A new report released today by the World Bank Group’s Lighting Global Program, Dalberg Advisors and GOGLA finds that the global off-grid solar industry has taken a leap in the past year to help developing countries reach their energy access goals. Dalberg estimates that, to date, the off-grid solar sector has provided improved electricity to as many as 360 million people.
The 2018 Off-Grid Solar Market Trends Report, funded by the World Bank’s Energy Sector Management Assistance Program (ESMAP), is the biennial flagship publication for the global off-grid solar industry. It will be formally launched during the 2018 Global Off-Grid Solar Forum and Expo, which takes place this week in Hong Kong. As an in-depth study of the industry, the report will set the tone for the convening by highlighting key industry investment trends, advances in technology, finance, policy and social impacts during the opening plenary to the 600+ industry stakeholders in attendance.
One of the key findings of the report is the dynamic growth of solar devices over the past decade: an estimated 130 million off-grid solar products have been sold globally since 2010, ranging from small portable lanterns to 100+ Watt solar home systems capable of powering appliances such as TVs and fans. Selling in over 100 countries, these devices often provide critical first-time access to lighting and other energy services to the 2.2 billion people who still lack grid connection or reliable electricity. As the market has grown, so has the supplier base: a little over 60 dedicated suppliers in 2010 has grown to over 330 today, with increasing specialization along the value chain.
In 2016, the most recent year for which complete data is available, total sales amounted to over 30 million devices, generating an estimated USD 1 billion in revenue. Sales growth of smaller devices are stabilizing, while larger devices have witnessed explosive growth of over 85% annually since 2014. This has been driven largely by pay-as-you-go (PAYGO) sales. PAYGO financing is bringing solar products within reach of more consumers than ever, and has the potential to revolutionize consumer financing in emerging markets across a much wider spectrum of products.
“The numbers in the report reflect a dynamic young industry that is altering the economic landscape of developing countries while delivering unprecedented development impact,” explains Russell Sturm, Global Head of Energy Access at the International Finance Corporation.
“However, the real story of the sector lies in the transformative power of innovation as revolutionary new business models and disruptive technologies continue to emerge across the market. This report provides a compelling view under the hood of that dynamic machine and casts a light on what may lie around the corner”.
Investment in the sector doubled annually from 2012-2016, with companies raising approximately USD 922 million in financing between 2012 and 2017. Ten market leaders have moved ahead of the pack, attracting over 90% of all financing in 2016. Funding has also become more commercial in nature: the majority of financing since 2014 has been through equity deals, with a rapidly rising share of debt. While fundamentals remain strong, profitability has eluded the vast majority of players. Moving forward, an injection of capital will no longer be a substitute for a long-term, sound business model.
Governments, too, are increasingly supportive of the off-grid solar market: they are incorporating off-grid solar solutions into their national electrification plans and developing regulation to support the private sector and protect consumers. Fast-moving performance and cost improvements in solar PV, battery, and appliance technologies also amplify the sector’s potential.
Together, these and other trends explored in the report are expected to boost annual off-grid solar sales to 70 million units and USD 8 billion in revenues in 2022.
“Over the next five years, technology performance and cost improvements could reduce prices by up to 40%, and consumer incomes are rising in most target markets. Hence, we expect off-grid solar devices to be in 150 million un- and under-electrified households in 2022, reaching around 740 million people."
Gaurav Gupta, Dalberg Regional Director for Asia and head of the firm’s energy practice goes on to explain: “That is a strong reflection of how private markets can help address a social challenge at speed and quality, if given the right support.”
Koen Peters, Director of GOGLA adds,
“This report paints a picture of an industry that has firmly claimed its place in the energy landscape. It will continue to innovate quickly and is only becoming better at serving energy needs for customers in developing countries”.