Electricity for the rest of the world – opportunities in off-grid solar power
Ten years ago, most of the photovoltaic (PV) systems installed in the world utilized batteries for storage and were not connected to an electric grid. While connection to a grid has become the dominant way that the world uses this technology in the last decade, there are still many areas of the world that do not have access to such a grid, where off-grid PV can be a practical solution to power needs. In coming decades, off-grid PV may again become a significant portion of worldwide PV installations, and off-grid PV in the developing world offers tremendous market opportunities.
Off-grid PV in the developed nations
PV was developed in the most industrialized and technologically advanced nations, so it should not be surprising that the first applications of off-grid PV were primarily in these nations, including the United States. With its hyper-individualistic culture, part of the allure of PV for customers in the United States has always been the ability to generate electricity for personal use without being tied to the large and unaccountable structures of utility companies and the electric grid. However, though such psychological motivations may be strong, practical considerations are often more important.
In the US state of California, off-grid PV was pioneered by an unlikely industry: indoor marijuana farmers. These black market agriculturalists had two distinct needs: one, to generate power for lights to grow their illicit crops, and two, to do so without attracting attention from law enforcement. Indoor marijuana cultivation prospered in remote areas of Northern California, away from prying neighbors and often in areas not served by the power grid. Even for those who did have access to electricity, it was also important not to show a spike in an electricity bill that would tip off the power company that something was amiss, who might then pass such information on to police and federal agencies.
The popularity of off-grid PV among these counterculture horticulturists provided important experience to early PV installers who would go on to build the booming industry in that state. After 2002, the majority of PV installed in the United States was grid-tied, and in places where a grid is available, the significant extra cost of batteries discourages many users from installing off-grid systems.
In the last four decades PV has become a practical technology for remote areas in the developed world, a solution for places where power was previously only available by generator if at all. But as prices come down and policies are put in place to ease interconnection and support wide-scale adoption of PV, more and more individuals who have access to the electric grid have chosen to install PV, and grid-tied systems now represent the vast majority of installations.
Some developed nations with geographies that limit grid penetration to remote areas still utilize mostly off-grid PV. In Australia, Israel, Norway, Sweden and Turkey, total off-grid capacity outnumbers grid-tied PV. In Israel, Norway and Turkey, the majority of PV installed in 2008 was off-grid.
Potential customers – populations not served by the grid
However, most of the potential customers of off-grid PV are not in the developed nations, and these technologies have an enormous and eager potential customer base in the developing world. 1.5 billion persons globally, representing 22% of the earth’s population, do not have access to electricity. These persons reside mostly in rural areas in South Asia and Sub-Saharan Africa, but can also be found in South America, Central Asia, and Central America, as well as in urban areas in less-developed nations. Many of these areas have good to excellent solar potential, much better than many locations in the developed world.
As a potential market, these individuals are not going away. Global access to electricity over the last few decades has remained remarkably static. World Bank officials have stated that the number of persons who do not have access to electricity may actually increase in the next few decades unless more effective policies are put in place to speed off-grid electrification and the expansion of existing utility grids into unserved areas.
Furthermore, studies in Ethiopia, South Africa and other nations indicate that these populations are eager to gain access to electricity, and that off-grid PV solutions are often far more cost-effective than current ways of meeting power needs or, in many areas, extension of the existing electric grid. However, many barriers still exist to the full development of the off-grid solar market in developing nations.
Geographical distribution of populations not served by the grid
South Asia, with high population densities, has some of the highest concentrations of persons who do not currently have access to electricity. The largest single potential market is in India, where roughly 400 million persons – including 48% of the rural population – do not currently have access to electricity. Most of India also boasts excellent natural solar potential. Indonesia, the world’s fourth largest nation by population, also had 108 million persons who did not have access in 2001 – 48% of the overall population of the nation.
Huge populations in Africa also do not have access to the electricity grid. The Alliance for rural electrification estimates that over 80% of Africa’s rural population does not have grid access, and 550 million Africans do not have access to electric light. The total electricity generation capacity of Africa is 137 GW, less than the nation of Germany. Even in relatively “developed” South Africa, 22 million persons – 45% of the population of the nation – lack electricity.
Ethiopia serves as a particularly striking example. 84% of the Ethiopian population lives in rural areas, and 99% of those persons do not have access to electricity – 66 million persons. Ethiopia, like most of Africa, also boasts excellent solar potential.
In Brazil, 23 million persons do not have access to electricity. The highest concentrations are in the Amazon, which makes up 45% of the area of the nation, but only 3% of the population.
Reasons for lack of access to electricity
There are multiple reasons why communities in the developing world may lack access to electricity. In the developed world, where we tend to take electricity for granted, it is easy to forget the enormous infrastructure costs of installing an electric grid. Private companies may not see the potential revenue from poor rural communities as worth the trouble, and governments may be uninterested or unable to extend the grid in certain areas due to economic and technical factors. The World Bank estimated in 2000 that the cost to extend the grid in developing nations averaged USD$8,000 to USD$10,000 per kilometer.
