Why off-grid energy is ready to scale in emerging markets

The ever-growing demand for safe and reliable power has led to companies investing in off-grid energy.
18 November 2019

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Off-grid energy has always been associated with social development projects which allow energy to be distributed to remote communities and areas lacking proper infrastructure.

Many countries in Africa such as Uganda and Tanzania suffer from high grid connection costs and low access to electricity hinders growth and creates obstacles for businesses.

The lack of access to electricity has sparked developments in renewable energy such as solarwind, hydro, and biomass.

Even though these green energies are gaining prominence as costs are much lower than conventional coal or gas units, there are challenges in infrastructure and development that may not meet the global power demand.

On the other hand, off-grid energy access solutions are designed for the needs of communities from the start and thus, allows its development to upscale without much friction. After all, the majority (75 percent) of development in off-grid energy solutions are geared for commercial use.

For 840 million people worldwide, without access to safe and reliable modern energy — off-grid energy could be the solution.

The off-grid energy sector is expanding with its annual investment surged to US$500 million last year; exciting opportunities are charging up and it isn’t just for the benefit of remote communities, but also enterprises.

Focusing on the strengths in business models

The majority of the early entrants in the pay-as-you-go solar home systems made the mistake of taking on a variety of roles and losing sight of the organization’s initial goals. Companies that developed in-house hardware and software gradually became manufacturers and mass produced products; subsequently, they broadened their services to distribution and logistics as well.

This expansion may be perceived as growth but often lead to a division of investment and resources, inevitably misdirecting the focus of companies.

Unlike their early ventures, many companies are embracing a vertical approach by focusing on their strengths and growing continuously along that line. Besides that, emerging firms are staying on one part of the value chain instead of aiming to be part of every stage in the off-grid energy sector.

“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,” Emma Hawkins, Director of Corporate Finance at PEG Africa said.

Big data leverage R&D in off-grid energy 

Big data is essential when making important business decisions as the insights provide a holistic and large overview of the present market.

Energy companies are using big data in terms of analyzing potential sites suitable for off-grid energy solutions and also driving the business forward through securing deals, evaluating future investments and making procurement decisions. 

Moreover, data on customer usage of energy allows companies to provide better services and gain valuable insights during research and development.

Besides that, big data helps customers build creditworthiness which helps when forming strategic partnerships with off-grid energy companies. 

A growing demand for off-grid energy

Besides the development of off-grid energy companies and the catalyst role of big data in the industry, a rise in demand drives the growth of off-grid energy companies. 

A hike in the development of off-grid development projects in Africa has contributed to emerging markets in that continent. Alistair Gordon, CEO of the largest solar provider in Nigeria, Lumos, stated the rise in demand as a result of a growing population and improving quality of life.

“Energy is very aspirational, and people move up what you might call the energy ladder. They get a new job, they want a bigger TV, they need more power. So you have to have the flexibility in your solution to deal with that — people are changing.”

Recognizing the potential of off-grid energy solutions to complement the national grid, government bodies are getting more involved in the growing industry.

As an example, Togo is on the road to providing affordable, clean and off-grid energy at a large scale and its support for the movement is clear when the country’s president is involved.

The involvement of stakeholders from bottom to top encourages partnerships to form between local and international companies, public and private bodies to work towards a common goal.

Besides that, a range of investors from EDF to Shell and Uber, are flocking towards off-grid energy access. This indicates an emergence of energy access markets as the demand for power accelerates, and streams of data will inform global audiences of its progress.

Clearly, the future is looking bright for off-grid energy companies.