2021 Market Entry Analysis

By Kisa Giebink
June 02, 2021

Of the 800 million people living without energy today, roughly 60% will remain unenergised by 2030 if we don’t deploy off-grid solutions at scale.

The State of the Market – 2021

If you’re in the energy access space, you’re probably sick to death of hearing about these numbers.

But the good news is: the price of solar panels and batteries have come down to about one-fifth of the cost they were 10 years ago. And over the next 10 years, the prices are expected to drop another 2x by 2030. It’s already cheaper to make a coffee table using a solar panel instead of wood – but what is the significance of this?

Well…it means there’s going to be a lot of solar. Everywhere.

So with prices of solar and batteries falling rapidly, why haven’t off-grid solutions taken off? Why are people still using kerosene and diesel for lighting?

We call it the “pay-off problem” – stakeholders simply can’t afford upfront and ongoing payments for conventional off-grid energy infrastructure.

Conventional approaches like small solar home systems are cheap, but they don’t provide enough power to enable increased productivity and income generation. On the other end of the “conventional approach” spectrum there’s mini-grids, which provide households with more reliable productive power, but they cost so much to set up that they’re hard to pay off in a reasonable timeframe without strong subsidy programs to back them up. As a result, nothing but small systems end up being deployed and paid for – this means that providing infrastructure that actually delivers productive power, and enables sustainable holistic growth, remains a largely donor-funded endeavour.

Regardless, off-grid energy access remains a $190Bn market opportunity across the globe, and we’re excited to be a part of it.

The Target Markets

Okra’s mesh-grid technology is suited for about 70% of the total addressable market (TAM); that’s a $130Bn segment. To tap into this opportunity, we’re currently focussed on scaling up operations in Nigeria, Haiti, The Philippines and Cambodia, where there are more than 30 million households without access to energy.

We’re focussing on these markets for a range of reasons, including size and the purchasing power of off-grid households, but also for the regulatory environment, maturity of the local utilities and the funding available for off-grid energy programmes.

Let’s take a closer look at each market individually.

Cambodia

Cambodia was the first market we entered. We knew we could get to an off-grid village from the capital city very quickly and build a fast feedback loop that would accelerate our early stage product development.

Cambodia enabled us to push through multiple iterations of our service offering and get repeat customers but then we ran into a roadblock of navigating regulatory frameworks that were not ready to adopt new technology. This is a lesson for all off-grid energy companies: sooner or later, you will have to deal with regulation.

It’s been almost 3 years since our first deployment (ever) and now we’re currently in negotiations to be a part of a government-sponsored program that wants to achieve 100% nationwide electrification by the end of 2022. Needless to say, Cambodia will remain a key market for us as well as being Okra’s HQ within Asia.

The Philippines

Fate would have it that around the corner from Cambodia lay 7,000+ islands with countless communities without reliable energy infrastructure. Most of these communities are fishing villages that would benefit hugely from productive power; we’ve visited many of them and have seen how they ship ice from one island to the next, and how they use cold-chain appliances to increase the storage capacity of their daily catch.

According to the National Electrification Agency of the Philippines, more than 2 million households remain off-grid and more than 50% of these households will not be reached by mains grids any time in the foreseeable future. Okra entered the Philippines market in 2019 by partnering with AteCo and Island Light and Water (ILAW), and we’re currently scaling up deployments funded by infrastructure investors and multinational development organizations.

The regulatory framework in The Philippines permits private developers to set up off-grid energy under a Qualified Third Party (QTP). This enabled us to work with Electric Cooperative (EC) joint ventures that directly supply licensed energy companies. Working directly with EC’s is a laborious yet necessary path, as it yields at scale and will help achieve The Philippine’s goal of hitting 100% electrification by the end of 2022.

Nigeria

Nigeria has 80 Million people without access to electricity. It is the largest off-grid market in the world and has the highest per capita spending on diesel generators. USD $12Bn is spent annually on self-generated power and the government recognises that this is sunk human capital potential. This is why a regulatory framework has been established to promote micro-grids, along with a $500Mn of funding to support off-grid electrification through the National Electrification Programme (NEP). The goal is to subsidize off-grid energy access to the point where increased productivity and household income offsets the subsidy investment.

In terms of how Okra is looking to empower Nigeria, we recently completed a mesh-grid pilot deployment with GVE, the largest mini-grid developer in the country, and we’re now in the process of scaling up this project. Additionally, developers who use Okra technology, and are eligible for the NEP, can receive a $120-$320 subsidy per connection through the Output Based Fund (OBF) program.

We believe the Nigerian market is primed for rapidly scaling mesh-grids, with thousands of sites having clusters of less than 300 households that are currently relying on diesel generators. The vast majority of these communities will be energised by renewable energy come 2030.

Haiti

Across the Atlantic, the island-side of Haiti has about 1.4Mn off-grid households and a national grid that underperforms so frequently that project developers are not even concerned about the possibility of eventual mains grid extension to sites that are currently without power.

The Haitian government, the Inter-American Development Bank and the World Bank have created a license and subsidy approval process for the electrification of communities using microgrids.

Okra is currently establishing a mesh-grid pilot with a local company, Alina Energy, and has signed an MOU with UBQ Energy, a global developer planning to energise more than 6000 households on the island of La Tortue with a mixture of mesh-grid (smaller towns and isolated communities) and mini-grid technology (bigger towns).

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Kisa works in project development at Okra, helping our partners to leverage finance and innovative business models to scale up their reach. Her background is in renewable energy investment in North America and the Mekong region. She holds a Masters of Management in Finance from McGill University.

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