A new report published by the World Bank and GOGLA (Global Off-Grid Lighting Association) shows that the off-grid solar (OGS) industry has been showing robust growth and has grown into a $1.75 billion annual market.

The off-grid solar industry has been providing lighting and other energy services to nearly 420 million users around the world.

According to the report, the off-grid solar industry has made rapid strides in the past decade and since, 2017, the revenues from the off-grid solar industry have been growing rapidly at a rate of 30% annually.

As stated in the report, the global potential off-grid market remains substantial, with 840 million people without electricity access, over one billion connected to an unreliable grid, over 70 million farmers who could leverage off-grid solar for productive use, and a promising public institutions market.

The sector showed rapid growth between 2010 and 2015, with annual growth rates of 133%. The industry saw a decline in sales leading up to 2017. Since then, the growth in annual unit sales has stabilized to 10% from 2017 to 2019, showing signs that the market is maturing.

The report adds that around 180 million off-grid solar units have been sold worldwide since 2010. Accounting for the lifecycle of these products, approximately 84 million units are ‘live,’ that is, in use today, benefiting more than 420 million people.

“The off-grid solar industry is instrumental for achieving universal electricity access. We are scaling up our support to client countries by helping them leverage this potential through innovative and financially sustainable solutions,” said Riccardo Puliti, Global Director, Energy, and Extractive Industries-Africa, at the World Bank.

The report notes that the solar home systems (SHS), which currently represent about 17% of unit sales, will increasingly drive growth in the years to come. The PAYGo business model used to finance both the solar home system and pico solar products is rapidly increasing its market share and has grown from 20% in 1H 2018 to 24% in 1H 2019.

The household appliance category is also becoming the primary driving force for the sector, and high-efficiency DC appliances are contributing to the increase in solar home systems’ sales. Between the second half of 2018 and the first half of 2019, appliance sales increased by 111% with televisions and fans accounting for 99% of the recorded sales.

Productive use leveraging solar energy (PULSE) products represent an emerging opportunity for the OGS sector, although the market is still in its infancy and will continue to learn and evolve.

The companies are expanding into new geographies and countries, and several providers in East Africa have expanded into new markets, especially in West Africa.

Earlier, the competition was based on price, but things are changing, and quality is now becoming an important competitive attribute. Increased consolidation or competition could both provide significant benefits to the sector, but it is too early to tell which market dynamic will prevail moving forward.

The report notes that there is a vast market for off-grid solar products across sub-Saharan Africa and Asia-Pacific, which has 716 million people without electricity access and more than one billion people with an unreliable grid.

The vast majority (over 80%) of people without electricity access live in Sub-Saharan Africa. Within this region, the countries with the largest populations without access in terms of absolute numbers are Nigeria (89 million), the Democratic Republic of Congo (68 million), and Ethiopia (61 million).

The report adds that at the end of 2019, the off-grid solar sector had attracted more than $1.5 billion (~₹111.5 billion) in investment with growth in the early years, primarily driven by equity and debt becoming more common.

While the $1.5 billion (~₹111.5 billion) capital inflow to date has fuelled the sector’s growth, it is not yet enough to serve the available market opportunity. The majority of companies report a lack of available finance. A range of financing mechanisms, such as off-balance-sheet financing, will enable additional capital to flow into the off-grid sector.

The policy landscape continues to improve, with almost all governments in countries with energy-access deficits now including a role for off-grid electricity solutions in their electrification plans.

Public funding for the off-grid sector has multiplied with over $800 million (~₹59.48 billion) for off-grid solar and energy access– related technical assistance approved by the World Bank from 2018 to 2019 alone. This represents a significant increase in the availability of finance compared to the $386 million (~$28.69 billion) approved by the World Bank between 2015 and 2017.

The report stresses that strategic investors will play an increasingly more significant role in the growth of this sector.

Achieving universal access to electricity by 2030 is a daunting task, and it would require as many as 617 million people be served through off-grid products as their primary source of electricity.

Achieving universal access by 2030 requires the sector to grow much faster, with significantly more external investment and public funding to bridge the affordability gap. Given the sector’s track record, its proven ability to innovate, the sector certainly could surpass the current growth trajectory forecast, the report concludes.

Recently, the African Development Bank (AfDB) announced that the Facility for Energy Inclusion’s Off-Grid Energy Access Fund (FEI OGEF) reached its final equity close target of $59 million (~₹4.17 billion) in committed equity capital and $36 million debt facilities to promote off-grid energy access.

Earlier, according to a study published by GOGLA, nearly 94% of the households surveyed reported an improvement in their quality of life after buying a solar home system. The Powering Opportunities in South Asia research funded by UK AID and conducted by Altai Consulting, surveyed 949 households in South Asia, primarily including rural customers from the states of Assam and Uttar Pradesh.

Previously, Mercom reported on how solar energy projects are providing rural economies with new sources of revenue, employment and business opportunities, product and policy innovation, capacity building, and, most notably, affordable energy.