Reliable and decentralized electrification through solar home systems is becoming the standard rather than the exception in most East African rural areas

By Stefan Zelazny, Mobisol

For decades, the only accepted idea of electrification was access to the grid implemented by big utilities, served by huge power plants.

This concept worked fairly well in the developed world  —  if leaving out of consideration the environmental aspects of the massive use of fossil fuels. Billions of dollars have been invested to transfer this model to emerging markets. This attempt has failed. Even today, less than 25% of sub-Saharan households have access to the grid; and those who do have access encounter ongoing problems with load shedding and poor reliability. Grid extension has proven to be logistically difficult, expensive to implement and not adapted to lower consumption rates. Full electrification from the grid has become an unachievable goal for the fast-growing countries of sub-Saharan Africa.

Mary is a Mobisol customer from Tanzania

Looking at the developments over the last five to six years, one can see that this shortfall of traditional grid development might turn into a long-term advantage of these economies. Falling solar panel prices have led to a steep surge of economically viable off-grid solutions all over the world  — as well, and especially, in sub-Saharan Africa.

Combining a small solar panel with a storage battery and energy efficient LED lights creates a very affordable lighting solution for rural off-grid households in India, Kenya, and Tanzania. Millions of these lanterns and small solar home systems have been sold in recent years, improving the lives of families all over the developing world. But real electrification does not end with the provision of lighting and phone charging. The demand for more powerful off grid solutions has steadily increased over the last years.

Alongside the development of more and more highly energy efficient DC household appliances, larger off-grid solar electrification solutions developed into a very compelling alternative to the grid. Reliable and decentralized electrification through solar home systems is becoming the standard rather than the exception in most East African rural areas.

Larger solar home systems  —  often bundled up with appliances like TVs, stereos, fridges, and even irons result in higher purchase costs for each household. Given the economic realities in East Africa, this is a challenge to overcome. As almost no consumer financing institutions are active in remote rural areas, new solutions had to be developed. PayAsYouGo technology (PAYG) evolved as a solution to overcome the lack of availability of other financing instruments. PAYG means that an off-grid solar system can be purchased on an installment plan but can be remotely shut off, in case the customer stops paying the agreed installments. This allows for high flexibility for the customer but also ensures a high repayment likelihood  —  and therefore forms the foundation of the scalability of the underlying business model. PAYG technology has paved the way for the financial inclusion of millions of unbanked rural households ever since.

The economic success of this model attracts more and more international and local financing into these emerging markets. The PAYG energy sector is on the brink of taking off all over Africa and other markets in South Asia and the Pacific Islands and to deliver decentralized, sustainable energy solutions to hundreds of millions underserved households.

One major challenge of this expected scale up is the ability to master business operations on the ground. This requires a deep knowledge of last mile solar distribution in some of the most challenging business environments worldwide.

Technology can help distributing companies to overcome this challenge. Hardware enabled PAYG technology, powered by mobile money payments and last-mile-centric software solutions can ease the steep learning curve for companies entering the distribution business. This includes profound customer affordability predictions as well as logistics and stock management adopted to suit the requirements of the target markets. 

The off-grid solar sector today avails itself of the condensed learnings and experiences of the past six years of PAYG based distribution, supported by ready-to-use and affordable software solutions  —  such as Mobisol’s PAYGEE software suite. This expertise helps distributors all over the world to choose the most appropriate hardware and software solutions as well as the best-fitting business model for their specific geographic location and customer segment.

Sophisticated soft- and hardware solutions will additionally enable a much higher transparency within the entire sector and allow financial institutions as well as private investors to support this growth with a risk-controlled impact oriented investment. Crowd investing platforms  —  such as Sweden based Trine  — have seen a steady surge in investment interest into the off-grid energy sector and embrace the real-time transparency through Mobisol’s PAYGEE software suite towards their investors. Crowd-based investment into decentralised energy solutions in emerging markets, facilitated by high tech software platforms, will turn into a commercially attractive way to bypass today’s financing challenges and big energy structures  —  leaving room for an enormous scale-up potential and a real impact for both communities on the ground gaining energy access and the global climate.

