It is now well established that increasing access to modern energy services plays a key role in spurring local economic development and addressing poverty. In many isolated rural areas, the least cost approach to providing electricity services will be through the provision of solar PV systems. This is particularly true when it is a priority to provide modern energy services to isolated social institutions. Such provision also provides poor households with 'proximate access' to modern energy services.

However, previous solar PV projects/ programs have often failed to establish sustainable solutions for rural communities. They have not adequately addressed the high capital costs of solar PV systems, nor the complexities associated with small scale and dispersed rural markets. This experience has motivated the development and implementation of the Sustainable Solar Market Packages (SSMP) approach, which is already being successfully implemented in the Philippines and is now being implemented in Tanzania.

The SSMP approach draws on lessons learned from previous programmes and projects. In order to overcome the transaction costs associated with doing business in remote areas, the SSMP concept recognizes that sufficient PV business operations is essential to securing commercial viability. Hence, the SSMP comprises the following key features: Bundling of wards/villages into commercially viable packages (SSMP packages) that are bid out on a competitive basis; Each SSMP package comprises a baseload of community facilities (village halls, health facilities, schools, public light, and water pumping);

• Innovative subsidies to develop the private market and to buy down the capital cost and improve affordability;
• Strong focus on after-sales services and continued marketing (including contractual obligations and performance securities)

ECON has been assigned by the Ministry of Energy and Minerals to develop 3 to 4 SSMP packages in Tanzania. ECON has a long history and experience with working in Tanzania mainly from the 3.5 year long Sida-supported institutional support programme to the MEM, that was concluded in August 2006. ECON provided assistance to the MEM on inter alia establishing the Rural Energy Agency (REA) and the Rural Energy Fund (REF) including developing the REAAct, the REA Draft Operational manual, REA strategy targets, Preparation of Priority Rural Electrification Projects (PREPs), a new Electricity legislation, a Power Sector Reform Strategy and the Draft Rural Energy Policy.

The SSMP assignment started in early March with an Inception Phase in which the Rural Energy Working Group agreed to start up the assignment in the Rukwa region and Sumbawanga Rural district. The fieldwork data collection will be conducted during April and includes a public facilities survey and assessment of the private market. Next step in the assignment includes developing standard solar PV system designs for public facilities, preparation of a model business plan, targets and budget requirements over a five year period, implementation plan and bid documents for the SSMP. The bidding process is planned to start late 2007.

In sum, the SSMP aims to establish a sufficient market size so as to attract private sector contractors, and achieve a sustainable development impact. Donor support to this approach allows for a larger number of packages and/or connections per package - thus contributing to increased rural access to modern energy services. If designed well, donor support will contribute to leveraging both private investment and local public funding, as well as an overall deepening of the local solar PV markets.