Close, yet so far away from the grid

Piura’s rural dwellers, in Northern Peru, are reaping the benefits of a solar franchising venture.

Up until a few months ago Emilio Durand (35), worked as a night guard on a vineyard in the village of Las Vegas, a rural area in the Piura province of Northern Peru.

Today he is one of the most successful franchisee for Rural Solar Energy, the brainchild of Emprenda (Argentina), registered in Peru as Vivencia, a social enterprise that won financial support from GVEP International and GTZ (German Aid Cooperation), through the 2009 IDEAS Energy Innovation Contest.
The purpose of this project, now in its pilot stage, is to create a business model based on small franchises providing solar energy for people living in rural, poor areas in Latin America, who do not have access to the national electric grid.

Emprenda was set up in 1999 in a remote area in the North of Argentina with a population of 1.5 inhabitants per Km2. To date the company has managed to install 1100 solar panels that can generate between 40 and 50 watts, reaching six out of every ten households.

While in Argentina Emprenda has been focusing primarily on larger solar energy systems for households, in Peru a whole range of products are on offer, including portable solar systems for people with lower income. “We believe that in this way we will be able to reach ten out of ten households”, says Patricio Boyd from Emprenda.

“In Argentina, credit advisors of our rural financial institution employed by Emprenda and trained to install the equipments”, Mr. Boyd explains. “In this case, instead of having employees we work with people from the local communities to whom we give a franchise. They put in the infrastructure, their business, their house, their local know-how, and we provide them with the brand, the merchandising, the training and the products. Basically we are setting up joint society.”

When GVEP International spoke to Emilio Durand a few weeks ago, he explained that although his business had seen a slow start, since taking over the franchise at the end of April, “I’ve sold a good amount of portable solar products in cash (the solar lamps sell for US$35-) and I’ve also opened three credit lines for solar panels”.

The village of Las Vegas, where Durand lives, is ten minutes drive from Piura, the most important city in Northern Peru; nevertheless his district is not connected to the electric grid.

For Emilio and his family, (wife Elvira and daughters Ana Belen, 4, and Kyosty Sabita, 2), electricity has brought major changes in their lives. Before the arrival of electricity, they depended on a battery that fed four light bulbs and had to be taken somewhere else to be charged every time it went flat.

Today, Emilio has a solar panel installed by Emprenda-Vivencia in his home. The solar panel also serves as demonstration for his clients. Thanks to this equipment he can now power ten light bulbs at home and a black and white television set. “The first night we had electricity, our youngest daughter Kyosty Sabita , who was so accustomed to the dark, got scared and crying demanded to be taken ‘home’. She thought she was somewhere else!” – remembers Durand with amusement.

Emprenda-Vivencia started this pilot project in Peru in January 2010 and sales started picking up in mid April. By February 2011 – date of completion of this pilot phase – they expect to have six franchisees. At present they have five.

Although it is not Durand’s case, most of the franchisees are people who have already other means of earning an income.

One is Orlando Chávez (30), who with his wife Josefa, own a small grocery shop in their home in the district of El Tallán, 50 kms, south of Piura.

Since getting the franchise, sales in their shop have increased thanks to the small solar lamp, which enables them to stay open after dark. The solar can also be used to charge mobile phones.
“Electricity is the eternal political promise of the mayors in this area”, says Mr. Chavez. “People are disillusioned because every time a new mayor is elected all the electrification plans gets forgotten.”

In his shop, Orlando Chávez keeps a small stock of solar products he can show to his clients. “People are in awe when they see the light and, if they have enough money they’d purchase the solar lamp”, he says.

“We explain to our clients that these solar products can be used not only illuminate their homes or to work in the fields at night, but can also improve their quality of life. Kerosene, which they use now, is notoriously dangerous for causing fires. It is also harmful to their health because of its toxic fumes.”

Orlando Chavez is using his marketing knowledge to make his franchise successful. Following a local market research, Mr. Chávez assures that “there are great expectations and with a bit of hard work the business can go far”.

Patricio Boyd says in three months of setting up the franchises in Peru, he has learned a lot about the reality on the ground. A few of their assumptions have been challenged he explains: “for example, the learning process of the franchisees has been much slower than expected. This is because most of them have other businesses to look after and the franchise is only an extra activity for them. Furthermore, they don’t learn as much from a Power Point presentation, as they do through a more hands on experience.”

Nevertheless, “we are satisfied and it looks like the business model is going to work”, Mr. Boyd says.

The pilot project in Peru has made Emprenda-Vivencia realize they can reach more households if they diversify the products on offer. Having taken that in, Emprenda is thinking of introducing portable equipment, such as low-cost solar lamps in Argentina, where only solar panels – that are harder to place, due to their price range – are currently available.