The off-grid solar industry transforms lives. With the right support, the off-grid solar market can scale to provide affordable, clean and reliable access to electricity to the 840 million still living without. While, total investment in the sector grew by 20% in 2018 (compared to 2017), reaching USD 352 million, additional investments are still needed for the sector to grow. Findings from the 2018 Off-Grid Solar Market Trends Report, shows that there is still need for funding of up to USD 5.7 billion until 2022. To achieve that, the industry must perform for investors and consumers and meet the needs of all those we work with.
The GOGLA Consumer Protection Code aims to safeguard impacts of the off-grid solar sector and respecting rights of consumers. The Code aspires to help companies within the sector provide investors and other stakeholders with a framework to promote good practice. SunFunder – a solar finance business – was the first investor to endorse the GOGLA Consumer Protection Code. In this interview, Avi Jacobson, Senior Investment Officer at SunFunder, talks about the importance of committing to the Code, the positive signals it helps companies send to investors and the future of the Code within the off-grid solar sector.
1) What does success look like to you, as a company?
Success to us is when our investments enable our borrowers to deploy more solar systems to power homes and businesses that lack reliable electricity. To date, our financing has directly impacted over 5 million people with increased access to clean energy and mitigated more than 450k tons of CO2e annually. This reflects the long-term relationships, scalability and trust that we have always tried to build in the sector. In the next few years, we aim to work with our borrowers to improve energy access for millions more people. The ultimate measure of success is sustainable energy for all: we also have a role in attracting new investors to the industry, both through our own funds and by helping off-grid solar companies build their own track record.
2) What do you think are the most important next steps for the off-grid solar industry to scale successfully?
For now, the onus is on the sector, its extraordinary enterprises and financing partners like SunFunder, to prove that they can operate sustainable business models. Attracting commercial investment will be critical for the industry to scale. Traditional commercial investors are looking for off-grid solar companies with proven business models. They will flock to the industry when leading enterprises can offer predictable returns in a similar form to what they already buy. SunFunder’s role is to ensure growth capital is invested through appropriate financing products so that solar companies can develop sustainably.
There are important intermediary steps to lay the foundations for getting there: more early-stage equity and catalytic capital. Companies need both of these to build more track record and reach profitability. SunFunder actually hosted a roundtable on catalyzing capital for energy access and climate change in May and we shared key points in a blog here.
3) What role does The Consumer Protection Code play in your success?
The Consumer Protection Code supports our success by ensuring a level of mission alignment with our borrowers. As a responsible investor we want to know they also take their responsibilities seriously. The Code maps out the safeguards we think are necessary to protect the ultimate beneficiaries of off-grid solar energy access – and SunFunder’s financing. Part of this is seeing that a solar company’s commitment to the Code demonstrates understanding of its clients and long-term business. Adhering to the Principles should result in distributors being accountable to their end-users. While leadership may commit to the Code, following it is dependent on training staff on how to responsibly interact with customers. Additionally, successful self-assessment relies on a company’s ability to effectively collect and analyze data on end-users and ensure consistent treatment of customers by all employees. The capacity to integrate both the Code and those underlying processes into operations is indicative of a strong management team. In summary, implementing the Code is not only the right thing to do, but also sends positive signals to SunFunder and other investors.
4) What areas do you feel need more attention?
Implementing an industry-wide initiative is inherently an iterative process and the current Consumer Protection Code provides a very solid baseline. But until it is put to use and tested, it will be difficult to detect areas that need to be strengthened. Therefore, it is critical that the Code is adopted and endorsed by solar companies and investors to validate the Principles. As distributors integrate the Code and conduct self-assessments, the elements that need more attention will become visible – and we support GOGLA’s ongoing role in this process. As the first investor to endorse the Code, SunFunder is also committed to being engaged as the industry applies the Principles and hardwires consumer protection into business practices.
5) What are your plans for the next year, to help achieve your goals on Consumer Protection?
We require all of our residential solar borrowers commit to the Code. At the same time, we recognize that making it a requirement will affect our portfolio companies differently. While all of our larger borrowers have already adopted the Code, smaller and newer enterprises may need support to implement the Principles into operations. In our role of investor, we have limited capacity to provide this kind of technical assistance. We see this as a potential need as the Code gains traction, so that consumer protection can successfully be integrated industry-wide.
6) What do you see as the future for the Consumer Protection Code? (Thinking about third-party assessments, certification, regulation, etc.)
At this point, adoption of the Code and self-assessment/self-regulation are good starting points. Industry standards and norms are important. The Code provides a foundation while the sector scales and matures. As companies elect to go through self-assessments, success will be determined by how seriously they rate themselves and how they use the results. Formal regulation, third-party assessments and branded certifications bring up important questions around government involvement, data privacy concerns, and implementation costs. There may be a role for more formal consumer protection regulation in the future, but as a sector we need to carefully consider the responsibility being put on solar companies and structure processes and requirements accordingly.
7) Is there anything else you’d like to say?
We are proud to support GOGLA’s consumer protection initiative and look forward to continuing our involvement as the off-grid residential solar sector integrates the Code.
Learn more about the GOGLA Consumer Protection Code, its principles and indicators in our Consumer Protection Hub.