to successfully deploy PAYG, 2021 data to assess progress against the goal of achieving including how a government’s electrification strategy for universal access to affordable, reliable, sustainable, and OGS and policies can incentivize PAYG business models. modern energy for all by 2030 in SDG7. The Africa Clean Energy Technical Assistance Facility, IRENA, 2022. Off-grid renewable energy statistics 2022. 2020. Access to Consumer Finance for Vulnerable Groups. This report provides statistics that include data on SHS units. This report examines the role of consumer finance in serving vulnerable groups by assessing the ability of consumer SE4All, 2019. Integrated Electrification Pathways for finance models to improve the affordability and accessibility Universal Access to Electricity: A Primer. This report of OGS products. outlines key steps to guide policymakers in creating and developing strategies, policies, and programs to support a IFC, CGAP, 2018. Strange Beasts Making Sense of full-systems approach to electrification planning. PAYGo Solar Business Models. This report explores the components of PAYG business models. SE4All, 2020. Analysis of SDG7 Progress. The report provides a snapshot of current state of progress on meeting The Off-Grid Solar Policy Toolkit 105 GOGLA, Hystra Hybrid Strategy Consulting, 2017. Pricing How OGS Enables the Digital Economy Quality Cost Drivers and Value Add in The Off-Grid Solar GSMA, 2022. The Value of Pay-As-You-Go Solar for Mobile Sector. This report explores the cost components and Operators: Insights from customer journeys in Benin pricing of Pico and SHS systems, including costs of the PAYG and Côte d’Ivoire. This report applies research with PAYG model and the difference in costs and pricing of products customers in Benin and Côte d’Ivoire to analyze how energy verified to meet quality standards. access can drive behavior change in customer to increase mobile use and mobile money transactions providing a Hystra, Global Distributors Collective, 2020. Identifying benefit to both OGS companies and telecommunications affordable quality solar products for the last mile. This providers. report explores the procurement challenges felt by last-mile distributors and explores possible solutions for procuring the ITU, Broadband Commission for Sustainable Development right products for their target audience, at the right prices, in Broadband Commission Working Group on Broadband the right places, and within acceptable time frames. for All, 2020. A “Digital Infrastructure Moonshot” for Africa, Connecting Africa Through Broadband A Strategy for Doubling Connectivity by 2021 and Reaching Universal How Women Benefit from Energy Access Access by 2030. This report sets an agenda for digital ESMAP, 2022. Operational Handbook for Gender Equality economy transformation across Africa. It stipulates the in the Off-Grid Solar Sector. The handbook provides importance of energy access for broadband inclusion and operational guidance and case studies on closing the the need to increase network capacity and quality and offers gender gap in the OGS sector, with a particular focus on a roadmap on how to achieve broadband for all in Africa. women’s roles at the consumer and enterprises level. Facebook, Bloomberg New Energy Finance, 2018. OECD, 2021. Gender & the Environment, Chapter Powering Last-Mile Connectivity. This report provides 8: Women and SDG7 – Affordable and Clean Energy: data and analyzes the connection between energy access Ensure access to affordable, reliable, sustainable, and and providing last mile connectivity to digital services by modern energy for all. This chapter from OECD’s Gender broadband network providers and to consumers seeking & the Environment publication reviews the barriers and to charge their internet-enabled devices and use digital opportunities to improving women’s access to energy and services. their role in supporting a clean energy transition. African Union, 2019. The Digital Transformation Strategy for Africa (2020-2030). This strategy is based on foundation CHAPTER THREE: HOW OGS CONTRIBUTES TO pillars and critical sectors to drive digital transformation, THE DIGITAL ECONOMY including the need for governments to create appropriate policies and an enabling environment with critical policy How OGS Uses Digital reforms. It also provides recommendations and proposed actions for policymakers. GSMA, 2023. The State of the Industry Report on Mobile Money 2023. GSMA’s annual report outlines the state of the mobile money industry and provides data on the rate of Promoting OGS and Digital Together digitization of payments and the growth of the industry as USAID, 2017. Pay-As-You-Go Solar as a Driver of Financial well as an overview of the role of mobile money in bridging Inclusion. This assessment provides an overview of key the digital inclusion divide. considerations relevant to determining where PAYG solar is more likely to drive financial inclusion through mobile money GSMA, 2023. The Mobile Gender Gap Report 2023. adoption. It informs the development of an investment GSMA’s annual report on the gender gap in mobile phone strategy in PAYG that may contribute to a complementary and internet use in lower- and middle-income countries. goal of financial inclusion. GSMA, 2020. The Value of Pay-as-you-go Solar for Mobile Alliance for Financial Inclusion, 2019. Policy and Operators. This report provides a multi-country analysis Regulatory Reforms in the AFI Network. This report from five mobile money providers to quantify the commercial provides a unique and integrated snapshot of policy value and synergy opportunities the PAYG solar industry has and regulatory reforms that enable the development of for the mobile industry. appropriate digital financial services and products that increase women’s financial inclusion. 106 The Off-Grid Solar Policy Toolkit The World Bank Group, 2020. Digital Financial Services. for enabling mobile money. The index has 27 indicators that This publication reviews the elements of an enabling apply across 6 dimensions: (1) authorization, (2) consumer environment for digital financial services. protection, (3) transaction limits, (4) know your customer, (5) agent networks, and (6) investment and infrastructure The report also discusses how the COVID-19 pandemic has environment. amplified the benefits of expanding digital financial services by reducing the need for physical contact in retail and GSMA, 2020. Tracking the Journey towards Mobile Money financial transactions. Interoperability Emerging Evidence from Six Markets: Tanzania, Pakistan, Madagascar, Ghana, Jordan and Mastercard, 2018. Pay-As-You-Go and the Internet of Uganda. This publication highlights the importance of having Things: Driving Financial Inclusion in the Developing an enabling regulatory environment that allows mobile World. This white paper explores the potential of PAYG and money providers to make commercially viable business IoT for driving financial inclusion in developing markets. decisions about interoperability that facilitates financial inclusion. CHAPTER FOUR: POLICY ISSUES AND PRIORITIES Cook, William, Dylan Lennox, and Souraya Sbeih, 2021. Building Faster Better: A Guide to Inclusive Instant GOGLA, Lighting Global, ESMAP, DFID, Sustainable Payment Systems. This guide defines foundational Energy for All, IFC, Power Africa, 2019. Providing Energy concepts, delineates the key roles in an instant payment Access through Off-Grid Solar: Guidance for Governments. system, and offers actionable insights on planning, This guide provides a holistic overview of issues to consider designing, launching, and scaling an effective system for in the design of policies and programs intended for policymakers, financial service providers, and other actors governments to deliver on energy access goals. involved in driving interoperability in digital payments. Issue 1: Ease of Market Entry and Competition Issue 4: Fiscal Policies for OGS Products, Services, and