The government of Kenya has been trying to expand the electricity grid for decades, with little success—80% of Kenyans are still living without access to the grid. An alternative solution, off-grid solar lighting products, such as solar lanterns and solar home systems, increasingly provide Kenyans with decentralized clean energy. Kenya’s private sector market for off-grid solar lighting products has been developing since the 1980s, yet the key to rapid market growth was the introduction of a pioneering pay-as-you-go business model in 2011 that made solar products affordable for poor rural customers. Today, with almost 30% of all off-grid households using some type of off-grid solar lighting products, Kenya is a market leader. Other factors that have encouraged market growth include the massive need for power in areas where grid electricity is not available, the high cost and unreliability of grid power where it is available, a value-added tax exemption on solar products, numerous education and awareness campaigns, and expensive kerosene. However, poor quality products present a major challenge. This challenge will have to be overcome for the market to reach its full potential and to ensure that these products represent an effective and lasting lighting solution.

The federal government of India and the state government of Bihar, India’s least electrified state, have always focused on grid expansion to bring power to those living without grid access. However, grid expansion has been slow. In Bihar, 83% of people still live without electricity, relying on dangerous kerosene lamps to light their homes. In the 1980s, an alternative—a market for solar home systems and solar lanterns—started to develop in Bihar. Yet, this market has failed to thrive, despite three decades of intervention by the government and activity by private companies. Today, fewer than 4.2% of unelectrified Bihar households use a solar lighting product. Based on interviews with key stakeholders, this case study found that the biggest obstacle to market growth is the government kerosene subsidy, which halves the price of kerosene, and makes people less interested in solar lighting products. Lack of company financing, product quality issues, lack of customer awareness of the benefits of solar, and another counterproductive government subsidy for solar products are other challenges that hamper market growth. Interviewees also identified factors promoting the growth of the sector, including the large unmet electricity demand and unreliable electricity supply, and dropping solar prices. Overall, there is significant potential for market growth if strategies are developed by key stakeholders to help overcome the challenges identified in this case study, and build on the factors promoting the sector’s growth. Most importantly, the government needs to re-think their subsidy policies and adopt a stance to encourage market forces.