National

For the more than 1 billion people without reliable electricity access, advances in off-grid solar (OGS) solutions present significant promise: A recent World Bank report showed that by 2017 the global OGS sector was providing improved energy access to an estimated 73 million households.

Yes, but: Half of the projected $5.7 billion for OGS to hit its full potential from 2017 to 2022 still needs to be raised. While established multilateral and commercial financiers are expected to partially fill this gap, new financial innovations that tap less traditional investors also show strong potential to help meet the sector’s growing needs.

Financial innovations such as pay-as-you-go business models have combined with falling photovoltaic-cell costs to open funding channels on terms acceptable to newer investors. This financing offers growing OGS companies the resources to expand their activities and increase customer access.

The details: Several features make the OGS market particularly suited to today's financial services innovations (e.g., blockchain, cryptocurrencies, crowdfunding, receivables securitization, data-enabled lending):

Newer technology and business models deployed by startups that lack track records or collateral

Smaller transaction sizes with multiple parties

Typically unmonetized social impacts (e.g., energy access and zero emissions)

Decentralized, remote providers and low-income customers

Limited financial infrastructure in OGS markets, requiring new models to finance market entry

Multiple companies beyond top firms that are needed to serve more customers

What's next: Many private, government and multilateral stakeholders are piloting these financial innovations in the OGS market. This summer, the World Bank will release a study with the Cambridge Center for Alternative Finance assessing these efforts and suggesting ways to scale moving forward.

Jonathan Coony is global lead for green competitiveness at the World Bank Group. 

How to finance expanded access to off-grid solar power

Financial innovations and falling solar costs are creating new funding channels.

A man adjusts a solar panel on his roof at dusk in the villqge of Kwa-Mutisya in Machakos county, some 100 kilometres southeast of Nairobi, on November 16, 2016. 

A man adjusts a solar panel on his roof in Kwa-Mutisya, Kenya. Across the continent people are opting for off-grid solar solutions. Photo: Tony Karumba/AFP via Getty Images

Energy

Solar power

Expert Voices

World

Alternative energy

Axios Pro: Deals

For the more than 1 billion people without reliable electricity access, advances in off-grid solar (OGS) solutions present significant promise: A recent World Bank <a class="gtmContentClick" data-vars-link-text="report" data-vars-click-url="https://www.gogla.org/resources/2018-off-grid-solar-market-trends-report" data-vars-content-id="13a0e558-0cf9-40b1-88c9-06e5535e3670" data-vars-headline="How to finance expanded access to off-grid solar power" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.gogla.org/resources/2018-off-grid-solar-market-trends-report" target="_blank">report</a> showed that by 2017 the global OGS sector was providing improved energy access to an estimated 73 million households.Yes, but: Half of the projected $5.7 billion for OGS to hit its full potential from 2017 to 2022 still needs to be raised. While established multilateral and commercial financiers are expected to partially fill this gap, new financial innovations that tap less traditional investors also show strong potential to help meet the sector’s growing needs.

Ominous forecasts about the impact of climate change serve as the backdrop for the world — led by U.S. lawmakers and companies — to debate big action on the problem, which could upend energy systems and our way of life.

Energy & Environment

Over 75 million Nigerians lack electricity access — including nearly 60% of those in rural areas — and development of the off-grid solar (OGS) market there seriously lags behind other African countries, notably in East Africa. 

Yes, but: Factors that have impeded the Nigerian OGS market appear to be changing and the sector is poised for substantial growth in the coming years. Widespread deployment of commercial OGS technology across the country could not only address the harmful energy-access shortfalls but also provide a catalyst for job growth and investment.

To compensate for inadequate power supply, Nigerians spend an estimated $14 billion annually to run small-scale diesel generators. Over 80% of Nigerian businesses cite electrification challenges as the most significant obstacle to doing business, and the government estimates that erratic power supply results in more than $25 billion in annual losses.

But progress on multiple fronts promises growth for the Nigerian solar sector:

Policy commitment: The government has electricity access targets of 75% and 90% for 2020 and 2030, respectively. Now, with a revitalized Rural Electrification Agency, new policy frameworks and a $350 million World Bank project, the government is better equipped to achieve these goals and foster sector growth.

Company entry and maturation: Leading international OGS companies have been reluctant to enter Nigeria, and local companies have lacked capacity for at-scale deployment. This is changing as major players migrate from East to West Africa and local companies develop operational experience to compete. For example, Lumos is planning to continue growing its customer base and startups such as One Watt Solar are exploring blockchain.

Capital: Obtaining investment in this capital-intensive sector has been a challenge. International financiers have shown interest in Nigeria, but prospective borrowers face major currency-exchange risks. Domestic banks have been reluctant to lend, but this is changing now as the market matures. 

Mobile money: The lack of mobile money platforms, like M-PESA in East Africa, has deterred the spread of pay-as-you-go technology by limiting an important payment channel essential for lower-income customers. Companies are now piloting innovative ways to replicate this payment system, including partnering with mobile phone operators.

What’s next: As the OGS sector grows, more Nigerians will gain energy access and the economic and quality-of-life benefits it confers. It’s too early to tell which companies will emerge with significant market share, but joint ventures between international and local companies will have the inside track.

Jonathan Coony is global lead for green competitiveness at the World Bank Group.

Nigerian off-grid solar market poised for growth

The government has an electricity access target of 75% for 2020.

A tailor uses a generator for power due to the epileptic public power supply in Lagos on September 27, 2016.

A tailor uses a generator for power in Lagos, Nigeria, on September 27, 2016. Photo: Pius Utomi Ekpei/AFP via Getty Images

Nigeria

Over 75 million Nigerians lack electricity access — including nearly 60% of those in rural areas — and development of the off-grid solar (OGS) market there <a class="gtmContentClick" data-vars-link-text="seriously lags behind other African countries, notably in East Africa" data-vars-click-url="http://www.worldbank.org/en/topic/energy/publication/Global-Tracking-Framework-Report" data-vars-content-id="e2b33835-9a2f-453a-8ac2-22c87323b21d" data-vars-headline="Nigerian off-grid solar market poised for growth" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="http://www.worldbank.org/en/topic/energy/publication/Global-Tracking-Framework-Report" target="_blank">seriously lags behind other African countries, notably in East Africa</a>. Yes, but: Factors that have impeded the Nigerian OGS market appear to be changing and the sector is poised for substantial growth in the coming years. Widespread deployment of commercial OGS technology across the country could not only address the harmful energy-access shortfalls but also provide a catalyst for job growth and investment.

Jonathan Coony

Stories

Nigerian off-grid solar market poised for growth

How to finance expanded access to off-grid solar power