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How to bring solar power to the unelectrified world

Solar home systems can help to bridge the electrification gap in developing countries—if certain conditions are met.
Laurence de l Escaille

Advises government and business leaders on the energy sector’s strategic issues, including national and regional planning, investment, and major transformations

Gillian Pais

Leads McKinsey’s work in African agriculture with expertise in rural-development topics, including forest protection and energy access

There are close to one billion people in the world without access to electricity, 90 percent of whom live in sub-Saharan Africa and South Asia. Whether households are unable to connect to the main electricity grid due to being too remote, too poor, or too inconsistent in their use, off-grid power solutions can provide them a critical electricity lifeline.

Of these off-grid solutions, solar home systems (SHS) are on a promising rise: In 2018, GOGLA (the Global Off-Grid Lighting Association) reported that SHS sales have increased 77 percent from 2017 and 133 percent from 2016, bringing the systems to nearly 5 million people worldwide. A McKinsey assessment of the 39 countries that represent the lion’s share of the world’s unelectrified population found that as many as 150 million households could benefit from SHS by 2020. But for this to happen, utilities leaders and stakeholders will need to meet specific conditions that attract investments and contribute to a healthy and sustainable SHS market.

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Different countries face different challenges when it comes to their SHS readiness. Below are some strategies to help create a positive environment for SHS investment.

Electrification strategy

Building the confidence of private investors starts with recognizing SHS as a viable alternative to grid-based electrification. In Bangladesh, the government prioritized off-grid electricity generation for rural populations as a means of achieving its overall renewable energy targets. The expansion of rural SHS there is explicitly supported by Bangladesh’s regulatory agencies and government-run renewables institution. Solar home systems have scaled up considerably since the rollout of Bangladesh’s 2008 Renewable Energy Policy—more than 3 million SHS kits have been distributed by the end of 2014.

In Zambia, where only 27 percent of the population has access to electricity, the government set a goal to more than double electrification rates to 66 percent by 2030. A geospatial model was developed to assist with this plan. It identifies the lowest cost technology per household to provide a connection, and the results show that an important share of new connections could be served through off-grid technology and SHS.

Consumer awareness

Consumer education campaigns can successfully teach the public about the costs and benefits of SHS. In Kenya, a group called Lighting Africa sponsors road shows, media campaigns, and product discussion forums to inform Kenyans about home-based solar solutions. The group even arranged a product placement in one of the country’s most popular television shows. The campaign reached millions of Kenyans from 2009 to 2013 and the uptake of solar lighting in the country continued to climb.

In Zambia, USAID funded a program called “Go solar,” which comprised a four-month awareness campaign involving roadshows, radio broadcasts, and demonstration placements at key locations in rural communities. The focus of the program was to build awareness about SHS and the importance for customers to be equipped to identify quality products.

Product quality

Countries should consider adopting the internationally accepted Lighting Global product standards to monitor the sales of and problems associated with poor-quality solar products. In Bangladesh, a government program provided financial support to SHS developers on the condition that those developers accept the Lighting Global standards. The developers had to purchase their kits from approved suppliers as well as submit to technical installation and maintenance audits to receive their government incentives.

Payment solutions

In areas most in need of electricity, many households are short on cash. Establishing pay-as-you-go models can help make SHS affordable for families who cannot spend $150 to $300 on an entire system in one lump. One model might see a customer paying up to $35 in deposit fees, followed by regular payments over nine to 36 months. An analysis of how much unelectrified households in Kenya spend on kerosene, batteries, and mobile telephone charging showed that 70 percent spent between $8 and $23 per month. On that basis, these households could afford the most basic SHS, a Tier 1 system that allows for basic lighting, mobile telephone charging, and entertainment needs of a typical, low-income household in sub-Saharan Africa or South Asia. This research was backed up by sales figures of SHS in Zambia, where fewer than 20 percent of all sales are completed through upfront payment. The rest are paid off using a pay-as-you-go system.

Financing for SHS companies

Some countries are expanding access to SHS by providing credit facilities through local banks or debt providers and guaranteeing loans to SHS companies. Tanzania, for example, is piloting a financing scheme that includes professional management support from TIB Development Bank to encourage sales in an underserved region in the Lake Zone. Within the first year, more than 10,000 households benefited from the pilot. In Zambia, Beyond the Grid Fund for Zambia (BGFZ) provided seed funding to three SHS companies, who together represent more than 80 percent of total SHS sales in a country where more than 100,000 units have been sold in the past two years.

Logistics and channels

Distribution partnerships can help overcome the challenges of bringing power to remote, poor, and lightly populated areas. One Nigerian company is marketing its solar products through telecommunication kiosks, and companies in Cameroon and Kenya have collaborated with distribution through a broad network of gas stations.

Solar home systems have proved their value by bringing light and power to the homes of tens of millions of people. Sunny optimism is not a business model, and like any other product or technology, the economics and practicalities must be firmly placed. Countries around the world are showing how solar power can be spread further and faster to those who need it most.

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