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The weekend read: In pursuit of universal energy access

Which are the most active regions for off-grid solar products? 

Since we started as GOGLA in 2012, it initially started in Eastern Africa and that is still the biggest market. We see a lot of traction in West Africa, the second-largest market. India is still a big market in terms of total sales numbers, but mainly for smaller products. The Indian market has been stagnant or actually declining.

Have you seen any changing trends since 2012?

We definitely see trends. The sales data we track is self-reported data of our members, and affiliates of lighting and appliances programs. But in that group, we see both a trend towards higher capacity products and pay-as-you-go business models. The next wave we are seeing is the productive use appliance such as solar water pumps and appliances that get sold with solar home systems (SHS), such as televisions, fans, and radios.

A concern that has been raised in the past notes that such business models could hurt local companies. Is that justified?

It is a concern we sometimes hear; however, it is not really justified and most governments get that now. Off-grid solar is not competing with local power utilities, instead it is taking their loss-making customers away from them, so that the utilities can concentrate on customers with higher power consumption. That is a win-win situation for everyone. To reach universal energy access, we need to mobilize all solutions

I believe part of the criticism comes more from the angle that such business models offer the opportunity to channel dividends or funds out of Africa. Are there ways to prevent that, such as taxation? 

Until now, only a handful of companies have succeeded in becoming structurally profitable, and most would reinvest that into the growth of the organization. So, at the moment there certainly isn’t an outflow of money from developing countries to developed countries through off-grid solar—quite the opposite. There are still lots of investments being made from western countries into developing countries. And that will continue for a few more years. I think all the companies in this space would love to find more access to capital coming from the region.

We do, of course, hope that this market will become more profitable in the next few years, and then that might be a discussion that we should have at that moment.

Covid-19 has had a big economic impact around the globe. What can we expect in terms of off-grid solar systems? 

In the beginning, we were concerned about supply chain disruptions, because manufacturing in China stopped. I think the worst of that is behind us. Some individual companies were really hurt, but for the overall market, it seems that it didn’t create a lot of problems.

Another issue is the operational disruption because of lockdowns in response to Covid-19. That has hurt a lot of companies very badly because it meant that salespeople couldn’t get out on the street and sell products.  GOGLA and many other industry facilitators have been doing surveys among their members. What we found is that many companies were concerned about how COVID would create financial problems in a few months. Some of the larger companies had more runway and were thinking they could survive for long. But we have also seen that many small companies already had to stop operations – and these companies typically reach the most rural and poor communities.

The GIZ EnDev program found that among the 670 companies that responded – mostly smaller ones-  a third had to cease operations because of those operational constraints of the lockdown measures.

With the impact felt across many industries, I imagine customer purchasing power must have dropped. 

We are certainly also concerned about customers going to have less to spend because the Covid-19 measures economically hurt them. So we have asked 60 Decibels to track and research that for us. We found that over 85% of customers have been financially hurt and close to 40% have been severely hurt financially.

We also hear from them that they value their solar system even more with 93% reporting their quality of life has improved thanks to their solar product. Two-thirds of customers still make their regular repayments, but around a third of customers are concerned about their ability to keep up payments in the future, and that makes us concerned about the health of our members.

What about institutional funds and development aid? 

Our concern is that the amount of finance that is going to be available for the market is going to decline as we find that all the donors are adjusting their support programs. We will need to look at the total funding available for development aid. International development is adjusted towards health, sanitation, and food support.

But also, investors are going to look at the quality of their portfolio and are going into survival mode and might not continue to invest. We don’t have reliable data on that yet, but we are researching and are trying to get a clearer picture of this.

What does usually happen to the installed SHS when a company goes bankrupt? 

It depends a little bit, but what we have seen in the earlier cases is that other companies take over the portfolio of customers and continue serving those customers. At any rate, we like companies to have a plan for what happens when they need to stop operations. This is a discussion we started to have in the industry, as part of our work to ensure companies address consumer rights adequately. As an industry, we are promoting companies to adhere to our consumer protection code, and encouraging investors to endorse the code.

Source: pv magazine