 

Mobisol Maasai village cinema night in Tanzania

Stefan Zelazny, Chief Innovation Officer Mobisol

Other notes

Kofi Anan – governors often view utilities as a locus for patronage and political corruption

Renewables blocked, can’t get access to land

Huge amount of it on rent-seeking behavior

Clientalism, buiying of votes, work

Clientlism: the exchange of goods aor services for political support

Governments view utilities primarily as sources of political patronage and vehicles for corruption while providing affordable energy …

The report says that access to electricity in Africa is limited and expensive. About 621 million people have no access to electricity and four out of five rely on solid biomass for cooking.

“Africa’s poorest households are the unwitting victims of one of the world’s starkest market failures. We estimate that the 138 million households comprising people living on less than $2.50 a day are spending $10bn annually on energy-related products, such as charcoal, candles, kerosene and firewood.

“Translated into equivalent cost terms, these households spend $10 per kilowatt hour on lighting, which is about 20 times the amount spent by high income households with a connection to the grid for their lighting. The average cost for electricity per kWh in the US is $0.12 and in the UK is $0.15.”

Donors have considerable insight into PEA but are not willing or able to share it.  Aid agencies are clear on political economy but not changing behavior because of it.

Annan’s report calls for a global connectivity fund that would provide the $20bn a year annually that would ensure universal access to electricity by 2030. Half the money would come from Africa itself, with the other $10bn coming from aid and low-cost finance.

Noting that Africa will pay the highest price for failure to avert a “global climate catastrophe” while making the smallest contribution to climate change, the report says: “For too long, Africa’s leaders have been content to oversee highly centralised energy systems designed to benefit the rich and bypass the poor. Power utilities have been centres of political patronage and corruption.

“The time has come to revamp Africa’s creaking energy infrastructure, while riding the wave of low carbon innovation that is transforming energy systems around the world.

“Millions of Africa’s poorest people are paying among the world’s highest prices for energy because of the cost barriers separating them from affordable, efficient and accessible renewable technologies.”

Sep 7, 2015 – In many countries, power utilities are nexuses for political patronage and corruption. Many are … Second, leaders must tackle vested interests and break the webs of political patronage in energy utilities. … As APP Chair Kofi Annan says in his foreword to the report, we simply must “act now and act together”.

Brian Min – looked at satellite images over time and seeing how electricity to lighting of the grid, correlate with electoral grid, people who voted for the winning party got electricity and those who did not di not

WB – govts don’t want to hear it.  Great sensitivity about what might be unearthed.

According to the Africa Progress Report 2015, Power People Planet Seizing Africa’s energy and climate opportunities done by Africa Progress Panel chaired by former United Nations secretary-general Kofi Annan, African governments view utilities primarily as sources of political patronage and vehicles for corruption while providing affordable energy is a distant secondary concern.

“Governance of power utilities is at the heart of Africa’s energy crisis. Governments often view utilities primarily as sites of political patronage and vehicles for corruption, providing affordable energy can be a distant secondary concern,” reads the report.

The report says the international community will channel an additional US$10 billion in aid and concessional finance to support investments that deliver energy access to populations that are being left behind.

African governments should mobilise around US$10 billion to expand on-grid and off-grid energy access with the international community, says the report.

It is estimated that the 138 million households comprising people living on less than US$2,50 a day are spending US$10 billion annually on energy-related products such as charcoal, candles, kerosene and firewood.

Zimbabwe is saddled by a power deficit, producing 1 203 megawatts (MW) against demand of 2 200MW due to obsolete machinery and limited investment in the energy sector.

Power people planet report affirms that African governments spend US$21 billion annually covering utility losses and subsidising oil-based products, diverting resources from more productive energy investments.

Zimbabwe Electricity Transmission and Distribution Company (Zetdc) MD Julian Chinembiri told parliament last month, that the company is owed over US$300 million by domestic customers, public lighting US$27 million, mining and industries US$244 million, while commercial and agriculture owe the utility US$351 million and US$75 million respectively.

Zimbabwe Electricity Supply Authority was under the spotlight after it emerged that the power utility flouted tender processes.

According to the report, some 130 independent power providers (IPPs), are now operating across Sub-Saharan Africa with a new generation of private equity investors also emerging.

In Zimbabwe only eight of 22 licensed IPPs are operational IPPs as government’s desire to see IPP projects coming up to complement power supplies from Zimbabwe Power Company.

‘Power utilities a source of energy crisis in Africa’