Rethinking Africa's Solar Market

Mark Hankins
Friday, December 1, 2006

A sea change is needed to get solar power widely distributed in Africa. An article by a solar expert in Kenya, from World Rivers Review, December 2006.

Mark Hankins

I was struck recently by an industry graph showing global demand growth for solar photovoltaics (PV). It revealed sharply rising sales in Europe, America, Japan and China – but Africa sales didn’t even register. In the heady early days of PV market growth, Africa was an important market and there was much talk about how PV would help solve the low access to power throughout rural areas of the continent. Today, Africa does not even feature in PV executives’ world-view and we are no closer to widespread electricity access, PV or otherwise.

In 1995, Africa accounted for about a quarter of the annual 75 MW world PV demand. Many of us in the PV sector then thought that Africa’s place in the market was secure. Since then, world demand for PV has skyrocketed to over 1,500 MW per year, while PV demand in Africa has remained virtually stagnant. In fact, the demand for off-grid PV systems has not grown substantially, few national PV programs have taken off and, with the exception of the telecom sector (which is thriving), the PV sector in Africa has become less and less interesting to international players and the private sector in general.

Why has PV in Africa been such a non-success? Several reasons are proposed below, which have to do with the strategies, policies, multilateral projects and use of incentives for PV in Africa. Some of the key decisions made by donors and governments have held back the PV industry in Africa. For example, why has development of PV in Africa been limited to the off-grid sector only? Why have PV initiatives in Africa been so closely tied to poverty alleviation? And most importantly, why have PV subsidies been largely disallowed, when it can be shown that they are the key to growth everywhere else in the world?

Just about any supplier – even those enjoying the billions of dollars pumped into northern countries’ on-grid programs each year – will agree that eventually Africa must be an important market. Investment in real growth strategies makes sense. Might there be a better approach to the development of Africa’s PV market?

Off-grid Only

While grid-connected PV has dominated sales in developed countries, in Africa the focus has remained almost exclusively on small off-grid, stand alone systems – especially the 50 Wp solar home system (SHS). PV has much to offer the rural electrification strategies of Africa. On a continent where electrification rates are typically less than 10%, providing any form of power for rural people is of interest.

Since the early '90s, international policy makers and energy planners (this writer included) promoted PV as a first step to rural electrification. But PV was never a substitute for the grid, and power planners and consumers were not as enthusiastic about 50 Wp systems as were donors, multilaterals and NGOs.

For the most part, permanent secretaries, government ministers and utility CEOs intent on extending wires see little role for 12 volt PV systems – for them it is a second-class technology for the rural poor at best. Unaware of the rapid advances on-grid PV is making around the world, planners are preoccupied with the pressing problems of managing decaying national electric grids, using conventional solutions such as hydropower and thermal stations. They do not have enough resources to innovate or find creative uses of PV.

There are at least 80 million rural families off-grid in rural Africa – a huge market, it would seem. Nevertheless, in 10 years, the PV industry hasn’t penetrated more than a half percent of this market. There are only a few hundred thousand SHS installed in Africa. Few large PV companies are excited about prospects, and they have been unwilling to invest in infrastructure for delivery of PV to off-grid areas. Without incentives, should they be expected to?

In the few places where PV SHSs have been moderately successful (Kenya, Morocco, Zimbabwe), markets operate in an informal manner outside of government or power company control. Like bicycles and gen-sets, PV systems are sold over the counter. Although this private sector market might be the preferred approach, it is often accompanied by a downward spiral in quality and performance. The rural poor buy components, not designed systems, and the poor performance of these often slipshod systems does not help the technology's reputation.

For an expensive technology, the off-grid rural poor market segment poses challenges that thus far have not been surmounted. Rural spending power is quite limited. Although the cellular phone boom provides hope that PV SHS markets can be expanded on the continent, the expansion is not happening fast enough.

The spectacular growth of the PV industry in the North has come as a surprise even to Europeans – but in Africa, governments still do not have PV on the radar. For most, PV has been a "donor thing," with no real role in electricity sector planning. Even for off-grid PV, donors are usually the champions – PV has not been taken seriously at policy levels.

Poorly implemented donor projects

As of 2005, there is relatively little to show for the investment of over US$100 million in PV in Africa from multilateral donors such as the Global Environment Facility (GEF), the UN or the World Bank over the past 10 years. Although failure of PV projects is linked to development failures in Africa in general, there are some fundamental project issues that need to be re-thought.

