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Saturday, November 17, 2007

Renting Solar energy

In 2001, Fabio Rosa, a pioneer of rural electrification in Brazil, had a flash of inspiration: he would rent solar energy to rural low income families.

Rentals would allow people to purchase electricity with monthly payments, similar to how grid-connected households pay. In addition solar rentals in Brazil are smart business, rentals are not subject to Brazil’s mind numbingly huge sales tax that adds more than 50% to the cost of a purchase.


Moreover, the idea made intuitive sense. “What does it mean to buy solar panels?” asks Rosa. “It means to buy energy for the next 25 years. Who buys food for the next 25 years? You buy food for the next week or month. It should be the same with electricity.”

Rosa began by conducting a market study. He received an initial investment of $60,000 in grants and a combination of soft and commercial loans from the Washington, D.C.-based Solar Development Group, with commitments for an additional $50,000 of financing. STA invested $45,000 of its own research and development funds.

Rosa’s team began by spending eight months surveying 77 families in six rural municipalities in Rio Grande do Sul. The responses encouraged them. Almost 70 percent of the families interviewed spent at least $11 per month on non-renewable energy sources – kerosene, candles, batteries and liquid petroleum gas – about the same amount they would need to spend each month to rent a basic photovoltaic solar home system equipped with lights and outlets, all the necessary wiring, plus the boxes, locks and saints.

Rosa began hammering out a business model. He dubbed the venture “The Sun Shines For All.” Solar cells With assistance from the Ashoka-McKinsey Center for Social Entrepreneurship, he spent two years developing a business plan, analyzing the market, risks and competition, conducting a sensitivity analysis and sketching out pro forma cash flow and income projections for ten years.

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