Lighting Global, IFC, 2019. PAYGo Market Attractiveness Mobile Money Index. This index provides a set of indicators and an online GOGLA, Hystra Hybrid Strategy Consulting, 2017. tool that can be used by policymakers and practitioners to Pricing Quality Cost Drivers And Value Add in The Off- assess the attractiveness of a national market for PAYGO Grid Solar Sector. This report examines the cost drivers energy services. of OGS products including the role of taxation and informs policymakers on how to lower the costs incurred by companies upstream as well as downstream costs. Issue 2: Quality and Reach of Digital Broadband Infrastructure GSMA, 2020. The Causes and Consequences of Mobile World Bank, 2020. Digital Economy for Africa (DE4A) Money Taxation, an Examination of Mobile Money Taxes Country Diagnostics Reports. This report provides a in Sub-Saharan Africa. This report looks at the causes and snapshot of the state of the digital economy in different consequences of mobile money taxation. African countries for each of the five pillars of the DE4A initiative: digital infrastructure, digital public platforms, digital Lighting Global, ESMAP, IFC, GOGLA, 2020 Off-Grid Solar financial services, digital businesses, and digital skills. It also Market Trends Report 2020. Section 4.1.2 of this report outlines opportunities for future growth. delves into the tax and import duty regimes faced by the off-grid solar sector and notes that taxes act as a very real IFC, GOOGLE, 2020. e-Conomy Africa 2020 Africa’s $180 barrier to OGS market growth, as many consumers are billion Internet economy future. This publication offers an highly price-sensitive. It also discusses the benefits that analysis of Africa’s current Internet landscape, key trends, governments gain from stimulating the OGS sector through and a roadmap of investment opportunities for accelerating fiscal incentives. the growth of the Internet economy, including the role of private and public sector players in driving economic growth. USEA, KEREA and UNREEEA, 2020. East African Regional Handbook on Solar Taxation. This handbook offers a look at the taxation regime for solar products in East Africa, Issue 3: Mobile Money and Digital Payments and specifically Kenya, Rwanda, Tanzania, and Uganda. It GSMA, 2019. The Mobile Money Regulatory Index. GSMA provides a reference customs handbook on OGS products used this index to score 80 countries’ regulations and components that can be used to build capacity and The Off-Grid Solar Policy Toolkit 107 consistency in custom offices across the East African for transparency and consumer protection through the digital Community to facilitate the flow of OGS products. credit process. It suggests areas of consideration for digital credit providers and policymakers to ensure responsible Africa Clean Energy (ACE) Technical Assistance Facility market development which maximizes consumer benefits (TAF), 2021. Impact of Tax Incentives on Access to Stand and minimizes consumer risks. Alone Solar Recommendations from analysis in Malawi, Rwanda, and Sierra Leone. This report includes a tool to analyze the impact of VAT and duties on consumer purchase Issue 8: Pre-Sale Product Quality Standards of SHS. GOGLA. The Consumer Protection Code & Principles of Consumer Protection. The Consumer Protection Code consists of a set of six principles or minimum standards Issue 5: Availability and Cost of Capital of practice consumers should expect from an off-grid GOGLA, Open Capital Advisors, 2018. Increasing Local company, and an assessment framework to help companies Financial Institution Investment in the Off-Grid Solar measure, demonstrate, and improve their practices. Sector, Lessons from East Africa. This report outlines the information gaps and other barriers to investment and Africa Clean Energy Technical Assistance Facility, financing by local financial institutions for the OGS sector, 2020. Standards for Stand-Alone Solar: Guidance for and outlines recommendations to catalyze local currency Governments. This guide provides a holistic overview of investment in the sector. the status of standards adoption in Sub-Saharan Africa, and issues regulatory bodies must consider in the adoption CGAP, CLASP, 2020. Electric Bankers: Utility Enabled process of harmonized standards. Financing in Sub-Saharan Africa. This report looks at the recent phenomenon of utility enabled finance that uses data on consumers’ utility re-payment history to extend financing Issue 9: Transparency: At Sale: Disclosure of Fees, for appliances. Terms of Services and Warranties Lighting Global, 2020. Summary of Requirements in IEC TS 62257-9-8:2020. The IEC summarizes the requirements Issue 6: Access to Data for Credit Scoring in the standard IEC TS 62257-9-8:2020 for stand-alone The World Bank Group, 2018. Developing a Strong Credit renewable energy products with power ratings less than or Reporting System: A Toolkit for Practitioners. This toolkit equal to 350W that include a truth-in-advertising component provides step-by-step guidelines policymakers can use to and minimum standards for warranties. assess their country’s credit reporting infrastructure, identify areas for improvement, or create an action plan to create the GOGLA. Principles of Consumer Protection. GOGLA led the credit reporting infrastructure where none exists. effort to develop consumer protection principles for the OGS sector. The principles include a principle on transparency GSMA, 2019. Data Protection in Mobile Money. This paper and minimum standards of practice that consumers should reviews data protection practices in mobile money services. expect from an off-grid solar company. The transparency It outlines four key areas that mobile money providers need standard stipulates that an OGS company shares clear and to address: data processing, data security, data sharing, and sufficient information on a product, services, payment plan, data localization. and personal data privacy practices to help consumers make informed decisions. CGAP, 2017. Consumer Protection in Digital Credit. This paper explores new approaches to address risks and Center for Financial Inclusion, 2019. Handbook on problems associated with consumer protection in digital Consumer Protection for Inclusive Finance. The handbook credit. The publication also recommends well-designed and is designed to be a practical resource for policymakers and enforced consumer protection rules based on emerging regulators seeking to develop or revise legal frameworks as provider good practices to complement existing industry a whole or on consumer financial protection. initiatives. Issue 10: Data Protection Issue 7: Financial Regulation GSMA, 2019. Data Protection in Mobile Money. This paper CGAP, 2018. A Digital Credit Revolution: Insights from provides an overview of data protection practices that will Borrowers in Kenya and Tanzania. This publication have a significant impact on the provision of mobile money highlights the role of monitoring mechanisms by regulators services. 108 The Off-Grid Solar Policy Toolkit Rafe Mazer, 2018. Data Sharing Models to Promote Issue 12: E-Waste Financial Service Innovation. This report provides insights GOGLA, 2019. GOGLA e-Waste Toolkit. This toolkit is around key considerations for developing data-sharing presented in six modules covering a range of topics, models, including insights on key features and design including policy and regulation (Module 4). elements public and private actors should consider in developing data sharing models. The Africa Clean Energy Technical Assistance Facility, 2019. E-Waste Policy Handbook. This handbook provides Central Bank of Kenya, 2019. Guideline on Cybersecurity guidance and policy options for policymakers and the for Payment Service Providers. The guidelines mandate that industry to analyze ways to manage e-waste produced by payment service providers appoint personnel responsible OGS products. It draws on country examples and discusses for managing cybersecurity and data breaches, among other the elements of designing and implementing sustainable things. solutions for e-waste management. The Africa Clean Energy Technical Assistance Facility, Issue 11: Managing Customer Service Complaints 2020. Policy Brief: Solar e-waste in Sub-Saharan Africa. 