In the mid-1990s, donors began designing a number of PV projects throughout the continent. Using GEF funds, the UN launched national PV efforts in Zimbabwe, Ghana, Uganda, Malawi, Lesotho, Namibia, Tanzania and elsewhere. The World Bank and IFC used GEF funds to build PV into energy programs in Kenya, Ethiopia, Mozambique, Zambia and Uganda.

From day one, "barrier removal" was the guiding mantra of GEF-supported PV projects in Africa. The theory was that renewable energy technologies would be viable if key market barriers were removed. What was needed, said the economist project designers, was elimination of these barriers so that renewables could compete on an even footing. For PV, high investment costs, low awareness, lack of technical skills and capacity were seen as the chief barriers.

So GEF funding, channelled through government, ended up funding activities that – it was hoped – would remove these barriers. In reality, most of the funds supported international workshops, vehicle purchases, hiring of project managers and consultants, and a whole range of awareness-raising activities, while comparatively little was spent on actual installations. In fact, to date, much of the allocated money hasn’t even been spent! Clearly, removal of barriers does not mean that the private sector will enter the sector or that investments will occur.

A look at some of the "major" projects that were supposed to stimulate marketsreveals a litany of failure – and sadly, there are many more:

  • A $5 million 1995 UNDP GEF project in Zimbabwe resulted in the PV marketplace growing from four to over 60 companies overnight. After the project, most of the companies fell out of the market, and the fund was quickly depleted and closed down.
  • A $5 million 1998 IFC project in Kenya sought to make PV financing funds available to banks and PV companies to "transform" the market. Even at the project’s concessional rates, PV companies and banks were not interested in the loans. In a market where 15,000 systems are sold per year commercially, less than 500 systems have been installed by this project.
  • A multi-million dollar 2003 World Bank GEF effort to expand the PV market in Ethiopia, offered as part of a $120 million dollar energy sector loan, was designed by consultants and handed over to a government department that did not have the capacity to execute the project. No systems have been installed thus far, but the project is listed as "active" on the GEF website.
  • The Solar Development Group was a $45 million GEF/IFC program aimed at accelerating private sector reach into rural areas. Aimed at developing country markets, it made several million dollars of investments and grants to PV companies in East Africa, with a relatively small impact. It had trouble finding companies that were interested (or could qualify) for the loans. Eventually its portfolio was handed over to a Dutch bank.

In the aid business, nobody likes a muckraker. Typically, we say little about the failures and move on to the next project. The danger, though, is that we get cynical, and begin to believe that development of the PV market is not possible.

Among the projects completed in the last decade, there were a lot of good ideas on how to build markets, but there wasn’t really that much money and even less commitment to make things happen. PV company directors in Africa tell of days spent working with project designers and managers in vain hope that they could make something happen. Too often, projects were designed and handed over to entities, such as small government departments, that could not possibly execute them.

Often, multinational organizations simply went ahead with the business of implementing projects because (in the case of the World Bank) they are green window-dressing for much larger loan packages or (in the case of the UN) they are part of a political process of doling out internationally agreed funds. Even the most enthusiastic government officials and PV companies were thwarted by GEF’s faceless bureaucracy, committee decision-making and endless paperwork.

Lack of incentives

The most important single reason for PV’s lack of progress in Africa is the lack of incentives for companies and consumers. The phenomenal growth of PV in Japan, Germany and elsewhere is almost entirely due to incentive support and policy drivers that come from governments.

For Africa, the GEF – the largest single investor in PV – has said that subsidy is forbidden in its projects. From the beginning, this was the rule. Elaborate financing and guarantee mechanisms have been designed, pilots have been executed, new marketing methods introduced and productive uses proposed. Every gimmick imaginable to build markets has been incorporated into multilateral projects except subsidies.

Without the type of subsidy that has stimulated western markets, it is impossible to expect rural African markets to start buying PV on even modest scales. If the rich in the North can only be convinced to buy only with a subsidy, how can the poor be expected to pay full price? How can PV companies be expected to invest huge amounts to set up infrastructure to sell one 50 W module at a time in remote villages when they can sell them by the thousands in Germany?

Government rural electrification funds – which might have subsidized thousands of systems – have not been made available for PV. In most countries, there is not even enough funding for grid electrification. Existing resources are too scarce to extend the hundreds of kilometres of 30 kV lines required, and renewable energy departments didn’t want to split funding with PV companies.

