Rethinking the Cost of Off-Grid Power: Let’s Do the Math
by Andrew M. Herscowitz, Coordinator for Power Africa
Since the launch of Power Africa, the U.S. government-led initiative to double access to electricity in sub-Saharan Africa, we have seen off-grid, home solar systems transform countries, bringing electricity to millions of people for the first time. Yet some people have been dismissive of off-grid, home solar systems. The critique often begins with the idea that people are paying more than $1.00 per kilowatt hour (kWh) instead of $.10-$.20 kWh for grid power or that those who live in rural areas can’t afford electricity and shouldn’t be paying more than people in the cities for power. Even if the kWh cost for off-grid systems seems to be higher, that’s not the right comparison. We need to look at what people are able to do at those costs. We need to dig deeper and do that actual math. What you’ll find is that at times off-grid power can be even more productive than grid power, particularly when grid power is not even available.
Many governments currently do not have the resources to offer everyone grid power. Most governments are not yet in a position to provide hundreds of millions of people with access to grid power within the next year or even decade. Even if a household can afford the connection fee, they could be waiting years for the connection to be made. Once made, it may be unreliable, particularly for households at the end of small lines or in countries where there is too little power generation. That’s not to say that we all shouldn’t keep trying to get people connected to the grid. But even when connected for the first time, the customer doesn’t always have the upfront cash to purchase appliances. The connection does them little good as they’re not really using the electricity for anything but a few lightbulbs. Solar home systems, however, offer almost immediate access to electricity, and customers do not have to wait months or years for the grid to come to them. They can get connected to a solar home system in a day, along with efficient appliances that they can use immediately.
Connecting customers to the grid is costly. A grid connection in sub-Saharan Africa costs between $400 and $1,200, plus the costs of wiring a home and the regular required payments for power consumed into the indefinite future. A solar home system that can power a 32-inch television and radio, provide light and charge mobile devices, typically costs less than $2/day (based on Mobisol Kenya’s 200W “Elephant” system). In most cases, the consumer receives after-sales service, owns the solar home system and the appliances after a period of time without having to make further payments. While the Mobisol system costs approximately $700 per year over the first three years (or $2,065), the consumer owns the system and appliance free and clear after year three, so there is NO cost for the power or for the appliances after year three. A consumer also can easily upgrade to a larger solar home system as the customer’s demand for energy grows. With increased competition, the market now offers basic systems that include lights and phone chargers for $0.50 per day payable (M-KOPA’s Starter costs $130 payable within 1 year). In addition, the Pay-As-You-Go model allows consumers to pay what they can afford to while using their system making it accessible to low income families.
Many solar home system companies provide the appliances people want and need. Solar home systems help customers build credit and provide financing options for televisions, electric hair clippers, radios, etc. The distribution companies that sell grid power currently do not, and customers are required to purchase these appliances outright with high upfront costs.
Let’s take two households in Kenya — one near the grid (the On-Grid Family) and one in a rural area with no grid access (the Off-Grid Family) — and compare what it costs for them to fulfill their daily energy requirements over a three-year period. Let’s assume that they both want to power 8 light bulbs, a 32-inch television, a set of hair clippers, a clothing iron, and a 4-port cellphone charger.
In comparing the costs that the Off-Grid Family would have spent on energy, the on-grid system might appear to be less expensive for the first three years. But the off-grid system can actually be more attractive and provide significant co-benefits (health, education, etc.) for several reasons. First, the off-grid system and appliances are owned free and clear after three years, which means that there will be limited future power costs.
Importantly, the Off-Grid Family’s power system and appliances come with free installation, three-year product guarantees and service agreements.
The On-Grid Family, on the other hand, probably will deal with broken appliances, often destroyed by power surges from the grid, not to mention power shortages (load shedding, brownouts, blackouts). I recall spending more than $300 on surge protectors for electronic equipment and approximately $15/month on light bulbs when living in two different developing countries because of the wild power surges from the grid. From the perspective of a barber using solar-charged Mobisol hair clippers to run a business vs. a grid-connected barber who has to deal with power outages, the off-grid barber likely can run a more lucrative business. This analysis also does not account for the purchase of a back-up diesel generator or the cost of diesel to run it, which many grid-connected businesses and households have. The positive impact of bundling of both energy and energy efficient appliances as one offering is unfortunately yet to be fully appreciated.
Rather than thinking about how much power is needed to run appliances; it is more important to consider how much productivity you can get out of the power that you have. Off-grid solar home system companies have accelerated the development of super-efficient appliances that can squeeze every watt out of a solar panel. For example, as set forth in the chart below, the 19-inch television that the off-grid system uses may require just 10 watts of DC current. A standard 19-inch LED television, plugged into a grid-powered home, likely will consume more than 30 watts.
Power Africa continues to work with its partners and communities to identify the next highly efficient appliance families want to make their lives better. Power Africa, along with its partners, including Global LEAP, UKAID, and the Shell Foundation, is running a competition for the development of highly efficient off-grid refrigerators that can be powered with solar home systems.
So, next time someone puts down a solar home system and says, “that’s not real power” or that “the cost per kilowatt hour of a home solar system is 10 times the cost of grid power,” stop and do the math.
Because it’s really not more expensive, and it’s available now.
Power Africa is a U.S. Government-led initiative, coordinated by USAID, and launched in 2013 to unlock the substantial natural gas, wind, solar, hydropower, biomass, and geothermal resources on the continent through partnerships. To date, Power Africa has leveraged over $50 billion in commitments from the public and private sectors, including more than $40 billion in commitments from the private sector. More than 80 projects comprising more than 7,300 MW have reached financial close. Power Africa has helped provide over 10 million electrical connections, which means tens of millions of people have access to electricity who did not prior to Power Africa’s launch in 2013.
For more information, visit www.usaid.gov/powerafrica