As 2022 soon reaches its inevitable end, we take a look at Africa's renewable energy sphere, focusing on the ever-growing solar sector.
According to the World Bank, 733 million people still lack access to clean, modern, and reliable electricity worldwide, and solar energy kits are the best-suited solution to electrify an estimated 55% of households in the next five years.
These figures have not eluded African governments, and alongside private entities and global development agencies, the continent's electrification race is becoming increasingly solar-focused.
Affordability is the answer to Africa's electrification gap
Of the 733 million people that still lack access to clean, modern, and reliable electricity worldwide, 660 million of them – more than 90 percent – live in Africa. Up to three-quarters of them are in rural areas and low-cost urban dwellings relying on expensive and life-threatening energy sources, including kerosene and firewood.
The continent's geographical constraints, lack of infrastructure, low budgets, and historical overlook of rural areas cemented its electrification gap. While other regions moved forward and made significant progress during the past decade, Africa lagged.
One of the biggest problems in trying to reach 100 percent access is affordability. Encompassing some of the poorest communities in the world, Africa's pricy electricity grid is simply not an option, even in cases where it can reach last-mile locations. To that end, the PAYGO model was devised. The PAY-AS-YOU-GO (PAYGO) business model was invented in the last decade, becoming an instant success across Africa's renewable energy sphere. Under the model, companies lease solar home systems to customers who commit to an upfront amount for the system, which acts as the security. Then they can pay for the energy they consume daily, weekly, or monthly. A basic system has a battery, solar panel, and a charge controller, light-emitting diode bulbs and mobile charger.
Payment is made through mobile money platforms or scratch cards, which expands the ability of those who do not have a bank account to pay. At the same time, renewable energy companies devise flexible payment terms to entice customers and reduce the risk of defaults in payment. In the past decade, PAYGO has revolutionized access and consumption of electricity for entire communities that have been historically locked out of conventional energy. As other costs of the sector decreased, solar home systems became one of the most cost-effective and sustainable ways of addressing energy poverty in Sub-Saharan Africa.
Off-grid solar is leading the electrification race
According to the Off-Grid Solar Market Trends Report 2022 by GOGLA, the World Bank, and Lighting Global, off-grid solar (OGS) technologies are expected to be the dominant technology to unlock progress towards SDG7. Off-grid solar technologies are estimated to be the most cost-effective and feasible solution for 55% of new household connections in the next five years. They can expand faster than the primary grid and mini-grids in the short term. By 2030, the share of mini-grid and grid connections is expected to increase, but OGS is still expected to account for 41% of all connections realized.
We are talking about hundreds of millions of systems to be deployed in less than a decade.
Off-grid solar not only solves the need for new connections but also presents an extremely viable option for already-connected homes across the continent that suffer unstable connections and lengthy blackouts. According to a survey done by Afro Barometer, published in April, fewer than half (43%) of Africans enjoy a supply of electricity that works "most" or "all" of the time. Reliable electric service is far more common in cities (65%) than in rural areas (24%) and increases with respondents' economic status, ranging from 28% of the poorest households to 73% of the wealthiest.
The World Bank and GOGLA state that 1.1 billion people worldwide must be electrified by OGS systems to reach SDG7. This includes 493 million current OGS users expected to continue replacing and upgrading systems, 464 million new OGS customers who will use OGS products as their primary energy source, and 186 million new OGS customers who will use their products to complement grid electricity. Around 416 million of the 464 million new OGS users will reside in nascent and emerging markets, primarily in sub-Saharan Africa.
After a 22% decline in solar energy kit sales in 2020, the sector recorded a 10% increase in sales in 2021, indicating the onset of a post-Covid-19 comeback. The global solar energy kit market was valued at an estimated $2.1 billion in 2021. And that is only the beginning.
A recent report, "Solar Home Systems Market Technavio,” forecasting 2022-2026 predicts the market to witness an accelerating growth momentum at a compound annual growth rate (CAGR) of 21.4%, with primary growth drivers including increasing availability of favorable financing options, rising demand for energy and surging favorable government support. Growing support from NGOs is one of the trends that is expected to impact the industry positively. About 47% of the market's growth will originate from the Middle East and Africa during the forecast period.
With added support from local governments looking to reach their electrification goals and with an added focus of the international development community, Africa's solar industry is set for an impactful, exciting year. Tens of millions of lives will be improved, and entire communities will gain opportunities for a more prosperous future. Here is to an inclusive, sustainable 2023!
Yariv Cohen is an entrepreneur and investor, leading sustainability-driven companies in Africa and the Middle East.