For years, small solar companies have been bringing tiny solar systems to Africa, India and other areas where people still have no electricity, and some see 2016 as the year when this really takes off.
"The big story in 2016 is a solar leapfrog. What you have seen for the past 2-3 years is a lot of innovative companies proving that there is a big market. They have received funding and product offerings are getting better. In 2016 you’ll see solar taking off on a mass-market scale," Xavier Helgesen, CEO of Off Grid Electric, told Bloomberg New Energy Finance (BNEF).
Everyone in Africa has an energy problem, he says. Even where there is a grid, it doesn’t work well or electricity is very expensive.
Small solar could be as much of a game-changer as mobile phones, Patrick Pouyanne, CEO of oil company Total, told BNEF. Total is one of Off Grid’s investors.
Last year, around 7.5 million tiny solar systems were sold in Africa, an incredible increase from the 40,000 sold in 2009. With fresh investment pledges from the US and other countries, 14 African countries joined Energy Africa to bring solar to the 620 million people who still lack access to electricity.
Besides Off-Grid Electric, many small solar companies are active such as SolarAid, BBOXX, and GravityLight.
Africa’s Development Bank aims to mobilize $55 billion to eliminate Africa’s energy deficit by 2025.
Turning Off-Grid Solar Into an Asset Class
The funding mechanism that’s worked so well in the US to mainstream solar is being used to accelerate growth in Africa.
In the US, SolarCity was the first to raise funds by securitizing its portfolio of solar leases. In just a few years, it raised $450 million by selling bonds backed by monthly payments customers make for rooftop solar systems.
"We think it’s an interesting model that can be replicated in Africa," David ten Kroode at Oikocredit, told Bloomberg. Working with merchant bank Persistent Energy and BBOXX, they are offering bonds in Kenya and Rwanda, with plans to expand to Pakistan and Nigeria next.
The first bond raised $500,000 from institutional investors by bundling 2500 solar contracts in rural Kenya. It pays 21% interest and matures in 2.5 years.
They plan to issue bonds every three months, raising $16 million this year, and up to $2 billion within five years.
Last year, Africa launched a "Solar Academy," where people across the continent can develop professional skills to enter the industry.
Read our article, Really Small Solar Gaining Traction Around the World.
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