4Q 2017 Frontier Power Market Outlook

Micro-grid project activity in the past quarter has given way to larger development financing commitments and policy statements, led by India’s announcement to complete rural electrification in fifteen months. Niche markets such as telecom towers, solar irrigation and home systems have seen most activity and growth, albeit from a small base.

Number of Indian households electrified and target (monthly)

Source: Bloomberg New Energy Finance.

  • PV shipments from China to non-OECD countries dropped across all major regions. Monthly exports stood at just $279 million in July, after having hit a monthly peak of more than $700 million in March. India, the biggest buyer, was also responsible for most of the decline.
  • Micro-grid projects with a capacity of 215MW were announced since July (including existing capacity that is being hybridized). Solar and diesel hybrids are the most popular technology combination, with recent target markets in off-grid utilities, mining sites as well as on-site assets in weak grid areas.
  • While project activity was somewhat muted, several development banks, governments and multinationals agreed or pushed for large-scale financing packages and policies. The Asian and African Development Banks committed loans and grants worth more than $7 billion since July for energy access and distributed energy programs.
  • India’s government plans to spend an additional $2.5 billion on rural electrification, announcing that it aims to reach 100% household electrification by December 31, 2018. This is three months faster than the previous target and would require a ten-fold increase in the pace of new connections (Figure 1).
  • Whereas India’s policy primarily relies on grid extensions, policymakers in Southeast Asia are keener on micro-grids. The Philippines plan for an increased government budget to improve the patchy energy access on many islands. In Indonesia, GE joined Caterpillar and Engie, which all signed separate MoUs with different partners to support development of a portfolio of micro-grid assets in the island state.
  • After several months of muted financing activity, pay-as-you-go solar companies have raised at least $105 million since July. This is a faster pace than previously this year, but still below last year’s total which exceeded $200 million.

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