Finally, from the overall needs perspective, PV as a technology has never been a priority. Alleviation of poverty is the big theme. In the development community, there are many who believe that PV has received too much development assistance already. In a continent where health, shelter, education, water, income generation and other basic human needs are so poorly served, it is difficult to make a direct case for PV.

Still, when Germany, California and Japan invest billions in PV – places with hundreds of times more kilowatt-hours per capita than Africa and scarcely half the solar radiation – doesn’t the idea of building the Africa PV market make a kind of moral sense? Of course it does! PV must play a role in the future of Africa’s power supply. The question is: How to do it.

Real niches for PV in Africa

Unlike Germany or Japan, few (if any) African countries have a coherent plan or strategy for the PV sector. PV in Africa has always been a small-project led affair, without long-term champions or deep-pocketed supporters. National governments do not have serious interest, except where rural electrification wires can’t reach. The sectors that matter – the private and utility sectors – are almost universally unaware and unwilling to invest in PV.

Perhaps the focus on PV for rural electrification only has taken the focus off – and diverted resources from – other viable and important PV markets. While grid-connected growth worldwide has outstripped off-grid PV market growth, similar important and strategic niches for grid-connect PV in Africa have been ignored.

Nevertheless, growing PV production and falling costs will eventually reach Africa and new niches will surely develop. As these niches develop, key stakeholders in African power markets who presently view PV only as a tool for off-grid electrification will become more interested in the PV technology.

Although much of the potential impact of PV remains in small off-grid systems, there is considerable potential for use of PV in more elaborate off-grid systems. Maximizing access means looking at the public sector (as the World Bank is currently doing in a number of countries with projects that install PV in clinics, schools and pumping stations) as well as the private sector. Tourism, small business, telecom and agriculture would invest in PV if provided with the necessary incentives and capacity building. If on-grid PV makes sense in countries where there is excess power, then surely PV makes sense where grid power availability and fluctuations are a problem, in places like Kampala, Dar es Salaam and Nairobi. Today, there are tens of thousands of battery back-ups in east African cities where power supplies are fragile.

As happened in Germany, grid-connect programs will be critical to development of the PV industry in Africa. Grid-connect system capacity will build skills in an industry that has been focusing on small off-grid systems, andmake the sector more interesting to investors. Finally, grid-connect PV will enable PV companies to diversify their business and, in the long term, enhance their ability to serve rural customers.

What is needed
There is an urgent need for support of both off-grid and on-grid PV activities. A market that has not grown significantly in 10 years will not grow spontaneously.

Support by donors and governments for PV projects and the achievement of agreed targets should go hand-in-hand. Supporters must mandate accountability on numbers of systems installed and sold. Africa knows how to install PV – what is needed are supporters concerned about the entire process of design, execution, monitoring and evaluation.

As in Europe, US and Japan, subsidy will be a key element to the development of the market. With the drying up of GEF PV support, there is a need to seek new sources of subsidy funding. Some countries may be able to support modest PV subsidies with locally raised revenue. Others will require support from donors. The $20 billion PV industry should consider allocating support for Africa from within its own coffers.

Off-grid, PV needs to become part of the rural electrification planning process, and governments need to be clear about the limits of rural grid expansion.

  • Intelligent incentives must be made available. Subsidies should be available for a range of PV systems. A long-term vision is needed.

On-grid, there is a need to develop experience and treat PV as an electricity source that it highly valued and easily deployed. Clearly a situation where there is over a gigawatt of grid connected PV in developed countries and nothing in Africa is not tenable.

  • government and utility policy must be adjusted to provide incentives and clear procedures for connecting PV to the grid
  • targets must be set by ministries to promote use of PV on-grid
  • investment by private sector must be supported and encouraged
  • creative financing tools must be developed (including carbon finance)
  • group of knowledgeable champions among African power utilities, ministries, private sector and regulators need to be developed and supported
  • existing global experience in grid-connected PV needs to be incorporated into the African market.

More that in any other part of the world, solar energy must play a role in Africa, as alternatives become increasingly expensive. New efforts in PV must take different approaches that learn from successes in the North, and mistakes of past projects. An Africa with a large PV market benefits everybody.
Mark Hankins is an energy consultant based in Kenya (email: A longer version of this article appeared in Renewable Energy World