Despite the challenges posed by the pandemic, the number of people using solar energy kits as their source of electricity has continued to grow, reaching 490 million. This information comes from the "Off-Grid Solar Market Trends Report 2022: State of The Sector," published by the World Bank's Lighting Global, International Finance Corp. (IFC), GOGLA, Efficiency for Access Coalition, and Open Capital Advisors. The report states that the number of people using solar energy kits increased by 70 million by the end of 2021, up from 420 million in 2019.
The growth can be attributed to sustained sales, longer lifespan of larger products, and existing customers upgrading their systems as they pay off or save money from their initial solar energy kits. For example, in 2020 and 2021, 3.8 million customers gained access to solar TVs.
The adverse effects of the pandemic resulted in a 22% decline in solar energy kit sales in 2020. However, the off-grid solar sector rebounded in 2021 with a 10% increase in sales.
Off-grid solar technologies are expected to play a crucial role in achieving universal energy access by 2030, particularly in regions like sub-Saharan Africa with high population growth. The report indicates that off-grid solar is the most affordable solution for 41% of new household connections between 2020 and 2030.
However, the price of solar energy kits remains a barrier for many households and businesses, especially considering declining income levels and job losses caused by the pandemic. The availability of consumer financing options, such as pay-as-you-go (PAYGo), is crucial to address this affordability challenge.
According to the report, between 177 million and 277 million unconnected individuals cannot currently afford a Tier 1 solar energy kit, even with consumer finance options. Without such financing, only between 3 million and 167 million out of the 733 million unconnected people worldwide could afford to purchase a Tier 1 multi-light and charging system upfront.
The report emphasizes that end-user financing is essential to provide the poorest populations with Tier 1 energy access. However, PAYGo alone is not sufficient to close the affordability gap.
Investments in the off-grid solar industry have been increasing, surpassing $2.3 billion since 2012. However, most of the finance has gone to large-scale companies, making it challenging for seed and start-up companies to attract funding. Investment volumes plateaued between $300 million and $350 million from 2016 to 2020 before reaching $457 million in 2021. This year is expected to be another record-breaking year.
The report also highlights the maturation of emerging technologies like solar water pumps and solar cooling, which are now classified as "near-to-market" and have already made significant improvements in food production and storage. Additionally, PAYGo technology, which enabled consumer financing for solar energy, is now being leveraged for various electronic devices and digital financial services.
Finally, the report underscores the need for end-user subsidies, acknowledging that more public funding will be required to reach remote and lower-income customers and bridge affordability gaps.
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