Policy Can Help Drive Growth Of Africa’s Off-Grid Solar Market
While sub-Saharan Africa’s utility-scale market is promising — as evidenced by the string of blockbuster deals that SkyPower Global has revealed in recent months in countries such as Kenya, Nigeria and Djibouti — only slightly more than 2GW of capacity was installed on the continent by the end of last year, according to figures from the International Renewable Energy Agency (IRENA).
South Africa, which had 1.36GW installed by the end of 2015, will continue to lead the region in the year ahead, says IHS analyst Josefin Berg.
However, the high risk of investing in utility-scale projects on the continent means that future growth will hinge to a large degree on the involvement of multilateral organizations, she adds.
That is already happening. Earlier this month, the World Bank held an auction under its Scaling Solar programme that saw US thin-film supplier First Solar and France’s Neoen win a bid to jointly develop a 45MW solar array in Zambia for just $0.06/kWh.
However, grid limitations throughout sub-Saharan Africa mean that over the medium term, off-grid PV lighting solutions and small solar home systems will continue to improve rural electricity access at a faster rate than utility-scale developments.
Koen Peters, executive director of the Global Off-Grid Lighting Association (GOGLA), tells Recharge that regional policymakers need to clearly articulate their grid-expansion plans, so individual consumers do not hold off on buying off-grid solutions, in anticipation that the state will extend the national grid infrastructure to their rural communities.
Kenya, Ethiopia and Tanzania account for roughly 66% of demand for solar lanterns and small solar home systems, according to a report published earlier this year by Lighting Global — an initiative under International Finance Corp. and the World Bank — in cooperation with Bloomberg New Energy Finance (BNEF).
In the years ahead, GOGLA also sees demand for such solutions potentially rising in countries such as Sierra Leone, Nigeria and Cote d’Ivoire.
Demand for products such as off-grid solar lanterns and small home PV systems is also high in Uganda, says Lyndsay Handler, managing director and interim CEO of Fenix International, estimating that more than seven million homes in the country lack access to the grid.
The San Francisco-based company — which sells 10-34W solar home systems in Uganda — believes that modularity is important in bringing rural consumers on board.
All of its kits can be expanded up to 70W, Handler says. “And as we scale up, our priorities on the product side are to have even smaller kits, to allow customers to get on the energy ladder even earlier,” she adds.
Under its pay-as-you-go (PAYG) payment platform — a model that other distributed-energy service companies, includingM-Kopa and BBOXX, have adopted in East Africa — Fenix can accept payments from customers in daily, weekly or monthly instalments, all by mobile phone.
The company can also remotely lock the systems of customers who fail to keep up on their payments.
By the end of the third quarter of 2015, as many as 500,000 solar home systems had been sold by PAYG businesses, according to Lighting Africa.
It expects the PAYG market to explode beyond East Africa to other countries across the continent this year.
Governments can guide the growth of the market by helping to facilitate debt financing for PAYG businesses, in addition to monitoring the industry for product quality.
Policymakers also need to ensure that a fiscal regime is in place to ensure that solar home systems can compete with subsidised kerosene, while reducing or eliminating value-added taxes and import duties on products such as solar lanterns.
“If you take that away, it’s an important factor in the market… the fiscal policy is the immediate next step, because it’s such low-hanging fruit,” says Koen at GOGLA.
“Governments are now also picking up that the off-grid solutions are really helpful to them in terms of addressing their own policy needs and providing access to electricity.”
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