Industry leaders at GTM’s Off-Grid Energy Access Forum on why the stars are aligning for “the next billion” electricity customers.
Sometimes good ideas take off right away. Nobody buys suitcases without wheels these days.
Other great ideas, however inevitable, need more time. Off-grid energy, running the gamut from solar home systems to microgrids in small villages, seems to have fallen into this category.
Former U.N. Secretary-General Ban Ki-moon launched the Sustainable Energy for All initiative in 2011. The U.N. launched its Sustainable Development Goals in 2015. Off-grid energy companies like d-light and Mobisol have been operating for years.
Yet despite billions of dollars invested, and the backing of some of the world’s biggest energy companies, the off-grid energy sector still has not scaled quite as much as many might have expected.
But things are finally changing very rapidly, according to industry leaders at Greentech Media’s first Off-Grid Energy Access Forum, held last week in London.
All the signs suggest many of the thorniest barriers to scale have been overcome. Here are four reasons why experts say the path is finally clearing for electricity companies to reach “the next billion” customers.
1. Companies are focusing on what they’re good at
Many early entrants in the (largely) pay-as-you-go solar home system space tried to do everything.
Companies developing hardware and software in-house often wound up becoming manufacturers. Next they might have branched out into distribution and logistics, before also becoming a consumer utility and micro-financier.
Today, many vertically integrated players are narrowing their focus to what they’re best at, while new entrants are tending to stay in one part of the value chain.
Trying to everything is “very, very hard,” said Emma Hawkins, director of corporate finance at PEG Africa.
PEG Africa, a distributor of pay-as-you-go home solar systems, is about to expand to its fourth country, and it’s done so without having to raise as much capital as some of its vertically integrated peers because it never ventured into expensive product development.
“You have to decide as a company what is in our DNA: Are you a product company or is it the financing?”
“The offshoot of that is that it becomes easier to explain what you are to an investor, if you’re a distribution or technology or product company, and that allows you to tap into different kinds of investors,” Hawkins said in London. “Your business model is more easily understood by investors.”
Leslie Labruto, head of energy at the early-stage equity investor Acumen, noted that early vertically integrated companies had laid important foundations for the off-grid sector. She can see space in the market for companies taking both approaches.