Everyone from local entrepreneurs to a new United States government program are jumping on Africa’s off-grid energy revolution bandwagon.
“It has everything to do with serving a new generation of technology and new approaches to delivering energy to rural communities. But we’re not just looking at individual solar panels on people’s homes,” Shari Berenbach, President and CEO of the US African Development Foundation told AFKInsider in an interview. “In other instances there might be mini-grids that are connecting many households and schools and clinics and jobs.”
More than two-thirds of the population is without electricity because they are not grid-connected, including more than 85 percent of those living in rural areas. That is nearly 600 million with no access to an electricity grid, a number expected to reach 700 million by 2030, according to World Energy Outlook.
And according to the International Energy Agency, it would cost more than $300 billion to achieve universal electricity access by 2030 through conventional means.
The World Bank estimates that 34 million Kenyans – 84 percent of the country’s population – have no electricity. In Uganda, the rate of rural electrification is just seven percent, according to the country’s Rural Electrification Agency.
Zambia’s Rural Electrification Authority has identified 1,217 rural centers needing electrification. And Namibia’s Energy Minister Isak Katali, speaking in June at a ceremony for the Usib solar project, requested the project partners to “consider replicating this project in other suitable areas, particularly to remote villages in the country that are far away from the national grid.”
According to the April NPD Solarbuzz report Emerging PV Markets Report: Middle East and Africa, “Solar photovoltaic demand from the Middle East and Africa (MEA) region is set to grow 50 percent year-over-year in 2014. Between 2014 and 2018, annual PV demand will nearly triple as the MEA region becomes a key market for the global industry.”
This represent a dilemma to those seeking to expand access to affordable energy: Should this electricity be generated by large, centralized power plants – the system Europe and America used to reach widespread development, or by distributed, off-grid sources like wind and solar power. It is a debate now raging among sub-Saharan Africa developers who see demand for power largely focusing on big industry and urban areas rather than those living in remote rural regions.
Beyond “Power Africa”
Recognizing the need for power in rural areas, in June 2013 the United States
launched “Power Africa” to increase access to power in sub-Saharan Africa led by United States Agency for International Development and involving a number of other government agencies and private companies such as GE.
“The logic behind power Africa is to use a relatively modest amount of public support to create the enabling environment and the advisory support for what they call transaction advisers to help facilitate getting different projects closed, projects in terms of raising financing, coordinating with the government, coordinating with the regulatory bodies, influencing the policy structure and the tariffs approach,” Berenbach told AFKInsider.
“So a lot of that kind of advisory function can sort of create a conducive environment for private capital to come in.”
According to the US Department of Energy, the public-private initiative has already created 2,800 megawatt worth of projects and has secured commitments for another 5,000 megawatt, representing almost 75 percent of the initial goal of bringing an additional 10,000 megawatt of cleaner energy to Power Africa’s six countries of Ethiopia, Ghana, Kenya, Liberia, Nigeria and Tanzania. To date, the projected has also leveraged more than $15 billion from the private sector.
But to date, many of the Power Africa projects have not targeted rural areas. With that reality, the Power Africa “Off-Grid Energy Challenge” was created to fill the void.
“Power Africa, particularly in the early days, was primarily focused on large transactions for large power facilities to meet the needs of industry and urban centers and is not related what happens to rural communities,” says Berenbach. “So we came up with our strategy which is intended to complement the other efforts.”
When the Off-Grid Energy Challenge program was announced in 2013, the three-year initiative aimed to award 25 grants of up to $100,000 each to African companies and organizations providing off-grid renewable power in the six Power Africa countries. It was originally funded by GE Africa and US African Development Foundation.
But when the first six winners totalling $600,000 were selected in the Challenge’s first round in 2013, it was just three grants each to Nigeria and Kenya.
“In the first round, being a first time effort for US African Development Foundation and GE in Sub-Saharan Africa, we wanted to keep it manageable, working in Kenya and Nigeria, two countries where we had GE offices and the right staffing to support the project closely,” Patricia Obozuwa, Director of Corporate Communications for GE Africa told AFKInsider in an interview.
“We started out by just focusing on two countries and kind of prototyping this to make sure it worked,” says Berenbach.
“The one thing that has changed is that United States Agency for International Development has come on board with this program allowing us to not just double the grants but to triple them, reaching all the countries involved in Power Africa,” says Obozuwa.
During May’s World Economic Forum in Africa, it was announced that entries were open through June 20 for the second round of the Off-Grid Energy Challenge, this time with additional funding from the US Agency for International Development to offer 18 grants of up to $100,000 each for projects in all six Power Africa countries.
Then earlier this month, Power Africa upped their off-grid focus again.
