Report: Off-Grid Solar Investment Trends

8 October 2020 | A report newly launched by GOGLA, compiled with California-based consultancy Catalyst Off-Grid Advisors and supported by GET.invest provides insights into how the Covid-19 pandemic has affected sales and investments in the off-grid solar sector.

Overall, the report demonstrates that while the sector has shown resilience against Covid-19, more, and more diverse capital for an equally diverse energy sector is needed to power recovery and scale up energy access.

Substantial financing commitments into off-grid solar in 2020 mirror global
trends. Recent numbers from Crunchbase1 and the GOGLA deals database show that between 2019 and 2020, impacts on off-grid and in venture capital trends are not that pronounced. Venture capital was still flowing in the first part of 2020 and off-grid solar investment trends have been behaving similarly to other sectors, even slightly better than average. However, future trends in venture capital remain uncertain and the effects of Covid-19 on investments are expected to be felt at a later stage.

Though 2020 total investments have held up, the underlying details may be cause for concern: investments are highly concentrated, and while debt flows remain robust, equity commitments have fallen dramatically. The high concentration underscores the urgent need to not only boost commitments to the sector, but to diversify them. Equity commitments in 2020 have contracted significantly relative to previous years. Of the modest commitments to date, 73 percent are in the form of convertible debt.

 

  • Photo: GOGLA

Survey results confirmed investors’ bullishness about the performance and potential of the  sector. Despite the increased risks posed by Covid-19, 75 percent of survey respondents anticipate maintaining or increasing their level of investment into off-grid solar over the course of 2020, and over 65% have made investments since the onset of the pandemic.

Despite 75 percent of investors see overall risks increasing as a consequence of Covid-19, investors remain bullish and optimistic around the impact of the sector and the stage of the market, flagging that, disproportionately, this is the reason they plan to maintain or increase their investment exposure going forward.

The impacts of Covid-19 on the industry will be long-term, and substantial concessional financing needs to be mobilized to ensure an inclusive, resilient, and sustainable sector that emerges from it. While the sector has demonstrated resiliency against the first wave of Covid-19, it must continue to successfully navigate uncertainty and risks associated with the pandemic’s subsequent waves.

New sources of finance must address the immediate needs of energy access enterprises, and help de-risk and crowd in additional investment to enable off-grid companies to continue to deliver impact for their customers and value for their investors.

The full report is available for download here.

A webinar to present main findings and latest trends in off-grid solar investment will take place on 13 October. To sign up, click here.