SolarCity became America's biggest solar company by providing solar services to people who can't afford to pay upfront for a system. It's now looking to do the same for off-grid solar in developing countries.

SolarCity has joined up with venture firms Vulcan Capital and Omidyar Network to invest $7 million into Off-Grid Electric, a Tanzania-based company providing solar lighting services in Africa. The investment round is part of a flurry of venture activity in the off-grid solar sector.

Rumor surfaced last week that SolarCity was making a significant investment in off-grid solar, but Greentech Media was unable to confirm the details. VentureBeat broke the news yesterday of the $7 million round, which puts SolarCity CEO Lyndon Rive and Vulcan Capital Managing Director Steve Hall on the board of Off-Grid Electric.

The small investment gives SolarCity an entry point into the booming off-grid solar market where mobile money platforms are enabling pay-as-you-go services in Africa, Asia and the Middle East. It's a seemingly natural fit for a company like SolarCity, which has helped pioneer the solar services model in the U.S.

Off-Grid Electric uses a mobile payment platform that allows customers in Africa to purchase solar lighting in small amounts, rather than having to pay for an entire solar system upfront. This approach is becoming increasingly attractive in the developing world due to the ubiquitous use of cell phones. Some have dubbed the model "solar in a bottle," as it allows people to buy solar lighting services in small amounts, just as they would kerosene lanterns.

“Solar power is already more cost-effective than kerosene and other polluting power sources that are common in the developing world,” said Rive in a statement. “Many emerging economies skipped the build-out of phone lines to go straight to cell phones, and the combination of solar and storage can obviate the need for more power lines. Off Grid’s growth could have a profoundly positive impact on the economies, human health, and air and water quality in the markets it serves.”

The mobile technology shift is dramatically changing the outlook for distributed energy in the developing world. Historically, energy access programs have been governed in a top-down manner by large development banks and government institutions, which have favored expensive coal plants and large grid build-outs. Many of those projects have been a boon to industrial customers, but have failed to bring energy services to individuals. That has led to a push for off-grid solutions that utilize the flourishing network of mobile payment methods.

However, finding financing is still very hard for the small companies operating in the off-grid solar market. While non-governmental aid organizations and impact investors have been instrumental in supporting the market, entrepreneurs suffer from a lack of money compared to the level of international support for large, centralized energy projects. But now that more big-name investors are jumping into the off-grid solar market, the prospects for financing are starting to look better.

In the last six months, firms such as Khosla Ventures, DFJ, Omidyar Network and Gray Ghost Ventures have put $13 million behind off-grid solar lighting companies. This $7 million round from SolarCity, Vulcan and Omidyar brings the total to $20 million.

That's an extremely small fraction of what's needed to truly scale the market and reach the 1.4 billion people around the world without access to modern energy services. But cleantech investor Jigar Shah thinks the recent spate of venture activity will could have a "catalytic impact" and encourage more investors to enter the space -- consequently convincing large development institutions and governments to put more emphasis on distributed solar.

"This will be a huge boost. These investments are from mainstream investors that actually see themselves making a 10x return on this money. And I think that's the critical difference," said Shah. "Now that you've got high-profile investments from the venture capital community, you're going to see huge shifts from government agencies to actually help these guys push the technologies out the door."

While only a small investment, SolarCity's entrance into the market is yet another sign that off-grid solar technologies combined with mobile money are ready to take off.

Tags: energy access, off-grid solar, solarcity