In the solar PV industry, only a small part of the potential market for off-grid solar PV lies in the developed world.The majority of this market is in the rural areas of less developed countries, where it is driven by necessity. In developed countries on the other hand, most off-grid plants are set up for demonstration purposes, or to reduce emissions by replacing diesel generators.
Prior to 2008, off-grid solar PV dominated solar installations in terms of installed capacity, as solar was only economically viable in remote areas without grid access. However, after a phenomenal drop in price, solar PV gained popularity as a reliable way of supplying the grid.Today, only a few developed countries continue to develop off-grid solar power.Demand and market potential are high in emerging economies such as China and India,but highest in underdeveloped countries that have up to 85% power poverty.A number of charities and social businesses have taken up the cause of providing basic electricity to these areas, mostly using off-grid solar PV.
Australia and the US
Australia and the US are among the few developed countries where off-grid solar PV has continued to grow, even after the phenomenal growth of on-grid solar power between 2008 and 2010.Australia has 150MW of off-grid solar PV capacity, of which 60 MW was installed between 2011 and 2014; some 60% is in the domestic sector as backup power for grid-connected homes or the main supply for off-grid homes. The remaining 40% covers commercial installations such as cell phone towers, remote observatories, and agricultural equipment.However, with less than 20 MW installed each year, off-grid capacity has not seen significant annual growth, and the scenario is similar in the US.Both countries are expected to continue this trend due to strong grid penetration, meaning that few applications require off-grid solar power.
China and India
China and India are among the top emerging economies in terms of off-grid solar existing capacity and market potential. China has more than 300 MW of off-grid capacity (as shown in Figure 1) as a result of steady growth in annual additions between 2006 and 2014,largely under the Village Electrification program.
India has around 230 MW of off-grid capacity and is set to add another 50 MW in 2015. Most off-grid installations took place after 2010 in rural areas under the Ministry of New and Renewable Energy’s Remote Village Electrification scheme.The scheme promotes off-grid systems on varying scales –from a single-lamp home lighting system to a mini/micro grid– by subsidizing up to 90% of the cost.Several charities have also implemented initiatives and dedicated programs to provide solar panels to rural households.
Off-grid installations in China and India are driven by government encouragement and executed by the private sector, social organizations, and communities working to improveliving conditions in rural areas. There is significant potential for the growth of off-grid power in both countries as thousands of remote villages remain un-electrified and unable to access the grid.
Africa and the Future of Social Ventures
Sub-Saharan Africa holds the most potential for the growth of off-grid solar PV, but does not have significant capacity due to a lack of government support and funds. Its potential comes from the 300 days of sunshine that it receives annually, high irradiance levels, and a large population without access to power; however, the outlook for grid infrastructure is grim.Electricity supply usually only accounts for a very small portion of actual demand. More than 90% of the population in the Democratic Republic of Congo, Chad, and the Central African Republic– numbering 600 million – lives without electricity and has no means of accessing it due to poverty. This not only affects the lives of citizens but also narrows the scope for other forms of development that could provide a route out of poverty.
In the past five years, several charitable organizations and social businesses have implemented initiatives intended to end energy poverty through off-grid solar installations of varying sizes, deemed hotspots for the next decade of the market. Some have individually vowed to provide solar lighting for the entire 600 million population, while others target specific countries, regions or communities. This implies a combined capacity of close to 100 GW in the next five to eight years,assuming that each household would require at least a 150 Watt system.
A range of organizations have developed and adopted strategies to achieve their objective of electrifying Sub-Saharan Africa. Some charities provide full financial support by supplying complete systems free of cost to households without expecting anything in return from the government or the end user. Others provide technical expertise and a proportion of the cost but expect the government to pay the remainder. Some social businesses have adopted the third-party ownership model tested and recommended by the World Bank, wherein the organization sets up a solar power system or a smaller solar lighting system for a household and receives a monthly payment from the residents, which accumulates and is eventually used to buy out the system.
Australia and the US have significant off-grid installations and are not likely to see much growth in the future due to sufficient grid infrastructure.China and India on the other hand are two of the top emerging economies in terms of off-grid installations. With large rural populations lacking access to electricity, both have strong potential for off-grid solar but are working toward expanding their respective grids.Sub-Saharan Africa has a huge population without access to electricity but has never fulfilled its potential due to the current economic climate. However, with a number of charitable organizations and social businesses working on projects aimed at guaranteeing a basic electricity supply to all households, some with deadlines as close as 2020, it currently has the largest potential in terms of off-grid solar PV equipment and services.
About the Author:
Harshavardhan Reddy Nagatham, GlobalData’s Senior Analyst covering Power, specializes in alternative energy, cleantech, and environment and emission reduction, tracking major industry trends, building forecast models, and performing comparative analysis of market contenders. He has authored reports covering a variety of different topics, including all renewable energy technologies, fuel cells, and electric vehicles.
Harshavardhan has prior work experience in greenhouse gas emission auditing, financial modeling, and rural off-grid solar installations. He holds an MSc in management from Warwick Business School, UK, and a Bachelor of Technology in electronics and instrumentation engineering from Jawaharlal Nehru Technological University, India.