Solar Tribune

Off-Grid Solar and the Path to Universal Access


One in seven people around the world live without access to electricity, and that is leaving a devastating human toll. In Sub-Saharan Africa, where over 60% of these affected populations live, people are dying from basic ailments because vaccines cannot be refrigerated; lack of lighting for school-work leaves the region with the lowest literacy rate in the world; and 300,000 children die each year from inhaling toxic fumes after burning dung and firewood.

The UN  and the World Bank both estimate that 1.1 billion people lack access to electricity. This points to significant progress over the last 2 decades. In 2000, the estimate was 1.7 billion people. However, it has only been in the last few years that real strides have been made towards addressing some of the endemic challenges that are leaving almost 15% of the world’s population in the dark. The rapid maturity of Solar PV technology, advancements in energy storage, and the adoption of new business models are the primary catalysts for recent progress in energy access.

Reliable, Affordable, and Clean Energy for All

Energy access has long been a major development challenge. In 2015, the UN’s 193 member-states ratified the Sustainable Development Goals (SDGs), defining 17 measurable objectives to eradicate poverty by 2030. Goal 7 aims to provide universal access to affordable, reliable, and clean energy. As the International Energy Agency (IEA) stated in its assessment of progress along this goal, “Energy is not only a global goal in its own right but is at the heart of the sustainable development agenda…”

“Goal 7: As Seen Through the Eyes of Children” by Margreet De Heer.

Since 2000, the total number of people living without access to affordable, reliable energy has dropped by 35%. The World Bank reports that since 2012, access to energy has expanded by an average of 118 Million people per year. Over half of that need has been met by off-grid solar (OGS) projects, which have enabled countries to address some of the biggest challenges in supplying reliable energy to remote populations and has been an affordable alternative for impoverished populations. This has fueled massive growth in off-grid solar, with global capacity tripling over the last decade.

These are promising indicators, but the progress is not evenly distributed. Over half of the 1 billion people who lack access to energy live in Sub-Saharan Africa, while the remainder live predominantly in Asia. However, less than 30% of new OGS capacity since 2008 has benefited Africa. Asia, on the other hand claims 67% of new OGS capacity over the same period.

Project Require Strong Fundamentals and Rule of Law

The disparity in new capacity reflects broader regional issues beyond technical project feasibility. In a report on the African energy problem, The Independent pointed to a range of factors from poor management of utilities, to misappropriation of funds and political corruption.

“But it’s also because utilities are vehicles for political patronage and, in some cases, institutionalised theft. US $120m went missing from the Tanzanian state power utility last year though a complex web of off-shore companies.”

The majority of OGS projects over the last decade have resulted from public-private-partnerships (PPP), or multilateral collaborations where, ultimately, a commercial provider takes on the long-term management of decentralized assets. Many of these projects are funded through matching agency funds from international development agencies or NGOs. Under the Power Africa Program, for example, USAID is providing technical assistance to expand energy access in Sub-Saharan Africa, but it will only support initiatives when there is active cooperation and participation from the host country government. Third party implementation partners typically face numerous challenges that USAID is unable to address. Lack of steady Government involvement, weak institutions, and corruption have been major barriers to projects moving beyond exploratory stages.

This 500-watt PV system, installed by SolarNow and financed by Power Africa partner SunFunder, provides clean power for a home, a public broadcasting system, a barbershop and a video hall in a rural village in Uganda. / Sameer Halai, SunFunder


Other OGS projects obtain more traditional development financing from institutions such as the World Bank, regional development banks and the International Finance Corporation (IFC). IFC upholds commercial feasibility standards, like those of a conventional commercial bank, but tailored to the conditions of development projects. In these projects too, host government cooperation is key, and without sufficient regulatory clarity, they lack the assurances that implementation partners need to take on the long-term risks associated with operating distributed generation assets.  As the World Bank stated in an issue brief:

“…the biggest challenges are poor policies, inadequate regulations, lack of planning and institutional support…successful countries have also balanced the objective of the financial viability of electricity suppliers with the need to keep consumer prices affordable…”

Achieving this balance requires the type regulatory clarity and market market reciprocity that can only be achieved through stable institutions of governance.

