Accelerating access to off-grid energy
GOGLA, a key partner in SNV’s call to action for solar energy, is an association representing companies in the global off-grid solar energy industry. They help members to build sustainable markets and deliver quality, affordable off-grid electricity products and services to customers across the developing world.
Koen Peters, the Executive Director of the GOGLA Secretariat, gives us a frank overview of the challenges the industry is facing while attempting to scale up their initiatives in the developing world.
This interview was first published in Connect Magazine 2017. The complete publication is available for download.
How can GOGLA help accelerate access to modern energy?
“We try to achieve this goal by building a vibrant and sustainable industry that can grow and scale quickly. However, not so quickly that it will come to a grinding halt because the foundations are not strong enough.” He cautioned.
A major hurdle for the solar industry is governments’ perception of the off-grid paradigm. Peters elaborates, “The prevailing paradigm is still that a proper energy connection is a socket in the house. But who says that every household in Africa or Asia needs an on-grid connection?”
“The challenge is to convince governments that off-grid energy solutions are able to do much more than they think, and can be scaled up quickly. Fortunately, this message has reached the hearts and minds of some leading government officials across developing countries and we see increasing support from governments for off-grid solar.” Peters is also keen to highlight that off-grid is not actually a threat to utilities. “Many of these companies have customers who use minimal electricity, therefore the payback time for the connection is too protracted. In a sense, off-grid solar energy helps to take care of customers who are out of reach of traditional utilities and would never become profitable clients for them” he clarifies.
Another challenge the industry faces when scaling up, relates to the fact that solar energy is very different from classical public sector energy infrastructure, with its long term feasibility studies and large scale project plans. “We need to look at solar products as household electronics, and approach them in the same way as fast moving consumer goods. You don’t have to wait years for solar energy, you can get it, often literally, over the counter.” He explains.
Sweating the small stuff
According to Peters the perception that the market for off-grid is too small for investors is changing. Development Finance Institutions traditionally have trouble investing in business models that start small and then scale up, “These institutions’ procedures are designed to sign off large sums of money and invest in large scale projects – it is simply more efficient. So big plans attract more attention, whereas solar is about starting small and scaling up. However, we do see positive developments. We recently strengthened our partnership with the African Development Bank, for example, who launched an initiative to boost off-grid energy solutions across the continent. Also other investors, from impact investors to more commercial ones, are increasingly taking notice.”
Peters firmly believes that governments and private sector need to work together to make best use of the available market business models. “With some creativity, there is a lot you can do with market mechanisms and it will be far more efficient and effective than working with public instruments alone.” In terms of policies, governments should first and foremost aim to create a predictable regulatory environment. He mentions an example where the governments changed the regulatory regime overnight, without warning, creating confusion and a lot of problems at customs bureaus.
Countering the counterfeit
The quality of products is also essential and Peters believes that quality control mechanisms are a necessity. People who buy a cheap copy or an outright fake product, which lasts less than the 3 years promised, will see the solar product as poor value for money – and share this view with their neighbours and relatives. “It is hard to convince people that next time, they should invest their limited funds in a quality product instead,” he says. Currently, the market is not scaling. “We actually see a dip in sales of the smaller product categories. We see continued growth in the larger pay as you go systems (payment in weekly instalments), but less than expected. Whether this is due to too many low-quality products coming into the market, is not very clear yet from this data.” Peters continues: “We also need to accept that the market is still young and vulnerable to external shock. In India, a demonetisation scheme removed a lot of cash from the market; while in East Africa the drought had major impacts. This is not a market for the faint hearted, but ultimately the potential is significant, so this is an attractive industry for those with an entrepreneurial mind set.”
Building markets from the bottom up
Koen believes that SNV’s adds value as a professional market builder with “it’s the feet on the ground presence”, working with local entrepreneurs in difficult environments, helping them to scale and form part of the supply chain and also connecting many of the players in this space. SNV looks at energy access from a market perspective, providing the support to build markets for hard to reach consumers. “The result based financing scheme which SNV ran as part of the Energizing Development programme worked well especially for our pay as you go companies in North Eastern Tanzania. We need more of these examples. We also need people that provide leadership, who deploy their experience and expertise not on theoretical solutions but to actually get things moving in practice. My message to SNV is: we need you for this. We encourage you to be out there, igniting and activating these markets.”