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Amy.Offord_111 Aug 12

CONNECTING AFRICA’S VILLAGES: SMALL IS BEAUTIFUL

CONNECTING AFRICA’S VILLAGES: SMALL IS BEAUTIFUL image

Mini- and micro-grids that produce renewable energy are key elements needed to help solve Africa’s power problems, writes Ian Lewis.

Mini- and micro-grids based on renewable energy are no longer regarded as mere stopgaps while rural communities wait – often in vain – to be joined to the national power grid. Falling prices, increased power out-put and technological advancements mean that small grids can now being treated as long-term energy solutions in their own right. 

A plethora of life- and livelihood-enhancing services hitherto out of reach are fast becoming available to Africans in rural areas. Small-scale, renewable generation is regarded as a key element in the drive to pro-vide universal access to power across Africa. But the scale of the universal access challenge remains immense.     

In its Energy Access Outlook 2017 report, the International Energy Agency (IEA) said that based on policies either being enacted or promised by governments, 90% of the 674m people worldwide without access to electricity by 2030 would live in sub-Saharan Africa.

The IEA concluded that new connections to utility-scale grids would bring electricity to more than half of those that gain access, offering the most cost-effective means of access in urban areas. However, it said decentralised systems would be the most cost-effective solution for more than 70% of those who gain access in rural areas. 

“By 2030, renewable energy sources power over 60% of new access, and off -grid and mini-grid systems pro-vide the means for almost half of new access, underpinned by new business models using digital and mobile technologies,” the agency said. 

This is reflected in a shift in thinking by governments across Africa, which are starting to view non-utility scale power as an essential part of their forward planning.    

 “What we’re seeing is off -grid solar being integrated into national energy policies,” said Simon Bransfield-Garth, Chief Executive of UK-based micro-grid solar provider Azuri Technologies. “So Rwanda, Kenya, Nigeria and, more recently, Ethiopia, have all come up with policies where perhaps one- third of the people will be supplied by off -grid power.”

Importantly, the provision of mini- and micro-grids is no longer as reliant as it was on financial support from development agencies or governments to make it economically viable. The advent of affordable, ultra-low power consumption LED lighting, combined with cheaper and more ubiquitous solar and battery costs, means the sec-tor now represents a serious business proposition.

CUSTOMER COSTS FALL

Mini-grids that supply power to entire African villages are now being built by larger utilities, but just as significantly, solar power has become an affordable proposition for many households in rural areas. 
The proliferation of affordable solar panels and more efficient technology mean many rural households can afford to be connected, given help from companies with the right business model.

Bransfield-Garth says that when Azuri started out in 2010, pay-as-you-go solar didn’t really exist in Africa, and the ones that did tended to be led by charities and other non-govern-mental organisations.

“We did a few sums and figured out that you could do something good that you could also make a business out of,” he said. “It was driven by the enormous market requirement in Africa and the realisation that just because people have relatively low incomes doesn’t mean that you can’t make a successful business from those customers.”

Azuri, along with the proliferation of other pay-as-you-go solar services companies around the continent, offer a solution to the problems presented by the steep upfront costs of solar energy generation and the associated peripherals by using the financial clout of their own backers to pay for the equipment. The outlay on solar panels, solar-powered lights, sockets and any other services is then recouped, along with a profit, by charging customers manageable weekly or monthly payments over a fixed period, after which the customer owns the equipment. 

Bransfield-Garth said it’s not hard to pique the interest of potential customers who currently rely on kerosene or paraffin for their lighting needs. “Kerosene is horrible, so if you can just price match kerosene then you’re onto a winner. We can do that roughly for the duration for which the customer is paying, typically 18 months,” he said.

“But after that they’ve got a system that’s going to last them 10 years or more and by then it’s free.” The ability to recharge mobile phones – those staples of modern African village life – at home rather than having to travel to a charging station in the nearest town is another attraction. 

Apart from light and phone charging, other services offered to customers include rechargeable torches and radios, and satellite television, with the cost of all the equipment and services included in the periodic payments. 

