The first post-pandemic update on the state of the world’s off-grid solar industry painted a picture of the dominance of European companies, but highlighted the potential for new startups in West Africa and a use growing use of PV as a back-up solution to unreliable grid supplies.
The latest biennial report on the global off-grid solar industry indicates a post-pandemic recovery in solar home system sales, but also highlighted the stranglehold of Africa’s seven largest pay-as-you-go (PAYG) companies on the sector.
The 2022 Off-Grid Solar Market Trends Report: The State of the Sector was released this week by the World Bank, the Netherlands-based industry trade body Gogla, member group American Efficiency for Access Coalition and the Nairobi-based financial firm Open Capital Advisors. .
The report says sales of single-panel solar home systems (SHS) rose 10% last year from Covid-induced lows in 2020 to contribute $2.1 billion to a global market worth of $2.8 billion in 2021 when the $700 million solar-powered appliance trade is included. According to the study, sales of household appliances – mainly televisions in Africa and fans in South Asia – have yet to rebound from the pandemic.
In terms of funding, about 72% of the total support secured to date for “affiliated” off-grid solar companies that submit their figures to Gogla has gone to just seven companies, according to the report, with 26% shared among 150 other companies.
The fact that the Big Seven “appear to have weathered the pandemic”, according to the report’s authors, is likely to unlock access to even broader equity support and will see them drive a consolidation cycle in the industry, after the acquisitions made by major energy companies entering the Covid crisis.
For example, San Francisco-based d.light has secured $365 million to expand operations since the last off-grid solar report in February 2020 via a special-purpose vehicle from which investors will cash in income from company PAYG receipts. Chicago-based Sun King — formerly Greenlight Planet — landed a $260 million Series D funding round this year led by the climate investment arm of New York-based private equity firm General Atlantic.
Other members of the Big Seven identified in the report are London-based Bboxx, French-based Engie Energy Access, Dutch-based Lumos, Nairobi-based M-Kopa and Amsterdam-based Zola Electric.
According to the study, these companies took out $243 million in loans last year, and $70 million in equity sales, while the other 150 companies in the Gogla database took out $52 million between them. dollars of loans, attracted 50 million dollars of equity investment and 9 dollars. million dollars in non-repayable grants.
Most investment continues to flow into the more mature East African off-grid market, via the Big Seven, although more companies are active in West Africa, although attracting less support. The off-grid solar report – which this year will be split in half with a forward-looking outlook to be released later in October – said less data was available in South Asia because a prevalence of cash purchases there meant that less outside investment was needed, and because there were more companies present that did not report their numbers to Gogla.
The document highlighted industry developments such as the need to regulate the PAYG market and for companies to put in place e-waste disposal and recycling policies, especially after recent legislative changes related to waste. in Kenya, Ghana, Tanzania and Nigeria. On this question, the study highlighted the work of a company called Solaris which gives a second life to used automotive battery cells in power supplies for SHS.
Overambitious sales plans
The Gogla-World Bank study also shed light on the problems caused by rapidly expanding PAYG giants who have been overly optimistic about their market reach and the ability of their low-income customers to keep up with payment plans. . For example, according to the authors, the government of Rwanda plans to reduce its goal of using off-grid solar power to provide access to electricity for 48% of its population by 2024, to 30%. Kigali could raise the ambition to use its conventional electricity network to compensate, from 52% to 70% of the population in the same timeframe.
The study hinted that the term “off-grid solar” may soon become obsolete, with an increasing number of urban customers using solar-powered devices and power systems to compensate for grid deficiencies, opening up a new market. huge for African solar companies.
And the 160-page publication also highlighted, yet again, how far the world remains from achieving the goal of universal access to electricity this decade, with 90 million Nigerians without electricity, as well as 72 million people in the Democratic Republic of Congo, and 56 million Ethiopians.
With access to electricity failing to keep pace with population growth and an estimated 128 million people and 3.1 million businesses missing out on solar power due to Covid, the report also distorted the claim made by Bangladeshi Head of State Sheikh Hasina in March that his country had achieved universal access to electricity.
According to the World Bank, Gogla, Efficiency for Access and Open Capital, only 96% of Bangladeshis had access to electricity when the first tranche of the report was finalized in August, leaving six million people without.
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