Pay-as-you-go, or PAYGo, is becoming an increasingly central part of the distributed solar market. PAYGo allows for modular payment and flexible financing; making products more affordable and attainable to customers. In our latest sales report we were able to look, for the first time, at how PAYGo sales of products compared to cash sales globally. The picture is an interesting one. In the first half of 2018, sub-Saharan Africa and South Asia together accounted for 83% of the global sales of all products, with 1.51 million and 1.52 million units selling in these markets respectively. One crucial difference between these two regions, however, is revealed when you look at the breakdown between PAYGo and cash products sold. PAYGo has not yet penetrated South Asia - or indeed any other region - as much as it has sub-Saharan Africa.
What are the reasons for this difference?
As the graphs above show, very little of the South Asian market is made up of PAYGo sales. In the first half of 2018, a vast 87% of all off-grid products in the South Asia region were sold in India, the largest market in the region. In fact, India has the highest sales figures in the world for distributed standalone solar products, with 1.25 million products sold (or 34% of the global total) for a value of $36 million in the first half of this year alone. So, why is PAYGo yet to really catch on in the region? India is a largely cash-based economy and, unlike the African market, mobile money - a key component to PAYGo - is not yet widely used there. In fact, there’s very little awareness of mobile money in the country, let alone usage. Aside from mobile money, industry experts have identified other barriers to PAYGo really scaling up in India as being: lack of capital required to scale, fluctuations in policy and legislation, and problems in on-the-ground operationalization.
Challenges and opportunities
So, when it comes to PAYGo, India and the wider South Asia region has a long way to go to catch up with sub-Saharan Africa. Increased consumer awareness and digital literacy will help, and there needs to be greater engagement by the telecommunications industry with the distributed standalone solar sector in India; telecommunication companies have, so far, been largely reluctant to partner with our sector. But while the challenges are huge, the opportunities are far-reaching. Joint initiatives, collaborations and investment from private sector will help carve the path for this sector to thrive, such as the recent deal of ENGIE taking a 90% stake in Simpa Energy India. There are opportunities for partnerships between distributed standalone solar companies and digital service providers to create digital services and platforms, and scope too for improved marketing plans which bring mutual benefit – increasing consumer education as well as improving customer services by players across the sector.
Meanwhile, and at a national level, the Government of India is focused on universal energy access. The Indian government is working towards electrification of all households across the country by March 2019, as part of its Saubhagya Scheme, providing single phase connections which can support LED bulbs and mobile charging points. But where does distributed solar fit in here? Our sector will complement the Government of India’s bold efforts to reach all households by March 2019. Standalone distributed solar will help consumers access additional power. Household appliances will help customers across the country to move up the energy staircase and productive-use appliances, such as solar irrigation pumps, will provide opportunities for consumers to increase their income.