In the two months since buying her solar water pump, Mama Vero’s small farm in Morogoro, Tanzania has gone from being a parched stretch of earth with withering plants to a blooming crop of hot chilies ready for the market in the capital, Dar-es-Salaam. The rains were late this season, and without her solar water pump (SWP), Mama Vero would have had to write off the entire growing season as yet another loss. (Note: “Mama” is a term of respect and endearment in Tanzania.)
Solar water pumps are not a new technology. However, declining costs in solar panel prices and new business models have made SWPs more accessible and affordable to customers. That market includes the roughly 500 million smallholder farmers worldwide, who own small plots of land and rely almost exclusively on family labor to grow subsistence crops and one or two cash crops.
Innovations in pump financing and technology are making it possible for rural farmers in South Asia and sub-Saharan Africa to transition from diesel and manual irrigation methods to solar, improving livelihoods and mitigating climate impacts. New research we conducted in collaboration with 60 Decibels surveyed 375 SWP customers in East Africa and found 81% of respondents believed their pump improved their quality of life. One customer said, “I managed to grow a bigger garden last year. This has increased my income which I have used to pay school fees, add more cattle, and pay for all the basic needs for my family.”
Scaling the use of solar water pumps can contribute to many of the Sustainable Development Goals. They enable greater energy access (SDG7), but their potential to improve productivity and improve access to water for households extends their impact to achieving zero poverty (SDG1), zero hunger (SDG2), gender equality (SDG5) and clean water and sanitation (SDG6).
Donors recognize this and we have seen a significant increase in philanthropic and development agency interest in support of market growth over the past two years. Our organization, CLASP, is the co-secretariat of the Efficiency for Access Coalition, which is comprised of 14 donor organizations working to scale markets and reduce prices for high performing off- and weak-grid technologies, including SWPs. Ten of these organizations currently support programs or companies that develop markets for SWPs. CLASP, as co-secretariat of the Coalition, is proud to support and implement many of these programs, including the Global LEAP Awards and procurement incentives for SWPs, as well as the DFID-funded Low Energy Inclusive Appliances (LEIA) Program, which we co-manage with the Energy Saving Trust.
The market for solar water pumps is expanding rapidly. New startups delivering small, low-cost pumps are scaling up operations. For example, off-grid solar companies like Futurepump and SunCulture have added SWPs and other productive assets to their portfolios, leveraging their distribution channels and pay-as-you-go (PAYGO) financing platforms. Finally, several large multinational companies are exploring the design and distribution of smaller, lower-cost pumps to serve untapped market segments.
In theory, expanded product and financing options should foster a competitive market that offers customers a range of durable and efficient pumps, and sufficient after sales support. Yet in many parts of the world, sales remain low or nonexistent, causing many to ask: Why haven’t SWPs substantially penetrated the smallholder farmer market?
KEY CONSTRAINTS: MARKET ECOSYSTEMS, AFFORDABILITY, AWARENESS
Despite increased attention from donors and investors, barriers constrain the growth of this market—including affordability, low levels of consumer awareness, and lack of accessible and patient capital to enable companies to scale. In addition, the insular structure of government bodies that are crucial to supporting market growth (e.g. ministries of agriculture, water and energy) inhibits collaboration and risks inadvertent market obstruction through siloed policymaking and planning.
Very few farmers have the ability to purchase pumps with cash. Without affordable financing, smallholder farmers are unable to afford SWPs. Our forthcoming study with Dalberg Advisors found that only 13% of smallholder farmers in sub-Saharan Africa can afford a SWP. And this assumes that all farmers have access to credit to purchase the pump, which is not always the reality. Another Efficiency for Access study, which surveyed over 400 farmers in Tanzania, found that affordability was the top consideration when purchasing an irrigation system.
We also found that awareness of solar pump technology is extremely low and uptake practically non-existent. Reaching scale will require increasing awareness of the existence and benefits of SWPs, and ensuring affordability and access to credit for consumers.
Public and private investment in companies and programs that are building the market for small-scale irrigation solutions remains low. There have been some recent investments in companies with business models that target smallholder farmers, for example EDF’s investment in SunCulture and Acumen’s investment in Simusolar, but overall underinvestment persists. In many cases, the investment community doesn’t know where to start in expanding their investment portfolio to include off-grid appliances and ‘productive use’ equipment. To address this gap in market intelligence, we partnered with Acumen to create the Efficiency for Access Investor Network, a group of over 20 investors interested in investing in energy companies focused on SWPs and other productive use technologies. Together, we provide investors with the technology and market insights they need to invest with confidence.
CLASP’s early work with the Efficiency for Access Investor Network and Donor Coalition reveals an appetite for investment, but few attractive and scalable business models. Historically there have been few viable business models to deliver energy services to rural farmers, the customer base for most solar home system (SHS) companies. In a bid to offer their customers a much need solution, many solar water pump companies have turned to the PAYGO model, as discussed in other NextBillion articles. Offering PAYGO has led many companies to conduct in-house financing, creating vertically integrated companies with increasingly large portfolios. However, many investors favor a highly specialized company over a jack of all trades. There are some concerns that vertically integrated companies may lack the technical expertise to develop and deploy agricultural technologies and sustain scale.
The ideal approach for companies may lie in partnerships. For example, SWP companies could export their financial activities to organizations equipped to handle the complexities of smallholder debt management and payment collection. This separation would allow investors to accurately assess a company’s economic viability and further demystify an unfamiliar industry. By working with other specialized experts, SWP companies can leverage new strengths and remove inefficiencies in their supply chain, allowing them to focus on doing a few things well.
- Tackling the market challenges must start with up-to-date, reliable, and actionable market intelligence.
To size the market, Efficiency for Access has partnered with GOGLA to collect data on sales of SWPs and other appliances, all for the first time. We’re synthesizing this and other research to deliver a much-needed snapshot of macro-level market trends. Next, we hope to better understand the SWP customer: their usage patterns, behavior triggers, and socioeconomic impact. Understanding customers is easier said than done and will require longitudinal impact studies to understand customer usage patterns, and field testing to better understand a pump’s performance in a real world setting.
- Understanding the route to affordability is a good starting point for market development programs.
Efficiency for Access worked in concert with over 20 organizations to develop a technology roadmap for SWPs. The roadmap identifies potential levers to enhance the affordability and efficiency of pumps. Benchmarking these gains is crucial to market growth. The Global LEAP Awards’ test method is the first attempt at a common framework for evaluating SWPs at a scale suitable for smallholder farmers. Efficiency for Access will make all performance data available on Equip Data, which also houses performance data for off-grid televisions, fans and refrigerators.
- Providing working capital for businesses and attractive opportunities for investors will help accelerate the market.
For the under-capitalized distributors and manufacturers, we are working with Efficiency for Access Coalition members Powering Agriculture and Energising Development (EnDev) to provide procurement incentives for winners and finalists of the Global LEAP Solar Water Pump Competition. For the investors looking for scalable business models, we will carry out research to pilot a partnership model that leverages climate insurance linked with distributor financing as a mechanism to unlock new consumer financing models
- More work is needed to bring the SWP market for smallholder farmers to scale.
In addition to the Coalition’s work, the market needs the following: Increased awareness of SWP technologies, further pilots of scalable business models, increased provision of cheap and patient capital, research directing companies to high potential geographies, and reduced silos across the agriculture, energy and water sectors to ensure coherent policy and planning accelerate the market.
Scaling this market means that millions of rural farmers like Mama Vero can be increasingly agriculturally productive, economically secure and climate resilient.