There have been many changes in the off-grid sector since we kicked-off our Lighting Africa program with a pilot in Kenya in 2009. Nearly ten years later, the market for solar devices has penetrated 35% of the population in Kenya, while globally annual sales for off grid solar devices and systems saw more than $1 billion. Despite this, our objectives remain mostly unchanged – to modernize and scale off-grid solar energy access while catalyzing a commercial market.
Today, a new frontier beckons the sector – Productive Use Leveraging Solar Energy (PULSE) at a household or micro level. It’s a concept that taps into the income generation opportunities that can be opened with access to energy at a household or micro level. Can the same success -- in only six years, 13.5 million small solar systems units sold across Africa— be replicated in the productive use market segment? Can this technology play a role in transforming and enhancing rural income opportunities (in irrigation, refrigeration, drying, night time fishing etc.,) and help catalyse economic development at this level? At the same time, solar power has already demonstrated its suitability for electrification of schools, health centers, and other community services - but mostly through the public sector and with limited sustainability. Can a service model be extended to these uses as a viable business?
To that end, we are redirecting our own efforts to expand beyond lighting and basic household energy needs to explore the market for productive uses of solar enabled (PULSE) irrigation, pumping, refrigeration, agricultural processes and manufacturing in less developed markets. Lighting Global is currently undertaking extensive market research in three countries and plans to share a new public market survey later this fall. This research will assess the development of the productive use of solar in terms of (i) understanding the various markets segments that can be served under PULSE at a HH/micro level, (ii) determining the incumbent energy in use and a topline assessment of its financials, (ii) sizing of these market segments, (iv) evaluating their commercial viability as stand-alone activities with the introduction of solar as an energy source, (v) challenges that early entrants in this sector are facing (vi), and a candid evaluation on whether a programmatic intervention is needed and if it will have a catalytic effect.
At the same time, we are engaging with more and more national governments in off-grid electrification - with country programs now in more than 30 countries across Africa, Asia, and beyond - working with them to determine the best strategies to achieve their energy targets and meet the needs of their people. As part of these efforts, 20 national governments have already adopted favorable policies for the import and sales of quality-verified off-grid products. These policies serve to protect consumers from poor-quality products and keep down the cost of reliable off-grid energy to end-users. We are also engaging with these countries now in efforts to support off-grid solar energy for productive and community uses.
More broadly, our team is exploring new ways to support PAYGO companies and potential investors in order to enable more end-users to access more energy, affordably. While commercial funders have invested approximately $160 million into PAYGO companies in the last two years, PAYGO businesses still substantively lack debt financing and rely on equity financing for shortfalls. In an effort to help unlock significant capital for growth and further enable companies to self-diagnose, compare, and course correct, Lighting Global -- alongside GOGLA and CGAP -- is convening a broad coalition of investors, PAYGO companies and providers, technical experts, and government representatives to develop a common set of metrics to measure the financial performance of PAYGO companies. We hope you’ll join us this November in Kigali for this discussion as we test, update, and eventually mainstream company performance KPIs into the financial sector.
Similarly, In the coming months, the Lighting Global/Africa team will share a decade’s worth of collected data and analysis to continue driving market expansion and identify nascent market opportunities in the sector. The PAYGO Market Attractiveness Index is a series of high-quality datasets covering critical aspects of the commercial opportunity and enabling environment conditions for 14 countries. This index will provide companies insight on how to evaluate and prioritize market entry opportunities beyond the East African market, where PAYGO is well established.
As we have done for nearly a decade, we will continue to strive to keep pace with technological advancements, so as to support ever-better, high-quality solar energy delivery to the people and areas that need it the most. We can only do this through effective delivery in collaboration with the private sector, national governments, and the members of this coalition.
Dana and Itotia