According to the International Monetary Fund, 7 of the world’s 10 fastest-growing economies are located in Africa. While Cairo, Egypt, was the only city in Africa to have a population exceeding 10 million in 2010, seven cities across Africa are expected to achieve this level by 2040. Rapid urbanization means that more than 100 African cities are projected to exceed 1 million inhabitants by 2040. Such levels of urbanization and economic growth have forced local utilities to acquire new, primarily large-scale power projects. Utilities are primarily calling for large scale natural gas power plants and renewable energy projects (led by solar PV and wind), as evidenced by the booming South African renewables market.
Over time, however, there will be growing opportunity for smaller-scale distributed renewable energy projects in the 1 kW to 1 MW range. Growth in this power class is led by government agencies that are electrifying health clinics and schools, often with international donor support. This is likely going to continue to be the case for at least the next 5 years. According to Navigant Research’s report, Global Distributed Generation Deployment Forecast, annual capacity additions of distributed solar PV in Africa are expected to grow from 10.9 MW in 2014 to 56.5 MW in 2023. Agriculture, hotels, extraction industries, water pumping, telecom applications, and growing consumer markets in Africa will result in distributed solar PV growth across the region. Cumulative distributed solar installed capacity during this time will reach 332.2 MW, representing less than 5% of the total installed solar PV capacity in Africa in 2023.
Urban residential will be the last segment to catch on in urban African communities, primarily due to the combination of a small middle class, a lack of awareness among potential customers, and a lack of financing options. Several experienced engineering firms, particularly in Kenya, are targeting distributed solar customer segments. And while there is significant buzz about microgrids in the region, in particular, these projects have not yet developed at the anticipated rate. That will change if innovative companies, such as PowerHive, Access Energy, and PowerGen, are able to successfully scale up current microgrid efforts and attract further investment. In Kenya, there are a number of creative mid-sized projects, including solar-wind hybrid systems, ranging from 10 kW to 300kW. In general, the opportunity for distributed renewables is immense, and the field is wide open – provided companies (and investors) are patient enough to deal with potentially problematic African bureaucracies.
Patient Yet Determined
The engineering firms and developers offering these solutions are working with utilities and regulators to create a more conducive environment for this small-to-mid-scale market segment in urban and off-grid settings. Compared to utility-scale installations by larger international companies that hire workers for a short period and do not have a continued presence, the distributed market segment will have the most impact from a job creation and sustainable development perspective.
These companies tend to be staffed with very determined people who have made progress in very uncertain and often frustrating circumstances. They’re becoming more organized and lobbying for a more favorable regulatory environment – including more robust net metering policies, feed-in tariffs, and, in general, more freedom to operate.
Equally critical, however, is education among financiers (and customers) on how to finance small-to-mid-sized solar PV systems. Similar to the diversity among U.S. state policy and public utility commissions, pathways for growth will differ for each country in Africa. Those that are willing to stay the course and weather the frustrations of operating in uncertain political and regulatory environments stand to profit and, in the process, contribute to the establishment of the local industry over the long term.
Tags: Africa, Distributed energy, Finance & Investing, Policy & Regulation, Renewable Energy, Smart Energy Program
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