The major drivers of demand are

1.Lagging Grid Growth

The importance of grid growth as a driver for solar lighting demand varies by region, with rapid grid growth likely in select geographies and very slow grid growth seen in many special category states. Grid penetration typically needs to grow by over 2% a year to counteract the effect of population growth – in practice this means that even substantial investments into the grid will leave many large and growing off-grid populations in decades to come.

2.Price Trends

Rapid technological innovation in basic Solar lighting technologies and a scale-up of commercialization efforts by entrepreneurs is driving a substantial decrease in the manufactured price of solar products, and since affordability is arguably the main obstacle to market adoption, falling manufacturing costs and corresponding declines in the retail product price will be a critical driver of demand going forward.

3.Technology and Design Innovation

Beyond improvements in price, the top of the solar off grid market is also undergoing a revolution in product design and quality. Most manufacturers have not yet achieved the quality and reliability standards of mass produced consumer electronics, but the market is starting to see a number of products that combine good quality, long battery life, and most important, value-added features and product designs that address the particular needs of BoP off-grid and under-electrified consumers. Innovation is set to accelerate as technological components fall in price and entrepreneurs invest more resources into studying local conditions and end-users.

4.Kerosene Prices

Kerosene, the main traditional alternative to off-grid renewable lighting, has long been an expensive commodity for the poor and is expected to continue increasing in price. The recent decrease in international oil prices will reverse, making it even more expensive.

5.Growth Economics

Rising demand for energy, driven by GDP growth rate and the gap between energy supply and demand, penetration to remote under-served areas, availability of low cost solar/PV, energy security for the nation and growing emphasis on clean technology and renewable energy to combat climate change are set to grow the industry.

6.Rural Electrification

There is enormous potential for off-grid PV deployment in India based on real needs and benefits in the areas of rural lighting and electrification for powering various rural requirements like pumping, cellular tower powering etc.

Key Aspects to Consider

While the off grid solar PV sector is an exciting business, success in this industry requires efforts similar to those for other businesses. It is important that investors and developers analyse the key aspects of the industry well enough while making this investment decision.

  • Costs
  • Technology Differentiation
  • Central & Regional Policy & Mandates
  • Value Chain and Key Industry Segments
  • Business Model and marketing strategy


The high cost of decentralized solar energy and solar products owes primarily to the high capital expenses, as the operating expenses are quite low.

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Most of the off grid solar product vendors and system integrators, assemble the products procured from various manufacturers. It is critical that they choose the most efficient players along the solar PV value chain, since this can affect the overall cost of the off grid installation or the solar product.

While capital costs for solar panels are not under the control of system integrators of off grid/mini grid power plants, there are two ways to reduce the cost of per unit of electricity (kWh) produced:

  • Reduce operating costs
  • Enhance electricity output

The most important step to enhance electricity output from off grid solar PV power plants is to assemble the system at an ideal location to ensure maximum solar insolation. The other aspect is to ensure that high quality solar cells that deliver the promised efficiencies are purchased.

2.Technology Differentiation

To avoid having to compete just on price, firms must offer a solution that is technologically differentiated. Whilst there are many distinguishing features, the one number to beat is “efficiency” as measured in $/kWp, followed closely by the module efficiency measured in kWp/m².Differentiating on technology will not be easy for Indian companies because most, if not all, will essentially be purchasing technology from external vendors. As a result, the technology differentiation can occur only to the extent that they choose the most efficient solar panel vendor, after a detailed research effort for the same.

3.Central & Regional Policies and Mandates

Government initiatives are critical to the market adoption of solar PV systems and products, and so it is important for the company to be completely updated on the initiatives and policies from both the central and state governments.

In India, government incentives are available under central government schemes and state government schemes coordinated by the energy development agencies of the respective states. The incentives are usually in the form of capital subsidies for off grid solar PV installations and solar products.

The percentage of capital subsidy or CFA is typically designed to ratchet downward over time to track technological change and overall cost reductions.

4.Value Chain & Key Industry Segments

The off grid solar PV industry value chain comprises a number of sub-segments. It is desirable that a company acquires an understanding of all these sub-segments and the opportunities that they represent before deciding to venture into this sector.

In addition to the most prominent opportunities, it might be useful if they could spend time to analyse the niche areas that are underdeveloped, where solar PV could be better applied. For instance, in India, the following are some of the segments underserved by the current electricity grid and hence could make excellent markets in the context of the solar PV industry

  • Villages that have no grid connectivity
  • Companies that use diesel generator sets as a power backup
  • Solar PV pumps
  • Mobile telecom towers in many parts of India that have little access to the utility grid, and other standalone commercial and industrial ventures.

5.Business Model and Marketing Strategy

The off grid solar sector is a very fragmented market and the growth of the sector is completely dependent on the public adoption of the technology. Hence, one of the key considerations before entering the off grid solar sector is to identify the suitable target segment and develop a suitable business model and marketing strategy which would maximise the reach of product/technology to the segment.

Related Articles

1. Solar Off-Grid Applications and Products
2. Market Status of Offgrid Solar Products in India
3. Government Initiatives/ Programs to Support Off-Grid Renewable Energy Deployment in India
4. Ways to Identify Other Potential and Attractive Off-grid Segments
5. Business Opportunities in Diverse Off-grid Applications
6. Key Drivers for Rooftop solar Power in India
7. Drivers & Challenges for MW Scale Power Generation in India