60 Decibels, 2020. Why Off-Grid Energy Matters. This report provides a snapshot into the e-waste policy and This consumer insights reports includes data customer regulatory landscape in selected African countries. It also satisfaction with OGS products and services and resolution includes approaches to e-waste regulation development and of complaints by OGS providers. enforcement. The Off-Grid Solar Policy Toolkit 109 Annex C: Tools Step 1: Champion Identification Step 4: Policy Analysis Tool 1: Champion Checklist Tool 13: Meeting Planning Form Tool 2: Policy Diagnostic Tool 14: Stakeholder Engagement Plan Tool 3: 3 As Checklist Tool 15: Workshop Agenda Tool 4: Charting Internal Stakeholder Engagement Tool 2 (Revisited): Policy Diagnostic Tool 5: Sample TOR Tool 16: Policy Options Worksheet Tool 17: Policy Cost/Effectiveness Evaluation Step 2: Stakeholder Identification and Influence Tool 6: Stakeholder Map Tool 18: Risk Analysis Tool 7: Assessment of Existing Initiatives Tool 19: Feedback Form Tool 8: Stakeholder Interest and Influence Grid Step 5: Roadmap Development Tool 9: Stakeholder Concerns Tool 20: Roadmap Development Template Tool 10: Priority Mapping Step 6: Planning for Policy Implementation Step 3: Stakeholder Capacity Building Tool 21: KPI and Milestone Tool Tool 11: Meeting Invite Tool 22: Communications Strategy Plan Tool 12: Briefing Memo/Meeting Agenda Tool 23: Policy Implementation Budget Forecast 110 The Off-Grid Solar Policy Toolkit POLICY DEVELOPMENT DECISION TREE TOOLS 1. Champion checklist 2. Policy diagnostic START Who else in the 3. “As” checklist STEP 1 What policy Who can lead lead agency 4. Charting internal stakeholder Champion issues seem most needs to be this work? engagement pressing? identification involved? 5. Sample ToR Can your ministry solve the policy issue(s) through its own action? Y jump to step 4 N Know the policymaker(s) of influence to engage? 6. Stakeholder map STEP 2 7. Assessment of existing Stakeholder Map the Stakeholders Evaluate concerns initiatives N identification 8. Stakeholder interest and Rank influence Prioritize engagement influence grid and influence 9. Stakeholder concerns Y 10. Priority mapping STEP 3 Do the policymakers of influence understand the issue(s)? N 11. Meeting invite Stakeholder Y 12. Briefing memo/ meeting capacity building agenda Is there political will to act? N Y Determine the method for stakeholder engagement STEP 4 Have a current mechanism for stakeholder engagement? Policy Analysis 13. Meeting planning form Stakeholder engagement plan 14. Workshop Agenda Policy Development Workshops 15. Policy diagnostic (revisited) Set the agenda 16. Policy options worksheet 17. Policy cost/ effectiveness Identify policy options evaluation Evaluate policy options 18. Risk analysis Gather stakeholder input 19. Feedback form STEP 5 Develop a policy development roadmap Roadmap Create a roadmap Roadmap development template 20. Development Validate roadmap Adopt policy 20. KPI and milestones tools STEP 6 21. Comunications strategy plan Planning for Policy Implement policy Monitor and evaluate 22. Policy implementation budget Implementation forecast Develop communications strategy Development measurement framework The Off-Grid Solar Policy Toolkit 111 STEP 1: CHAMPION IDENTIFICATION Suggested Time Allocation: To complete Step 1, one month of participation by the lead energy authority. Expected Outcomes: Select a leader to serve as the champion that can shepherd the work, connect with stakeholders across ministries and lead the tool application process. Generate and secure buy-in across the champion agency for the importance of the toolkit process and its role in generating policy options to advance the OGS sector. Tentatively identify key policy issues that will be finalized and discussed in later steps. TOOL 1: CHAMPION CHECKLIST Use this tool’s checklist to identify who in the lead agency can lead this work. The champion can be identified through interviews that address the checklist. The champion should meet at least five of the criteria listed below. Champion Selection Criteria Level of Importance Policy issues directly affect the accomplishment of champion’s goals/objectives e.g., national development goals High Is interested in the subject; motivated, reliable, and enthusiastic High Has dedicated and motivated internal staff and resources that can be assigned to the activity High Is a government ministry, department, agency or recognized industry association with clear goals and objectives. High Has sufficient authority/mandate to invite key stakeholders from other ministries. The champion has sufficient influence within the ministry to help secure buy-in from senior members and move High policy reform forward within the ministry.  The champion will select an individual who will act as the project owner/coordinator and the selected High coordinator will own and manage all project activities. Ability to identify and select a competent person/firm to work alongside the champion to provide technical High expertise. Technical support may be in-house if the champion has the capacity. Technical input may be derived from discussions within an existing working group. The technical expert will support the champion’s coordinator to guide technical discussions, execute/implement workshops/dialogues and prepare technical documents to be used in the project activities. Has a track record working on the subject or similar activity Medium Has funding, established structures, working groups and other resources to feed into or implement the activity Low (or can mobilize funds) 112 The Off-Grid Solar Policy Toolkit TOOL 2: POLICY DIAGNOSTIC Use this chart to identify issues across the enabling environment components of the 3 As. This analysis should be preceded with a review of Toolkit Chapters 1-4 for policymakers less familiar with the OGS sector and PAYG model. MICRO-LEVEL ISSUES — ACROSS THE ENABLING ENVIRONMENT COMPONENTS Enabling Environment Policy and Regulatory Zones of Influence Other Issues Component AVAILABILITY Ease of market Quality and reach of digital Mobile money and digital inclusion entry and broadband infrastructure competition AFFORDABILITY Taxation Consumer Financing OGS provider Access to data Financial regulation cost of capital for credit scoring ACCOUNTABILITY Sales Cycle Pre-Sale At-Sale Post-Sale Product Transparency Data Customer service and e-Waste standards of terms and protection complaint resolution warranties TOOL 3: 3 As CHECKLIST Product Availability Context matters as you seek to create an enabling environment across the 3 consumer requirements of product availability, affordability, and service provider accountability. Product Service Provider Use this checklist and the issue matrix to look at issues that affect Affordability Accountability all three of these enabling market conditions that impact consumer adoption of OGS products. Product Availability= a market state in which consumers can conveniently purchase OGS products, including PAYG products with consumer financing, from competitive OGS providers. 1. Ease of Market Entry: Do current policies encourage or restrict OGS companies, including those using the PAYG model, from operating in the market? YES NO 2. Quality and reach of digital broadband infrastructure: Do digital broadband networks provide coverage in areas where consumers will use OGS products for energy access? YES NO 3. Mobile Money and Digital Inclusion: Do licensed mobile money and digital payment providers offer services and access points in rural areas where consumers rely on OGS products for energy access? YES NO 4. Financial Regulation: Do government regulations of financial services apply to PAYG financing offered to help consumers purchase OGS products? YES NO The Off-Grid Solar Policy Toolkit 113 Product Affordability = a market state in which consumers can afford to purchase OGS products either with cash or financing at a price that is suitable for their income levels. 