The potential for utility-scale applications is enormous, as just 2.09GW of solar was installed in Africa by the end of 2015, account-ing for only 0.1% of the world’s cumulative total, according to the In-ternational Renewable Energy Agency (IRENA). So far, South Africa leads the continent with 1.36GW installed by the end of last year.
“South Africa will keep its position as the major market for utility-scale PV over the coming years, even though interconnection is-sues are causing some delays,” says IHS analyst Josefin Berg.
"A recent string of deals underscores growing momentum for large-scale solar across the continent."
A recent string of deals underscores growing momentum for large-scale solar across the continent. Over the past year, for example, Toronto-based developer SkyPower Global has announced plans to build 1GW of solar in Kenya and 200MW in Djibouti, on top of 6GW it had already committed to install in Egypt and Nigeria.
Over the long term, Berg believes countries such as Nigeria have the potential to install massive amounts of PV. However, real and perceived risks will continue to weigh on investment.
“Multilateral backing will be key,” Berg says, pointing to the World Bank’s Scaling Solar scheme, under which French developer Neoen and US thin-film PV specialist First Solar recently won an auction for 45MW in Zambia with a joint bid of just $0.06/kWh. “Zambia is a per-fect example of multilaterals enabling PV projects by reducing the risk.”
However, she argues that relatively low power demand in Africa could quickly saturate underdeveloped national grids across the continent. And that is where micro-grids are increasingly playing an important role in solar electrification, particularly in rural areas.
"Kenya and Tanzania are Africa’s biggest micro-grid markets, but the Democratic Republic of the Congo and Somalia could emerge as new investment opportunities over the long term."
Kenya and Tanzania are currently Africa’s biggest micro-grid mar-kets. But Sam Slaughter, co-founder of Nairobi-based installer PowerGen, believes that the Democratic Republic of the Congo and Somalia could emerge as new investment opportunities over the long term.
“We still see diesel as the best pairing with solar, but hopefully that will change,” Slaughter says, noting that biomass has yet to emerge as a major option, despite its huge potential when matched with PV, because it’s so difficult to scale up.
“The thing about micro-grids (or any off-grid power system) in this region is that they need to have very low maintenance and operating requirements, because the logistics of servicing hundreds or thou-sands of small such systems is not viable.”
In the years ahead, Slaughter believes that micro-grid projects will increasingly be aggregated into portfolios and pitched to the kinds of financiers that typically fund megawatt-scale projects.
"The next few years will be crucial in shaping policies in the early adopter markets to set a precedent in Africa."
“Policy is a huge risk,” he laments, noting that most African gov-ernments have not established clear rules for the sector. “We are in a nascent experimentation and formation stage when it comes to how regulators and governments perceive private utility actors. The next few years will be crucial in shaping policies in the early adopter markets to set a precedent.”
Policy will also help to facilitate the spread of off-grid lighting solu-tions and small solar home systems throughout Africa, according to Koen Peters, executive director of the Global Off-Grid Lighting As-sociation (GOGLA).
“Governments need to be realistic about their grid extension plans and say what they’re going to do and what is not realistic for people to expect, so they don’t sit and wait for the grid to come,” Peters says, noting that 60-70% of solar lanterns and small solar home sys-tems in Africa are currently sold in Kenya, Tanzania, Uganda and Ethiopia.
However, GOGLA believes that other countries, such as Sierra Leo-ne, Cote d’Ivoire and Nigeria, could emerge as important markets for off-grid solar lighting and electrification in the years to come.
Beyond policy, a range of other challenges remain. For example, Lyndsay Handler, managing director and interim CEO of Fenix In-ternational, notes that a viable market has still not developed in Af-rica for DC appliances that can be used with the 10-34W systems solar home systems that it sells in countries such as Uganda.
The San Francisco-based company therefore plans to eventually package optional lights, radios and other DC accessories with its system upgrades.
And under its pay-as-you-go (PAYG) mobile payment platform, scalability and modularity — the ability for end-users to upgrade their current systems, without having to buy new products — are central to the appeal of its solar home systems in rural communi-ties.
“We fundamentally believe that the poor can’t afford cheap prod-ucts,” she says. “The poor can’t afford to take a product now, use it for one year and then throw it away when their energy needs grow.”
"Limited access to financing — particularly as it relates to the increasingly common PAYG model — is also holding back the sector’s potential."
More efficient end-user appliances will help to drive down system costs, just as the efficiency of LEDs has helped to reduce costs by allowing companies such as Fenix to offer smaller systems, says Peters at GOGLA.
But limited access to financing — particularly as it relates to the in-creasingly common PAYG model — is also holding back the sec-tor’s potential.
As the industry struggles to explain risks to the region’s banks, a growing number of multilateral policy lenders are starting to get in-volved in opening up financing, just as commercial investors are beginning to express cautious interest in the African off-grid light-ing market, Peters says.
“The clear signal is that we’re heading to a market with a larger tick-et size, more standardization and more deals that aren’t the first of their kind,” he adds. “But at the moment, it’s still fairly early days.