💡 Off-Grid Solar: A Promising Investment Landscape
[Guest blog] As Climate Tech funding continues to grow, GOGLA's Laura Fortes shares the latest trends on an important sub-sector: Off-Grid Solar
By Laura Fortes, Senior Project Manager Access to Finance @ GOGLA
Despite the overall slowdown in start-up investments in Africa over the past two years, the announcement of another significant securitisation deal in the off-grid solar industry last month (d.light, $176m), illustrates how the sector remains a top priority to the investor community in Africa.
The industry has been positioned by many as the most viable route to electrifying half of the 685 million people that still lack electricity today, 86% of whom live in Africa. The World Bank and African Development Bank recently announced ambitions to support the private sector to rapidly expand access to 300 million people, with significant new regional and country-led programmes coming online.
The sector has already transformed the lives of over 490 million people. Backed by donors and financiers, resilient off-grid companies are reaching some of the world’s most vulnerable communities. Beyond energy access, the sector offers innovative technologies for irrigation and cooling, enhances financial inclusion through its pay-as-you-go model, creates economic opportunities, improves health and education outcomes, and enables climate adaptation and resilience. Off-grid companies are also expanding into new product categories such as mobile phones, solar generators and weak grid solutions.
Over the past few years, the off-grid sector has become a key market for Africa-focussed investors, making up 25% of amount invested in start-ups in Africa since 2023. Yet it has only received around 1/7th of the finance it needs to help reach the 2030 goal of basic access to electricity for all. The overall investment opportunity/need is expected to be in the region of $300billion (including power for agriculture, health, enterprise and higher levels of energy service).
Here are three takeaways from our GOGLA’s 2023 investment data:
The industry attracted a $425m investment globally in 2023, across 85 companies: $281m in debt, $128m in equity, and $15.5m in grants. The total haul represents a decrease of 43% from the previous year, due to Sun King’s exceptional raise in 2022.
Scale-ups raised a record amount of off-balance-sheet financing, which accounted for $157m, 75% of the debt raised by this segment. Securitisation is a promising liquidity solution that attracts new sources of financing, such as national banks and institutional investors. The largest securitisation deal of 2023 was led by Sun King and Citi, a Kenyan-Shilling-denominated $130m transaction.
Start-up and seed-stage companies saw investments grow to $148m and $24m, respectively. The Productive Use segment, which supports economic opportunities by energizing livelihoods, attracted the highest equity raises. In April this year, SunCulture, a provider of solar-powered irrigation solutions for smallholder farmers in Africa, raised $27.5 million in Series B funding.
For more analysis on these trends, please refer to our recent blog. We also welcome you to join the Global Off-Grid Solar Forum and Expo 2024 in Nairobi, Kenya (8-10 October) to engage with industry leaders, meet development actors and get the latest on key investment trends and activities. The event will also feature a Deal Room for investors. If you are an investor and would like to access, do get in touch with myself (l.fortes@gogla.org) or my colleague Linda Yunia (l.yunia@gogla.org).