Off-Grid Solar. A Growth Engine For Jobs - GOGLA

Evolution of the off-grid solar sectorOff-grid solar energy provides a safer, cheaperand reliable alternative to access energy formillions worldwide. The nearly one billion peoplewho lack access to a reliable electricity8, spendabout USD 27 billion each year on lighting andmobile phone charging9. The use of traditionalsolutions like kerosene, candles, battery torches orother fossil fuel-powered transitional technologiesare expensive, harmful to health, hazardousand polluting. Clean off-grid solar energyproducts provide an alternative that is beneficialto individual consumers and society, directlycontributing to SDG 7.1 – the goal to ensure accessto affordable, reliable, and modern energy for allby 2030 and indirectly contributing to several otherSDGs.Access to off-grid solar has grown substantiallyover recent years, with decentralized renewablesmaking up 6% of new electricity access since201210. This growth has been combined withsignificant market entry and private sectorengagement from an increasingly diverse, globalpool of manufacturers and distributors. Totalsales value generated by the off-grid solar sectorhas exceeded USD 3.9 billion11, raising increasedinterest and commitments from investors, includingcommercial debt and equity players.Products have evolved from smaller solar lanternsand multi-light kits (pico products) to larger, ‘plugn-play’ solar home systems (SHS) often sold withefficient appliances such as TVs, fans and radios12,bringing increasing levels of energy service tocustomers. The combination of declining costs forsolar and decentralized solutions, and cheaperand more efficient lighting and appliances, hasincreased the number of available solutions tocater to those currently without electricity access.13As a result, off-grid energy has been transformingthe energy access landscape, especially in ruralareas.8910111213Two distinct service delivery models haveemerged, cash-based versus pay-as-yougo (PAYGo). The solar lantern market is stilldominated by cash sales and is becomingincreasingly commoditized, with differentiationamong players being substantially based on price.Recently, new service delivery models makinguse of digital, mobile-enabled platforms, suchas PAYGo have allowed customers to buy largerSHS. These business models have seen substantialgrowth, especially in countries with a maturemobile money market. PAYGo allows households topay for clean and reliable off-grid solar productsin small instalments: instead of requiring upfrontpayments for a system, customers can pay for thesystem in small amounts. Customers typically makea down-payment of about 10-20% of the total costof the SHS. Following the initial down-payment,customers make regular payments, using a mobilewallet, mobile money, or scratch cards receivingtokens for the equivalent of units paid for. Of theoff-grid solar products sold by GOGLA Membercompanies in the first half of 2018, 80% weresold on a cash basis and 20% via PAYGo servicedelivery models.For both of the main off-grid solar deliverymodels, there are four main aspects to thevalue chain, from initial technology acquisitionand manufacturing, to sales and distributingof products, to technical installation, throughto customer support and after sales services.Depending on the sales model and the chosendistribution channel, the proportional numberof jobs within each category will change in linewith the requirements of service delivery. Figure2 provides an illustrative example of the valuechain for the off-grid solar sector, displaying thedifferent types of jobs generated along the offgrid solar products’ journey to the customer, andafter sale services.IEA (2018), World Energy Outlook.Lighting Global (2018), Off-Grid Energy.IEA (2017), Energy and the Sustainable Development Goals.Dalberg and Lighting Global (2018), Off-Grid Market Trends Report.Pico-PV products include lanterns and simple multi-light systems of 0-10.999 Watt peak (Wp). Plug-n-play solar home systems are all-inone packaged solar home system kits of 11 Wp, typically powering several lights as well as energy-efficient appliances.IEA (2017), Energy and the Sustainable Development Goals.8

