In partnership with:

Harald Schützeichel

The development of the off-grid industry stagnates

There are three uncomfortable facts that the off-grid industry is currently facing:

1. Neither off-grid nor grid-technology have yet succeeded in making a significant step towards the goal of sustainable energy access for all. The number of people living without any power supply has remained the same in absolute terms. Although many off-grid households have been supplied with decentralized solar systems in recent years, the number of off-grid households has remained unchanged in absolute terms due to the population growth.

Then there is also the further increase in the number of households and companies that are connected to a power grid, but yet are far from having a reliable power supply. Although they fall out of any official off-grid statistics, they often live more or less off-grid.

 

2. The industry has to admit that it cannot even reach the majority of off-grid people with the existing models of distribution and financing. The sale of solar systems via end-customer loans (pay-as-you-go / PAYG) proves itself to be an effective financing and sales instrument. But today's business strategies only reach a portion of people without electricity. Those who either live in regions with very low population densities or those who are simply too poor to pay a price for solar systems, which enables companies and their investors to make a good profit, still remain on the margins.

The off-grid industry has started with the clear goal of providing power supply, especially to remote and poor people. So far, however, we have not found a scalable approach to providing electricity to those people who actually represent the "bottom of the pyramid" with a purely economic approach. Although there are individual projects for this group of people, they usually follow an approach that cannot be implemented as a business concept.

We therefore need to realise that those target groups, for whom many companies say they work for their mission statements, remain underserved.

 

3. International financial institutions and development banks, such as IFC or African Development Bank, get involved at best in homeopathic dosage. The largest part of the financial flows continues to go by far into large central prestige projects. This still includes climate-damaging energy sources, such as coal power plants. In the renewable energies area, the focus goes to major central projects, such as large hydropower plants or the currently emerging MW Solar Plants worldwide. However, these central electricity generators do not even offer a rudimentary solution to the future of power supply in a developing country. But they look good as a prestige object for local governments and development banks.

The concentration of financial institutions on such major projects is not only due to the fact that they are easier to handle financially than decentralized projects. The real reason is far more frightening: decentralized energy supply is not recognized by the IFC, AfDB or any other development bank as a technology to be taken seriously. At most they are a "nice to have", but certainly not an essential technology.

A serious mistake! Decentralized energy technology is on the rise worldwide, as a glance at the markets in Europe, the USA and Australia shows impressively. While developed countries (and even traditional utilities!) are developing their energy supply with 21st century modern technology, IFC, AfDB and their likes remain trapped in the past century.

 

What to do? Three things are urgent:

1. The off-grid industry should not try to be more catholic than the pope: The old technologies (fossil energies and grid electricity) can only survive economically with a mix of non-profit and for-profit. All old techniques are highly subsidized. So why should the off-grid industry be forced to pursue a pure for-profit approach?

However, the off-grid industry seems willing to continue to occupy a niche position just because they believe they have to prove they can be profitable without structural subsidies. But why?

It is time to redirect subsidies for old energy technologies to decentralized energy solutions. Then a reliable supply of electricity to the remote and poor areas would be possible. But of course, this is a wish that the economic profiteers of the previous subsidy will oppose with all their might. On the other hand: that alone is no reason to give up the idea.

 

2. Off-grid associations, such as GOGLA and ARE, need to increase their lobby activities significantly, also vis-à-vis the institutions that significantly finance them: the development banks. Lobbying is required by international financial institutions (IFC, AfDB etc.), but also by governments in developing countries. Both addressees have not yet realized that in the case of decentralized energy supply, we are talking about the modern technology of the future, which is cheaper and more reliable than any centrally organized energy system, while enabling a worldwide power supply.

In industrialized countries, the transition from the dominance of centralized energy supply to decentralized technology is taking place at astonishing speed. For developing countries, on the other hand, predominantly outdated techniques are offered. An absurd situation, which is due not least to the successful lobbying of the traditional energy industry.

It is also time for the existing associations (GOGLA, ARE etc.) to finally join forces with associations in industrialized countries that are also fighting for decentralized energy technology. For example, Eurosolar would be such an association.

 

3. The off-grid industry must urgently think outside the box and beyond the supply of solar home systems. It is necessary to follow the current developments in decentralized energy technology in the industrialized countries, such as the worldwide booming solar plus storage development or the exciting off-grid developments in Australia.

The Intersolar, the world's leading solar trade fair, takes place in June in Munich. At solar fairs like this one, but also at comparable fairs of the storage industry, off-grid remains a niche topic. Why, actually, when customer needs and technologies in industrialized and developing countries are increasingly overlapping?

The off-grid industry is currently mainly occupied with itself. Despite all the commitment, it is amazing that the topics dealt with have changed little over the years. The General Assembly of GOGLA in Amsterdam in May was another proof of this. A curious look in the direction of related market segments in industrialized countries, an exchange with techniques of the solar plus storage sector or a learning from the off-grid market of Australia takes place at most in passing.

A football player who only looks at the ball in his possession cannot influence the game. It should be rather: head up! And then use the ball on the foot to steer the game.