Off-grid: A demanding market

Optimistic pragmatism was the common sentiment at the Forum Solarpraxis conference’s Nov. 22 Off-Grid PV workshop in Berlin.

Off-grid PV is still a small and hardly understood frontier market. There are no statistics that show how off-grid PV installations have done worldwide in recent years, said Catherina Cader of the Reiner Lemoine Institute.

Tobias Cossen, project manager at the German Society for International Cooperation (GIZ), referred to the EPIA Global Market Outlook 2013-2017, which estimates new off-grid installations in Africa, the continent with the lowest rate of electrification, to be between 70 and 100 MW per annum. "That is one big project in Germany — not very much,” said Cossen.

"The market is very fragmented," confirmed Geraldine Quelle of the wholesaler and supplier Phaesun. Therefore, she said, it is important to cooperate with good local partners. The company specializing in off-grid PV finds its primary source of sales and earnings in larger projects, solar water pumping systems, for instance, or power supply for telecommunication stations, explained Quelle, but added that small projects outweigh by number and achieve larger margins.

AD vs. DC

Each new off-grid solar system is a foray into terrain not yet electrified. The questions raised in the process occasionally go back to the early days of electricity. AC or DC was one of the controversial topics of the Off-Grid PV workshop: what makes more sense for isolated solar applications and minigrids far away from the power grid – DC power systems without inverters, or systems to which all AC devices can be connected? "We are back to the original controversy between Edison and Tesla," said Daniel Philipp, managing director of MicroEnergy International. In Bangladesh, where more than two million small solar home systems (SHS) have been installed, it makes sense to build DC systems even in the long term, he said, pointing out that "Most home appliances can run on DC."

Solar home systems, which only cover the basic needs of the users, are a good basis for "swarm electrification" if they can be connected in a DC minigrid to share unused power with neighbors in the beginning and eventually feed power into the main grid as soon as utility power grids develop, explained Philip.

Nicolas Rohrer, managing director at system integrator Asantys Systems, took the opposite position: "AC coupling will be the standard type of installation," although there is a "huge market" for Pico products. Asantys installs autonomous village minigrids on the basis of three-phase AC because, as he explained, larger distances can be covered, they are more flexible regarding applications and AC coupling is simpler and much faster in the case of an expansion or the combination of different energy sources. "Installation time is a very important factor in the field."

The trend in more densely populated villages is towards centralized systems, said Rohrer, and the size villages request is getting bigger and bigger: 50 kWp systems in 2010, 150 kWp in 2012. "Once we installed minigrids we had difficulties to sell solar home systems because the comparison of cost, service and maintenance is not in favor of SHS," he said. "SHS will slowly disappear from the market and be replaced by more efficient Pico systems," he predicted. Hybrid systems are another trend Roher noted, mostly PV combined with diesel generators. "Almost 100% of the requests are for hybrid systems."

"It is not a question of replacing AC with DC," was Quelle’s comment on the discussion. "It makes sense to use DC loads at places where there is no AC grid," she said, because you don’t need an inverter and the risk of failure is much lower.

Diesel and PV

Cader of the Reiner Lemoine Institut presented maps of potential markets for off-grid PV and PV-based hybrid minigrids, which the institute had compiled in cooperation with the SMA Stiftungsverbund foundation. These maps show that there is a cost advantage of PV-diesel systems over diesel systems in many regions word-wide. According to the study, the payback period is only five to seven years in many regions of Africa, Australia and South America, and less than four years in extremely remote areas. Combining these systems with batteries is profitable only for systems with a PV share of 80% or more, said Cader.

According to Philipp Neff, co-founder and managing director of OneShore, a company that specializes in the integration of PV into existing diesel plants, up to 40% of diesel fuel can be saved by coupling diesel gensets with PV. It is important first analyze loads, he said, and it is not beneficial to go for 100% renewables on islands immediately instead of phasing in PV.

Cossen of the GIZ also stressed the trend to PV-diesel systems: "PV-diesel systems are coming, but they still need more reference projects." So far, he explained, off-grid projects are usually still not bankable due to lack of political support. "Innovative financing models are needed," he said, adding that a transfer from capital expenditure operating expenditure was necessary. Local financing is not or almost not possible, he explained, and whoever is able to bring it along and bare the risk will have a huge unique selling proposition.

According to Cossen, the demand is there, but the end customers cannot pay upfront. Tender-driven off-grid markets are only accessible with a reliable local partner and only well-connected companies will get the early mover bonus, he explained.

Cossen characterized the off-grid market as a small segment with very long development cycles and demand for experienced developers with local partners and an appropriate budget.