Electrifying Africa: A Brief Introduction to Solar & the Opportunities (Article 1 of 3)
By Patricia Chin-Sweeney, I-DEV Co-Founder
In April 2018, I-DEV published a short introductory report to off-grid solar energy called Kenya: The Race for Electrification Powered by the Sun. This article is written for new investors and grant funders interested to understand the solar energy landscape in emerging markets, and includes insights gained from I-DEV’s support to investors and operators in the clean energy sector and as Co-Managing Entity of the Green Mini Grid Facility Kenya, funded by DFID.
The Electrification Situation
According to Power Africa, there is a long way to go to 100% electrification.
- Kenya is only 65% electrified by the national grid, run by Kenya Power & Electric (KPLC); this percentage is significantly higher than neighboring countries…and still far from the Vision 2030 target of 100% of the population with electricity access
- In contrast, Nigeria (45%), Ethiopia (40%)and Rwanda (30%)
- South Africa takes the lead with 86% electrification
- At only 22%, Uganda has one of the lowest electrification rates in Africa
The Debate Continues: Home Solar Systems (HSS) vs. Green Mini Grids (GMG)
While various parties have published and will profess their stance on why one model is better than the other, the reality is that context matters a lot! The inforgraphic below highlights the difference in technologies, and when each makes the most sense.
A Brief Introduction: Solar Home Systems & Green Mini Grids
When They Work Best: Solar Home Systems vs. Green Mini Grids
The Possibility of A Solar Energy Future
Not surprisingly friendly regulations that reduce the costs of imported equipment and to consumers are particularly important in low income settings. Local and national agency willingness to partner with private sector solar operators and provide longer term agreements are also important in attracting investors to an often capital expenditures (CapEx) intensive build out, in the case of green mini grids. Fortunately, major power consuming nations across the continent are starting to put in place private-sector friendly regulations that address major roadblocks to investment covering licensing provisions, cost-reflective tariff setting, and risk mitigation posed by the arrival of grid in off-grid communities. And despite the higher upfront costs (with green mini grids), a solar energy future also poses opportunities in cost savings to the nation and individual consumers that governments increasingly appreciate, and can unlock technological innovations in rural sectors such as agriculture, by allowing rural farmers to access solar drip irrigation systems and other farmer management tools.
Factors to Consider
And Let’s Not Underestimate These…
It is one thing to offer energy, and another to offer reliable energy. Both the national grid (where it is present) and solar solutions continue to deliver mixed results, and are limited by battery storage capacity and efficiency as well as unplanned outages for baseload generation sources. Reliability continues to be an issue, which may be a strong case for a mixed GMG + HSS combination. Many green mini grids rely on an anchor offtaker or backup diesel generator to mitigate major mishaps…Let’s just say poultry egg incubators do not produce good results if the incubator goes cold!
International and government support, as well as investors are critical to long-term success as well. Organizations like Lighting Africa, an IFC and World Bank joint initiative, and Power Africa, a USAID initiative, have worked hard to promote improved product standards and best practices, for example, to mitigate the market repercussions of cheap, poorly made and fast-breaking solar products flooding the market. Meanwhile, programs like the Green Mini Grid Facility Kenya provides grant subsidies to private mini grid operators for technical assistance and CapEx, in the form of an agreed upon dollar amount associated with each household connection established and where funding is paid upon successful connection. This Results-Based Financing (RBF) has become popular in the off-grid solar investment industry, and while it poses limitations e.g. only delivering capital to companies after they’ve had to front the cost of build, has shown success in unlocking third party investment.
A Natural Stopping Point…
I could continue in much greater detail, but better yet, start by reading the full I-DEV report! And stay tuned for the next article.
Additional Resources:
Leading Sector Information Sources
- Sustainable Energy for All
- GOGLA: The Voice of the Off-Grid Solar Energy Industry
- Power Africa
- Lighting Africa
