In 2023, the off-grid solar sector had impacted 561 million people globally, with 253 million gaining basic electricity access and 132 million benefitting from higher levels, according to Off-Grid Solar Market Trends Report 2024, jointly prepared by the World Bank Group, the Energy Sector Management Assistance Program, and GOGLA.

In Sub-Saharan Africa, off-grid solar accounted for 55% of all new electricity connections between 2020 and 2022, underlining its critical role in narrowing the electrification gap.

Sales and Market Growth

The report reveals that over 50 million off-grid solar products were sold in 2022 and 2023, surpassing the pre-COVID peak of 47 million units in 2019. Market turnover reached  $3.9 billion in 2022 and $3.8 billion in 2023, surpassing the previous $3.3 billion set in 2019.

The market for income-generating solar appliances has also expanded, with 1.76 million solar-powered fans and TVs sold in 2023, alongside 30,000 solar water pumps and refrigerators. While TV and refrigerator sales remained relatively stable, products like solar fans and water pumps experienced substantial growth due to increased demand from rural businesses and farms.

Innovation in Business Models

The report identifies a key trend in diversifying business models within the off-grid solar sector. Companies that have shifted their focus to higher-value products for middle- and high-income consumers or adopted innovative financing models—such as pay-as-you-go (PAYG)—have demonstrated stronger commercial performance.

PAYG has become a popular method for delivering off-grid solar products to lower-income households, allowing consumers to pay for solar products in small installments, often via mobile money. By 2023, 39% of all off-grid solar products were sold through PAYG financing, up from 24% in 2018. Larger solar home systems saw 96% of their sales via PAYG.

However, affordability remains a critical challenge for expanding off-grid solar to the most underserved populations. Only 22% of households without electricity can afford basic solar energy kits under the PAYG model. This percentage drops significantly in more remote or fragility, conflict, and violence (FCV) regions due to higher distribution costs and lower incomes. For more advanced Tier 2 systems, only 1% of households can afford the monthly PAYG payments, emphasizing the need for subsidies and innovative financial products to address the affordability gap.

In many regions, currency devaluations have made off-grid solar products less affordable. Prices for off-grid solar products rose in local currency terms, triggering higher default rates on PAYG payments. While the industry has responded with better credit management practices, collection rates remain low, at 62% in 2023, indicating persistent affordability constraints.

Investment Trends

The off-grid solar sector attracted $1.2 billion in investments from 2022 to 2023, with 20% of the funds provided in local currency to mitigate currency risks. This represents a significant increase from the $773 million invested during the previous two-year period. Most investments went to large, established companies, leaving smaller and mid-sized firms struggling to access affordable financing.

In fiscal year 2024, the World Bank lent a record $660 million to governments to scale up off-grid solar solutions, alongside an additional $733 million committed to results-based financing programs since 2018.

However, the report indicates that public financing alone is insufficient to meet the growing demand for off-grid solar products. To achieve universal access by 2030, an estimated $3.6 billion per year is needed to provide electricity to the 398 million people for whom off-grid solar is the least-cost solution.

India has also seen an uptick in off-grid solar tenders, mostly for solar water pumping systems, with entities like the Chhattisgarh State Renewable Energy Development Agency, Bihar Renewable Energy Development Agency, and Solar Energy Corporation of India floating tenders for significant capacities.

In September, the Punjab Energy Development Authority invited applications to install 20,000 surface and submersible solar pumps under the PM-KUSUM program.

In March, the Haryana Renewable Energy Development Agency awarded contracts to supply, install, and commission 24,484 solar water pumping systems under Component B of the PM-KUSUM Program.

India’s Potential Market Expansion

The report said sales of solar lanterns and smaller solar home systems in India have declined due to improvements in grid electrification and rising interest rates in the microfinance sector. This has impacted affordability and demand for these products.

However, expanding solar solutions, including productive-use appliances like water pumps and refrigerators, could continue to drive economic growth in rural areas.

India’s potential market for solar water pumps is approximately 30.9 million units. However, only 23,000 units were sold in 2023, indicating a significant gap in market potential. The Compound Annual Growth Rate (CAGR) for solar water pumps is estimated to be 19.6%. If trends continue, total sales are expected to reach 354,000 units by 2030. To achieve universal access, an investment of $16 billion is required for solar water pumps in India.

In India, there is an estimated potential market of 37.9 million units for solar refrigerators. However, only 7,000 units were sold. The CAGR for solar refrigerators is relatively modest at 4.1%. Achieving universal access to solar refrigerators will require an investment of approximately $32.7 billion.

In India, affordability constraints prevent many rural households from accessing solar energy kits. Only 22% of the population without electricity can afford a basic solar energy kit using PAYG, according to the report.