Long the domain of non-profits, church groups, and government programs, off-grid solar in so-called base of the pyramid (BOP) markets has shifted from an aspirational service to big business. SolarCity, Vulcan Capital, Omidyar Network, and others recently invested $7 million in Off-Grid:Electric, one of Tanzania’s leading residential solar providers, which plans to reach 10 million homes in 10 years. The investment follows a wave of funding for many similar companies operating in Sub-Saharan Africa and South Asia, which are the biggest markets for pico solar (or solar lanterns) and solar home systems.
Significant reductions in solar PV technology costs have opened up several new markets for solar as a service companies that provide 1 watt to 200 watt solar systems to people who live on as little as $2 per day. The vast majority of the market is focused on providing lighting, cell phone charging, and power for small direct current (DC) appliances. Navigant Research’s recently report, Solar PV Consumer Products, provides a comprehensive global look at the three primary segments of the solar off-grid lighting and portable power market: pico solar, solar home systems, and solar PV generators and kits. While the technologies behind these innovative products are all very similar, the applications, target markets, business models, and pricing are diverse. We forecast that the annual market for solar PV consumer products will grow from $551 million in 2014 to $2.4 billion in 2024.
Less Than Kerosene
Up to 1.4 billion people worldwide, including nearly 600 million in Sub-Saharan Africa and 800 million in Asia, are without access to electricity, according to the International Energy Agency. These populations previously had no choice but to pay high prices for low-quality and polluting fuel-based lighting, such as kerosene lamps. Due to transportation challenges, kerosene costs as much as 50% more in remote areas than in cities, further contributing to the cycle of poverty. In addition to providing inadequate illumination, kerosene lamps pose significant health risks. New advancements in lighting technology have enabled the development of pico solar systems, which are compact, clean, and affordable off-grid lighting and energy products. Many of these products use solar charging (<10 watt) and light-emitting diode (LED) lighting technology. As with most renewable energy technologies, solar lighting is typically more affordable compared to conventional lighting primarily from kerosene, but upfront capital costs (even if only $10) can be a challenge to last-mile customers.
Companies such as Off-Grid:Electric are now offering a range of payment options to get around upfront costs, including microcredit, pre-payment options, and innovative pay-as-you-go technologies, which reduce barriers to ownership of solar lighting for rural customers – particularly for larger solar home systems that enable customers to do more than simply recharge mobile phones.
To date, most activity has been in Kenya, but the market in Tanzania has great potential to replicate those early successes, making the Off-Grid:Electric investment a good bet. The system’s advantages are hard to beat and claim up to 50 times more light service for less than the current daily cost of kerosene. The company’s management team is representative of the growing breed of young, bright, highly skilled social entrepreneurs that are comfortable blurring the lines of traditional private versus non-profit ventures, launching social enterprises that seek to leverage the power of business and profits toward a goal that improves social well-being.