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Correcting the decentralised solar system disparity

September 24, 2024

The market for decentralised solar systems is gaining popularity in African cities. But stakeholders must do more to scale up the deployment of decentralised solar systems in rural and remote areas to accelerate the continent’s electrification rate, writes Nasi Hako.

To achieve United Nations Sustainable Development Goal 7 of affordable, reliable, sustainable and modern energy for all by 2030, African Development Bank (AfDB) President Akinwumi Adesina says the continent must connect 90 million people annually to electricity by 2030 and shift 130 million people from dirty cooking fuels each year.

The AfDB estimates that only 40% of the continent’s people have access to electricity. In addition, according to Afrobarometer, only 68% of African citizens live in areas with access to an electric grid and they still face unreliable electricity networks subject to power outages. As the AfDB’s Africa Infrastructure Knowledge Program states, “Africa’s chronic power problems have escalated into a crisis affecting 30 countries.”

Rapid population growth and urbanisation in Africa make meeting the growing energy demand more challenging. At the same time, the lack of reliable centralised electricity grids and high energy costs drive consumers to seek alternative energy solutions to meet their energy consumption needs.

As such, more consumers are turning to decentralised solar systems to gain autonomy from national energy networks. Though developers first forged decentralised technologies in difficult-to-access off-grid rural communities, these solar energy systems are gaining popularity in the continent’s cities.

According to the French Institute of International Relation’s (IFRI) Booming Decentralised Solar Power in Africa’s Cities report in 2019, global sales of decentralised solar systems of all sizes reached more than $1.75 billion, with an increase in industry revenues of more than 30% per year between 2017 and 2019.

Likewise, a Global Market Insights report stated that the market for decentralised power generation is expected to grow significantly between 2023 and 2032, driven by smart grid investments, which are expected to double by 2030.

As the world ramps up its net-zero ambitions, decentralised solar systems can capitalise on Africa’s clean energy potential and close the continent’s energy access gap. The IFRI report highlights the decentralised solar capacity in 14 cities in sub-Saharan Africa alone stands between 184 to 231MW, representing nearly 10% of centralised solar power capacity in the region, excluding South Africa. The 14 cities cited are Ouagadougou, Accra, Bamako, Cape Town, Dakar, Harare, Ibadan, Kampala, Khartoum, Lagos, Lusaka, Nairobi, Niamey and Windhoek.

Given that the IFRI report estimates almost 60% of Africans reside in rural communities, of which about 5% have access to clean electricity, governments could scale decentralised solar energy systems to boost electricity access and contribute to the continent’s energy transition.

“In 2019, global sales of decentralised solar systems of all sizes reached more than $1.75 billion.”

Building resilient electricity networks

In September 2022, an independent sustainability-driven energy service provider successfully commissioned decentralised solar energy solutions in three countries. The commissioning included the implementation of a 10kWp (kilowatt peak power output) decentralised solar PV system in Senegal; a 286kWp solar energy system for a plastic recycling plant in Nigeria; and a 69kWp PV hybrid energy system with battery storage to benefit 3,000 residents, 40 businesses and 10 public buildings in Mali.

These are clear examples of decentralised renewable energy systems being used to stimulate economic activity, avert carbon emissions and electrify African communities. These applications present multiple benefits. While reducing pollution, in comparison to other decentralised generation sources such as diesel, decentralised solar systems also create increased autonomy for consumers. As a result, consumers are no longer subject to dependence on unreliable power systems.

By relying on a decentralised solar system, consumers can gain a more significant influence over their electricity costs while growing the penetration of solar technology on the continent. Consumers can therefore contribute to the increased resilience of the central grid by alleviating electricity demand and easing peak demand periods.

Given that decentralised energy systems generate power where it is consumed, these generation technologies need not pass through transmission lines, of which Africa has a deficit.

Through a scaled use of decentralised solar systems, African countries can prevent electricity losses that occur significantly in power lines in African countries. This addresses the energy system funding gap by reducing network investment needs.

Decentralised electricity networks enable access to affordable electricity and build more resilient and energy-secure communities. Gradually, communities can expect physical and digital infrastructure improvements, reducing inequality and contributing to an economically stimulated environment suitable for attracting investment and economic growth across the country.

A decentralised solar system disparity

For poorer populations covered by the national electricity network, connecting to the central grid may be unaffordable and inaccessible due to limited incomes compounded by rising electricity costs. Decentralised solar systems, therefore, present an opportunity for low-income communities to take advantage of the technology’s multiple benefits. In fact, according to the Booming Decentralised Solar Power in Africa’s Cities report, these populations are more likely to revert to pico-solar systems and solar lamps for their powering and lighting needs.

However, the report says that as consumers’ revenues increase, the use of decentralised solar systems becomes marginal. In other words, consumers may abandon decentralised technologies for connection to the central grid as it becomes more affordable.

The report says that instead of rural community projects flooding the market for decentralised solar systems, wealthy households in Africa are likelier to own the technology, regardless of the quality or reliability of electricity supplied from the national grid.

The report revealed that the wealthiest cities in Africa – namely Windhoek, Nairobi and Cape Town – have the largest aggregated decentralised solar capacity with 29.6MW, 21.7MW and 69.6MW, respectively, with a yield of 20%. Meanwhile, the poorer cities of Khartoum and Harare hold a capacity of 1MW and 4.5MW respectively, with a yield of 20%.

Contrary to its many benefits, the rise of decentralised power systems also presents a significant threat to centralised power networks, the 2022 report adds. Considering that most African utilities struggle with their financial stability, a substantial loss of its greatest revenue contributors including residential and commercial customers, could devastate their finances.

In addition to this, scaling decentralised solar systems in rural areas and poor communities is dependent on cross-subsidisation. Larger consumers would have to pay higher tariffs than poorer consumers, who would consume less and could benefit from the subsidised electricity tariffs.

However, if more profitable consumers can turn away from the electricity network, increasing consumer autonomy threatens to fragment African centralised electricity grids as wealthier consumers turn away from the centralised network. The trend can therefore have negative implications for centralised networks and their financial sustainability.

Despite this, the report says that the rise in demand for decentralised solar systems opens up a path to conduct research in formulating strategies for future policies to develop efficient, reliable and sustainable electricity systems in Africa.

Strategies to scale decentralised solar energy

The 2022 Booming Decentralised Solar Power in Africa’s Cities report cites that if new uses for decentralised solar systems are analysed and integrated into policies for developing electrical systems, they could present opportunities.

For example, as highlighted in the report, decentralised solar systems can be fostered with reductions in value-added tax, reductions in import tariffs on solar products or appropriate tax instruments. The report says these interventions “..would lower the threshold for adopting large-scale solar systems from households in the wealthiest class through to the middle classes.”

In addition, public entities will have to encourage the use of technology through monetary policy and fiscal strategies to scale the use of decentralised solar systems in Africa and decarbonise the continent’s off-grid network.

Given that developing countries already face significant budgetary constraints, the onus for investment in decentralised electricity networks generally falls on the private sector, as one research paper, Harnessing finance for a new era of decentralised electricity access: A review of private investment patterns and emerging business models, outlines.

As such, African states will also have to encourage private sector investment in the decentralised energy sector to ensure that the large capital requirements are met, and these off-grid networks can be implemented.

If the public sector can harness monetary and fiscal tools and collaborate with the private sector to incentive investment in decentralised solar markets in Africa, the continent can close its electricity access gap and achieve Sustainable Development Goal 7 while decarbonising electricity networks in pursuit of individual net-zero ambitions. ESI

About the author

ESI Africa
Content Team
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