Evolution of the off-grid solar sectorFigure 2 - The off-grid solar product journey creates different types of employment acrossthe whole value ringand assemblyInstallation andtechnicalmaintenanceSales anddistribution3rd T system (in case of PAYGo: allowing automated payments and systems monitoring / activation)The International Energy Agency (IEA) hasrecognized that decentralized energy systemscould provide the most cost-effective way toreach 70% of energy poor households in ruralareas14. Global market projections suggest therewill be steady overall growth of the off-grid solarsector by 25% per annum over 2017-2022 andan 87% growth for the SHS segment, which isoverwhelmingly driven by PAYGo15. From 20122018, PAYGo companies have raised just overUSD 961 million to reach new customers, equalto about 75% of all funds raised16. This suggeststhat investors have high expectations of how fasta relatively small group of PAYGo companies cangrow17.1415161718However, several challenges remain to scaling upoff-grid solutions, both for the individual consumerand the off-grid companies. For the individualconsumer, affordability remains a criticalbarrier. Even though traditional off-grid energysources such as kerosene and candles make upa substantial part of household costs for peoplewithout electricity access (off-grid households inAfrica pay 20 times more per kWh than householdswith a connection to the gridt), the upfront costsfor off-grid systems may still be higher than mostconsumers are willing or able to pay. For off-gridsolar suppliers, a key challenge is to decide onthe most appropriate service model to delivertechnologies to end consumers in an increasinglycompetitive market. This will require businesses tocontinue to innovate in their service offering, andhow they provide those services across the valuechain; from assembling products, to deliveringtechnology platforms and, increasingly, extendingthe range of services offered to consumers.IEA (2017), Providing Energy Access for all by 2030.Dalberg and Lighting Global (2018), Off-grid Market Trends Report.GOGLA (2019), Investment Database.Dalberg and Lighting Global (2018), Off-Grid Market Trends Report.Africa Progress Panel (2015), Africa Progress Panel Report: Power, People, Planet.9

MethodologyThis report draws on an Employment Survey(2018) carried out by GOGLA, gathering datafrom close to 40 off-grid solar companies. Thisincluded information on the types and levels ofjobs across the off-grid solar value chain, suchas management positions, technical roles, HR,and customer services. A full description of thejob categories used is provided in Annex 2. Thisemployment information has been aggregatedand anonymized and used to estimate industrywide employment using current industry salesdata, and projections of future sales.Market data research was then validated andexpanded upon with seven interviews carried outwith GOGLA industry members operating acrossthe four regions covered in this report. The authorsare indebted to all companies that participatedin this research and most particularly to therepresentatives of seven organizations who sharedtheir experience of the evolution of the labor force,the insights of which provide the context behindthe numbers.Gross employment estimates for PAYGo and cashbased sales across the four regions are based onsector sales data and sales growth projections.Specifically, the three main sources of data areused to generate employment estimates:- Employment factors for emerging regions,developed through recent GOGLA marketresearch and interviews carried out withGOGLA industry members. This data includesinformation on the types and level ofemployment in different positions across thecompany. These employment factors representthe proportional relationship between salesand employment generation. Applying them tosector wide data on sales therefore generatesan estimate of how many jobs are createdaccording to the magnitude of sales.- Industry sales data to benchmark the currentsize of regional markets for solar lanterns,multi-light kits and SHS19. This sales data is usedto apply the proportional relationship derivedfrom the employment factors. Sales data fromGOGLA and Lighting Global affiliates is scaledto estimate total off-grid solar market sales (i.e.including non-affiliates) in each region. Theproportions are based on an estimate of nonaffiliate sales comprising 30% of global sales forPAYGo and 71% for cash20.- Projections of future sales, which are used togenerate changes in employment profiles by2022. The projected growth of the sector isbased on the latest market insight21.To generate evidence of the nature and type ofjobs created, data was provided through GOGLAfrom the Employment Survey22, and supplementedby structured interviews with sector players. Dataon the number and nature of jobs provided bycompanies was used to estimate the potentialscale of the employment opportunities, and howthis is likely to be split by part of the value chain asthe sector evolves.A more detailed methodological outline is providedin Annex 1.To determine the potential size and impact of thesolar irrigation market, the technical potential forsolar water pumps was calculated. This calculationwas based on a number of characteristics. Forexample, the share of agriculture in employmentand GDP, weather conditions, existing modernirrigation, and the extent to which farms are inareas not well served by a reliable national grid.The methodology used to estimate the technicalpotential for SWPs in this section is presented inAnnex 2.A framework to measure the indirect and inducedemployment effects from the off-grid solar sector,and broader socioeconomic benefits, is set out inSection 7.19 GOGLA (2018), Global Off-Grid Solar Market Report Semi-Annual Sales and Impact Data.20 Dalberg and Lighting Global (2018), Off-Grid Market Trends Report. Growth rates provided are general for the off-grid solar sector.Estimates may not take into account regional differences in growth rates which could shape employment demand.21 Dalberg and Lighting Global (2018), Off-Grid Market Trends Report.22 The GOGLA Employment Survey of all GOGLA industry members was conducted in September 2019, with nearly 40 members contributingdata to this research.10

