With around five percent of the region still without electricity, Latin America offers ample opportunities for solar solutions for off-grid households.

By Adam Critchley

(Image credits: European Commission -  EURO-SOLAR Regional Cooperation Programme; UNDP Honduras)


Highlights

  • Areas in Latin America where off-grid energy innovations are needed

  • Business case and return on investment for rural households

  • Improved living and safety conditions for communities

  • Taking the next step in financing the off-grid sector

  • Innovation in the sector: opportunities and pitfalls


Areas in need of off-grid energy solutions

Some 1.3 billion people worldwide are still without electricity, and in Latin America the number is between 35 and 40 million, or 5% of the population, making it an attractive market for companies providing solar-powered off-grid solutions.

The region has three major areas that largely remain off-grid. Firstly there are significant parts of northern Central America – Guatemala, El Salvador, Honduras and Nicaragua, and some of southern Mexico that are without grid-connection. Then there’s the Andean region, comprising parts of Peru, Bolivia, Colombia and Ecuador. Lastly there’s the Caribbean. Haiti, in particular, is one of the most non-electrified countries in the world. Less than 50 percent of the population there is connected to the grid, according to Miguel Sagastume, solar Greenlight Planet’s business development manager for Latin America and the Caribbean. 

“We see many opportunities in Latin America because even the markets that do have electricity are still very unstable, with energy shortages.”

Miguel’s company provides solar-powered lighting and phone chargers for off-grid households.

“We see many opportunities in Latin America because even the markets that do have electricity are still very unstable, with energy shortages,” he tells Solarplaza.


Image: European Commission

Image: European Commission

The business case

The company works with commercial, social entrepreneur and advisory partners in the countries it operates in, he says, selling its products to its partners, which are in touch with the final consumer. 

In some countries the company deals directly with villages, with its own sales force and on-the-ground personnel, but only in markets of greater density such as India. 

“Having such a system in Latin America would be too expensive, and the company has yet to establish such a presence, having only been in the region for a year, and it is still in the networking process,” he says.

Off-grid areas in Latin America are now benefiting from projects launched in the last few years to bring electricity to remote communities. 

In Mexico, local firm Enlight launched a program in 2016 to bring electricity to rural communities by providing access to financing for solar arrays in collaboration with Iluméxico, a non-profit run by engineering students which launched a solar schools initiative in 2014 with the national solar power association (ANES), installing arrays in the country’s southeastern region.

The country’s first 100-percent solar-powered school opened in Chiapas state that year.

“When we provide lamps the return on investment for these people is incredible, and the saving translates into food or schooling, or for investment in their agricultural projects.”

Sagastume says Greenlight Planet has yet to establish relationships with local authorities, and partners tend to be NGOs or private companies, but in some countries it is beginning to touch base with local and municipal governments.

“We are currently focused on Central America and the Andean region.”

The benefits that such systems bring are life-changing, enabling children’s study time to be increased by 75 percent, while bringing health benefits, particularly to women.

“It’s a very clear impact that you can create with one lamp. A person with no electricity in a rural community will spend $15 per month on candles, and most of these people have mobile phones, on which they will spend an additional $10 per month. The impact on their pocket is huge, so when we provide lamps the return on investment for these people is incredible, and the saving translates into food or schooling, or for investment in their agricultural projects,” Sagastume says. 


Impact on safety and living conditions

“One of the biggest causes of death among women in rural communities is respiratory problems caused by kerosene candles, in addition to accidents and burns.Solar lamps therefore create a safer environment and avoids CO2 emissions.”

“Off-grid electrification is still a relatively new sector, that has emerged over the last five years, and now has significant sales and investment.”

Image: UNDP Honduras

Image: UNDP Honduras

And the solar solutions are portable, which allows people such as migrant workers to take them with them.

“Off-grid electrification is still a relatively new sector, that has emerged over the last five years, and now has significant sales and investment,” according to Laura Sundblad, program adviser for facilitating access to finance at the Global Off-Grid Lighting Association (GOGLA). As the industry’s representative body, grouping together 85 members, GOGLA works to support companies in the off-grid sector on issues related to policy, technology and financing.


Financing: the next step

GOGLA also works with donors and investors to educate them about the sector and explain what kind of financing people need.

“The sector has attracted a significant amount of equity and debt investment, with the deal size and number of deals having increased, and attracting specialized investors in off-grid energy such as Sunfunder and Energy Access Ventures.”

“The next step is to go beyond the specialized fund managers to bring in mainstream financing.”

“The next step is to go beyond the specialized fund managers to bring in mainstream financing, where it gets a little bit more challenging. Now we are engaging with local banks, such as in Kenya, and it is crucial that we get more local financial institutions involved, as we need to procure local currency financing,” she says.

“Our member companies are mostly small and medium-sized and are looking for financing for different parts of their value chain, either for their inventory or customers, so different types of financing are required.”

Sundblad says the two main markets GOGLA is focused on are East Africa and India, but Central and West Africa are also becoming more important. 

“In South East Asia there are still off-grid markets, and in Latin America there has not been such a traditional focus, but a lot of our manufacturing members already sell products to that market, and there are a number of companies now working there, with around 15 now present in Central America.” 

“There are a variety of ways of reaching off-grid communities, either with a grid extension, a mini grid, or stand-alone, and it depends where those people are and what kind of infrastructure is in place, so there is no one-size-fits-all,” she says.

Off-grid solutions are a huge boon when the wait for a grid extension can take several years, which is a long time in a child’s life, and has a long-lasting impact on a child’s education and development. Such solutions can also be deployed in informal settlements around urban areas, and in humanitarian settings for disaster relief and in refugee camps, she says.


Image: European Commission

Image: European Commission

Innovation: the need and the risks

The growth of the sector is also encouraging innovation, given the need for companies to create and adapt systems for local conditions.

“There is a large human element to the sector, and customisation comes into play as we look at the next phase of solar home systems that can power different kinds of appliances. There have been several revolutions, such as the development of LED lighting, and the rapid gains in efficiency by different appliances, such as a TV that only requires an eight-watt panel to power it,” Sundblad says.

Customers’ electricity needs also vary widely depending on the region they live in.

Families in South East Asia will want to power a fan, but that is not such a priority in East Africa, for example, where people are more likely to want a TV or a radio or a refrigerator, she explains.

“Having strong local partners is key to bringing in the local market knowledge.”

“Innovation also comes in at the level of the business model and the financing scheme, in addition to the technology, depending on the way that customers can pay for the service. That can depend on where people are, what kind of income they have, whether they are used to dealing with mobile money or use a bank or a savings group.”

But innovating with all three things at once can be risky, she adds.

“And having strong local partners is key to bringing in the local market knowledge. The job creation part is important, as you need to make sure there are enough staff that are trained and able to serve the customers. For many of them this is the first time they are buying a solar product, and you need to have staff to explain how to service it and maintain a long-term relationship with the customer, or you risk losing the customer.”


Learn more about off-grid solar developments in the Latin American region during the dedicated off-grid conference track of Unlocking Solar Capital LATAM (15-16 June 2017 - Miami, USA). At this event, 200+ executives will connect and engage in in-depth discussions to solve LATAM's solar energy funding gap - and get projects realized.