Close
Pay-as-you-go solar energy reaps rewards in Africa

Pay-as-you-go solar energy reaps rewards in Africa

Pay-as-you-go off-grid solar energy is bringing electricity to millions across Africa. Ian Lewis reports

Falling costs and improved sales networks mean that small-scale solar power for households or micro-businesses is taking off across Africa. Crucially, this is fast becoming a self-sustaining  sector that can generate its own revenues, and allowing numerous companies of all sizes to cater for demand on a commercial basis. 

The reasons for this change in the landscape for small-scale solar are not hard to find. As consultancy Kleos Advisory put it in a recent report on the sector: “In 2010 a typical solar unit could replace a kerosene lamp for around three hours per day – hardly a replacement for grid power. Today an affordable solar unit can power a 32-inch television with satellite, 24 hours a day. In five years’ time affordable solar units are expected to be able to power all the key routine devices many Africans have in their homes, such as mobile phones, TVs, fans, lights and the Internet.”

The widely used pay-as-you-go model for the sector enables consumers to buy a small solar unit with a rechargeable battery pack on a rent-to-own basis. They make repayments via mobile phone at a cost similar to those of buying kerosene for lighting and paying someone else for phone recharging. Typically, they can pay off the costs of the solar unit and other equipment in around 18 months and then own it outright. 

GOGLA, an association representing the off-grid solar industry, estimated in 2019 that over 5m pay-as-you-go sales had been made in Africa since 2015, with more than 1m sales in the first half of 2019 alone.

Sustainable business

Kleos, whose report was carried out in collaboration with small-scale solar provider Azuri Technologies, says this means that up to 25m people are getting the benefits of off-grid power via this model without any direct government or development institution financial support, and with the prospect of a rapid rise in uptake over coming years.

However, there is little prospect that household-scale solar installations could  power heavier duty equipment, such as washing machines or hair dryers – and this is not going to be a solution for powering cookers anytime soon. Kleos says that for most off-grid Africans using small-scale solar this won’t be a problem because they have limited power needs or have access to a diesel generator to run any more power-hungry equipment. But, at the moment, that is unlikely to include the very poorest Africans.

This has led to some criticism that proponents of small-scale solar are overstating the benefits to those without electricity access, because the poorest remain excluded.  They might be able to acquire a simple solar powered lamp, or even a non-rechargeable battery powered torch with a long lifespan, but not a generator or a solar system.

A report published in February 2020 by consultancy 60 Decibels, and backed by UK development finance institution CDC, notes that despite the growing availability of financing, the poorest were underrepresented among users. Some 37% of off-grid energy customers around the world live below the $3.20 a day poverty line, compared to 60% of the population as a whole in the developing markets in which 60 Decibels operates.

“These data suggest that whilst off-grid energy offers tremendous promise to bridge the global energy divide, to do so we need to see more accessible financing options, lower prices, smarter subsidy, and wider distribution,” the report says.

Supporting the sector

CDC Chief Executive Nick O’Donohoe says greater inclusivity is needed but there are Africans who are so poor that it is hard for energy businesses to serve them on a commercial basis and they will continue to require aid, grant support or subsidies.

However, this shouldn’t detract from the benefits off-grid solar has brought. “There are probably 50m low-income Africans that have access to power who wouldn’t have been able to afford it before. And in most cases, it’s replacing kerosene in homes. So, it’s a win-win by any standards,” he says.

One element of CDC’s support for the sector has been its investment in M-KOPA, one of the world’s largest pay-as-you-go solar energy companies. The company’s off-grid solar home systems now operate in over 750,000 low-income households in Kenya and Uganda.

CDC invested $11.6m of equity in M-KOPA in 2016 and a further $7m in 2017. In 2017, CDC also provided $20m of debt financing, as part of a $55m local currency facility with Stanbic, FMO and Norfund. 

Related Posts

Join our 70,000+ subscribers by signing up to our mailing list

Help us deliver better content