IFC Publishes Lessons Learned on Solar Energy

IFC, a member of the World Bank Group, today presents its lessons learned from investing in solar energy in emerging markets for more than a decade, at the 22nd European Solar PV Energy Conference. The study, entitled “Selling Solar,” finds that, to be successful, investments in solar photovoltaic technologies must acknowledge different market segments and adapt products and financing accordingly. It also finds that most solar PV programs require subsidies to be viable. The study explains how IFC is moving toward supporting programs that deploy a mix of technologies, rather than solar PV alone.

IFC is committed to finding market-based solutions for rural electrification in emerging markets. In the mid-1990s, IFC initiated several solar PV activities, in partnership with other investors and donors including the Global Environment Facility. These efforts did not overcome all the complexities of the market. They provided valuable lessons of experience and case studies, which IFC has compiled in the publication.

Rachel Kyte, IFC Director for Environment and Social Development, said, “We hope these lessons will be useful to other investors looking to explore the nascent PV market in the developing world. We think that solar PV can make a significant contribution to addressing rural electrification issues, and that we can develop sustainable business models. The World Bank Group is the largest financier of solar PV businesses in the developing world. Supporting solar PV and renewable energy applications is an important component of our work to combat climate change and ensure sustainable energy access for the poor.”

The study encourages PV companies to acknowledge the different segments in the market. For example, low-income consumers are often looking for a system that supports a single light source. Higher-income consumers, however, are probably connected to the power grid and looking for larger systems to ensure an uninterrupted power supply during outages.

The study recognizes that without some level of subsidy, solar PV in developing countries is often too expensive for the average rural consumer. While prices were forecasted to decrease between 2004 and 2006, they actually increased. Alternatives to solar, such as grid extension, often benefit from subsidization and political support.

The study notes that private equity is not the most appropriate mechanism for financing solar PV activities in the developing world. Returns on such investments are nonexistent, so flexibility in investment offerings is necessary.

While solar PV is a viable technical solution, it is not the only or preferred one, the study concludes. IFC is moving toward a broad approach to market-based solutions to rural electrification that supports a variety of technologies, including low-power lighting devices and distributed power generation. IFC is working on a number of market acceleration initiatives, including “Lighting Africa,” which is looking at affordable off-grid lighting to replace fuel-based lamps.