India has been the leading market globally for off-grid solar lighting in recent years. But the country’s ambitious grid extension program, which this year claimed 100% household electrification, calls into question the future of the market, as do government requirements that all solar panels, batteries, converters and inverters—whether sold separately or in a kit, whether imported or made in India—meet local standards. While those requirements were modified in April 2019 to exempt small solar modules for the time being, uncertainty remains.
To understand what the future holds and why off-grid lighting is still important, Power for All spoke with the Lighting Asia Program team of the International Finance Corporation (IFC): Anjali Garg, Brendon Mendonca, Salman Zahir. Below is a Q&A on major trends in the off-grid lighting product market in India.
Question: Given recent developments, are off-grid solar solutions still needed in India or is it time to move ahead?
Answer: Electrification in India has been increasing in pace in the last few years, with the announcement of 100 percent household electrification as of March 2019. The push towards last-mile connectivity was the result of an ambitious government initiative — dubbed Pradhan Mantri Sahaj Bijli Ghar Yojana, or Saubhagya for short—launched in September 2017. This initiative has been successful in connecting city and countryside households. However, recent studies indicate that villages still experience frequent outages and lack consistent access to electricity during the evening hours. The market is rapidly changing with consumers demanding more than just lighting solutions. But, data shows that the market for off-grid lighting solutions still remains significantly large, although it is evolving.
Q: What is the size of the current Indian off-grid solar market?
A: Almost 10 million solar lamps and lanterns were sold in India in both 2017 and 2018, up from 6.38 million in 2016. This is nearly 40 percent of the estimated global market for solar lighting solutions. A large number of these products were imported. The volume of imported solar lamps and lanterns increased by almost 86 percent in 2017 (7.61 million units) over 2016 (4.09 million). There was a slight dip in imports of solar lighting products in 2018 over 2017. While 2017 saw imports increase to 7.61 million units, 2018 saw them down to 7.34 million. During April to June 2019, 2.5 million units were imported, which, if extrapolated over a 12-month period, surpasses the imports of 2017 and 2018 by a wide margin. Exports of these products from India remain low with only 0.09 million units exported in 2018 and 0.06 in 2017.
Total sales in India as estimated above comprise imports, plus local manufacturing, less exports. While there is no reliable data on units manufactured in India, sector experts estimate this to be in the range of 2.5-3 million units per year (Table 1)
Table 1: Import and export data for pico-solar, grid-rechargeable and dry-cell based off-grid lighting solutions
| YEAR |
| 2016 | 2017 | 2018 |
| IMPORT DATA | HS Code | Mn units | Mn units | Mn units |
| Solar lamp/lanterns (A) | 94055040 | 4.09 | 7.61 | 7.34 |
| Portable electric lamps designed to function by their own source of energy (for example, dry batteries, accumulators, magnetos), other than lighting equipment of heading 8512 – Lamps | 851310 | 44.31 | 71.11 | 118.15 |
| EXPORT DATA |
|
|
| |
| Solar lamp/lanterns (B) | 94055040 | 0.20 | 0.06 | 0.09 |
| Portable electric lamps designed to function by their own source of energy (for example, dry batteries, accumulators, magnetos), other than lighting equipment of heading 8512 – Lamps | 851310 | 3.39 | 2.92 | 3.03 |
| Estimate market for solar pico products in India | ||||
| Made in India (estimate) (C) | 2.50 | 2.50 | 2.50 | |
| Total Market – India (A+C-B) | 6.38 | 10.05 | 9.75 |
Q: Where do non-solar off-grid lighting solutions like rechargeable lights fit in the picture?
A: It is also interesting to see how the market for grid rechargeable as well as dry-cell based off-grid lighting solutions in India has been evolving. Around 118 million units of these products were imported in 2018, a huge increase of around 66 percent over 2017, pointing to a very large market for battery powered emergency lighting products for both indoor as well as outdoor use.
Q: Do you think there are opportunities for domestic solar lighting manufacturers?
A: There is definitely an opportunity to build local manufacturing capacity to meet demand. At present, China accounts for almost all the off-grid lighting products imported in India. Exports from India are a negligible portion of the overall off-grid lighting market. With the right incentives, local manufacturing can be increased, and in fact constitutes a major opportunity. If Indian companies can make quality products at competitive prices, they should be able to compete globally. A recent example is a solar torch developed and manufactured by Jaipur-based company Frontier Markets that meets the Lighting Global Quality Standards. The Global Off-Grid Market Trends Report estimated the number of households that need off-grid lighting products around the world at around 434 million for 2017. The estimated global pico solar sales for the same period was around 22.3 million, indicating a large untapped market.
Q: You mentioned a growing market for emergency lighting products across India. How big is the opportunity?
A: The portable battery-operated off-grid lighting products market is booming. As mentioned earlier, 118 million units were imported in 2018, while the total market of off-grid solar lighting products is around 10 million. A shift in this market towards solar would lead to significant gains for the solar off-grid industry, contribute to India’s effort to be a global climate leader, and increase the country’s solar footprint. In the second half of 2018 alone, off-grid solar lighting products had an installed stand-alone solar capacity of 32.39 MW worldwide. However, non-solar off-grid lighting products are usually low cost with low consumer expectations on durability. For solar lighting products to succeed in this category, product design innovation, along with increased consumer awareness of quality, is a must.
Q: Is it correct that most pico solar lighting products are sold through micro finance institutions in India, or are there other channels? Can you comment on the quality of the products sold through these channels?
A: Micro Finance Institutions (MFIs) remain the key channel for giving consumers access to quality solar lighting products. However, it is our understanding that there is a thriving retail market for off-grid lighting products and most of the imported off-grid lighting products are sold through open market retail channels. Many different models of off-grid lighting products are easily available to end-consumers in retail shops across most states. However, a large proportion of these products do not adhere to any quality standards and are sold at low cost without a warranty. It is estimated that of the total off-grid solar lighting solutions imported into India, only 25 percent meet international standards,. Recent market surveys and feedback from companies suggests that increased awareness about quality off-grid lighting products that offer a warranty generate retailer and customer interest and lead to higher sales offtake in the retail market, even though their cost is often more than that of generic unbranded products that do not offer a warranty.
Power for All and IFC are keen to hear your views on the following as we continue to track the growth of this market in a rapidly changing business environment:
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Given the backdrop of rapid electrification, what is the future of the off-grid solar sector in India?
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How can Indian solar companies capture a larger share of the global as well as the domestic off-grid solar market?
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Can solar companies tap into this large and growing market for emergency lighting solutions, and if yes, how?