Many of the under-served communities are also in remote areas, and difficult terrain is often a factor – which can drive the cost of extending the grid up to USD$22,000 per kilometer. In Indonesia, which covers a chain of islands large and small, a new grid with new generation must be built on each island.
Potential uses of off-grid solar in developing areas
The benefits of electrification to rural communities and thus the potential uses of off-grid photovoltaics (PV) are many. Lighting is often the first need that is met, followed by radios and televisions, and later appliances such as washing machines and refrigerators. Fans and air-conditioning units are also potential uses, though the high power needs of air conditioning tend to require larger systems than many in the developing world can afford.
Access to electricity assists with income-generating activities, including agriculture. Rural electrification in India in the previous decade has largely focused on irrigation, which has moved the nation from a net food importer to a net food exporter. Other income-generation uses include in fisheries, processing of agricultural goods, and small-scale industry such as welding shops.
Electricity is also important for the function of schools and hospitals, and many demonstration and private philanthropy projects are designed to meet these needs. The significance of power for lighting should not be underestimated; studies of rural electrification indicate that supplying lights, which allow students to study into the evening hours, creates a greater potential income gain for families than uses that generate income directly. In Bangladesh, incomes increased up to 30% following electrification, mostly due to higher educational attainment.
Off-grid PV technologies
Between 500,000 and 1 million persons in the developing world are currently using off-grid PV technologies. The Solar Home System, a small (30-100 peak watt is typical) PV system involving a solar panel and battery, which can power modest needs such as lighting, radios and fans, is by far the most common technology currently in use.
A wide range of similar products is currently on the market, where a solar system connects to various DC appliances. Companies such as Reliance Solar, a division of Indian energy company Reliance Industries, Limited (Mumbai, India), offer products from home lighting systems and water purifiers to street lights and lighting/fan systems using modules that supply from 3.3 – 250 watts of electricity. Batteries are an essential component of all such systems.
Construction of micro-grids is another way to meet the needs of rural communities, which often consist of a number of homes and businesses clustered closely together. Such micro-grids can potentially be powered by any technology, and for small villages in areas with rich sunlight, PV and more often PV/diesel generator hybrid systems are often practical solutions. In such instances, the PV installations are typically much larger than those used in solar home systems, and when combined with diesel generators, do not require batteries. As of 2008, 150 hybrid mini-grids, using either wind turbines or solar panels, coupled with diesel generators, existed globally, 80 of which were located in the People’s Republic of China.
MicroCSP is a relatively new technology that also holds promise. These systems are essentially smaller versions of the large concentrating solar power systems used to generate electricity by focusing the sun’s rays on a central point to heat a fluid, which then drives a turbine. MicroCSP systems use water as the fluid, producing both electricity and hot water for users. Sopogy Corporation holds the trademark for microCSP and manufactures several models of such systems. The non-profit STG International has installed several similar systems as demonstration models in the African nation of Lesotho.
Economics of off-grid PV
For off-grid locations in developing nations, extension of the grid or the use of diesel generators are the two competing solutions for electrification. In many places, installing off-grid PV can be more cost-effective than either of these options; though such calculations vary according to the location, the quality of the PV resource, the cost of diesel fuel, the type of system, and other factors. In Ethiopia, researchers discovered that off-grid SHS systems were considerably more profitable than installing on-grid PV in more developed nations; though the smaller size of the systems means that more individual systems must be sold to realize similar revenue.
However while costs over time are often lower, the up-front costs of installing PV systems is higher than diesel generators, whose primary cost is fuel. This means that education on cost savings and financing options for buyers in the developing world are important considerations.
Not only can PV be cheaper over time than diesel generation or grid extension, but it is often a financial improvement for rural families in the developing world than substitute energy costs, such as kerosene and dry cell batteries. Such expenses are typically USD$5-10 per month for enough kerosene and batteries to run a few lamps and a radio, a considerable portion of a many family budgets. Furthermore, purchasing kerosene and batteries can often mean lengthy shopping trips and long waits to replenish supplies, and even then, there can be issues with availability.
There are other advantages to off-grid PV for families in rural developing nations which can be harder to put a dollar value on. PV systems do not create air pollution like diesel generators, nor do they carry the fire risk of kerosene lamps.
Barriers to adoption of off-grid PV
There are multiple barriers that must be overcome for the development of a healthy off-grid PV business. The first is in the minds of PV manufacturers and integrators, most of whom are in the more affluent nations of the developed world, and who are used to marketing their products to wealthier customers in the developed world. Likewise, potential customers in the developing world are often not familiar with photovoltaics and their advantages. For off-grid PV as a business to be successful in the developing world, manufacturers, integrators, and distributors must understand the unique challenges and opportunities of this market.
Great opportunity exists, as many in the developing world eagerly want reliable, safe, cost-effective electricity. However, the largest barrier for many potential consumers is availability of such systems.
