Increasingly, large international corporations are investing in off-grid companies, thereby providing a powerful boost on the one hand and contributing to consolidation and concentration in the industry on the other.

What is striking is that US and German energy giants still largely treat their activities in the off-grid market as CSR and do not integrate them into their business strategy. This could be a mistake in the medium term. For example, the “four French musketeers” (EDF, Engie, Schneider, Total) have already discovered the off-grid market a long time ago. And Asian companies are now also active in this market, as the examples of M-Kopa (Mitsui, Sumitomo) and now Bboxx (Mitsubishi) show.

Bboxx

The company founded in 2010 has obviously learned from the failures of the first few years. In order to differentiate itself from the other companies in the industry, the company has for several years been pursuing a strategy that is as courageous as it is entrepreneurial. Important aspects are:

1. Bboxx has expanded increasingly into countries outside the regions on which the industry otherwise concentrates (and therefore in some cases faces fierce price wars). In recent years, for example, the company has expanded into DR Congo, Togo, Côte d’Ivoire, Mali and Guinea.
2. Bboxx recognised very early on that “off-grid energy” could do more than just install lights and televisions. The idea of a full supply of off-grid households with energy of any kind has been pursued for years. Consequently, Bboxx today confidently refers to itself as “The Next Generation Utility” and also offers energy-efficient stoves or biogas.
3. Proximity to the customer: Bboxx has grown out of practical experience in dealing with off-grid customers. The requirements and experiences of these customers determined the development of new products and the range of services offered. This “ear to the customer” is an important advantage that large companies in particular often do not have at their disposal. Hopefully, Bboxx will continue to do so, even if it cooperates locally with large corporations (joint venture with EdF in Togo) or now has another strong large corporation as an investor in Mitsubishi. It’s a good idea not to lose sight of the roots.

Engie

The French energy giant clearly formulated its commitment to renewable energies at an early stage: “Engie is committed to successfully addressing the energy challenges of coming decades by producing energy that emits no CO2. The environment, universal access to energy and the quest for innovation are all key commitments for the Group.”

In the off-grid sector, Engie pursues the usual course for companies of this size: one accepts that one cannot develop the flexibility and rapid creativity required for a still young market and therefore leaves this to startups and creative SMEs. Once the industry is developed and a long-term business strategy can be gradually defined, it is then pursued through strategic investments (Bboxx, PEG) or the complete takeover of companies. At Engie these have been Simpa Networks (India) and Fenix / Mobisol (Africa). In the Mini-Grid segment, Engie is also active with its own company PowerCorner, which realizes Mini-Grids in Africa.

Fenix and Mobisol are not only close to their customers but also have considerable product competence: both companies have implemented innovative ideas, especially in customer service and financing. Fenix and Mobisol therefore fit perfectly into Engie’s strategic investment concept, which is based on these three priorities:

• Solar home systems for off-grid regions (manufacturers and distributors)
• Microgrid solutions (installation and operation)
• Provider of energy services, in particular solutions for monitoring, energy management and PAYG solutions

However, the complex bureaucracy and lengthy decision-making processes of a large corporation like Engie also entail risks, as they are sometimes of little benefit in new growth markets that require rapid and flexible adjustments or developments. Engie will therefore do well to give Fenix and Mobisol a lot of freedom, at least for some time.

On the other hand, it should of course not be underestimated that Engie has the financial and organizational strength to enable its subsidiaries to plan ahead in a stable manner. This is not a small advantage that most of the independent off-grid companies miss painfully in view of their chronic underfunding.

What’s next?

1. At Bboxx, it will be interesting to see whether the expansion into Asia that Mitsubishi is striving for with its entry will succeed. The off-grid market there differs significantly from Bboxx’s previous “home market” Africa, also in terms of product and service requirements. Experiences from one continent are often useless in the other.
It also remains an exciting question how the company manages to deal with the self-interest of its major invested groups Mitsubishi and Engie.

2. For Engie, the question arises as to which off-grid companies can be taken over next in order to further strengthen its position in the market. It would not be surprising if Engie soon also acquired Bboxx and thus finally became the undisputed market leader in the off-grid sector.

On the other hand, it will be a challenge to bring these companies together under a common umbrella strategy. Up to now, they have been active in the market independently of each other, with their own strong brand profile and different corporate culture. But large companies like Engie are not doing this for the first time.

3. Another aspect will be important for the general further development of the off-grid sector: as necessary and “natural” as the consolidation and concentration of the many market participants may be, the sector cannot exist without the economic substructure of local SMEs. These form the economic basis for the development of each sector. If the local SMEs are not built up as a foundation at the same time, the commitment of the international corporations threatens to become a castle in the air with no grounding.

Anyone wishing the off-grid sector a good development will therefore be hoping for both:

• the involvement of other financially strong large corporations in off-grid companies;
• the parallel development of local solar SMEs, which will complete the long-term economic success of the industry.

Harald Schützeichel