1. Taxation: Does the government have the tools to evaluate the impact of their fiscal policies on the consumers purchasing OGS products and PAYG financing? YES NO 2. OGS provider cost of capital: Are there government policies or initiatives that support the availability of capital (including local capital) to OGS companies to lower financing costs and help them manage FOREX risk? YES NO 3. Access to data for credit scoring: Are there national data sharing regulations and a credit reporting system that OGS providers can access to assess OGS customers credit worthiness? YES NO Service Provider Accountability: a market state in which OGS companies are responsible for providing consumers with quality products, clearly communicating about their products’ features, performance, and financing terms, protecting consumer data and managing and ensuring proper disposal of products. 1. Product Standards: Has the government set standards (voluntary or mandatory) that OGS products must meet to be sold in the market? YES NO 2. Transparency of terms and warranties: Are the terms and conditions of PAYG financing and OGS warranties readily available and easy for consumers to understand? YES NO 3. Data Protection: Are there government policies that regulate how OGS and PAYG companies manage and protect data on their customers? YES NO 4. Customer service and complaint resolution: Are there existing consumer protection policies that apply to OGS providers that include minimum customer service standards and that apply to licensed mobile money and payment providers? YES NO 5. E-Waste: Is there a government agency that has jurisdiction and a framework to address e-waste management that applies, or could apply, to e-waste generated from OGS products? YES NO 114 The Off-Grid Solar Policy Toolkit TOOL 4: CHARTING INTERNAL STAKEHOLDER ENGAGEMENT Use this tool to identify the high-level goals related to electrification and OGS and to identify the stakeholders that should be included in policy dialogues. What are the national [Describe, i.e., 90% of the population with Tier 1 energy access by 2030?] electrification goals and strategy?  What are the off- [Specify - i.e., % of population use OGS products for energy access (standalone systems)] grid solar targets for electrification? Hierarchical structure of Pull organizational chart for government organization  champion organization Using the organizational chart as a reference, select the stakeholders that will be impacted by or could impact the work Relevant Stakeholders Name and Title  Level of Support for OGS Desired Project Role Engagement Strategy [Department] Importance (High, (Supporter, Aware, (Ongoing Participant, (Kick-off meeting, Medium, Low)  No Interest)  Shared Vision, ongoing updates, staff Observer)  designation for working group) TOOL 5: SAMPLE TOR Using the OGS Policy Toolkit to Build an Enabling Environment For PAYG Solar Use To Scale | SEE ANNEX D STEP 2: STAKEHOLDER IDENTIFICATION AND INFLUENCE Suggested Time Allocation: To complete Step 2, one month to identify the relevant stakeholders and create an inter-ministerial dialogue to reach agreement to participate in inter-ministerial policy development. Expected Outcomes: Identify key stakeholders of influence, levels of knowledge, understanding of policy issues, capacities, skills, and potential concerns. Secure buy-in from ministry leadership and senior civil servants to address issues that affect the OGS sector and PAYG. Evaluate willingness to participate in the policymaking process. Anticipate likely stakeholder concerns. The Off-Grid Solar Policy Toolkit 115 TOOL 6: STAKEHOLDER MAP Fill in this chart with stakeholders with varied levels of decision-making authority, influence, and input. The tables that follow provide suggested stakeholders that may be relevant to policy action in your country. General public and consumers Key Influencers Decision makers Possible Stakeholders: Policymaker – Decision maker Policy Area Ministry of Energy Energy Access Rural Energy Authorities Rural Electrification and Energy Access Ministry of Industry, Trade & Cooperatives Business Licensing, Importation Bureau of Standards Quality Standards Revenue Authority Taxation Financial Services Regulator/Central Bank Digital Payments, Financial Services, Credit Competition Authority Consumer Protection, Marketing and Distribution (Market Competition) Telecommunications Regulator Mobile Network Coverage, Broadband Policy Commission on Data Protection Data Protection & Privacy Key Influencers Role OGS Value Chain Participants (See Figure 5) Industry Industry Associations Industry representatives Investors Equity funders Banks Creditors 116 The Off-Grid Solar Policy Toolkit Donors Advisors and Government Co-Funders Mobile Network Operators Broadband service providers Digital Payment Providers (including mobile money) Payment processors and retail distribution participants General Public and Consumer Groups Role Civil Society Organizations Consumer Advocates Development programs promoting energy access and renewable Consumer Advocates energy Consumers Buyers TOOL 7: ASSESSMENT OF EXISTING INITIATIVES Use this tool to identify the existing initiatives underway across ministries or government agencies related to the policy issues identified. This tool will help ensure that the policy design process is complementary, not duplicative, to existing efforts. Policy Issue Current Initiatives Status of Initiative Organizations + Key Contact at Champion Underway Contact Ministry Area (Please indicate the (Please indicate current current state/progress (Please add (Please indicate the main initiatives that are under of the initiative) organizations contact responsible at the way related to specific engaged, this can champion ministry) areas identified under be development each policy issue) organization or ministries, and indicate specific contact from the organizations) Issue 1: Ease of Market Entry & Competition Issue 2: Quality and Reach of Digital Broadband Infrastructure Issue 3: Mobile Money and Digital Payments Issue 4: Fiscal Policies for OGS Products, Services, and Mobile Money Issue 5: Availability and Cost of Capital Issue 6: Access to Data for Credit Scoring The Off-Grid Solar Policy Toolkit 117 Issue 7: Financial Regulation Issue 8: Product Standards Issue 9: Transparency at Sale: Disclosure of Fees, Terms of Services, and Warranties Issue 10: Data Protection Issue 11: Customer Service & Grievance Redress Issue 12: E-Waste TOOL 8: STAKEHOLDER INTEREST AND INFLUENCE GRID Use this grid to map out the most influential and interested stakeholders. Plot the names/roles of stakeholders in the appropriate quadrants according to their influence and interest. A B C D TOOL 9: STAKEHOLDER CONCERNS Use this chart to identify each stakeholder’s possible concern on the policy issue you seek to address. Rank the level of their concern and formulate responses to those concerns. Policy Issue Stakeholder Possible Concerns Priority Response to Concerns (Low-Medium-High) Point 1 Point 2 118 The Off-Grid Solar Policy Toolkit Point 1 Point 2 Point 1 Point 2 Point 1 Point 2 TOOL 10: PRIORITY MAPPING Use this grid to plot the urgency and importance of policy issues to determine priority issues to address. Place cards for each policy issue in the quadrant of the grid where you think it belongs. I+ U- U+ I = Important U = Urgent I- STEP 3: STAKEHOLDER CAPACITY BUILDING Suggested Time Allocation: To complete Step 3, one month of participation by the lead energy authority. Expected Outcomes: Build capacity on OGS and PAYG. Initiate stakeholder engagement. The Off-Grid Solar Policy Toolkit 119 TOOL 11: MEETING INVITE Consider holding an introductory meeting with AGENDA policymakers less familiar with the OGS sector and 1. National goals for electrification (including goals PAYG products to lay the foundation and gauge and rural electrification strategies) the policymakers’ level of interest and the need for persuasion to engage in dialogue about policy reform. To 2. Importancce of OGS in meeting our energy goals assure the meeting request gets attention, consider who (include and targets) should request the first point of engagement; should it be 3. How OGS enables consumers participation in the requested by the minister to build political will, or is staff- digital economy and financial inclusion level communication more likely to generate a response? 