Off-grid solar continues to expand

The off-grid solar sector has shown resilience in the face of pandemic-related challenges, with 70 million people gaining access to electricity from early 2020 to the end of 2021. However, the ability to pay for solar energy kits has taken a hit.

October 19, 2022 Marija Maisch

Image: Power Africa

From pv magazine Global

Despite the pressure the pandemic has placed on supply chains and income levels, the number of people who source electricity from solar energy kits has continued to grow and has now reached 490 million.

According to the “Off-Grid Solar Market Trends Report 2022: State of The Sector” report – published by the World Bank’s Lighting Global, International Finance Corp. (IFC), GOGLA, Efficiency for Access Coalition, and Open Capital Advisors – the number of people who use solar energy kits had grown by 70 million by the end of 2021, up from 420 million in 2019.

The report attributes this result to continued sales, the longer lifespan of larger products, and current customers beginning to move up the “clean energy staircase.” This is where they have paid off or made savings from their initial solar energy kit and are able to purchase a new, often larger product and additional services. For instance, 3.8 million customers have gained access to solar TVs in 2020 and 2021.

The adverse effects of the pandemic were most pronounced in 2020, translating into a 22% decline in solar energy kit sales. However, in 2021, the off-grid solar sector bounced back with a 10% increase in sales, the report finds.

In pursuit of universal energy access by 2030, off-grid solar technologies are expected to play a critical role as population growth, particularly in sub-Saharan Africa. According to the report, off-grid solar represents the cheapest solution for 41% of new household connections between 2020 and 2030.

But for many homes and businesses, the price of solar energy kits remains prohibitive. The pandemic has also exacerbated the affordability challenge in the form of declining income levels and job losses. Therefore, the availability of consumer financing options, such as PAYGo, has never been more important.

Assuming consumer finance is readily available, between 177 million to 277 million currently unconnected people are still unable to afford a Tier 1 solar energy kit, the report shows. In the absence of consumer finance, affordability levels drop even further. That is to say, of 733 million unconnected people around the world, only between 3 million and 167 million could afford to buy a Tier 1 multi-light and charging system upfront.

“This indicates that end-user financing is essential to provide the poorest population with Tier 1 energy access, but that PAYGo is not sufficient to close the affordability gap,” the report said.

Meanwhile, investments into the industry continued to grow, surpassing $2.3 billion since 2012. However, most of the finance went to seven companies operating at scale, while those in their seed and start-up phase have found attracting financing more difficult.

From 2016 to 2020, the industry saw yearly investment volumes plateauing between $300 million and $350 million, before reaching $457 million in 2021. This year is set to be another record-breaking year, the report states.

In other findings, the report found that solar water pumps and solar cooling seen as “emerging” technologies two years ago, have rapidly matured and are now classified as “near-to-market” – and are already improving food production and storage. Furthermore, the PAYGo technology that unlocked consumer financing for solar energy is now being leveraged on a variety of electronic devices, and to offer digital financial services.

Finally, the report highlights the need for end-user subsidies, noting that “there is growing recognition that more public funding will be needed to reach remote and lower-income customers, and to bridge affordability gaps.”

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