Easy Access to Finance in India’s Solar Off-Grid Market: PAYGo Report
The country scores lower on operational considerations, as rural access is less developed and solar yield is lower in some parts
Off-grid solar markets are instrumental in creating energy access to more than half a billion people around the world. According to the latest Pay-As-You-Go (PAYGo) Market Attractiveness Index (MAI), India has achieved a high score in the overall numbers, demonstrating a relatively robust performance in the sector and Asia as well. Indonesia and Kenya were high performing countries in the PAYGo model for the off-grid market.
The report compares 24 country-level markets across Sub-Saharan Africa and Asia on 71 indicators of relevance to the development of PAYGo technologies. PAYGo is a business model where the consumer pays for a solar system on a daily, weekly, or monthly basis. With this model, the solar system provider does not have to worry about collecting payments and the costs associated with it while the consumers get access to electricity without upfront payments.
The PAYGo business model is a pioneering approach that has been changing consumer financing. Because of the PAYGo model, the expansion of energy access has become more feasible in rural areas of emerging markets. PAYGo accessibility and penetration in the distributed solar market in countries has been calculated based on three parameters: Demand, supply, and enabling environment (legal, regulatory, and technological). The supply side consists of four pillars: access to finance, operational factors, market penetration, and human capital.
India and Pakistan rank high up on the supply parameters. India leads the index in ‘access to finance’ and ‘market penetration’ sub-pillars of the supply index. It has low scores in terms of operational considerations. Also, rural access is less developed than in other countries, besides lower solar yield.
Rural population is a crucial market for off-grid solar PAYGo products and various other payment methods, and business models are coming up to compliment the mobile money payment model. In Asia, micro-credit and credit bureaus are accelerating access to the market for potential PAYGo customers. In India, access to the bottom of pyramid consumers and provision of consumer credit has been achieved through partnership with microfinance institutions (MFIs) instead of through direct sales of PAYGo technology-enabled products.
Across the 24 countries, sales of PAYGo products improved 10% between the first and second halves of 2018. India registered the highest total units sold in 2H 2018 at 1.2 million units. This was less than its sales in H1 2018.
In India, credit bureau coverage has grown to 55% of the total population. India was the largest cash market for off-grid solar products in H2 of 2018 and PAYGo penetration, although nascent is making a significant impact in the distributed solar market.
Off-grid solar installations are important in a country like India, where grid connectivity is a challenge due to geographical limitations and under-development of regions.
According to a report by Global Off-grid Lighting Association (GOGLA), global sales of 3.9 million off-grid solar lighting products in the second half of 2018 had been recorded. Nearly 1.18 million units of off-grid solar products were sold in the Indian market during the second half of 2018. India emerged as the largest cash market for off-grid solar products, with 1.2 million units sold with a value of $58 million.
Image credit: Off Grid Electric
Ramya Ranganath is an Associate Editor and Writer for Mercom Communications India. Before joining Mercom, Ramya worked as a Senior Editor at a digital media supply chain solutions company. Throughout her career, she has developed end-to-end content for various companies in a wide range of domains, including renewables. Ramya holds a bachelor’s degree in Mechanical Engineering from M.S. Ramaiah Institute of Technology and is passionate about environmental issues and permaculture.