Asia is home to very diverse solar markets, ranging from highly developed ones - such as China and Japan - to less developed ones - such as Cambodia and Myanmar. The latter group of countries, similar to other developing regions, has long suffered from subpar electrification levels. However, despite the large number of people living without electricity and the favorable conditions for solar energy, the spread of (off-grid) solar PV applications have failed to keep up the pace with that of other major developing regions, like Africa. To get an insight into the current status of solar energy and the mechanisms set out to drive its development, we hosted a webinar - ‘How to bridge the electrification gap in Asia through off-grid PV systems?’ - and consulted local experts.
This article, which provides a summary of the main insights presented during this webinar, comes in preparation ‘Unlocking Solar Capital Asia’, our 4th conference examining the roots of bankability issues in the region. The event is set to take place on the 28-29th of September in Singapore and will bring together the most prominent stakeholders in the region. For more information about the unique features of the conference, please visit the event website here.
Ingredient for success
“Asia’s electrification struggle is now being tackled through various solar products and business models which guarantee that solutions are tailored to local needs,” Laura Sundblad, program adviser at GOGLA, points out. The Global Off-Grid Lighting Association (GOGLA) is one of the leading, independent, nonprofit electrification advocates. Stand-alone solar products in the region include a spectrum of applications, spanning from individual solar lanterns (0.5-3 Wp), through solar home systems (up to 100 Wp) to community lighting solutions, as well as solar applications that improve value chain efficiency.
Since the average purchasing power in the region is rather modest, the right type of financial model is crucial for the sustainable acceleration of energy access. The spectrum of business models starts with prepaid and rental setups in which consumers have very limited ownership or commitment to the appliance; where these solutions can only be used on an occasional basis (Figure 1). Moving away from the solar-as-a-service aspect, are the perpetual lease and lease-to-own business models. The lease-to-own business model, which is the more wide-spread out of the two, includes monthly payments according to a preset payment plan which concludes in consumer ownership.
Figure 1: The spectrum of business models utilized for the sale of solar appliances. (Source: GOGLA)
On the other end of the spectrum, are upfront sales and direct cash sales. The former is a business model that involves a financial institution dealing with the financial contract and a separate energy provider in charge of the energy contract. Even direct cash sales schemes include warranty and some level of customer relationships, as pointed out by Ms. Sundblad.
Affordability of these products and services, however, largely depend on how facilitating the involved companies are. One of the most crucial aspects of an adequate solar environment, is the presence of mobile money or other means of digital finance. The clarity and consistency of regulatory frameworks and national electrification plans are also crucial. Although these aspects are necessary, they are in itself not sufficient for success. The availability of appropriate capital and a skilled workforce, as well as a robust supply chain, are also key ingredients for success.
Market watch: South Asia
As a result of its vast network, not only can GOGLA provide a snapshot of the regional markets but also on the individual Asian off-grid markets. Out of the 8.07 million products sold in 2016, 1.41 million were sold in South Asia, corresponding to a revenue of US$ 35.52 million. East Asia and Pacific accounted for 96,456 of the individual sales and US$ 4.33 million in value, according to the company's information (which excludes some data from non-GOGLA-affiliated providers).
In India, 400 million people subsist with little or no access to electricity access. Although grid extension has been rapid, the rate of population growth renders increased involvement crucial in the country. This is especially true if the government is to achieve its goal of universal electricity access by 2019. The sheer size and variety of the nation will require an adequate range of products and business models to see success.
Estimates for Pakistan’s total electrification rates vary. ‘Lighting Pakistan’, an International Finance Corporation (IFC) program, has estimated that 144 million out of 197 million people lack adequate access to electricity. This number is made up of 75 million people with less than 12 hours of electricity a day and 69 million without any access.
Bangladesh, whose electrification rates are the lowest in the whole of South Asia, is actively trying to change this status quo. Through a concessional finance program spearheaded by the World Bank and other international participants, over 4 million solar home systems were installed in Bangladesh. The financing scheme is run by the state-owned ‘Infrastructure Development Company Limited’ (IDCOL) and, even though the program has achieved great success thus far, other government ‘giveaway programs’ and cheaper products are threatening the future of this initiative.
Market watch: Southeast asia
Countries in Southeast Asia can especially be characterized by uneven electrification rates. Countries such as Singapore, Brunei, Thailand and Malaysia pride themselves in near- or full universal power access (Figure 2), whereas countries like Cambodia and Myanmar are on the other end of the spectrum with significantly lower access. Due to their archipelagic nature, Indonesia and the Philippines feature a contrasting mixture of both ends. While these two countries display high urban electrification rates, the access on remote islands are especially low.
Figure 2: An overview of the Southeast Asian urban and rural electrification rates. (Source: Oxford Analytica)
While increasing off-grid development in countries like Indonesia and Myanmar are definitely noticeable, the off-grid system sales of 29,000 and 22,000 in H2 2016 are well behind the amounts needed for achieve the setout electrification goals.
While the many different markets have their own unique challenges in Asia, some vital elements necessary for continued development are shared across borders. These include ensuring the collaboration and communication among governments, DFIs and the private sector; increasing investment by improving business climate and reducing risk; and, lastly, developing adaptive solutions to meet the needs of diverse markets.
Thinking outside of the box
Using adaptive solutions to cater to local needs is especially important in Asia. Charu Chadha, a member of GSMA’s ‘mobile for development utilities’ initiative is an expert on the matter. Through the company’s initiatives she has sought commercially sustainable
business models that leverage mobile to deliver affordable and improved energy, water and sanitation services in emerging markets.
Mobile technology is a platform that can be utilized for a wide range of tasks. Besides communicating through mobile services and using mobile money as a form of payment, mobile technology can also be used as machine-to-machine (M2M) connectivity, through which electrical appliances can be controlled and monitored remotely. Another potential future application that can have a disruptive effect of the Asian solar landscape, is utilizing mobile usage data as a method to determine credit rating for individuals whose creditworthiness could otherwise not be determined.
Further building on the unique potential of mobile technology, smart metered grids were developed in Nepal, that not only increased consumption rates, but also increased operational efficiency. Using mobile data, the right tariff plans were created and utilization was increased from the initial 40-50%. Another promising application of mobile technology is peer-to-peer energy trading. Connecting dense, off-grid settlements can not only increase access but can also provide a source of income for the energy provider households. For this application, blockchain technology could provide a reliable way to manage transactions. Lastly, as more of a theoretical solution thus far, mobile technology can be used as a platform to establish a mobile-based e-commerce platform that is bundled with an instant loan. Such a system would take away a large number of the current hurdles and enable the upscaling of solar solutions in Asia.
While some countries are less in need than others, it is safe to say the Asia’s electrification efforts are far from being complete. Combining the right solar application with the right business model are vital to providing the solution for the diversity the Asian markets are displaying. In order to speed up this electrification process, adaptive solar solutions, similar to that of mobile technologies, will also be crucial.
