Getting Down to the Business of Off-Grid Lighting

Wolfgang Gregor

With an estimated value of almost $40 billion US$, the global off-grid market is dominated by international oil giants like Shell, Esso and British Petroleum (BP). Today, it is common knowledge that utilizing kerosene is, by far, the most expensive and inefficient way of producing light. Additionally, the more than 70 billion litres of kerosene sold every year is harmful to the health of its users and detrimental to the environment, emitting more than 190 million tons of CO2. But can we really blame the multinational oil company who is silently enjoying a very profitable business in this “mega niche?”

With the ongoing development of the solar industry, the first entrepreneurs and international institutions to get involved, realized the huge market potential in the off-grid area of developing and emerging markets – more than $30 billion per year for the 1.6 billion people without access to the electricity grid. Surprisingly, the global lighting giants have not shown a real interest in this ever-expanding market.

Many of the current business models for off-grid lighting are driven by NGOs, offering them an attractive field for activities and income. Altruistic distribution models were the main part of the NGO off-grid agendas which were met at times with hostile industry behavior. Receiving funding from international donors comes easily to NGOs who see themselves as” off-grid specialists” after only a few projects. The downside is that these organizations do not have the capability to address complex projects and issues. NGO bashing? Not at all! As long as the industry has not shown an interest in this market, the presence of all other players in the off- grid arena have been justified.

The International Finance Corporation (IFC) of the World Bank Group addressed this issue five years ago with the goal of creating an efficient off-grid industry presence. The IFC realized that only sustainable business models, based on the “triple bottom line” – people, planet and profitable business – would lead to a positive change. Solutions had to move from an NGO-driven patchwork towards fair and profitable business solutions.

This atmosphere of change inspired a few startups who had realized the huge potential of this market. Companies like d.light or barefoot power have now developed their own business models and are successfully selling products into the double digit millions of dollars and are growing fast.
The off-grid business is by no means easy to navigate. There are many issues that need to be addressed on an ongoing basis such as: unreliable and rapidly changing legislation in developing countries; the lack of transportation and infrastructure; and in many cases, corruption. Therefore, the off-grid industry needs a holistic approach for new businesses entering this market that focus on the education of local specialists; marketing activities; customer education; and the creation of a dedicated infrastructure. Effective scaling- and distribution models are critical tools that are required for success.
In June 2012, the Global Off-Grid Lighting Association (GOGLA) was founded with the support of the IFC. GOGLA is the first industry association in the field of off-grid lighting and follows the practices of other associations found in industrialized countries, with lobbying being an important part of its agenda. This is an important step towards business reality.

GOGLA’s Board of Directors consists of large global lighting companies, as well as the new entrepreneurial ventures and startups. Total of France, a major player from an unexpected business league, joined GOGLA as a founding member. Bad conscience? Surely not! It demonstrates the environmental responsibility, driven by the expectation of sustainable business. The global consultancy firm, AT Kearney, has also joined as a member which clearly shows that the need for an industry association is becoming evident in the expanding off-grid market. GOGLA has come to represent the rational way to business reality.

When examining marketing efforts for off-grid activities, images abound of happy children reading books and studying, mothers cooking, while fathers work at local businesses. “I am not concerned about how people spend their time by having light. What we need to provide for these consumers is good lighting that is equivalent to what is found in industrialized countries,” said Harald Schuetzeichel, President of GOGLA. “It is now time for a fair market transformation from the recipient beneficiaries to customers of a free market industry. It’s a win-win situation that creates many jobs and generates income in developing countries,” he added.

One of the last untapped profitable markets has now been defined. The money and products are available. The customers are there. So why wait? The mobile phone industry has demonstrated that lucrative business is feasible in the most remote areas of the developing world. It is time for the off-grid lighting industry to get down to business!

The author is Secretary General of the Global Off-Grid Lighting Association / GOGLA