OGS and the Path Forward to 2030

A range of factors are contributing to the continued rise of decentralize solar PV, and OGS is projected to make up an even larger proportion of new generation projects over the next decade. IEA points to cost as a primary advantage of OGS in closing the energy-poverty gap. The price of solar today is lower than natural gas and coal, making it more affordable than any other generation resource on the market. According to IEA, “To deliver universal energy access by 2030, decentralized options are the least-cost option for 60 per cent of people currently lacking access.”

There is evidence that prices could continue to drop. London based Crown Agents released a report that found that the installed cost of solar plus storage in developing countries may be as much as 80% lower than most project developers are currently estimating on their early stage proformas. One area, where the report noted cost discrepancies, was in the way proformas typically estimate energy storage costs. The cost assumption for energy storage are often still based on outdated lead-acid technology verses the lithium ion batteries that are now the prevalent form of storage. When accounting for lower installation and encasement costs for these batteries, the total cost of storage comes down considerably. Project estimates often use other outdated cost assumptions on panels and balance-of-system components as well, leading to inaccurate phase 1 proformas that render potentially viable projects unfeasible on paper.

Better technology also enables these projects to perform better financially when they are operational. The move towards microinverters enables commercial suppliers to obtain better real time analytics on system performance, minimizing downtime, and maximizing productive return from these projects.

Mobile payment technology, termed Pay-as-you-Go (PAYGO), has enabled a secure and consistent flow of revenue from customers to solar power providers, increasing the the accessibility of these projects for customers. This is particularly relevant in Sub-Saharan Africa where mobile payment has given many customers access to digital currency for the first time. By not having to collect cash payments from customers distributed across large regions, projects cost less to manage and operate. Customers can quickly connect to new systems and access energy, and they have more real time visibility how much they’re consuming through their mobile phone payments. Nearly $800 million has been invested in mobile money systems over the last 6 years. West African markets are seeing significant growth in PAYGO traction, and CGAP estimates that as much as 50% of new accounts in the region (outside of Kenya) are created to pay for electricity. PAYGO may eliminate one of the key challenges to electrifying Sub-Saharan Africa. But without stronger regulatory institutions, it will still be difficult to attract outside partners necessary to build capacity and deliver technology.

President Barak Obama looks at a Pay-as-you-Go solar power exhibit during a 2015 Power Africa Innovation Fair in Kenya. (Credit: AP Images)

The UN’s goal-setting strategy has enabled a multi-lateral suite of players, from Governments and NGOs, to banking institutions to establish a common understanding of the biggest barriers to universal access, and a shared timeline to closing that gap. However, despite current progress, the 2030 goal will not be met if new generation cannot be accelerated further. With many lessons learned under their belts, development agencies and financing arms are getting more rigorous in their vetting standards. For Asia, there is still a tall mountain to climb. Regions such as Myanmar are still in early stages of development and conflict has made it nearly impossible to reach the most remote populations. In Sub-Saharan Africa recent successes in Ethiopia, Zambia, and Ghana may be signs that energy access is accelerating. But the largest populations without access to electricity are those in the areas with the weakest institutions. Off grid solar offers the greatest hope for rapid scalability of access to energy. Technologies such as PAYGO systems enable providers and customers to get around market inefficiencies, and all indications are that these contribute to increased living standards. However, stable institutions are the only mechanism that will convert these short term achievements into long term long term solutions.

Case Studies

The following two case studies provide a glimpse into the factors discussed above. The Paluan project illustrates how lower system costs are leading to rapid acceleration of access in the Philippines. In the case of the Bangladesh Solar-Home-Systems program, this program provides an example of how customer side financing innovations are facilitating major changes.

