DATABASE

Case study

Luciérnaga, LLC

ongoing



Country
Guatemala
Nicaragua
Honduras
El Salvador

Budget
500.000 - 3M $

Year
2013


Issue

Solutions

Link
www.luciernagasolar.com


Abstract

Luciérnaga, LLC is a wholly owned subsidiary of the nonprofit organization Trees, Water & People (TWP) that is scaling commercial distribution of off-grid solar lighting products, thereby targeting the development challenge of energy poverty in Central America where approximately 1.5 million households lack access to electricity.


Project Description

In Central America, 7.4 million people live without access to electricity, and millions more have unaffordable and unreliable access. Luciérnaga is a supply chain company that distributes small (<15W) solar powered technologies that meet lighting and device charging needs for energy poor populations. The project’s primary objective is to provide rural markets in Central America with affordable, durable lighting products to reduce energy expenses, protect health, increase productivity, and create new income. Solar household systems (SHS) can light an entire home with three to four lights, two USB charging ports and 3-5 days of battery storage while displacing kerosene, candles, alkaline batteries and cell phone charging costs, which can cost up to USD$28 per month. A SHS eliminates the majority of these expenses, delivering a rapid return on investment while providing clean energy and saving each family hundreds of dollars annually. One of the challenges faced in this region is creating a reliable supply chain to dispersed and remote markets. Last-mile distribution is complex, unpredictable and expensive – roads can become impassable, mobile communications unreliable, and many rural households have no access to financing. Luciérnaga resolves this challenge by leveraging trade law and bulk purchasing to lower shipping costs, and by leveraging the presence and services of a vast network of rural institutions cultivated over 16 years by parent company Trees, Water & People.


BENEFICIARIES

The primary beneficiaries of this project include families in Central America living off the electrical grid who have chosen a solar household lighting product as an alternative way to light their homes, as well as those earning an income from the sale of Luciérnaga’s products.


Results

Since launching this program in January 2012, Luciérnaga has sold approximately 4,500 solar lighting products in Central America, providing safe and cost effective illumination and device charging to more than 22,000 people. These solar lights help children study at night, make small cottage industries more productive, reduce families’ energy costs, and offer new income opportunities to hundreds of vendors in rural areas. Vendors are generally extensions of other rural institutions, be it a coffee cooperative, a small general store or a school. By cultivating capacity in an existing workforce to both promote product and support customers, we keep costs low and create a new cadre of renewable energy promoters in rural areas. Working with agricultural cooperatives has allowed us to use their existing credit programs to finance larger products to the end user. Ultimately, this program will yield proof of operations data required to request social investment for further growth.


Business Model

Luciérnaga is a wholesale company that purchases product in bulk from manufacturers in China, then exports them to a Free-Trade Zone warehouse in El Salvador, from which shipments are delivered by truck to our other Central American markets. This permits us to cost-effectively serve several small markets without creating separate supply chains for each. Product is received by a TWP partner in each country, and then sold wholesale to rural institutions who sell the product to the end customer.


Lessons Learnt

While launched as a supply chain company delivering product in bulk to wholesale customers in various markets, we were required to become involved in additional parts of the supply chain to be effective. Vendors required more training, logistical reinforcement, marketing support and warranty management than we had planned, and product failures from a manufacturer defect required significant additional resources. Adversity struck in other ways, with crop disease and drought reducing liquidity in our markets, and extreme insecurity along the entire value chain. In all, external factors will affect the level of direct support you are able to offer customers, and should be built into budgets.


Key Feature

The path to scale requires a blend of context specific financing instruments and partners, consistent supply chain execution, solid distributor partnerships, robust data management, and new business development. This program imports solar lights and cell phone chargers in bulk and sells them to a trusted network of NGOs, small businesses, and cooperatives across four countries. These organizations have significant reach into rural markets and financing options for residents of rural communities. Our well established implementing partners provide warehouse infrastructure, logistical support, and unmatched market access, and act as our eyes and ears on the ground to deliver us customer feedback. This information is then transmitted to manufacturers, making us a vital conduit for both product and market data in the supply chain. Access to rural markets is only one part of a successful enterprise selling distributed energy – providing a complete customer experience is the bigger challenge.


Other significant information

Luciérnaga draws on over two years of experience selling solar energy products in Central America, training a sales force for household solar lighting systems under 6w. Compared to conventional energy sources, products in this size class are the most cost effective, but they also are the most difficult to sell to low-income populations due to relatively high upfront costs. Luciérnaga is the only solar energy wholesaler providing supply chain support from manufacturers to the last mile in Central America. It operates by leveraging organizations and individuals that already work and live in off-grid areas. We have seen that a quality consumer experience including tailored financing options, proper installation, follow-up services (ex: sale of replacement parts and accessories, battery recycling), and warranty support is the surest way to build consumer confidence, increase demand, and deliver higher value throughout the household solar value chain in developing countries.


Main Donor

ECPA
(Government)

Implementing Actor

Trees, Water & People (NGOs)