4. Current market data on the use of OGS In your initial meeting request point out the importance of policy coordination among sectors and refer to the 5. Role of PAYG in increasing access to OGS agenda of tool 12. 6. Country comparison rankings as measured by the regulatory indicators for sustainable energy (RISE) and, if, if available, PAYG Market Attractiveness TOOL 12: BRIEFING MEMO/MEETING AGENDA Index Policymakers outside the energy authority may have limited knowledge of the off-grid sector and its 7. Enabling envionment components (3As) importance to achieving universal energy access goals. 8. Overlap of issues (policy issues matrix) You will need to build the case that the sector is important 9. Brief on priority policy issues- 2 pagers drawing on to create political will to engage in a policymaking the discussion of the policy issue in Chapter 4 and process. We suggest that you build a briefing book with the possible policy options for that issue explored data on the issues that can be used in the initial meeting. STEP 4: POLICY ANALYSIS Suggested Time Allocation: To complete Step 4, four months with a series of workshops or working group meetings and to allow time to collect input from stakeholders including the OGS industry. Expected Outcomes: Build a shared understanding of key policy issues in the market. Identify the policy options. Evaluate policy options with input from stakeholders. TOOL 13: MEETING PLANNING FORM You can shape the approach to the exploratory meeting using this planning form. Exploratory Meeting Planning Form Location: Policy Topics: Policy Issue Key Questions Stakeholders Potential Tools Materials Required Facilitator 1. 2. 3. 4. 120 The Off-Grid Solar Policy Toolkit POTENTIAL SOURCES OF DATA FOR BRIEFING BOOK AND WORKSHOPS Energy Policy Inventory: Name of Policy Key Data: OGS Relevant Goals/Targets National Energy Policy Integrated Electrification Plan Rural Electrification Plan Others Market Intelligence: Data: Energy access Source Type of Data Link Government energy authorities Energy access, unserved areas, OGS use Country specific World Bank Global and country data https://data.worldbank.org/ ESMAP Regulatory Indicators for Country level data applied and scored across RISE (esmap.org) Sustainable Energy indicators PAYG Market Attractiveness Index Indicators and tool that can be applied to sort https://www.lightingglobal.org/resource/paygo- data and score market attractiveness for PAYG market-attractiveness-index-2019/ Sustainable Energy for All (SE4ALL) Data tracking for SDG7 https://www.seforall.org/data-and-evidence/ understanding-sdg7 USAID-Power Africa Country fact sheets and assessments https://www.usaid.gov/ GOGLA OGS sales data and trends https://www.gogla.org/publications Lighting Global OGS sales data and trends www.lightingglobal.org Data: Broadband/mobile network coverage Source Type of Data Link Government telecommunications Licensed mobile network providers, Country specific Regulator network coverage, mobile subscribers GSMA Market intelligence on mobile network https://www.gsma.com/newsroom/gsmai/ providers ITU Market intelligence on broadband https://www.itu.int/en/ITU-D/Statistics/Pages/stat/default. coverage aspx World Bank Digital Development Analysis of digital ecosystems https://www.worldbank.org/en/topic/digitaldevelopment/ brief/digital-economy-country-diagnostics-for-africa Data: Financial inclusion and mobile money use Source Type of Data Link Financial Services Regulator/Central Bank Mobile money and digital payment providers Country specific GSMA Mobile money usage and trends https://www.gsma.com/mobilemoneymet- rics/#global?y=2019?v=overview?g=global World Bank Global Findex Country level financial and mobile money https://globalfindex.worldbank.org/ account data Alliance for Financial Inclusion Financial inclusion regulatory initiatives and https://www.afi-global.org/publications/ targets The Off-Grid Solar Policy Toolkit 121 TOOL 14: STAKEHOLDER ENGAGEMENT PLAN Use this chart to identify your plan of engagement for the stakeholders you want to engage on the policy issue. Use tools from Step 2 to help populate some of the data points. Consider creating a working group with the relevant stakeholders as the forum for working through this process. A series of workshops with different stakeholders and sub-working groups that analyze issues or options could be helpful. WHO WHAT HOW WHO WHEN NOTES Name Role in Influence Interest Outlook Strategy Actions Owner Date Notes Project                                                             TOOL 15: WORKSHOP AGENDA Use this sample agenda as a guide for the initial policy dialogue. AGENDA 1. OGS Sector Overview 5. Policy Options- Identification and evaluation • Energy Aurthority presentation on • Policy Options Worksheet importance of OGS and links to other • Cost Effectiveness policy goals • Risk Analysis • PAYG model overview • Policy Option Scoring • Industry Presentations 6. Next Steps 2. Policy Diagnostic Findings or Exercise 3. Policy Prioritization- Set the policy reforms agenda 4. Stakeholder mapping- Who should be engaged for input? (Use the tools from Steps 2 and 3) TOOL 16: POLICY OPTIONS WORKSHEET Enabling ISSUE: [ ] Environment Wait-and-See Light-Touch Prescriptive Component: [ ] Policymakers with Influence POLICY OPTIONS ADVANTAGES Government: Government: Government: OGS Sector: OGS Sector: OGS Sector: Consumer: Consumer: Consumer: 122 The Off-Grid Solar Policy Toolkit DISADVANTAGES Government: Government: Government: OGS Sector: OGS Sector: OGS Sector: Consumer: Consumer: Consumer: Cost/Value [Fiscal] TOOL 17: POLICY COST/EFFECTIVENESS EVALUATION Use this chart to add cards to rank the effectiveness and cost of different policy options. Each meeting participant can be given a chance to rank the policy options. Effectiveness of Policy Options Cost of Policy Options Most effective Most expensive Least effective Least expensive TOOL 18: RISK ANALYSIS All policy options will come with risks and trade-offs. Use this chart to identify and weigh the magnitude of risks of pursuing a particular policy option. Policy Risk Likelihood of Happening Risk 1 Risk 2 Risk 3 High Medium Low The Off-Grid Solar Policy Toolkit 123 TOOL 19: FEEDBACK FORM Use this questionnaire to collect and track feedback from participants after each policy dialogue. Name: _____________________________________ Title: ______________________________________ Organization: ______________________________________ WORKSHOP FEEDBACK: 1. Did you find this workshop valuable? YES NO 2. Do you think that your Ministry will continue to engage in the policy dialog started by this workshop? YES NO UNSURE 3. What did you feel was missing from this workshop? _______________________________________________________________________________________ _______________________________________________________________________________________ 4. Do you agree that for PAYG to scale in [insert name of country] there must be cross-ministerial policy coordination? YES NO UNSURE TOOL X: [INSERT NAME OF TOOL] 1. Did you find the [insert name of tool] valuable? Yes because… __________________________________________________________________________________________ __________________________________________________________________________________________ No because…. __________________________________________________________________________________________ __________________________________________________________________________________________ 2. What could be improved about [insert name of tool]? _________________________________________________________________________________________ __________________________________________________________________________________________ 3. Can [insert name of tool] make a difference / support your policy objectives? YES NO MAYBE 124 The Off-Grid Solar Policy Toolkit STEP 5: ROADMAP DEVELOPMENT Suggested Time Allocation: The champion should lead the drafting of the roadmap and take time to validate it with individual stakeholders, likely taking 2-3 months of time. Expected Outcomes: Document results from stakeholder consultations. Create roadmap to take specific action on policy issues. Develop stakeholder ownership over policy actions. TOOL 20: ROADMAP DEVELOPMENT TEMPLATE Use this tool to develop a roadmap for taking action growth in mobile money availability, shifts in the on policy issues that emerged as priorities through the availability of forex, etc. consultations. Make sure to assign owners and stakeholders for each step of the process on an issue in the roadmap. Look at the role of international organizations such as the World Bank in supporting the government in achieving its Market Context for PAYG goal of expanding energy access through OGS.  Current consumer sales/product availability date: Consult Describe the why of the roadmap: This roadmap is national statistics, statistics from the energy ministry and designed to accelerate and facilitate this expansion by GOGLA’s latest sales data, https://www.gogla.org/off-grid- identifying the current barriers to scale and suggesting solar-market-trends-report-2022-0  policy options that can mitigate those barriers. Within the policy options, the roadmap provides discrete steps to Compare sales to trends in neighboring markets to see achieving the desired policy reform. how your country compares Applying/Testing the OGS Policy Toolkit Note recent market evolutions that could influence the opportunity for OGS but also expand digital financial Sample steps and timeline to develop the roadmap. literacy and access to financial services. For example, Step 2: Identifying the existing policy barriers Step 5: Narrowing of Tool 1: Policy Diagnostic policy issues Status of Current Step 1: Identifying Initiatives Step 3: Receiving relevant stakeholder input on policy Step 4: stakeholders & issues Validating Step 6: Preparing champion priority issues for and facilitating Step 8: Tool 1: Policy Diagnostic second workshop Step 7: Roadmap with the private Tool 3: Roadmap Validation Tool 2: Priority Mapping sector Stakeholder Tool 11: Explore Policy Development Tool 5: Stakeholders concern Options Validating the Mapping Tool 1: Policy Developing Tool 6: Meeting Invite Status of Current roadmap with Tool 4: Diagnostic the roadmap initiatives the stakeholders Stakeholder Tool 7: Briefing Memo/ Tool and receiving relevant for interest and workshop agenda Tool 2: Priority Policy Making feedback from policy option influence Grid 3As Diagnostic Framework Mapping Tool Continuum Mapping champions implementation January-April May June-September October November-December January- March The Off-Grid Solar Policy Toolkit 125 Priority issue and policy option summary No. 3As (Availability, Policy Approach Policy Issue Policy Timeline Policy Stakeholders Affordability, Description Option(s) Accountability) (wait & see, Outcome light touch, prescriptive) TIP: This category TIP: The 3As are the is drawn from the consumer centric issues identified framework applied in in the policy the Toolkit that look diagnostic. at the Availability, Affordability and Accountability of OGS products. 1. [Name the Issue Category] 1.1 Indicate which of the Indicate the Describe the policy Describe the Indicate Indicate the Indicate the [Name 3As is applicable applicable policy issue associated the stakeholders anticipated the approach policy option timeline required for policy sub- implementation outcome issue] 2. 2.1 2.2 3. 3.1 3.2 Issue X [NAME ISSUE] Step 1: Insert first step to achieving policy option Owner: Insert owner of first step Stakeholders: Insert stakeholders necessary for implementation of step [Describe step] Step 2: Insert first step to achieving policy option Owner: Insert owner of first step Stakeholders: Insert stakeholders necessary for implementation of step [Describe step] Step 3: Insert first step to achieving policy option Owner: Insert owner of first step Stakeholders: Insert stakeholders necessary for implementation of step [Describe step] 126 The Off-Grid Solar Policy Toolkit Step 4: Insert first step to achieving policy option Owner: Insert owner of first step Stakeholders: Insert stakeholders necessary for implementation of step [Describe step] Step 5: Insert first step to achieving policy option Owner: Insert owner of first step Stakeholders: Insert stakeholders necessary for implementation of step [Describe step] STEP 6: PLANNING FOR POLICY IMPLEMENTATION Suggested Time Allocation: The time required to complete Step 6 will be determined by administrative rules and choice of policy instrument. Expected Outcomes: Develop a communications strategy to accompany the rollout of the policy change to communicate its intent and raise awareness of the OGS industry and consumers. Create a budget forecast to identify and quantify the costs of policy implementation. Develop key performance indicators and an evaluation framework to measure policy influence on the OGS sector. TOOL 21: KPI AND MILESTONES TOOL Policymakers should set targets to measure the intended effect of policy approaches. This is best done at the time of policy development to assign ownership and responsibility for implementation and to create a process for data collection and analysis to measure policy impact. Use the KPI and Milestones Chart to establish targeted outcomes and assign stakeholder responsibilities. KPIs and Milestones Policy: Desired Outcome Indicators Data Source Data Analysis Publicly Milestones ( ) (Who/ Frequency) (Owner) Available Year 1 Year 2 Year 5 (Y/N) TOOL 22: COMMUNICATIONS STRATEGY PLAN Use this chart to develop a communications strategy for policy rollout. Consider partnerships to expand the reach of the messages and target specific audiences. For example, industry associations could be good communications channels to OGS suppliers, and civil society organizations might be positioned to lead or partner on consumer communication. The government might have channels of communication with other government agencies that can be used to increase awareness and support for the new policy. As part of your strategy, identify the costs and who will sponsor and provide funding to underwrite the communications strategy. The Off-Grid Solar Policy Toolkit 127 Why Purpose What Information Target Audience Target group Who Lead . Partners How Type When Timeframe and frequency Evaluation COMMUNICATIONS BUDGET Type of Per Unit Cost Quantity Subtotal Funder Communication TOOL 23: POLICY IMPLEMENTATION BUDGET FORECAST Use this chart to create a budget forecast to capture the costs of policy implementation and identify funding sources. POLICY IMPLEMENTATION BUDGET (TOTAL) Resource Need Per Unit Cost Quantity Subtotal Funding Source 128 The Off-Grid Solar Policy Toolkit Annex D: Sample Terms of Reference Using the OGS Policy Toolkit to Build an Enabling and understanding of how PAYG contributes to Environment for PAYG Solar Use to Scale national electrification, economic growth, and digital 1. Background development, especially amongst government stakeholders outside of Rural Electrification Around 733 million people around the world lack Agencies or Ministries of Energy. Since a multitude access to electricity, while an additional one billion of stakeholders have a role to play in creating an people are connected to an unreliable grid. The enabling policy/regulatory environment for PAYG off-grid solar (OGS) sector is a US$2.8 billion annual and off-grid solar more broadly, a critical first step is market that served 490 million users in 2021. It to build knowledge and understanding of the sector is anticipated that 41 percent of consumers will and how it contributes to government objectives as access electricity through OGS products by 2030. well as development outcomes and provide tools From 2017 to 2019, revenues grew rapidly at 30 to work to address any issues that are inhibiting the percent annually, while sales volumes grew at 10 scale of PAYG offerings.  