During the COVID-19 crisis, the off-grid solar (OGS) industry demonstrated its importance in providing essential energy access for millions of households and businesses in developing countries. Like almost all industries, however, the OGS sector has also been badly hit by COVID-19. The first half of 2020 saw sales of off-grid solar lighting products fall to 3 million compared to 4.1 million in the first half of 2019^[1]. Sales of most off-grid solar appliance types also saw decreases. The market also saw a drop in equity financing and the continued concentration of funds into a small number of players. Yet despite this, total investor commitments in the first part of the year remained strong; with leading financiers reporting positive support for the sector’s impact and potential.

The slowdown is not unexpected given the supply chain disruptions, national lock-downs and income losses resulting from the COVID-19 pandemic. However, the knock to the off-grid solar (OGS) sector is a concern. Nearly 800 million people are still living in energy poverty and off-grid solutions are critical for achieving universal energy access.

Sales Impact

The impact of COVID-19 on sales varied across companies and regional markets. The effect of stringent measures to combat the pandemic were particularly acute in Asia. Sales of off-grid solar lighting products in South Asia fell to 495,000 units, a 57% decrease, and to 74,000 in East Asia & Pacific, a 49% drop. A slowdown in sales was also seen in East Africa (11% decline to 1.6 million) where the economic impact of COVID-19 was exacerbated by the worst locust swarms for decades and heavy flooding in key markets. Sales of off-grid solar solutions remained stable in West and Central Africa, with 354,000 and 130,000 units respectively; however, this stability hides differences at the national level. Drops were seen in key markets, such as Nigeria, Senegal and Côte d’Ivoire, that had previously shown long-term growth, while increases were observed in Ghana and Sierra Leone due to bulk procurements planned in advance of the pandemic.

The market for efficient off-grid appliances saw a more diverse range of impacts. TV sales did not continue their upward trajectory, showing a 20% decrease compared to July - December 2019, but still showed a 16% increase compared to the first half of the year. Anecdotal evidence suggests that this comparative buoyancy in sales was a result of families prioritising access to entertainment and information during the initial lockdown period. However, sales of efficient fans dropped by 54% when compared to January - June 2019. This is linked to the more severe drop in sales seen in their main market, South Asia.

Investment Impact

When looking at investment, the first part of 2020 saw $198 million in commitments by 31st August - comparable to the rate of investment seen last year. Even more encouraging is the support the sector is still receiving from its leading investors. Among 31 surveyed, 75% anticipate maintaining or increasing their level of investment into off-grid solar as they are “optimistic about the performance and potential of the OGS sector” and “remain bullish around the impact”.

However, these positive signs belie some worrying factors. As in previous years, investment is largely concentrated in a few companies, an effect that has worsened in 2020. Between January - August 31st 2020, 75% of investment was made to only 3 companies. Grant funding was also concentrated, albeit from the investor side, with 3/4 of grant capital coming into the market from a single source. In addition, whilst the make up of investment in 2019 was relatively equal between equity and debt, in 2020 equity investment makes up only 16% of the total so far, leading to concerns about market growth and expansion. Stakeholder interviews also suggest that the current rate of investment may not be maintained in the latter part of the year, as many deals made to date were already planned before the pandemic.

This leaves some worrying gaps, most particularly for early stage companies and last mile distributors that often face greater challenges when engaging investors. These companies are vital for the overall off-grid solar ecosystem, driving expansion, creating local jobs and reaching low-income customers. Support for enterprises working throughout the sector, with the right type of capital, is crucial.

Energy Access Impact

Perhaps most concerning, though, is the effect of a slowdown in growth on energy access and other development impacts. Naturally, with less products sold, fewer families are accessing clean, safe electricity and more households are left with expensive or dangerous alternatives such as kerosene. At the national level, positive impacts on employment, economic opportunity and income generation are being missed; whilst at the global level, challenges for the off-grid industry could derail efforts to achieve a clean energy transition that leaves no one behind.  

Companies must be safeguarded in the short-term to avoid operational and staff losses that cannot be regained easily. To power the COVID-19 recovery and avoid losing 10 years of energy access progress a concerted, ambitious and strategic long-term effort to protect and promote the sector is also needed.

Off-grid solar remains the fastest, cleanest and most affordable way to unlock hundreds of millions of people from energy poverty. We urge governments, investors and the international community to work with us to support the off-grid industry and power recovery from the COVID pandemic.

^[1] Unless otherwise noted, all sales comparisons used in this report are for the periods between January - June 2019 and the same period in 2020

GOGLA is the association for the off-grid solar industry.

Data shared in this article is from two of its upcoming reports, written in collaboration with leading sector Partners:

• The GOGLA Deals Database 2019/YTD 2020 update, a collaboration between Catalyst Off-Grid Advisors and GOGLA, supported by GET.invest will profile investment into the OGS sector in 2019 and 2020 to 31 August, and investor perspectives on the industry. Report Launch in the week of 5th October; Webinar 4pm CEST, 13th October, 2020
• The Global Off-Grid Solar Market Report, a collaboration between IFC Lighting Global, the Efficiency for Access Coalition, Berenschot and GOGLA, will provide more detailed insights on the sales and impact of the off-grid solar industry from January - June 2020, including country and OGS system size specific data, and insights on a range of efficient appliances. Report Launch: 14th October 2020; Webinar: 2.30pm CEST, 20th October, 2020

GOGLA Members should note that the results highlighted above will also be discussed in the ‘Monitoring the Vital Signs’ session at the GOGLA Annual General Meeting on 30 September 2020.