The World Bank forecasts that 600 million African populace have no access to power, a number which, unless severe action is in use, will only go on to increase given the region’s inhabitants is rising at a rate of around 30 million populace a year.
And the easy truth, according to numbers from the International Energy Agency (IEA), is that electricity provides is not keeping up with require.
Over the last 30 years, consumption has grown at an average of 8.4 percent per year while supply has lagged behind at 6.1 percent, meaning that those who are connected to the grid face inadequate provision, with over half of African households not even connected at all.
Consumers are therefore turning to off-grid means of powering their homes and livelihoods.
In Nigeria, for example, it is estimated that the likes of diesel generators are providing up to four times the energy delivered through the national grid. Many households in Lagos, it is noted, actually have two generators, the second providing emergency backup if the first breaks down.
Meanwhile, in rural areas, it is prohibitively expensive to be connected to national grids due to the high costs associated with extending transmission lines and difficulties faced recouping fees because of a lack of adequate financial services.
These insights come from the Transformational Tech series of reports by Kleos Advisory, the first of which providing a convincing case for developing off-grid infrastructure to plug the gaping gaps in electricity provision across Africa.
Solar is hotting up
Harnessing the power of the sun is widely acknowledged as being the most effective and sustainable way of bringing off-grid energy to the masses.
The numbers, albeit small, are growing.
While solar and wind between them accounted for just 0.8 percent of African energy production in 2017, with oil, gas and coal providing over half, the balance of power does appear to be changing. Between 1990 and 2020, solar output has grown by a factor of 20 to an estimated 6,090 kilotonnes of oil equivalent.
Kleos Advisory’s report observes: “Despite being a very young industry, Africa’s solar power sector already has a high degree of segmentation and diversification.
“Some companies are focused on large-scale production to replace grid power. Others are leveraging solar’s ability to connect African households to their own private power supply and to sell them an array of goods and services that are enabled by access to electricity.”
The study pays particular attention to pay-as-you-go (PayGo) home solar systems, of which five million are estimated to have been sold in the past five years.
These are far superior to the first wave of solar generation units that entered the market in the 1990s, such devices tarnishing solar’s reputation as they were difficult to maintain and often arrived without the required level of customer support.
Today’s systems are more efficient and automated, some fitted with smart software that analyses levels of power received to ensure a consistent supply of electricity at all times.
They can also power far more devices than their predecessors – by the mid-2020s, affordable home solar systems are expected to power everything from mobile phones and TVs to fans, lights and the internet, leaving just high-power items like washing machines to be used via something like a diesel generator.
Powered by fintech
However, the critical breakthrough, according to Kleos, is the ability for these solar units to connect to the world of digital finance and payments services.
The PayGo model enables African consumers to buy a solar unit on a rent-to-own basis, with repayments made via mobile costing no more than what it would to charge their phones and buy kerosene for lighting.
“In as little as 18 months users can own their solar unit outright, and in the process build their own credit history,” the Kleos report claims. “This can be leveraged to purchase upgrades and electronic devices powered by the solar unit (e.g. widescreen TVs, set-top boxes and fans) and to give them access to financial services, including mobile banking and insurance.”
Crucially, the system does not require government resources, with the majority of consumers paying for the power themselves.
This also leads to another liberating benefit, which is free power. Once PayGo customers have paid off the cost of their solar units, they can enjoy cost-free electricity for the remainder of the battery life, which is typically at least 10 to 12 years. As battery technology improves, this will only increase.
Having crunched the numbers, Kleos and its research partner Azuri Technologies believe the opportunity to be worth some $24 billion per year.
This is based on an average annual household spend of $200 on energy and there being 120 million homes without power, the figure likely to be even higher as it does not factor in additional services that can be leveraged over the solar-fintech platform.