Features

The rising sun: Spotlight on Africa

27 Jun 2016 by BusinessTraveller

Africa is harnessing one of its key resources – solar energy – to provide clean, unlimited power to people and businesses. Jane Labous reports

Africa: The rising sun

Africa’s economies are expanding fast, with the continent’s potential for everything from tourism to fashion being excitedly documented by analysts of the “Africa rising” trend. Yet there is one thing holding it back – energy, or rather, the lack of it – jeopardising growth and basic quality of life. Many believe that power, quite literally, can give the continent the push it needs.

The solution seems obvious – the so-called Sun Continent, home to some of the hottest places on Earth, has natural power at its fingertips. Some studies estimate that Africa represents about 40 per cent of the world’s solar potential, says John Siko, head of business intelligence for Africa at the Risk Advisory Group.

Yet until now, the industry has not taken off, with charitable enterprises left to develop small, off-grid solutions for poorer communities. This has led to the mistaken belief that solar business is not big business, says Tej Kohli, investor in India-based Zynergy Group, which installs small rural and urban home lighting systems.

“Solar can be beneficial to the African continent when it is developed in a comprehensive way, both off-grid and on-grid,” Kohli says.

The International Energy Agency estimates that 585 million people in sub-Saharan Africa lack access to electricity, with as few as 14.2 per cent being connected in rural areas. In 2014, the off-grid population in sub-Saharan Africa spent US$14 billion on lighting alone. Even in the larger on-grid cities, there are often frequent power cuts and prohibitive energy prices.

“It’s very expensive to run even a small flat here,” says Idrissa Diop, an entrepreneur in a middle-class area of Senegal’s capital, Dakar, where on-grid electricity is supplied by government-owned Senelec. “There are no fixed prices for electricity, so you’re never sure how much you’ll pay, and the bill is often sky-high. Plus there are so many power cuts.”

HEATING UP

Both large solar plants and solar panel electricity systems, known as solar photovoltaics (PV), which capture the sun’s energy using photovoltaic cells, are seen as the way forward, representing a huge, untapped market. The International Renewable Energy Agency says it could attract US$30 billion in investment a year in Africa until 2030.

“There’s an enormous potential market for solar [in Africa] because of the amount people spend on fuels like kerosene – which is dirty, smoky and dangerous – for light and heat,” says Ellen Dobbs, international programme officer at Ashden, whose awards support sustainable energy solutions in developing countries and the UK. “Solar PV is a sixth of the cost of what it was in 2007, battery costs have more than halved, and huge improvements in energy efficiencies, such as LED bulbs, are allowing power to go further.”

One of the great advantages is that it negates the need to be connected to a national or regional electricity grid, Siko says. “Although improved, the electrification infrastructure remains poor across most of Africa, particularly in rural parts, and solar panels allow flexibility,” he says. “Individuals can put them on homes and businesses, and villages can use them to create micro-grids. Large-scale solar farms can also be cost-effective, where an effective grid exists. This scalability is key to why solar has so much potential.”

It’s this potential that is being unlocked, thanks to rapidly
falling solar panel costs, more efficient technology and a
greater international push toward clean energy sources. “All of these have fuelled an investment rush by private investment groups, multilateral lenders and governments,” Siko says. “Sub-Saharan Africa has seen installed solar capacity grow to 1.3 gigawatts, up from 127 megawatts in 2009. The majority of this is in South Africa, although several East African states, notably Kenya, are making strides.”

MEETING DEMAND

The potential to make money while helping Africa grow socially and economically is being recognised by savvy “solarpreneurs” such as Mwezi Limited, a solar distribution company in Kenya dealing in small off-grid products for households and small businesses. “We are expanding across Kenya and intend to begin expansion across Swahili-speaking countries by 2020,” director Mike Sherry says.

Another, Steamaco, uses a cloud-based metering and payment system, allowing customers to pay by mobile phone. “Its micro-grids work like mini power stations for villages, supplying enough for small businesses, as well as TVs, radios and lights in the home,” Dobbs says.

M-Kopa Solar has connected more than 330,000 homes in Kenya, Tanzania and Uganda, with more than 500 added daily. Its core concept is an affordable package bought by consumers via small instalments, incorporating a solar panel, torch, bulbs, USB charger, rechargeable radio and, most recently, a digital TV.

In recent years there has also been a strong demand for large-scale solar plants as governments find themselves unsustainably dependent on imported fuels, while facing growing energy demand. South Africa, Kenya, Tanzania, Ghana, Rwanda and Morocco are some of the biggest players, whose governments offer incentives to attract private capital.

Morocco’s desert complex will provide electricity for more than one million people when the first phase completes this year, with the whole country getting energy from solar by 2030. Blue Energy says its Ghana plant will be one of the world’s biggest when finished in 2017, adding that, with the right skills, technology and governance, it could take off.

South Africa is seen as leading the charge. The success of the government’s Renewable Energy Independent Power Producer programme, which awards 20-year power purchase agreements to successful bidders, has proved that renewables can be big business, provided a set of conditions exists, says Stavros Tassos, solar specialist at Mott MacDonald, which acted as a technical advisor to the South African government.

“These include strong political will coupled with a government-backed procurement programme that fosters a transparent business environment for investors and lenders,” he says. The scheme had procured about 6,400MW of projects by the end of 2015, with over 2,000MW already connected, according to Tassos. It has also created a renewable energy industry in South Africa by providing technology training.

BARRIERS TO OVERCOME

Beyond, the World Bank Group launched the Scaling Solar programme in 2015 to accelerate the uptake of PV systems in sub-Saharan Africa by helping developers to overcome some of the traditional barriers faced in emerging markets here. “We have already seen some early successes, such as increased investor interest for participation and new solar markets being created in Zambia, Senegal and Madagascar,” Tassos says.

Of course, the challenges are still enormous. Sherry says: “Poor transport networks, random local tariffs and corruption are impeding full-scale networks being established.” Siko adds that potential investors should be aware of the likelihood that they will need to work with local partners on the ground. “Firms should take care to undertake proper due diligence before entering into a business arrangement,” he advises.

One of the limitations of the technology is what to do for power once the sun goes down, but even this is solvable. “Improved battery technology combined with lower prices would lead to a real revolution in the solar industry, particularly in Africa,” Siko says. “The question is when this will occur, but the possibility of progress looks bright.”

Africa: The rising sun

SOLAR STATISTICS

  • According to the Off-Grid Solar Market Trends Report 2016, the number of people living off-grid in Africa has grown by 114 million on the continent since 2000, with several million joining yearly.
  • The pico-solar market – solar lanterns and systems smaller than 10W – has grown rapidly. In 2014, sales reached more than four million units.
  • Kenya accounted for 30 per cent of reported African sales of pico-solar products from July 2014 to July 2015; Ethiopia and Tanzania together made up another third. Grid-connected solar is also on the up.
  • In 2014, the off-grid population in sub-Saharan Africa spent US$14 billion on lighting alone.

Source: Ashden

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