Project Name: Community Managed Energy Service for Vegetable Market Chain (CEVeM)
Timeframe: April 2015 to February 2019
Sector: Vegetable farming and Solar powered irrigation
- Market mapping of both the vegetables market and the irrigation system to uncover other supporting services and enabling environment needed for success.
- Partnership with a social enterprise (not fully for-profit) entity to design a multi-year business model with a fixed rate of return and reasonable rates.
Use cases covered by this case study:
Tools used in this case study:
Practical Action Nepal worked with SunFarmer, a social enterprise that offered financing and technical implementation of a solar-powered irrigation solution for vegetable farming in a remote district. The business model was developed in close collaboration, with the added benefit that SunFarmer was willing to take risks to serve rural farmers.
The team worked with farmers and traders to undertake Participatory Market Mapping for different vegetables to select those with the most potential for economic growth and income. The community selected a mix of vegetables that catered for different growing seasons, seasonality of demand, price, market access and water requirements.
The Economic Analysis involved a projection of the amount of water used over the lifespan of the project, compared to the capital and operating costs. The business model required an up-front grant from Practical Action and capital investment from SunFarmer. Farmers would pay a fixed monthly water tariff payment assuming water was delivered throughout the growing season. This model was designed to have a moderate return for SunFarmer (15% Internal Rate of Return). A community irrigation committee was formed from the users to oversee the irrigation scheme, liaise with the hired operator, and raise concerns from the community. The project facilitated participatory planning sessions with farmers, the committee, SunFarmer and local government to agree on roles and responsibilities and to ensure the contracts were enforced.
Throughout implementation of the scheme, several challenges arose. One was a significant earthquake in 2015 which meant farmers were unable to pay for the water. In 2017 a significant flood damaged the pumping equipment – while there was some insurance, farmers found it difficult to be repaid because of the long documentation process. Overall, these external shocks led to significant delays in water fee payment, which lowered the actual rate of return for SunFarmer.
Throughout the course of implementation, there have been unresolved disputes between farmers and SunFarmer, with each side blaming the other for disruptions in the availability of irrigation. Contractually, this meant that during some growing seasons, farmers were not required to pay (because the water wasn’t available when it was needed). Another complicating factor has been the expansion of the electricity grid, which increased farmer access to irrigation. The range of other alternatives included some that are cheaper than the SunFarmer system which fixed its fees at the time of construction. Overall, the farmers have benefited – even if the company may not have.
In retrospect, a few adjustments to this intervention may have helped to mitigate some of the issues that have arisen:
- The financial projection could have presented a range of scenarios that factored in the risk of floods, disasters or climate change that may have led to disruptions to water delivery, and therefore the water tariff paid.
- The contract between farmers and SunFarmer could have been designed to better align incentives for shared ownership of maintenance and transparent information flows to keep the system running smoothly all year round.
- The strategic planning could have included a scenario where the electricity grid was expanded to reach the community, introducing an alternative source of energy. This may have allowed SunFarmer to consider options to adjust the pricing model in this scenario, allowing them to be more competitive with the grid electricity, and mitigate risks of a lower rate of return.