percent annually. Revenue growth was driven by the emergence of pay-as-you-go (PAYG) off-grid As a business model that provides electricity and solar. PAYG is a metering technology that enables access to finance leveraging mobile technology, customers to pay for solar lights and home systems PAYG is affected by policies and regulations in the over time, rather than paying the entire cost upfront, electricity, finance, import, data protection, and using mobile technology. Seventy percent of women telecommunication sectors. who purchased solar home systems did so through PAYG financing. The growing reach of larger PAYG Existing frameworks have not been designed to products means that over half of off-grid solar take PAYG technologies and business models into customers now enjoy Tier 1 energy access under the account because the evolution of technology and SEforALL Multi-Tier Framework. business models has outpaced regulation. In general politicians and civil servants are only beginning to PAYG is enabling more and more OGS customers understand the sector, and increasingly recognizing to access higher levels of energy service, its potential. including women and girls. Beyond lighting and phone charging, these customers use OGS to Limited government awareness of and support enjoy the benefits of radio, fans, televisions, for PAYG means there is a risk of new policy or and other appliances that can reduce the time it regulation, or new interpretation of existing policies takes to complete household chores, a burden or regulations, causing harm to the PAYG market. disproportionately carried by women, and can be Government policies can support or hinder the used to generate income. Girls greatly benefit from growth of OGS and PAYG. In the case of PAYG electricity access as well. For instance, girls living products, relevant policies reach beyond the energy in rural areas that have access to electricity are 59 sector to telecommunications and financial services percent more likely than those without electricity as well as broader issues such as data privacy and access to complete primary education by the time consumer protection. An enhanced policy/regulatory they turn 18.  environment for the PAYG market could accelerate growth by de-risking and attracting investment and 2. Problem to be addressed scaling up responsible consumer financing. All countries with energy access deficits have The OGS Policy Toolkit was developed by the formally committed to the goal of achieving World Bank to provide resources and practical tools Sustainable Development Goal 7, including the that can be used by government policymakers, target of achieving universal electricity access, by development agencies, and development or before 2030. An increasing number of countries practitioners. It is designed to help these have developed ‘integrated’ electrification plans stakeholders in identifying policy approaches and that include grid, mini-grid, and standalone off-grid solutions to support the scale of OGS solutions by components. But there is still limited knowledge fostering an enabling environment for OGS products sold using the PAYG model. The Off-Grid Solar Policy Toolkit 129 The OGS Policy Toolkit covers: Conduct a policy diagnostic.  Foundational elements of the PAYG model and Map existing initiatives and stakeholders.  interdependencies with the state of the digital and financial services ecosystems. Set priorities.  How OGS contributes to national electrification and Evaluate policy adoptions with multiple stakeholders. digital economy goals. Develop a policy roadmap to support government How to create a consumer centric approach to policy ‘champions’ with stakeholders. analysis. The particular application of the OGS Policy Toolkit and tools An approach to a policy diagnostic. will depend on the market context. The OGS Policy Toolkit lays out six steps for a policy evaluation, adoption, and Identification of 12 issues that impact the enabling evaluation process. [Note: some or all of these steps might environment for consumers to use OGS PAYG products.  be relevant to your market context]. The OGS Policy Toolkit provides 23 tools including tools that can be used to: 130 The Off-Grid Solar Policy Toolkit POLICY DEVELOPMENT DECISION TREE TOOLS 1. Champion checklist 2. Policy diagnostic START Who else in the 3. “As” checklist STEP 1 What policy Who can lead lead agency 4. Charting internal stakeholder Champion issues seem most needs to be this work? engagement pressing? identification involved? 5. Sample ToR Can your ministry solve the policy issue(s) through its own action? Y jump to step 4 N Know the policymaker(s) of influence to engage? 6. Stakeholder map STEP 2 7. Assessment of existing Stakeholder Map the Stakeholders Evaluate concerns initiatives N identification 8. Stakeholder interest and Rank influence Prioritize engagement influence grid and influence 9. Stakeholder concerns Y 10. Priority mapping STEP 3 Do the policymakers of influence understand the issue(s)? N 11. Meeting invite Stakeholder Y 12. Briefing memo/ meeting capacity building agenda Is there political will to act? N Y Determine the method for stakeholder engagement STEP 4 Have a current mechanism for stakeholder engagement? Policy Analysis 13. Meeting planning form Stakeholder engagement plan 14. Workshop Agenda Policy Development Workshops 15. Policy diagnostic (revisited) Set the agenda 16. Policy options worksheet 17. Policy cost/ effectiveness Identify policy options evaluation Evaluate policy options 18. Risk analysis Gather stakeholder input 19. Feedback form STEP 5 Develop a policy development roadmap Roadmap Create a roadmap Roadmap development template 20. Development Validate roadmap Adopt policy 20. KPI and milestones tools STEP 6 21. Comunications strategy plan Planning for Policy Implement policy Monitor and evaluate 22. Policy implementation budget Implementation forecast Develop communications strategy Development measurement framework The Off-Grid Solar Policy Toolkit 131 3. Objectives and Scope of Work STEP 3: Capacity Building The objective of this TOR is to engage a consulting firm (the The Consultant will design and help the Champion design Consultant) to support the government of [XXXX] in using an approach to building the capacity of stakeholders the OGS Policy Toolkit to evaluate and improve the enabling responsible for energy policy as well as those with environment for PAYG OGS to scale to meet its universal responsibility for the policies in the areas of broadband/ energy access goals.  mobile network access and skills and digital payments/ financial inclusion. The Consultant will also be available to 4. Deliverables and Timeline develop briefing notes and other short pieces of content drawing resources from the OGS Policy Toolkit as needed [Pick the description of the Steps you want completed and covering any issues that emerge of relevance to ensure delete those that are not applicable] a well-informed dialogue. This content will be developed with the intention of increasing knowledge of staff within The Consultant will work with the Ministry of [XX] on its the Champion’s ministry as well external key stakeholders use of the OGS Policy Toolkit to create an inter-ministerial with the goal of raising stakeholder awareness and building dialog that can foster an enabling environment for PAYG capacity before initial roadmap workshops.  