In the “Productive Use Report” the Access to Energy Institute evaluated ten different agriculture-related business cases for their potential to be successfully operated and scaled when using solar power. A business model was developed for each technology use-case to understand its profitability and barriers to adoption and scale. These findings are presented in detail in the individual sections.
In addition, however, five variables are described, which must generally be considered for the successful use of solar energy in the area of “Productive Use”:
1. Earnings per Acre: Supply as a Limiting Factor
The earning potential for an agricultural processing business is always limited in some form by the surrounding population and cultivation. For businesses where the service is used for the entire harvest, the income earning potential will be limited by the acreage.
Businesses that earn more per acre are less dependent on scale and thus more likely to be successful in remote areas or in areas with competing products. These kinds of business are well-suited to areas with high agricultural productivity, regardless of whether there is a dense population present.
We estimated the earning potential of services provided on a per-acre business and found that it closely tracked with our assessments.
2. Earnings per Household: Demand as a Limiting Factor
Does a farmer growing maize on 100 acres consume 20 times more maize flour per year than a farmer growing maize on 5 acres? No!
Some businesses are not improved by serving farms of bigger size and having more material to process. While services like maize shelling depend on the local acreage and scale by land area, services like maize milling depend on the local consumption and scale by population.
This insight is particularly relevant for productive-use businesses that provide food-related services. Demand-limited businesses are best suited to densely populated areas rather than areas with high levels of cultivation: in cases like these, it is better to serve 100 small farms than 1 large one.
3. Market Location: What is the final destination for the product?
The ultimate sales location for the end-product of any processed goods plays an important role in whether a processing technology should be solar-powered. If the customers for products of the processing are located on-grid, it is less advantageous to shift the processing off-grid where costs are higher.
A clear example of this is with rice milling. For rice that is consumed in the household (i.e. the market for hulled rice is off-grid), it is an advantage to have a nearby rice huller that can be used regularly to mill small amounts of rice.
However, for rice that is sold to traders and brought to urban markets (i.e. the market for hulled rice is ongrid), the rice is better off being processed at an on-grid rice mill, which is faster and offers additional value-add services.
4. Transport Load: Volumes and Density
Since solar systems are usually not portable, transportation is an important consideration for any
Services that are used for small volumes of material face fewer transport issues than services that are used to process large amounts of material. For example, a solar powered maize shelling business would require a farmer’s entire harvest (2-3 tons per acre including cobs) to be transported at once, which is a logistical challenge. Maize milling, however, requires an average of 7 kilograms of maize to be transported per household per week, which presents its own set of challenges but is plausible without access to cargo vehicles.
Ultimately, transport is an issue that can be overcome with time or money. But is it worth the trouble? One way to think about this is if a customer goes through the trouble of moving a ton of material to an agro-processing business and back, what is the value of the services they expect to receive?
In some instances, the value of the services justifies the transport. In others, not so much.
5. Essential Processes vs. Consumer Goods
Some of the productive-use businesses provided services that were more essential than others: milling flour and rice is an important service for small-scale farmers, whereas drinking juice and eating dried fruit is relatively more of a luxury.
It is difficult to generalize the demand for consumer goods marketed in off-grid areas, which is why productive-use cases such as juice-making were considered conditionally productive.