Exciting times for off grid electricity in Africa

October 29th, 2015

This week I am at the World Energy Council congress in Addis Ababa and have had the opportunity to speak at a couple of sessions on energy access. There have been some lively and informed debates, but for me the most interesting thing (given the congress attendees are generally from the formal power sector) has been the apparent widespread acceptance that off grid distributed electricity generation will have an important part to play in achieving universal access to energy. This, I feel, represents an encouraging change in attitude amongst policy makers in recent years.

Certainly that acceptance is in line with the thinking of major energy policy analysts such as the International Energy Agency (IEA). In 2011 the IEA suggested that achieving universal access to electricity would take 20 years and require, for sub Saharan Africa, around $18.5b of investment annually. Given that 80% of those without access to electricity at the moment live in rural areas and may not be economic to connect up to the grid in the near future, the IEA also said that around 60% of that investment, $11.5b per year, would have to be for mini grids or isolated off grid technologies if access were to be truly universal.

energy enablesBut today others, notably the Power for All coalition of which Practical Action is a member, argue that the IEA’s figures are too conservative and that universal access to electricity could be achieved in just 10 years and at one tenth of that cost by using rapidly developing solar photovoltaic technologies.

Certainly the viability of solar systems to provide domestic power has never been greater. The cost of solar panels has plummeted in recent years, falling 75% since 2009, while lithium batteries have become far more efficient vehicles for storing power.

Perhaps even more importantly the power requirements of appliances have also dropped with the advent of not just LED lighting but also super-efficient fridges TVs and fans, meaning you can get much more out of a solar panel than you could even a couple of years ago. The same 40 watt solar panel that 10 years ago could power one 25 watt light bulb can today power four LED lights, a phone charger, a radio and maybe even a small colour TV.

The size of the demand in Sub Saharan Africa (600 million people without electricity) and the falling price of the technology have combined with pay as you go approaches to consumer financing to create market based opportunities to tackle the energy access challenge using solar home systems and lights. The social enterprise Sunny Money has sold over 1.7 million solar lamps in Tanzania, Kenya, Uganda, Malawi and Zambia to date for example. Meanwhile companies such as MKOPA are using the MPESA mobile money system in Kenya, Tanzania and Uganda to allow people to buy US $200 pico solar home systems by spreading the cost over a year to 18 months in daily or weekly micro instalments. The MKOPA system provides an 8 Wp panel, 3 lights and charging for a mobile phone and a radio. Costs are around US 45 cents a day which compares favourably with typical household costs of 50 – 60 cents per day for kerosene for lighting plus typical mobile charging costs. MKOPA has grown rapidly from 60,000 customers in April 2014 to 250,000 today.

In Tanzania, Off Grid Electric uses similar technology but operates a leasing model, selling energy as a service as opposed to ownership of the solar panels and batteries themselves. Customers receive free servicing and repairs and can upgrade to higher power systems over time by just increasing their regular payments. Off Grid Electric is adding 10,000 customers a month at the moment and heading for 200,000 customers by the end of 2015. And there are other companies engaged in the solar home system market in sub Saharan Africa including Econet Solar in Zimbabwe, Nova Lumos in Nigeria, Azuri Technologies in East and West Africa and Sun Transfer in Ethiopia and Kenya.

The sorts of partnerships involved here are different from traditional power sector arrangements. Relatively small private sector companies or social enterprises are putting innovative technology packages together. They are partnering up with either mobile phone companies to use mobile money or networks of local distributors to use prepaid scratch cards similar to those used for mobile air time to manage micro credit payments, sometimes directly and sometimes via a 3rd party micro finance institutions.

But there are a couple of challenges to taking this model to scale.

The first is access to working capital to scale up. To date most companies have used grant finance or equity from impact investors to cover the costs of product development and inventory. But these sources of funds are limited and commercial finance is needed. There are some signs that this is happening – both MKOPA and Off grid Electric have recently raised funds in the market. But that needs to rapidly increase.

For this to happen though a second challenge has to be met – the need for a supportive policy and regulatory environment. Governments need to clearly signal SHS as part of the national energy plans. The playing field needs to be levelled by dealing with subsidies on kerosene – the principle competitor. Other boosts to the market such as import duty holidays or VAT tax breaks on renewable energy equipment have been shown to help. And the enforcement of quality assurance standards for products and consumer rights are also important to ensure markets are not spoilt by low performing equipment.

It’s also questionable though whether commercially delivered solar home systems alone can truly deliver universal energy access (as opposed to universal access to electricity). They cannot deliver sufficient power for the most intensive household energy application – cooking. And it’s doubtful that they can deliver affordable mechanical power at a household level for productive use and livelihood creation.

LPG has to be one possible solution for cooking. It’s not green, but it reduces indoor air pollution to safe levels and can make significant enough reductions in GHG emissions to qualify for carbon financing from the voluntary carbon trading market. Practical Action has some interesting experience of working with women’s groups, LPG suppliers and carbon brokers on stoves programmes in North Darfur in Sudan for example. Other more renewable options include biogas or ethanol as clean cooking fuels.

Off grid energy for productive use – particularly mechanical power for applications such as milling, water pumping, machine workshops, etc remains a challenge. In terms of renewables, the technology required tends to be at the communal rather than household level (microhydro powered mini grids for example) or much larger solar installations and affordability issues then play a factor in making this level of energy access available universally through commercial channels. Public funding support rather than pure market based solutions has to then be a consideration in this case to support the establishment of rural livelihoods and economic development.

But, in conjunction with clean cookstove programmes and public financing contributions for energy for productive use, the pay as you go solar home system can play a major role in achieving universal energy access, perhaps at a much faster rate that we initially envisioned.

One response to “Exciting times for off grid electricity in Africa”

  1. Salvatore Chester Says:

    Quite Interesting article.
    However, why is it that nowadays almost all articles by practitioners and “interested” parties exclude basic/quality solar lanterns retailing at $5 and above which are the most affordable and cost effective? BOP customers simply stand usually ready to pay cash on delivery for such products. Access to electricity starts right there, with no need of additional costs of pay as you go, MFIs’ loans and similar marketing moves.