OGS offerings. The OGS Policy Toolkit suggests a six step/ phase process of which the following steps are of particular reference for this assignment [PICK FROM THE STEPS]   STEP 4: Policy Analysis – Inter-ministerial Workshops   Through the policy diagnostic and stakeholder mapping STEP 1: process, it is expected that key issues for discussion will be Champion Identification and Policy Diagnostic identified using the diagnostic tools included in the OGS The project will begin with a three-month policy diagnostic Policy Toolkit. The Consultant will work with the Champion to and planning phase. Governments will assign a counterpart organize a series of carefully planned workshops to confirm ‘champion’ to advise on the project and work closely with the priority policy issues, gain support for engagement on the Consultant. It is expected that these champions will be the policy issues across relevant ministries, and explore from the Ministries of Energy, Rural Electrification Agency, or the policy options including the pros and cons of different a similar institution that is well-versed in universal electricity options. Key issues to focus on will be selected based on access efforts through scale-up of off-grid solar and PAYG potential impact and likelihood of success in the short to markets. Using the tools from the OGS Policy Toolkit, the medium term. The workshops will include the use of tools Consultant will work closely with the identified champion in from the OGS Policy Toolkit designed to facilitate in-depth the country to identify key policy or regulatory challenges discussion of pros and cons of policy and regulatory and opportunities.  options. By applying the key tools and processes from the OGS Policy Toolkit, this will help the Champion and other ministries identify which options appear viable by the STEP 2: stakeholders. Stakeholder Identification and Influence Once key issues have been identified with the Champion, The participation of Ministers or other high-level government the Consultant will help the Champion use the tools in representatives will be sought at initial workshops to the OGS Policy Toolkit to conduct a mapping exercise to showcase high-level political support for the roadmap understand which stakeholders would need to be involved process and help to ensure adequate awareness, buy- in the analysis of key issues and development of policy and in, and support for the process from senior and mid-level regulatory options for each area included in the OGS Policy civil servants. Some workshops will be ‘government Toolkit to ensure that diverse views of key stakeholders only,’ bringing together Ministries, Regulators, and other are captured. Stakeholder mapping will explore current stakeholders for frank discussion. Others will involve levels of knowledge, the existing policy landscape as well the private sector and potentially other stakeholders as understanding, awareness, capacity, and support for such as investors or civil society, to enable government the envisioned policy and regulatory options and define stakeholders to hear directly from these stakeholders key success factors and critical elements needed for each regarding challenges, opportunities, and potential solutions. option. Policy diagnostic and stakeholder mapping will Recognized industry associations such as GOGLA and the inform more detailed planning of the roadmap development National Renewable Energy Associations will be actively process. involved. 132 The Off-Grid Solar Policy Toolkit A key ‘process’ outcome of the OGS Policy Toolkit for their proposal. Offerors are requested to present, in application is expected to be enhanced dialogue between their technical proposal, the approach and methodology all stakeholders, including government and the private for carrying out this work, a detailed level of effort chart sector, possibly through a commitment to continue showing their expected chronogram, time allocation and meeting periodically to discuss the market’s development, cost for the development of each of the deliverables, and challenges being encountered, and potential solutions if any assumptions (including travel and accommodation) made ongoing mechanisms for public-private dialogue do not yet regarding the level of effort for each of the deliverables exist. Where relevant, external speakers from other ‘peer’ and the scope of work to be fully performed. However, it country governments may be invited to attend to share their is expected that country nationals will play a key role in experiences and perspectives on issues under discussion. managing the ongoing relationship with the governments. The process should also build off any existing working groups already in place in the market where appropriate. Payment will be linked to finalization and acceptance of key pieces of content. The meetings will provide an opportunity for in-depth discussion of pros and cons of policy and regulatory options, [INSERT PAYMENT TABLE]  as identified in the OGS Policy Toolkit and through applying the key tools and processes, this will help identify which The assignment is expected to commence in [XXXXX, XXXX] options appear viable by the stakeholders. and take approximately [XX] months to complete. STEPS 5-6: 6. Consultant Qualifications Roadmap Development and Policy Implementation Following the workshops, the Consultant will help the The Consultant — a consulting firm or consortium of firms — Champion develop a policy roadmap that addresses the should have at least 5+ years of experience in analyzing off- priority issues identified in the workshops. This will include grid solar value chains, markets, policies, and regulations in specific actions to be taken, assignment of ownership over [INSERT GEOGRAPHY]. The Consultant should demonstrate the issues and expected outcomes along the lines of the knowledge of the latest emerging technologies and business tools included in the OGS Policy Toolkit. The Consultant will models in the PAYG sector. Policy and regulatory expertise then help the Champion vet the roadmap with the ministries from related sectors, such as on-grid energy, telecoms, assigned as owners of each action identified in the roadmap.   digital finance in developing country markets is also highly valued. The Consultant should have deep experience of The Consultant will help the Champion organize a final engaging with governments and other key stakeholders workshop for adoption and public release of the roadmap. such as national and international private sector, civil society, The roadmap will include assumption of responsibility and investors, and donors on policy and regulatory issues in the commitment to implementation by the ministry assigned off-grid solar sector. as the owner of the policy issue. The Consultant will help the ministry develop a communications strategy for sharing The Consultant should demonstrate strong communication progress against the roadmap and help them develop a skills including a grasp of all key technical issues, the ability monitoring and evaluation plan for the specific policy action.  to convey complex ideas simply, and the capacity to draw upon statistical data, stakeholder interviews, focus group The timeline for the activities proposed above is outlined discussions, and other sources to present a balanced and below: well-reasoned analysis. The Consultant should also have strong visual communication skills including the ability to [INSERT TIMELINE CHART] develop high-quality graphics and diagrams to help convey ideas briefly. 5. Budget and Payment Terms The resulting contract will be a [lump sum contract] and the selected Offeror will be required to complete the work The Off-Grid Solar Policy Toolkit 133 To connect with the Lighting Global team: Email: info@lightingglobal.org www.lightingglobal.org