Original article in African Business Magazine.
Africa’s ability to provide electricity to its population has traditionally been judged on the ability of its governments to finance or attract private sector investment into new power plants.
Such discussion has generally missed the point. There is no benefit in funding centralised power plants, whether thermal or hydro, without parallel investment in transmission and distribution infrastructure to transport electricity to customers.
And all of this is virtually impossible to finance without a high degree of certainty that customers – whether business or residential – can afford to pay. Little progress on electrification was achieved for many decades because power companies were unable to produce electricity at a price that people could afford.
The lack of revenue made it difficult for utilities to maintain their networks, never mind expand them. Many were restricted to supplying electricity to the prosperous urban elite and companies with a proven ability to pay, particularly industrial consumers.
Most generation projects involved only the very cheapest schemes: coal-fired plants in South Africa and hydro schemes in most of the rest of the continent. Eskom’s coal plants came with a massive environmental bill in the form of carbon emissions but also deadly air pollution.
In 2012, the UN calculated that coal was responsible for a massive 7m deaths a year worldwide. A total of 600m Africans, most of whom live in rural areas, are still without access to electricity, while those reliant on hydroelectricity suffered from all-too-regular power cuts during periods of low rainfall.
Attempts to improve electrification rates came up against the same problems again and again, but all were top-down solutions imposed by government. Many environmental and development groups argued that renewable energy would eventually provide a solution but its potential was very slow to be realised.
Yet the staggering pace of wind and solar power investment over the past few years brings to mind the old adage that anything new takes longer to arrive than expected but happens faster than we ever thought possible. Renewables accounted for most of the new power generation capacity brought on stream last year. This is partly because of concern over global warming but also because of the rapidly falling cost of wind and solar photovoltaics (PV).
Not only has this made concern for the environment less of a trade-off with financial considerations, but renewables are quickly becoming the solution of choice on grounds of cost alone. Solar PV costs have fallen quickly because higher volume production cuts manufacturing costs, while solar conversion rates have increased. This means that the proportion of solar energy that is turned into electricity by solar cells is increasing.
Today, the best residential multi-crystalline silicon panels have solar conversion rates of about 17%, about double those of just eight years ago, and this rate is still increasing quickly. Tenders for large-scale solar PV capacity in the Middle East and Latin America are attracting bids half as high as those on offer just two years ago. Costs have fallen further and faster than anyone thought possible, including most people within the industry.
All this makes wind and solar PV increasingly attractive options for grid supply. Costs for utility-scale projects have not yet fallen as fast in Africa as elsewhere in the world but this is largely because there have been far fewer projects. The direction of prices is still rapidly downwards. Under Kenya’s feed-in tariffs, four 40MW solar PV projects planned by Kenyan and international joint ventures will receive $0.12/kWh for the next 20 years, far lower than suggested for similar schemes just four years ago.
Far lower prices are set to be paid in South Africa, where the Department of Energy announced in early September that it would finally sign power purchase agreements for 2.3 GW of new renewable energy generation projects, overcoming apparent opposition from state-owned power utility Eskom. The department has set a price cap of just R77/kWh (5.9 US cents/kWh) in price negotiations with the selected bidders.
This is exciting but not as exciting as a far quieter development that looks set to revolutionise power supplies across the continent: the spread of off-grid solar PV. Distributors in East Africa in particular are already importing the equipment to supply basic kits to hundreds of thousands of homes each year.
Typical kits cost about $150 and comprise a single PV panel, a battery, a few light bulbs and a charging connection for a mobile phone. Unlike traditional power supply solutions, this is not a top-down approach: it is market driven, with the private sector and individual consumers driving demand.
Companies such as M-Kopa and Juabar allow customers to pay for their equipment on a weekly or monthly basis, often via mobile phone. They can work out cheaper than kerosene lamps as a source of light, and best of all they don’t need transmission or distribution infrastructure. Additional solar panels can be added to provide extra electricity for other uses.
Bringing power to African homes
It may seem a very bold prediction, but it is likely that 90% of African homes will have access to electricity within a decade because of this technology. Let us be clear about this: this is not sufficient electricity to give the same quality of life as most enjoy in the West. It would not power a washing machine or boil a kettle, for example.
Yet they are a start. The first few watts of electricity are the most important: they give school children electric light by which to do their homework and allow adults to charge mobile phones at home.
Moreover, once people are used to regular access to electricity it will be easier to upscale them. The big question is whether this will be achieved via large independent power systems, micro-grids that connect small numbers of people, or via traditional national grids. It is most likely that different approaches will work best in different areas. Interconnected grids of whatever size will give people more reliable access to whatever amount of electricity they need.