59.4 Technology Transfer Projects and Institutional Development in Developing States: Success or Failure of Solar Home Systems in Rural Africa

Masa Kovic , Centre for International and Business Law, Ljubljana, Slovenia
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    International environmental law documents call for technology and knowledge transfer from developed States to developing States as one of the measures to mitigate climate change. There are endless possibilities for different technology transfer projects, from building and setting up wind energy centrals to enabling rural electrification with the use of solar power. However, the projects established under these measures all focus extensively on the amount of greenhouse gas emissions reduced. It is obvious that a technology transfer project based on acquiring energy from solar power will be unsuccessful in a developing State where there is little sun, since the reduction of emissions will be marginal. Nonetheless, it is generally far less clear that such a project might be equally unsuccessful in a developing State where there is an abundance of sun all year round and the greenhouse gas emission reductions from the project would be extensive.

    This research paper demonstrates that while the amount of greenhouse gas emissions reduced is the basic element for approval of a project, the success of a project in a developing State lies in the project’s conformity with the institutional system in that State. The findings are based on a comparative research of two different models of solar home systems [hereafter SHS] in rural areas of two African States with different institutional development.

    Electrification has often been promoted as one of the backbones of economic development in Africa, as it brings many benefits to the population of developing countries. From the literature on rural electrification, the SHS seem to be preferred over the other insular sources of electricity, with several other advantages, not just the reduction of greenhouse gas emissions. Thus today more than 600,000 SHS have been installed in the developing world. In Africa there are currently two different user models of SHS established: “fee-for-service SHS” model and “market SHS” model. Under the “fee-for-service SHS” user model, SHS are provided by a local Energy Service Company in exchange for an installation fee and monthly consumption fees. This model is in operation in Lundazi, Zambia. Under the “market SHS” user model, the SHS is bought by the user on the market under commercial terms. The user has start-up expenses with the initial purchase of the system and with technical support, such as installation, maintenance, repairs and renewal of batteries. The user does not have to pay a monthly fee for the produced electricity. Such a model is in operation in Kenya, which is also considered to be the most developed SHS market in Africa. Why is the “fee-for-service SHS” the most appropriate model for Zambia and why the “market SHS” model is more effective in Kenya?

    The answer lies in the different institutional development in these two States. The data of the World economy rankings show that in the category of enforcing contracts, Zambia is ranked 86th and Kenya 107th out of 178 world economies. However, in the category of getting credits Kenya is ranked 13th and Zambia 97th.  This data supports the findings that in Zambia the legal institutions and judiciary are more developed than the financial institutions. This means that contract enforcement mechanisms are strong and thus contracts between users and the Energy Service Companies are well respected resulting in regularly paid fees for electricity. Hence, the “fee-for-service SHS” model is very effective in providing wireless electricity in Zambia. Due to inaccessibility to credit for the rural population in Zambia, an unsubsidized over-the-counter market in SHS would not function, no matter how great the emission reductions from such a system would be. The situation is contrary in Kenya, where the financial institutions, especially the access to loans, are well developed. The rural population has access to loans for the purchase of SHS. This enables the unsubsidized market in SHS to flourish. While the respect for rule of law is lower in Kenya and corruption a big problem, the “fee-for-service SHS” model that requires respect for contracts and agreements would not function.

    Nevertheless, the fact that the research on SHS concentrates on rural Africa, the abovementioned findings can be applied also to other areas of the World and to other technology transfer projects. Namely, the importance of this research lies in its illustration that the success of a technology transfer project is not dependent only on emission reductions, but also on the accessibility of the project to the targeted user. This latter requirement however, depends on the how well the project takes into account which institutions are developed in a State and how well they function.