1.
Business models for
smallholder solar-powered
irrigation in Ethiopia
Dr. Miriam Otoo
International Water Management Institute
April 12th 2018, Rome

2.
Solar pump-based irrigation in Africa
• Significant potential for
small-scale irrigation in
sub-Saharan Africa for
improved food security
• Increased farmer
investments in irrigation
technologies
• Limited access to energy
for pumping water –
barrier
• Solar energy-based pumps
– ‘cost-effective’ and
‘clean’ approach for
irrigation in Africa

3.
State of solar-powered irrigation
 Increased government and
donor investments – pilot scale
 Projects limited to a few
farming communities who
benefit
 Limited technology uptake and
scaling up:
 Unsustainable impact
Figure 9: Farmer with improved dual
purpose cowpea.

4.
Business thinking: Why?
Most donors envision investment plans which do
not require their continuous support for large-scale
impact.
Donor
Support
$
Intervention
Sustainable
impact
$ $ $
Sustainable
impact
Donor
Support
Market-
driven
Mechanisms
$
Intervention
$ $ $

5.
How do we achieve this?
– Leveraging donor investments for up-
scaling necessitates the leveraging of
(local) private sector capital (incl. farmers)
– Incentives for private sector participation
– Development and promotion of
innovative business models that
represent sources of revenue
generation and benefits for all relevant
actors

6.
Methodology
Core:
• Business model approach
• Multi-criteria
assessment framework
 Suitability mapping
 Environmental
sustainability
 Institutional, policy
and regulatory context
 Finance mechanisms
 Technology supply
chain
 Economic
sustainability

7.
Application: Case of Ethiopia
Mapping suitability of solar
energy-based irrigation with
GIS:
 Constraint analysis based on
multiple variables (e.g., slope,
irradiation, rainfall, etc.)
 Scenario development to
assess suitability (depending
on threshold values) for
groundwater and surface
water
 Based on water source and
technical constraints,
potential suitable area
estimated
 Method allows tailored
mapping to different priorities Figure 1: Suitability based on groundwater depth up
to 25 m.

8.
Financing
• Access to financing continues to be a major challenge to
scaling-up agricultural technologies.
• Incentives available to private entities for investing, but
details are not widely known as information often
communicated to limited group of institutions and
organizations rather than as regulations.
• Rural MFIs may be most suitable financiers however do not
reach all regional states (e.g. Somali and Afar states).
• Borrowers face:
 High interest rates of 15 – 24% per annum
 High transaction costs
 Unfavourable repayment terms

9.
0
50,000
100,000
150,000
200,000
250,000
Drip-Pepper Furrow-Pepper Overhead-Pepper Overhead-Cabbage Overhead-Carrot Overhead-Fodder
NPV
Discount rate (15%)
Discount rate (18%)
Discount rate (24%)
• Investments in solar irrigation pumps can be profitable, depending
on crop type, type of water delivery system and cultivated area
• Investment in a solar pump will be more profitable and effective
when used in combination with a drip irrigation system
• Increased returns with increased cultivated area under pepper
production
Economics

10.
1: On grid: SPICE – Dhundi, Gujarat, India 2: Off grid: Irrigation Service Provider (ISP
Model)– Bihar, India
4: Decentralized grid: Solar Irrigation +
Home enterprise
3: Off grid: Solar Micro-irrigation – Ethiopia,
Ghana, Africa
Range of solar power irrigation business models

11.
1. Out-grower or insurer scheme model
• Challenge
- High risk of crop failure due to changing weather patterns
- Limited technology adoption to mitigate risk as most
farmers are poor
• Solution
- Investment in technologies by other stakeholders
interested in smallholder success – out-grower companies,
crop insurance companies, governments…
Business model scenarios for solar pumps

12.
Success drivers
• Farmers: Lower risk of crop failure, increased
water-use efficiency and cost savings
• Contract farmers/Out-growers: More reliable
crop supply incentivizes provision of free or
subsidized pumps to associated farmers
• Insurance providers: Lower risk or insurance
cases incentivizes investment (pump at a
subsidized rate to clients)
Out-grower or insurer scheme-based business model

13.
2. Technology supplier business model
• Challenge
– Limited access to financing stunts technology
adoption
• Solution
– Technology suppliers offer solar pumps coupled
with financing (via cooperation with financiers)
– Back-ended credit guarantees to mitigate risk to
technology suppliers.
Funded schemes operated by independent entities lead
to higher success rates
Partial guarantee funding
– Lease-to-own: mitigates prohibitive upfront costs

14.
Technology supplier business model
Success drivers
• Reduced prohibitive upfront costs
• Loan recovery
• Tailored financing to farmers’ needs
(e.g., repayment schedules)
• Relatively equal distribution of risk
amongst scheme (government), lender
and borrower

15.
• Feasibility potential for additional business
model scenarios
• Articulating research results in a way of interest
to key stakeholders (particularly private sector)
• Business model piloting with private sector
(solar irrigation technology suppliers) and
monitoring
• Mapping and analysis of solar irrigation supply
chain and model development for other
countries
Ongoing and future work

16.
THANK YOU
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