The global off-grid solar sector returned to growth having attracted $457 million worth of investments in 2021 with 44% annual improvement and $130 million more than in 2020, according to the Global Off-Grid Lighting Association (GOGLA), taking total capital inflows to the sector to $2 billion.
This growth comes after 5 consecutive years of reaching around $300 million mark in terms of annual investment, it shares. What's interesting is that the number of companies receiving at least 1 investment increased from 78 in 2020 to 83 in 2021. Over the same period, the average transaction size also grew from $1.9 million to $4 million.
GOGLA Investment Database sees total equity volume also having gone up 43.6% annually to $120 million 'bringing total equity volumes back to close to pre-pandemic levels'. This amount was raised by 27 companies, compared to 28 companies receiving $81 million equity in 2020, and 19 companies raising $133 million in 2019.
"This is significantly below the 300 companies and $6 billion to $11 billion of investment needed to achieve electricity access targets," analysts opine in the report.
It is the Big 7 companies that are attracting more capital, especially debt from commercial investors. In 2021, total debt volume went up by 59% to an all-time high of $326 million most of which was bagged by the Big 7.
"The total volume of debt provided to start-up companies bounced back from the low level seen in 2020, however it has not yet reached pre-pandemic levels," reads the analysis. "The pipeline of early stage companies receiving debt is not increasing either: excluding earmarked relief funding deals, 30 companies received a debt investment in 2021, compared to 31 companies in 2020 and 2019."
While the investment seems concentrated, GOGLA believes this continued confidence in the Big 7 could be positive news for start-ups and growth stage companies as early-stage capital can then be released via secondary sales and equity returns can be proven.
For grants, GOGLA says 75% of venture building grant was focused on productive use companies and 50% went to locally-owned companies, but all were start-ups.
Sector investors remain bullish about the success of off-grid solar segment as 70% of the companies surveyed expect the investees to perform in line with their financial expectations in 2022.
Even as the sector shows its resilience, GOGLA cautions that a lack of access to finance is an acute challenge for start-ups. "More investment, in particular patient equity, is needed to unleash the industry's full potential to achieve climate and electricity access goals," it states.
GOGLA Investment Data for 2021 is available on its website.