Methodology11

Off-grid solar drives employment and incomeThe off-grid solar sector has already spurreda range of new employment opportunities and,as the off-grid solar market matures, the scaleand nature of these jobs will continue to evolve.In the emerging markets with significant energydeficits included in this study, with supportivepolicies and investment environments, the off-gridsolar value chain could generate up to 1.3 millionfull-time equivalent (FTE) jobs by 2022, excludingmanufacturing23.These job opportunities include high-skilled, highvalue-add labor to support both over-the-countercash sales, and the sales of systems throughinstalments under the PAYGo service deliverymodel, including finance and management roles.The PAYGo business model in particular alsocreates skilled positions in sales and after-saleservices, and for technicians and engineers forinstallation and maintenance of the products overtheir lifetime.4.1 Service delivery models andemployment generationThe total employment generated by sales andthe prevalence of different job types is dependenton the service delivery model through whichthe technology is sold. This study differentiatesbetween two service delivery models: cash salesand PAYGo.The PAYGo model is relatively more labor intensivethan the cash-based sales model due to additionalroles needed for supporting installation, long-termtechnical assistance, and customer support asshown by Figure 3. For every unit sold throughPAYGo, the number of people employed by anoff-grid solar company tends to be higher thanfor cash-based sales. Cash sales, on the otherhand, employ a larger proportion of employeesunder the sales and retail portion of the supplychain. Regions with relatively more sales under thePAYGo model will typically see larger employmenteffects directly within the solar value chain andare likely to see a slightly higher concentration ofskilled work, given the higher proportion of jobs inafter-sales services.The PAYGo service delivery model places astronger emphasis on ongoing customer supportand long-term service value offering. In contrastto cash-based sales, the PAYGo model establishesa long-term connection to the customer stemmingfrom the payment structure of the service.Since customers are expected to make regularpayments, the PAYGo company must ensurethat the quality of the service remains constant.Furthermore, under the PAYGo model, thecompany is providing an ongoing service whichrequires enabling, and collecting payment fromcustomers, as well as initial credit checks. PAYGocompanies therefore have a larger proportion ofcustomer support jobs as well as installation andmaintenance jobs.Cash sales companies dedicate a higherproportion of their employees to sales anddistribution as they focus on maximizing theircustomer base. For cash-based sales, thetransaction with the customer is a one-offexchange so a company with this service deliverymodel can make better use of resources witha larger network of sales points and expansivedistribution network. As a result, they have a higherproportion of employees in management positionsneeded to manage the large pool of sales agentsand distribution employees.Figure 3 - The split of employment across total jobs in the supply chain will differ according tothe PAYGo and over the counter cash salesSales and distribution jobsCash64%PAYGo16%59%0%20%17%40%60%15%11%80%2% 2%5%7%100%Installation and technicalmaintenence jobsManagement jobsAcquisition /Manufacturing jobsCustomer Support jobs23 This section sets out the potential scale of employment opportunities across the off-grid solar value chain in the five years from 2018.12

