The World Bank estimates that only 42.8% of Sub-Saharan Africa had access to electricity in 2016. This is to be compared to a 85.6% access rate to electricity in South Asia and 98%+ access rates in most of the rest of the world. In remote areas, the national grid is often unreliable and costly to be deployed. The easy and affordable solution for those many households is off-grid energy.
Take Kenya, a country almost divided in half by the Equator line, where you only get daylight from 6AM to 6PM. Before and after that, people need to rely on fire, kerosene or candles. All represent a significant cost and are harmful for your health and the environment. In Sub-Saharan Africa, electrification is slow because few states have the administrative capacity and financial resources to deliver this public service. For many households, off-grid energy comes as a readily available solution.
It is important to understand the difference of scales and hence costs for the current available electricity options. First, the national grid used in most countries: it is comprised of power plants to produce electricity and electricity lines to distribute it throughout the country. National grids operate by definition on a country scale and require huge investment and maintenance costs. According to Africon, 1km of transmission electricity line had a median cost of $27,632 while 1km of distribution electricity line had a median cost of $8,278. On the other hand off-grid solutions are divided into two categories: mini-grids and Solar Home Systems (SHS). Mini-grids are built at the village scale, they require a significant investment but can be tailored to the village’s needs and often remain cheaper than a connection to the existing national grid. SHS are made at the household scale and require very little investment.
We have met with PowerCorner which installs mini-grids throughout Tanzania and Fenix International, a next generation energy company providing lease-to-own Solar Home Systems. Both companies were launched and subsequently acquired by the French energy giant, Engie, whose long-term strategy consists of 3Ds: decarbonization, digitalization and decentralization.
Meet Fenix, one of the main Solar Home System (SHS) provider across Africa
The mission of Fenix is to transform the quality of life of its customers through inclusive energy and financial services. The Fenix customer is typically unbanked and living off the national grid. Their flagship product, ReadyPay Power, is a solar panel paired with a power system into which you can plug in phones (appropriate cables are provided), ultra-bright LED light bars, a ReadyRadio equipped with a torch, and even a TV! Just with that, you’ll get light at any time of the day, access to information and the possibility to have a working fully-charged phone enabling you to potentially use mobile money (#financial inclusion).
The payment method is simple. For their entry-level solar system the ReadyPay Home Starter, you make a small deposit starting at 99 Zambian Kwacha (~8.88USD) and then pay off the remainder of your loan in daily, weekly or monthly payments via mobile money. Each time a payment is made, you receive a code enabling to activate your ReadyPay for a certain amount of time defined by the amount paid. Typically, for the home starter you will pay 2.50 Zambian Kwacha (~0.22USD) daily or 75 Zambian Kwacha (~6.72USD) for a period of 24 months. Once you have fully repaid the loan, you own your solar system (now) permanently unlocked.
You can then choose to upgrade your system — this options is also available after 100 days of regular payments — by purchasing additional panels and accessories such as a TV. Your current system will be used as collateral and you’ll continue to pay small amount daily, weekly or monthly through mobile money payments. Moreover, through those loan transactions you are building credit through your repayment record. Fenix can then analyze your history and attribute any of its customers a credit score. This cutting-edge credit score enables customers to access both power upgrades and other life-changing loans.
Meet PowerCorner, the company installing mini-grids throughout Tanzania
PowerCorner’s concept slightly varies from Fenix. The startup builds first a generation and storage unit (mini-grid) able to handle a large electric consumption and then redistribute the electricity to the nearby households and businesses.
Their payment system is highly similar to Fenix: once the local mini-grid built, the nearby households pay their electricity through mobile money payments. However, PowerCorner main difference and advantage compared to SHS is that their grid, thanks to its more powerful energy production, can handle energy-intensive appliances.
This particularity enables PowerCorner to truly position itself at the core of the economic development of villages where they are implemented.
Quentin Peries-Joly, Innovation Coordination Business Developer at PowerCorner, explained to us that in every PowerCorner equipped village, a dynamic center is created around a central kiosk with WiFi and TV. There, pedagogic and edutainment contents are broadcasted as well as commercial content encouraging the lease of PowerCorner appliances.
Indeed, PowerCorner leases industrial appliances such as flour mills or soldering irons. This directly contributes to increased employment and economic activity. On the supply side, the company recovers its investment in the mini-grid faster thanks to an extended usage. On the demand side, businesses either did not use machines before or had to rely on fuel-intensive machines. Moreover, even when connected to the grid, the frequent disconnections heavily impact the good conduct of the industry in most Sub-Saharan countries, this problem is eliminated with mini-grids which are far more reliable than national grids in use in these countries. The Citizen, a Tanzanian newspaper, reported that in 2017: “The supply can be cut and restored consecutively more than seven times in a matter of hours. A single power cut can last anything from 15 minutes to five hours. There is no way one can predict that.”
PowerCorner truly has an economic impact not only through the leasing of industrial appliances but also thanks to household appliance leases such as fridges and mobile phones.
Off-grid companies, the new development banks?
It’s worth noting that companies such as Fenix and PowerCorner have become mini-banks themselves. As mentioned in this article, they start by connecting the households to electricity, enabling them to build credit scores for their customers, and are then able to lease them (sell them on credit) a multitude of household and business appliances ranging from a basic radio to a more elaborate fridge.
In short, before off-grid possibilities, those villages had less opportunities to affordable light after dark, close to no access to information (no charging station for phones, no TVs), an unbalanced diet limited to a few products (no fridge), and a narrow economic activity due to the lack of a reliable and cost-effective sources of energy. Light surely also allows for increased security at home.
Leapfrogging the national grid?
Yes, again some sort of leapfrog. Villages equipped with off-grid energy, be it SHS or mini-grids, will most likely never be connected to the national grid. Thanks to solar energy, African countries are not only leapfrogging the use of national grids but also the use of fossil energies to generate electricity.