The United Nations Millennium Development Goals may pledge to achieve universal access to electricity by 2030, but nearly half of Africans lack access to energy. With inconsistent or non-existent access to the grid, solar services in Africa have taken off as nearly 10 percent of the continent now use off-grid clean energy to light their homes. As prices for solar panels and appropriate battery technologies fall, the mobile “pay-as-you-go” system pioneered by companies like M-KOPA and Off-Grid Electric appears increasingly appealing; however, their early promise is unlikely to meet long-term economic growth.
Although small-scale solar providers focused on the rural off-grid market have been the darlings of the development world, they generate just enough electricity to power more than a few basic appliances such as light bulbs, fans, and televisions. These improvements are undoubtedly an important improvement, but the vision for energy access should embrace a more comprehensive and robust potential. Improvements in quality of life and productivity should be the centerpiece of the agenda for powering Africa. A sustainable vision is required to identify feasible, durable solutions. Unless government and industry stakeholders invest in larger renewable systems, we will continue to champion an unsustainable model of sustainable development.
While African governments have increasingly framed renewable energy as the linchpin of their climate change and development strategies, solar energy still remains largely dependent on public sector capital from sources like the World Bank and the African Development Bank. At present, Africa lacks sufficient investment to fund enough energy projects to achieve universal energy access by 2030. In 2015, the African Progress Panel found that current energy-sector investments in Africa are about US$8 billion a year—less than one-sixth of the US$55 billion per year required to meet electrification targets. And even those funds won’t meet the renewable energy sector’s financing needs.
According to a recent Power for All report, only 11 percent of World Bank energy access funding and 1 percent of African Development Bank funding went to decentralized renewables between 2011 and 2014. With climate mitigation funding in flux due to the U.S. withdrawal from the Paris Agreement, Africa’s solar industry must rapidly develop more capital-efficient ways to reach consumers outside of the grant-based or subsidized rural electrification model or risk future impediments to growth.
Solar companies providing subsistence-level energy to consumers with poor economic prospects have provided an important basis for the industry’s development. Investors betting on the off-grid rural market are right about the transformative impacts of models like M-KOPA, which enables customers to repay the cost of a $200 entry-level solar system over time. These systems provide the means for children to read at night, and they improve household health by reducing reliance on dirty fuels like kerosene. However, if these investors hope to generate long-term growth and improve economic livelihoods, solar systems must be able to generate enough output to power products like refrigeration, which improve food security, or irrigation and agricultural machinery, which enable productivity in the increasingly promising smallholder-led agricultural industry in sub-Saharan Africa.
Likewise, water heating is a staple and important aspect of daily urban living. Enhanced access to electricity shouldn’t just be a stop-gap solution: it should provide a means of reducing poverty and create better conditions for healthier, more financially stable lives in the long-term. As governments and development partners work to catalyze Africa’s green revolution, energy generation must play an essential part of the story. In Kenya, for example, energy accounts for nearly 15 percent of agricultural input costs. Harnessing enough energy to enable customers to expand their discretionary income is a critical path to improving the customer experience while also helping the energy industry’s profit margins—everybody wins. Electrification efforts that focus solely on basic solutions will not uplift the continent as a whole.
For renewable energy to create scaled impact, greater focus is needed on urban and peri-urban locales, which are often neglected in the race to power Africa. The sheer number of customers in urban areas means that efforts to improve electrification among all residents will reduce marketing and distribution costs. Although the electricity deficit is most stark in rural villages, the continent’s most developed cities from Nairobi to Johannesburg also confront irregular power, which, given the rapid urbanization trends in Africa, will become an ever-greater problem as more slums spring up on the urban periphery.
According to the Honourable Akinwumi Ambode, Governor of Lagos State, nearly 86 people enter Lagos every minute of the day—a rate 10 times that of New York. As new settlements crop up, the grid has yet to keep pace with the scale of development. Because the cost of solar power has gone down by 80 percent since 2010, renewable energy solutions have become an increasingly appealing option to expand access to energy in urban environments, the primary drivers for Africa’s economic growth. In these environments, community-level mini-grids and individual solar home systems are models that can deliver higher returns for customers and solar providers alike. Expansion of solar provision in urban areas can subsidize the costs of expansion of solar power in rural communities, and translate into a more commercially sustainable approach to achieve universal and, equally as important, reliable electricity access for more Africans.
As hubs of innovation, urban areas also offer more opportunities to experiment with various types of solar solutions on a large scale. It is hard to imagine testing a scalable power system in a small village—distribution and maintenance would be expensive due to infrastructural and access issues, and piloting a scalable system in a population-limited area is difficult.
Urban settings are ideal testing grounds because research shows that innovation in urban areas grows at the same rate as populations because it increases more opportunities for personal interaction and leads to exposure to new ideas. Directing more investment towards urban energy solutions can improve local resilience by helping balance the over-stretched power grids found in most African countries, and facilitating nationwide energy efficiency.
Expanding electrification in rural Africa is an important step towards building an inclusive future, but the solar industry’s preoccupation with last-mile off-grid solutions will not deliver transformative growth for the continent. Empowering entrepreneurs at a scale that enables them to grow their businesses and generate more economic employment will require firms and investors alike to balance urban with rural concerns, and immediate energy access with a longer-term, sustainable vision.
By Ademola Adesina is the Founder and CEO of Rensource, a West Africa-focused distributed energy services company.