Paluan, Philippines: Solar-Battery Storage Microgrid

Brownouts are a common occurrence across the Philippines, affecting as much as 70% of the country’s population. Approximately 25% of the population lack access to electricity at all or only have access to sporadic, unreliable supply. To address this issue, and to close key vulnerabilities that the country faces as a result of climate change, President Duterte has been a strong proponent of decentralizing the nation’s energy supply, liberalizing energy markets, and transiting to more sustainable energy sources. His administration has set a goal to end energy-poverty by 2022.

It is against the backdrop of this national agenda, that Solar Philippines, a 4-year old company that has quickly accelerated to become one of the largest solar providers in Southeast Asia, recently completed Southeast Asia’s largest Solar PV – Storage Microgrids.

Last December, Solar Philippines completed construction and began operations on a 2 MW Solar PV facility. Combined with 2 MW of Tesla Power Pack battery storage, and a diesel generator for backup supply, this system has enabled the Paluan to benefit from 24/7 electricity service for this first time. Prior to the launch of this project, Paluan’s 16,000 residents frequently experienced brownouts. Napocor, the national utility, limited supply to 16 hours per day, and prior to 2014, village was served by a regional co-op that delivered 4 hours per day and eventually ceased operations.

Residents from the Town of Paluan hold a banner that reads “No More Brownouts” next to the Solar Philippines 2 MW Solar-Storage facility that serves their town with uninterrupted, affordable power. (Credit: Philstar)

According to the Philippine Star, Solar Philippines has reduced the electricity rate for Paluan residents by 50% and enabled them to eliminate the $550,000/year subsidy that the town previously consumed to afford Napocor’s rates.

This Project’s success has led to follow on projects. In June 2018, Solar Philippines flipped the switch on 3 more solar-storage microgrids serving towns in the province of Masbate. The company’s CEO announced plans to deploy a dozen more microgrids serving 500,000 people, all without taking grant or subsidies.

Bangladesh Solar Home Systems (SHS) Program

Bangladesh has seen the sharpest increase in energy access of any country. With a per capita annual income of $1,010, and 60% of its population living in remote areas or areas that need to be accessed via narrow waterways, Bangladesh has not been able to carve a feasible path to supplying electricity to majority of its citizens. Since 2009, Bangladesh has increased access from less than 50% of its population to 76% at the end of 2016. Almost half of this new generation capacity has been met with Solar Home Systems (SHS), stand-alone, turnkey systems that provide direct power to individual homes and businesses.

In 2002, the national government set a goal to achieve full electrification by 2020. In support of this goal, the Infrastructure Development Company Limited (IDCOL), a state-owned financial institution, launched the SHS program to provide cost-effective electricity to the country’s rural population. With subsidies from several international agencies, the SHS program partnered with Participating Organizations (POs) to reach customers in the country’s most remote regions, sell subsidized SHS to those customers, and enter into payment arrangements with those customers. IDCOL arranged the subsidy structure and provides backing for the credit that the POs extend to customers.

POs are responsible for purchasing the systems directly from suppliers. Because of the strong backing of the Government, suppliers have been accommodating and agreed to differed payment from the POs. While the POs are responsible for upfront costs, the majority of the capital was initially funded through international agency grants managed by IDCOL.

Different financing mechanisms have been used by the POs. Grameen Shakti, the largest PO responsible for 50% of the SHS installations, provided customers with a system ownership structure, rather than a pay-for-service arrangement. Customers were offered microfinancing arrangements, paying 15% up front, and the remaining balance over 12, 24 or 36 months. Average payments are around $17/month which is less than the cost to run a generator, and once the system is all paid off, Grameen Shakti continues to provide annual system checks for free.

The SHS program was just the beginning of Bangladesh’s rapid electrification process. But it illustrates the critical importance of devising financing mechanisms tailored to customers in the developing world, and it shows how strong regulatory institutions with active government involvement attract international development agency funding.

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