Off-grid and mini-grid market outlook, Q1 2017

 

This is the inaugural issue of a quarterly assessment of the latest developments in distributed energy and electrification in emerging or remote markets. The most noteworthy recent development has been two investments from Africa-focused private equity funds in pay-as-you-go solar home system companies, which are increasingly viewed as a new category of infrastructure investment.

This is the executive summary of the report.

Click here to download the full report

Meanwhile, storage providers are leading the charge to make mini-grids part of the solution to Africa’s supply shortage. In India, rooftop solar is expanding rapidly, both in terms of scale and sophistication and is joined by a rising number of solar irrigation projects.

Market fundamentals have been good for off-grid companies in the past months. Oil prices recovered somewhat in early 2016 and stabilised. The currencies of key markets such as Kenya, Tanzania, Bangladesh or Pakistan have been quite stable versus the dollar, with the exception of Ethiopia and Nigeria, which saw devaluations.

We estimate that roughly 1,4 to 2 GW of small-scale solar (sub-1 MW) has been deployed in emerging economies since January 2015. Pakistan and Nigeria are among the largest markets, having imported US$276-million worth of PV modules and $23-million worth of PV cells from China since January 2016, far exceeding the amount needed for their utility-scale project pipeline. Sales of integrated or plug-and-play solar kits are not included in these numbers.

By the numbers

  • US$3-billion – PV exports from China to emerging markets during January to October 2016
  • US$142-million – branded off-grid solar lighting kits sold in the first half of 2016
  • 21 MW – PV projects for emerging-market community mini-grids announced since April

Sales of branded solar lanterns reached a new peak at 4,3-million units in H1 2016, or 48% more than a year earlier, according to data from the Global Off-grid Lighting Association (GOGLA). Most of this growth came from India, as sales in the large East African markets continued to be under pressure from cheaper generics.

Larger solar home systems sold on a pay-as-you-go basis have caught the interest of at least two Africa-focused private equity firms, which invested more than $60-million in Mobisol and Lumos Global in Q4. Both companies sell larger systems than the original pay-as-you-go pioneers. Lumos is also tightly integrated with the mobile-phone operator MTN, raising the prospect that telecom operators may increasingly use their reach to distribute solar products.

This private investment is still dwarfed by the amount of funds disbursed to the sectors by donors and development banks. The Asian Development Bank alone announced that it would lend more than $1,1-billion to distributed energy initiatives in India, Pakistan and Sri Lanka, including $325-million for off-grid electrification in Pakistan.

Separately, mini-grid operators, storage companies and regulators are preparing for larger scale deployments. Nigeria’s draft regulation promises to remove some of the largest stumbling blocks to such investment, although details still need to be clarified.

This is the executive summary of the report.

Click here to download the full report

Acknowledgement

This executive summary is published here with permission from Bloomberg New Energy Finance.

Send your comments to energize@ee.co.za

 

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