Off-grid solar attracted record US$450m investment last year

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Debt financing for off-grid projects reached US$326 million in 2021, outpacing all types of financing in 2020 according to data from GOGLA. Image: B2Gold.

Investment in the off-grid solar sector hit a record US$450 million in 2021, according to the latest report from the Global Off-grid Lighting Association (GOGLA).

In what constitutes a return to growth for the industry post-pandemic, investment soared by more than 40% after years of topping out around the US$300 million mark.

Despite record high investment in 2021, companies in the early stages of growth have been the most affected by the impacts of the pandemic and had more difficulties in attracting equity capital, according to the report.

A growth in the amount of debt raised in 2021 – which, at US$326 million, represented more than all of the capital investment raised in 2020 – was primarily driven by large debt deals secured by larger operators in the space.

Referred to within the report as ‘The Big 7’, which includes the likes of d.light and Sun King, attracted more capital this year, with the aforementioned operators securing debt facilities for growth in established off-grid solar markets such as Kenya.

Climate-focused investors have been keen on entering the off-grid market, the report concludes, given its alignment with investment strategies. The report noted in particular Sun King’s recent equity raise of US$260 million earlier this year.

Laura Fortes, senior project manager at GOGLA, said: “The all-time high investment in 2021 is a major success for the industry and gives reason for optimism. It shows that the sector is resilient and has retained the confidence of a wide range of investors.”

Start-ups negatively affected by the pandemic

While debt investment into start-ups almost doubled year-on-year to US$52 million, it has yet to recover to pre-pandemic levels. In 2019 and 2018 debt provided to start-ups was closer to the US$80 million mark.

Grant financing to start-ups also more than halved last year, falling from a record high of US$24 million in 2020 to US$9.1 million. However 2020’s result was swayed by around two-thirds of grants originating from a single funder.

Around three-quarters of venture building capital was focused at earlier-stage companies, with around half of funding going to locally-owned businesses in the space.

Meanwhile there is some short-term concern within the investment community after around 25% declared that their off-grid portfolio had underperformed in 2021, rising from the 15% which declared as such last year. However more than 70% said that underperformance looks to be short-lived, anticipating financial performance in line with expectations this year.

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