CULTURAL SHIFT

Azuri TV provides more than 60 channels on 32-inch or 24-inch solar-powered TVs. So in areas where reception has hitherto been limited, the arrival of household solar power may herald a major cultural shift and improve living standards. However, there are limitations to this business model. It’s easy to collect payments using transfers via mobile phone, but any potential customer must have the financial resources to keep up their payments.

This is why Azuri’s model is best deployed in areas where agricultural incomes are reliable, making it well suited to countries with stable farming such as Kenya and Nigeria, but less so to marginal areas of Africa where out-put and incomes can fluctuate widely depending on the weather. Azuri has sold more than 150,000 systems since 2012, helping to improve the lives of 750,000 people. It operates in 12 sub-Saharan African countries, but focuses mostly on Kenya, Uganda, Tanzania, Zambia and Nigeria.

Such figures are impressive for a young industry, but there is clearly much to be done on a continent where 600m sub-Saharan Africans – representing 57% of the region’s population – still live without electricity, according to the IEA. The good news is that renewable energy provision continues to expand quickly. “There is still a long way to go in the countries we’re already in, so that’s going to be our principal focus, but we typically adopt one or two extra countries every year,” said Bransfield-Garth.

The industry is becoming more adept at marketing the benefits of small-scale renewables in areas where the target customers tend live away from the main population centres.

Azuri and other pay-as-you-go solar providers typically forge ties with mobile phone networks in the countries where they operate. That’s partly because mobile payments systems are a key to the success of the business. But it’s also because mobile companies already have a presence in remote areas, providing ready-made marketing networks for solar systems.

Similarly, a recent tie-up between Azuri and Unilever’s Kenyan subsidiary means it can use the greater reach of Unilever’s rural sales net-work to promote the benefits of its own service. Meanwhile, in Nigeria, Azuri’s solar home TV product is being co-branded and co-marketed by First-Bank of Nigeria in its rural branches, targeting low-income customers. 

MAXIMISING THE POTENTIAL OF THE MINI-GRID 

Mini-grids increase access to electricity even faster, bringing large-scale solar or wind power to entire villages or wider regions. But they come with their own complications, especially if they are to be provided on a commercial basis. Bransfield-Garth said it’s easier to persuade one customer to buy a system than a larger group with differing views and differing abilities to pay. 

“If you’ve got to put a mini-grid in, you’ve got to persuade several hundred customers that they all to want to have this thing that they’ve never experienced before and it’s more difficult to do that,” he said. Nevertheless, mini-grids have a vital role to play if the expansion of electricity access is to be speeded up, and if electricity use is to move beyond basic household power, lighting and charging facilities.

This sector can count on the involvement of some heavy hitters. French utility Engie is operating or building 13 mini-grids to power villages in Tanzania and Zambia, and has an ambitious goal to provide 2,000 mini-grids across Africa by 2025, bringing renewable power to 2.5m people.

SCALING UP 

Its modular PowerCorner offering aims to up the ante for mini-grids by providing power for a wider variety of uses than before from an internet-connected central solar generation and battery storage unit. Zambia’s first PowerCorner was launched in Chitandika, in the east of the country, earlier this year. The village, which has 378 households and a population of 1,500, had previously been without electricity access. Now it has enough to power all households and local businesses, as well as a rural health centre and two schools.

It can also provide energy for agricultural water pumps, and machinery for carpentry and welding, plus any other creative uses local entrepreneurs come up with. Homes and businesses are fitted with smart meters to measure consumption, efficient appliances are available on a leasing ba-sis and payments can be made using mobile smart money transfer.

ENGIE also has a solar home systems business, Fenix, which has sold more than 400,000 units in Uganda, Zambia, Nigeria, Côte d’Ivoire and Benin. Since launching Fenix in Zambia in October 2017, the firm has sold 70,000 solar systems, demonstrating the demand for small-scale, off -grid power. “We believe that universal access to electricity is possible in the foreseeable future, thanks to a smart combination of national grid extensions, mini-grids and solar home systems, depending on the local characteristics of energy demand,” said ENGIE's Chief Executive Isabelle Kocher at the launch of PowerCorner in Zambia.

This article is an extract from the Africa Energy Yearbook 2019, a partnership between African Business and EnergyNet.