With India almost Reaching 100% Electrification, the Off-grid Industry goes for a Toss

India along with other South Asian countries as well as Africa used to the prime market for off-grid solar products. The off-grid solar industry has become a multibillion-dollar industry with low priced solar lanterns, streetlights, home lighting systems, etc. finding ready takers at the bottom of the pyramid in these countries. Many of these countries do not have a good power grid in place, which makes the marketing of off grid products ideal. Given the low prices of these products, even poor people can afford these. The off-grid solar products compete with either no electricity or expensive kerosene and diesel so as such they find readymade users. With private companies entering the market, innovative business models that lower the financing barrier have made it a vibrant and growing market.

India which used to be one of the biggest markets is now facing a major slowdown. The Indian government under Modi has electrified almost all households in the last five years, such as that only 0.07% of the households do not have electricity access. Even those households will get access to energy over the next couple of years. This means that off-grid products will have pretty much no use as all households can get power from the grid. However, the sale of higher-end solar products is seeing rapid growth even as the overall market growth is coming down in the high double digits.

The Indian power structure is constructed such that residential consumers with lower average monthly consumption have to pay very low prices for electricity. This is typically only one-third of what the actual cost of power is required to supply to these households. This means that the distribution utilities which supply power run into huge losses when selling power to households with low power usage. As the financial condition of these government-owned utilities is quite bad in almost all states, they curtail power purchase and sale to low income and lower power consuming households. Both the duration of the power supplied as well as the quality remains quite bad. This means that off-grid solar products, especially those with storage, remain quite popular with low income rural and urban households. Even with complete electrification, mini-grids and high-end solar products have a good market in India for meeting the needs of people who do not get good quality and durable power.