Energy access remains a major challenge in Africa, keeping millions trapped in poverty and slowing economic growth. Some 550m people on the continent lack electricity, with many off-grid families using costly kerosene oil to light their homes after dark, exposing themselves to noxious fumes.
With the pace of electrification proving no match for Africa’s explosive population growth, renewable energy innovations, including solar, stand to make a significant contribution to improving lives, according to a new report by the Green Alliance. Indeed, solar is starting to reach scale in Africa, providing a wealth of investment opportunities, particularly as the market is still largely untapped, according to Lighting Africa, an IFC and World Bank initiative working to accelerate the development of markets for off-grid lighting in sub-Saharan Africa.
“There’s a high demand for clean, affordable energy solutions in Africa, yet solar penetration remains at just 2.5%,” explains Itotia Njagi, Programme Manager at Lighting Africa. “Access to finance is now the real bottleneck to progress.”
The African solar market experienced a 300% sales growth in 2012-13, Njagi confirms, while a total of 4.1m quality-assured off-grid solar lighting products have been sold since 2009, as more players enter the market.
At an ‘entry level’, solar lanterns made by companies including d.light and sold by SolarAid and others provide an additionalfew hours of light after dark. SolarAid has sold more than one million lights in Africa since 2006 and recently won a £500,000 grant from Google to explore the relationship between solar technology and poverty alleviation.
Home solar system kits made by Barefoot Power, for example, provide sufficient energy for multiple lamps, mobile phone charging, a radio or a fan. Barefoot Power has reached more than 3m people in Africa over the past six years. Such products are becoming more affordable with the advent of pay-as-you-go services from companies like UK-based Azuriand Off-grid Electric in Tanzania. With more than 10,000 customers to date, Off-grid Electric believes it could light every home in Africa within a decade by selling solar ‘as a service’.
One step further, PV micro-grids can power 50 to 100 homes, allowing people to use a wider range of equipment, including small tools. This type of installation is more expensive, hence micro-grid companies such as Kenya’s Access Energy have also adopted a pay-as-you-go pricing mechanism, allowing customers to pay over period of time via mobile phones.
“The growth in solar technology in Africa has been boosted by the increasing affordability of PV technology and LED lights, more efficient batteries and a growing recognition of the negative impacts of kerosene,” says Dr Anne Wheldon, renewable energy expert and Ashden advisor. “The desire to charge mobile phones is also driving demand for solar solutions, as mobile communication is seen as an important tool to improve economic prosperity.”
The additional few hours of solar-powered light give people the opportunity to work, innovate or study after dark. Children study for an extra hour on average each day with solar lights, and households save 12.6% of their income and improve their health by switching from kerosene lamps to solar, according to the Green Alliance report.
Looking to the future, product quality and effective market regulation will be ever more important to the success of the African solar market, Wheldon believes, as will finding a commercially viable way to reach people in remote, rural regions. While opportunities for investment exist across the solar supply chain, she identifies the lack of working capital as a ‘significant unmet need’.
“Helping solar businesses to function effectively day to day offers a distinct opportunity for impact investors to act decisively in the drive to bring lasting solar solutions to Africa’s off-grid communities,” she concludes.
This article was originally published on the Impact Investor website.