Off-grid power solutions in Africa set to present a $3.1 billion market for investors by 2020

By Dr Anthony Horton

According to a report entitled ‘Off-Grid Solar Market Trends Report 2016’ published last month by Bloomberg New Energy Finance and Lighting Global (a World Bank program), 1.2 billion people in Africa do not currently have access to a power grid. These people spend approximately $27 billion each year on lighting and mobile phone charging through the use of kerosene, candles and torches. This report predicts a bright future for off-grid power in Africa with sales of off grid solar power solutions presenting a $3.1 billion market for investors by 2020.

Lighting Global works with manufacturers, distributors, other development partners and end users to develop the off-grid lighting market through the International Finance Corporation (IFC) and the Global Off-Grid Lighting Association (GOGLA). Lighting Global is the World Bank’s platform for supporting sustainable growth of the off-grid solar market in order to increase global access to energy. It provides market insights and steers the development of quality assurance frameworks for modern off-grid lighting systems, and promotes sustainability.

GOGLA is an independent not for profit association which supports the progress of lighting solutions that benefit society and businesses in developing and emerging markets around the world. It acts as an industry advocate and aids the growth of clean, quality off-grid lighting and electricity. In doing so, it contributes to the objectives of Sustainable Energy for All (SE4All) and Sustainable Development Goals (SDGs) initiatives.

The IFC and the World Bank currently jointly manage off-grid lighting programs in more than 10 African countries through the Lighting Africa program. The success of the Lighting Africa program so far has inspired similar programs in Bangladesh, India, Pakistan and Papua New Guinea.

According to the ‘Off-Grid Solar Market Trends Report 2016’ report, the off-grid solar market has experienced impressive growth across the globe over the last 5 years. During this time, more than 100 companies have stared producing solar lanterns and home solar kits for people without access to grid power, with over 20 million pico solar products sold by mid 2015. Pico solar products are those that include a solar panel with a capacity of less than 10 Watts. Examples of these products include portable lanterns and solar home systems.

Kenya, Tanzania and Ethiopia are leading the off-grid market and account for two thirds of the total sales of pico solar products. The World Bank has provided assistance to expand and develop the size of this market in Africa. Off-grid solar products are no longer regarded as niche in many African countries. More than 30 percent of people who don’t have access to grid power have a solar product at home, which has helped to create this vibrant market.

Companies in Africa that offer pay as you go (PAYG) options have managed to attract four times as much investment in half the amount of time, compared to companies selling pico solar products for cash. Twenty companies currently offer PAYG options, servicing approximately 500 000 customers, predominantly in East Africa. Investors anticipate better returns and faster growth from companies with PAYG options.

The ‘Off-Grid Solar Market Trends Report 2016’ points to the market for off-grid solar products maturing rapidly. It predicts that 99 million households across the globe will constitute the market by 2020 – representing an approximate 4-fold increase from the 25 million households currently in the international market, with the market for simple solar lanterns expected to move towards pure price based competition and premium brand offerings. Companies selling these products will therefore need to agile and able to differentiate themselves from their competition through distribution partnerships, high value products and/or customer loyalty.

The fastest growth in the off-grid energy market is likely to be in Africa, where the uptake has been the most rapid.

I am convinced of the potential of off-grid power, and after reading the 2016 Off-Grid Solar Market Trends Report I am excited about its potential on three levels:

• On one level, as a scientist I am excited by the innovative off-grid power solutions that are being developed
• On the second level, I am excited by collaborations between organisations such as the World Bank, the IFC and GOGLA
• Lastly, I am excited by the possibilities that innovative financing options such as PAYG offer in terms of increasing access to off grid power

I believe that this report effectively balances the needs of those who don’t have access to grid power with the need for investors to feel they can achieve a sufficient return in order for them to provide finance so that off-grid solutions can be developed, marketed and sold. The report articulates the benefits of off-grid power supplies not only in rural African communities but also as an example to other developing as well as developed countries.

From a purely economic standpoint, a $3.1 billion market for investors in Africa is very significant. If extended beyond Africa the mind boggles as to the size of the opportunity for investors. From the point of view of industry, there is huge growth opportunity within Africa and beyond, both in terms of jobs and innovative new products. Lastly, and by no means least, from an environmental standpoint, off grid solutions will certainly make a difference in terms of reducing greenhouse gas emissions.

About the author: Anthony Horton holds a PhD in Environmental Science, a Bachelor of Environmental Science with Honours and a Diploma of Carbon Management. He has a track record of delivering customised solutions in Academia, Government, the Mining Industry and Consulting based on the latest wisdom and his scientific background and experience in Climate/Atmospheric Science and Air Quality. Anthony’s work has been published in internationally recognised scientific journals and presented at international and national conferences, and he is currently on the Editorial Board of the Journal Nature Environment and Pollution Technology. Anthony also blogs on his own site, The Climate Change Guy.