The potential for off-grid solar is not only large, but is growing rapidly. The five major drivers that are influencing the growth of the off grid solar industry is elaborated in this blog:
Lagging grid growth
The importance of grid growth as a driver for solar lighting demand varies by region, with rapid grid growth likely in select geographies and very slow grid growth seen in many special category states and rural regions. Grid penetration typically needs to grow by over 2% a year to counteract the effect of population growth – in practice this means that even substantial investments into the grid will leave a sizable population with no access to electricity.
Price trends
Rapid technological innovation in basic Solar lighting technologies and a scale-up of commercialization efforts by entrepreneurs is driving a substantial decrease in the manufactured price of solar products, and since affordability is arguably the main obstacle to market adoption, falling manufacturing costs and corresponding declines in the retail product price will be a critical driver of demand going forward.
Technology and design innovation
Beyond improvements in price, the solar off grid market is also undergoing a revolution in product design and quality. Most manufacturers have not yet achieved the quality and reliability standards of mass produced consumer electronics, but the market is starting to see a number of products that combine good quality, long battery life, and most important, value-added features and product designs that address the particular needs of BoP off-grid and under-electrified consumers.
Kerosene prices
Kerosene, the main traditional alternative to off-grid renewable lighting, has long been an expensive commodity for the poor and is expected to continue increasing in price. Analysts forecast an average increase of 4% annually over the next five years. This, combined with increasing pressure on kerosene subsidies will drive consumer demand for cheaper alternatives. Estimates suggest that between INR 10,000 and INR 20,000 crores (USD 2 to 4 billion) is spent by the government every year on subsidizing the price of kerosene and if these subsidies are reduced / eliminated due to pressure from environmental activists, there would be a compelling need to shift to off grid renewable sources.
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With stiff competition from local players and from imported panels from China, the market has become very competitive for module manufacturers. However, by optimizing the costs, utilizing government subsidies and solar products at competitive prices, both locally and abroad, the returns are expected to be lucrative and these companies can also clear their module inventory.
Financial incentives
With significant cost incentives and tax reliefs coming from government policies, the financial assistance to the market members from financial institutions is likely to take the growth exponentially.
Growth economics
Rising demand for energy, driven by GDP growth rate and the gap between energy supply and demand, penetration to remote under-served areas, availability of low cost solar/PV, energy security for the nation and growing emphasis on clean technology and renewable energy to combat climate change are set to grow the industry.
Rural electrification
There is enormous potential for off-grid PV deployment in India based on real needs and benefits in the areas of rural lighting and electrification for powering various rural requirements like pumping, cellular tower powering etc.
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