Off-grid solar drives employment and incomeTo date, the services shown in the value chainhave often been delivered by a single, verticallyintegrated business. However, alternative deliverymodels are already developing, with businessesproviding only part of the services in the valuechain and forming partnerships and links to othercompanies who provide other services. Thesepartnerships can generate indirect employmentacross other complimentary sectors – discussedfurther in Section 5.4.2 How the off-grid solar sectorgenerates jobs and incomeEmployment opportunities are created and willevolve as the market develops in four key ways.First, as markets grow and sales volumes increase,employment in the off-grid solar sector will alsoincrease. As new sales are generated, more staffwill be needed to distribute the products, and tosupport before- and after-sales services.Second, as the service delivery models evolve,employment opportunities will also change inscale and in nature. In particular, as describedabove, an increasing share of PAYGo sales willboth generate more jobs per sale and affectwhere these jobs are located in the value chain.The PAYGo model employs more people related toafter sales customer relations, as well as technicaljobs such as software design and logistics. Incontrast, cash-based models will invest in effectiveand extensive sales networks, translating in ahigher proportion of sales jobs across emergingregions.Third, as the industry matures, the type of jobsassociated with both the PAYGo and cash servicedelivery models may evolve. For example, anemerging trend is for customers to purchase largermulti-light systems and SHSs, often accompaniedby appliances such as televisions and fans.With more complex and extensive products andservices, companies may have to expand thenumber of employees focused on technical andcustomer support. Similarly, cash sales-basedservice delivery models may also have to innovateto compete against attractive PAYGo financingmodels. This may translate into more jobs intechnology developments, as well as customer andtechnical support24.Fourth, some off-grid energy solutions will enableincreased access to employment and incomeopportunities. This is explored in the recentPowering Opportunity report, where survey resultsshowed that customers in 7% of households thatpurchased a SHS reported that this enabledthem to get a new job25. This is explored further inSection 6 of this report.In addition to these direct impacts on the valuechain, the evolution of the off-grid solar sector willalso respond to and trigger employment effects inrelated sectors. The projections presented in thisreport do not consider how related sectors, suchas mobile money, technology sectors, or salesof appliances and services enabled by access toan off-grid solar product, will grow in responseto increasing demand. Typically, growth in onesector will generate ‘direct’ employment (that isconsidered here) as well as ‘indirect’ employmentin sectors linked to the value chain through‘forward’ (up the supply chain) and ‘backward’linkages (down the supply chain). Finally, theremay be an ‘induced’ employment effect, as theincome generated by new jobs is spent elsewherein the economy, generating a multiplier effect onemployment in other sectors. This can be positive– where activity is stimulated in other sectors in theeconomy, or negative – where activity is displacedfrom other sectors in the economy. The indirectemployment effects are further explored in Section7.In this study, only the direct employment throughsales of solar lanterns, multi-light kits and solarhome systems is modelled. The numbers presenteddo not include any employment that may beassociated with the use of off-grid solar products,employment created by the sale of off gridproductive use appliances, such as solar irrigationpumps, captive power for agriculture or industry,or the future employment that would be createdin associated sectors as the sales of off-gridsolar products grow. For example, jobs catalyzedthrough the sale of appliances or increased use ofmobile phones and mobile money.The value chain for off-grid solar productsis international – sales in one region willgenerate employment both in that region andin other regions. For example, manufacturing24 This effect has not been modelled because of lack of data. However insight from Dalberg and Lighting Global (2018), Off-grid MarketTrends Report, leads to that qualitative conclusion.25 GOGLA (2018), Powering Opportunity: The Economic Impact of Off-Grid Solar.13

Off-grid solar drives employment and incomeof components often takes place in a differentlocation to assembly or sale of the final product –and the organization of the supply chain will differfrom one region to another in this regard. The dataavailable for this study does not allow us to unpickthis global value chain – indeed it can only linksales in a particular region to employment in thatregion. As noted in Section 4.1, the estimates do notinclude manufacturing employment op

The split of employment across total jobs in the supply chain will differ according to the PAYGo and over the counter cash sales Figure 4. The off-grid solar industry will support around 220,00 high skill jobs, 290,000 medium skill jobs and 800,000 lower skill positions by 2022. Figure 5. Projected number of jobs for women and employees in