The global off-grid industry is deeply divided. Over the past years, the regional markets drifted further apart rather than to grow together. The result is a patchwork of five different regions where also very different products and market strategies are implemented.
The media star: East Africa
Currently, East Africa is getting the most attention worldwide. There, essentially three companies are the focus: M-Kopa, Off-Grid Electric and Mobisol. The “big three” offer financing to customers, which makes solar systems affordable. They concentrate thereby only on four countries in East Africa: Kenya, Uganda, Rwanda and Tanzania. But in these countries, are also represented all other companies that nowadays offer retail financing, such as SunTransfer, Bboxx or SolarNow. Such strong competition in an area that covers only 19% of the African off-grid population.
But at least: we now finally speak about energy access and no longer just about replacing kerosene lamps. What could possibly become dangerous is that now a market access (customer financing) could be conventionalized into a universal remedy – and moreover the risks could be underestimated.
The economic giant: Bangladesh
Completely independent from the media star and largely ignored, Bangladesh continues to be by far the strongest market for off-grid technology: 65,000 SHS are nowadays sold and installed – per month! But Bangladesh has achieved even more: the country has also set up a strong manufacturing industry. Whether panels, batteries, LED or charge controllers, Bangladesh’s solar companies produce inexpensive and mostly in good quality in their own country.
As before, it remains strange that the lessons learned in Bangladesh about customer finance, distribution or customer service, are hardly seized outside the country. As reason many refer to an alleged exceptionalism of Bangladesh, but this is more an excuse than a justification. It’s like people are celebrating in Africa, the discovery of fire, while in Bangladesh people deal with it for many years in a variety of forms.
But also vice versa: none of the producers in Bangladesh has made any significant attempt to expand to other countries in Asia or Africa.
The sleeping giant: India
In the Indian subcontinent, as many people live without power supply as in whole Africa. But the market has its peculiarities: it is protected, the government regulations hinder imports and also slow down the dissemination of off-grid installations due to high bureaucracy. Even investment by foreign companies are rather difficult in India.
This way, operating companies there remain largely among themselves. What is new today, however, is that, compared to previous years, the attention of international media and investors is significantly reduced. It seems that people have lost interest in the topic Energy Access in India, especially since the media star East Africa absorbs the international attention.
The newcomer: Australia and Germany
Yet completely unnoticed by the off-grid scene of developing countries, off-grid technology has become an issue even in some industrialized countries. Triggered by the dissemination of LiFePO4 batteries, more and more companies arise, for example in Germany, focusing on the offer of “solar plus storage” – and therefore advertising that households can make themselves completely independent from the grid.
This has now become a large market in Australia: studies forecast that by 2018 half of the local households will have said goodbye to the power grid and will have gone off -grid.
Of course, we are not talking here about “Solar Home Systems”. Due to developing countries, the term has the strong image of an “energy for the poor”. Instead, we speak of “NanoGrid” and mean the electricity grid within a house, starting from the battery as central storage unit.
The NanoGrid market in industrialized countries has already a size of $ 1.2 billion, far more than the SHS market in developing countries. Its potential for 2024: $ 23.1 billion – according to a recent study by Navigant.
The defeated: the rest of the world
These include all African countries that do not belong to the media star East Africa, and this is still around 81% of the African off-grid population! But also the off-grid markets in South America and the countries of Southeast Asia, such as the populous Indonesia.
In these regions, off-grid companies are in fact active, but a powerful market development is out of question. The market coverage is as low as the interest of investors, local banks and governments. The off-grid markets here are still waiting for being perceived and developed.
Developments in the coming years
There are three main developments that are expected in the coming years:
- NanoGrid and off-grid grow together
There will be a merging of “NanoGrid products” in industrialized countries with traditional solar home systems for developing countries. The big chance: decentralized solar technology could lose the stigma of being a product for the poor. Because to the extent that off-grid products are widespread as well in developed countries, the image of decentralized solar technology will improve also in Africa and Asia
- Bangladesh’ companies expand
It will not be long until the first financially strong solar companies of Bangladesh will expand abroad. And with all their know-how as a manufacturer and distributor. These companies will crucially change the markets in Africa and Asia because they are financially sound, and they can lean on a revenue and earnings strong domestic market.
- Local SME will be strengthened
Small and medium enterprises (SME) are the main driver for innovation, poverty reduction, employment generation and social integration. The lack of small and medium enterprises (SME) in developing countries is a significant obstacle. Also in the off-grid market a stronger growth of small and medium solar companies, which act independently of international manufacturers, will be needed. Some programs already promote today this development in a very committed way, like GVEP orSendea.