Lack of financing options can be a significant barrier, and researchers with the International Energy Agency suggest that financing carry over the lifetime of the system. However, other researchers indicate that such concerns are often overestimated, and in Bangladesh, one of the success stories for small-scale PV adoption, most customers buy their systems with cash even where financing is available.
Availability of DC appliances must also be considered. Most of the PV systems designed for off-grid applications in developing nations do not include inverters, which drive up system costs. While many solar home systems come with DC appliances, such appliances are not always readily available on the market. For off-grid PV to be successful, there is also a need for customer support, particularly in system maintenance and repair. The low levels of education in many areas of the developing world must be considered; in some cases PV systems may be abandoned after malfunctioning because the owner cannot read the manual.
Even in places where PV systems are visible, consumers in the developing world must be educated about the benefits of these systems. In some areas, there is a tendency to think of electricity from PV as “second-class” or not “real” electricity compared to that which is delivered from the central grid, and such attitudes must be overcome. In other areas where the government has supplied large numbers of PV systems to rural areas, there is a tendency to view the systems as a gift from the government. However, even in areas where the perception of PV as a state gift is widespread, there is still a tendency to use these systems for income-generating activities, to keep PV as backup power after grid-connection, and to invest in larger systems, indicating social acceptance of this technology.
Policies, primarily at the national level, played a decisive role in establishing the existing global market for grid-tied PV in the developed world. Likewise, they are playing and will play a critical role in the establishment of the off-grid PV market in the developing world.
Policies to bring electricity to rural populations in developing nations usually involve a mixture of grid extension and off-grid solutions. These policies have had varying degrees of success. China has brought electricity to its rural population over the last sixty years by use of aggressive policies. In the last decade the nation moved to 99% electrification in rural areas, partially by use of off-grid systems, mainly small hydropower systems. For the remaining 1% of rural China, the nation is focusing on off-grid solutions. Between 1999 and 2003, the Chinese government brought electricity to 1.3 million persons using distributed generation, including off-grid PV.
In other nations, policies have been more ambitious in terms of addressing larger percentages of the nation not served in shorter periods of time, but nations such as Brazil and India have not yet met ambitious targets for universal access to electricity.
India has focused largely on grid extension, however one goal of the Jawaharlal Nehru National Solar Mission is to reach 2GW of off-grid solar by 2022, including 20 million solar lighting systems for rural areas. In Brazil, off-grid solutions are the only practical way to bring power to remote areas in the Amazon. However, by the end of 2006 Brazil had installed only 3,100 solar home systems under the Luz para Todos (“light for all”) program, even though it had been estimated that this would be the most practical way to supply power to 17,500 locations, which would represent a total of 130,000 systems.
Indonesia was an early pioneer into wide use of off-grid PV systems, which should not be surprising given the nation’s geographical problems with grid extension. Between 1988 and 1993, 1,600 off-grid PV systems were installed in West Java as pilot projects, and between 1992 and 1997 the government distributed 30,000 off-grid PV systems. In 1997, the government launched a 50MWp One Million Roof program, with assistance from international companies and institutions. However the amount distributed as of the latest studies were still small in comparison to the total potential market, which is calculated at 900 MW.
Kenya and Bangladesh has also had success with off-grid PV. More than 5% of households in Kenya use PV for a portion of their power, and in Bangladesh a micro-credit bank has set up more than 700 technical centers which sell, install and maintain PV systems.
Conclusion: Experience in introducing off-grid PV helps to develop new attractive markets
Off-grid PV remains a small if significant market in certain areas of the developed world, however the greatest market for off-grid PV is in rural areas in the developing world. With the right combination of policies, business models and technologies these areas can develop into thriving markets for PV and related technologies. The economic advantages of solar for rural populations in developing nations can potentially create a cycle that drives demand for larger systems. In China, rural electrification has led to greater use of appliances such as televisions, washing machines and refrigerators, which are currently out of the reach of many in developing nations, just as they were in China in previous decades.
However, before this can happen, barriers need to be overcome by both governments and businesses seeking to expand into these potential markets. Consumer education will be as or more important in the developing world as it is in the developed world, with additional barriers of language and literacy. Likewise there is a need to educate government officials in these nations as to the advantages of PV, and to introduce policies that bring PV not as an aid product, but as a thriving industry, with strong local involvement ad sense of ownership. In 2008 the Alliance for Rural Electrification proposed a modified version of the feed-in tariff to be used in developing nations. Such financing models seek to copy the role of the feed-in tariff in more affluent nations, while addressing the unique circumstances of developing nations.
From California marijuana farmers to Kenya, India, China, islands in Indonesia and villages in the Amazon, off-grid PV has come a long way. We are now at a point where we have several decades worth of experience in introducing off-grid PV in developing nations such as Indonesia, and in the cases of Kenya and Bangladesh, successes in sustainable industry development. The rest of the world is waiting.