During the two-day US-Africa Energy Ministerial held in Ethiopia on June 3-4, U.S. Secretary of Energy Ernest Moniz announced the Power Africa “Beyond The Grid” initiative – yet another effort to forge partnerships between the US Government and the private sector to promote off-grid technologies.
Over an initial five year period, Beyond the Grid will leverage partnerships with 27 investors and companies committing to invest over $1 billion into off-grid projects in rural areas.
In the announcement, US Energy Secretary Ernest Moniz said: “With close to 600 million people without access to modern-day electricity, it is clear that centralized grid access is not a comprehensive solution for these countries in one of the world’s least urban continents.”
But Power Africa isn’t the only game in town for off-grid projects in rural Africa.
The European Commission announced in April results from the first call for proposals of a program for providing financing to bring electricity to rural areas with grants of €95 million awarded for 16 projects across Madagascar, Burkina Faso, Senegal, Cameroon, Liberia, Tanzania, Sierra Leone, Eritrea, Rwanda – an amount which will be translated to more than $200 million through co-financing support by applicants. Over the next 7 years the Commission will spend more than $2.7 billion for the program.
In May, Tanzania’s Rural Energy Agency announced a Lighting Rural Tanzania grant competition with $138,000 per proposal up for grabs to provide sustainable energy services. The competition’s main theme is “Promotion of Micro-Grids for electrification of remote off-grid rural villages and islands in Mainland Tanzania.”
Global Village Energy Partnership through a grant competition launched in June 2013 and funded by the Russian Federation through the World Bank and operated under the ESME Trust Fund, is funding expansion of eight off-grid lighting distributors in Kenya to foster local energy entrepreneurship in remote regions.
In April, Bloomberg Philanthropies announced $5 million in low-interest loans to Little Sun to bring solar energy to off-grid sub-Saharan Africa using low-cost solar lamps to replace kerosene lamps. The Little Sun project was officially launched in July 2012 and currently has distribution in Ethiopia, Uganda, Kenya, Burundi, Nigeria, Senegal, South Africa, and Zimbabwe.
“One of the most successful programs is Lighting Africa, a joint International Finance Corporation /World Bank initiative where over 13.5 million people have gained access to clean and safe lighting,” World Bank Africa region spokesman, Phil Hay told AFKInsider in an interview. “The Lighting Africa model is being replicated in Asia.”
The New Normal
Historically, energy programs have been funded by large development banks and government agencies favoring expensive power plants and large grid projects. While many of those projects have benefited industrial centers, in Africa they have neglected to bring needed energy to rural areas.
“While there are varying levels of progress in adding more energy to national grids across Africa, off-grid energy can play a significant role to power communities and economic activities that would otherwise not have access to electricity,” GE’s Obozuwa told AFKInsider.
One new model entrepreneurs large and small have embraced for some rural areas is a mobile technology payment approach which is becoming increasingly attractive due to the omnipresent use of cell phones that allows people to pay for their solar lighting services in small amounts without large up-front costs.
M-Kopa has been offering solar panels, batteries and lights at kiosks and shops around Kenya with payment through M-Pesa, Kenya’s mobile payment service.
In March, US-based giant SolarCity teemed with venture firms Vulcan Capital and Omidyar Network to invest $7 million into Off-Grid Electric, a Tanzania company providing solar lighting services using mobile payments.
Also in March, Powerway PV partnered with InnoVent Rental and Asset Management Solutions to launch a lease finance program for solar rooftop power in South Africa and later, all of Africa.
Meanwhile, non-governmental aid organizations and social investors that have been instrumental in supporting rural areas have jumped into Africa’s off-grid energy revolution.
Simon Gosling, director of UK-based EnergyNet, says there’s a huge role for these groups to support solar and other off-grid projects, “but they need to be implemented and managed and set up properly.”
“The problem which we have with solar from the perspective of these kind of things is sometimes you get some solar projects which are financed and built by charities in all these fine organizations, but sometimes the skill transfer is not there so they’re not maintained,” Gosling told AFKInsider in an interview. “So you’ve got hundreds of solar projects across Africa which are broken down for whatever reason.”
Africa never built the grid infrastructure for a traditional telephone network and now it won’t have to. Instead, the continent leapfrogged past the need for fixed telephone lines with the use of many millions of mobile phone systems. A similar leapfrog of technology is happening with off-grid energy in those rural areas that don’t need much power and are better suited to new off-grid technologies.
“Everybody’s come to recognize that in some ways, one of the most profound development achievements that is taking place in this time frame has been the introduction and popularization of cell phones. And that was done totally on a commercial basis,” says US African Development Foundation’s Berenbach, who believes the new and evolving off-grid technology is following the same path.
“We think that this is a time of great innovation and that ideally, 20 years from now, we’ll look back on this time the same way we now look back on the cell phone industry,” says Berenbach.