Standing by a towering equatorial forest, Jean-Noel Kouame’s new breeze-block house might be beyond the reach of Ivory Coast’s power grid, but it is perfectly located for solar power entrepreneurs.
Buoyed by success in East Africa, off-grid solar power start-ups are pouring into West Africa, offering pay-as-you-go kits in a race to claim tens of millions of customers who lack reliable access to electricity.
At least 11 companies, including leading East African players such as Greenlight Planet, d.light, Off-Grid Electric, M-KOPE Solar, Fenix International and BBOXX, have moved into the region, most within the past two years.
With a potential market worth billions of US dollars, major European energy companies, such as French utilities Electricite de France SA (EDF) and Engie SA are taking notice too.
“It’s important to be there now, because the race has already started,” said Marianne Laigneau, senior executive vice president of EDF’s international division.
The main challenge facing smaller companies is how to raise enough capital to supply the expensive solar kits in return for small upfront payments from customers.
Mobilizing funding for firms providing home solar systems is also part of the US government’s Power Africa initiative. Major power generation projects have been slow to get off the ground, so Power Africa has partnered with start-ups, such as Off-Grid Electric, M-KOPE and d.light, among others, to accelerate off-grid access.
In Abidjan, Kouame does not know when, or if, the national grid will reach the outer edge of the urban sprawl, but thanks to his new solar panel kit he has indoor lighting, an electric fan and a television.
However, it is the light bulb hanging outside his front door that he values the most.
“At night we were scared to go outside,” the 31-year-old taxi driver said. “Where there is light there is safety.”
About 1.2 billion people around the world have no access to a power grid, according to the International Energy Agency (IEA).
Lighting and phone charging alone costs them about US$27 billion a year and some estimates put their total annual energy costs at more than US$60 billion.
While governments in much of the developing world are extending access to national networks, Africa is lagging, with less than 40 percent of African households connected, IEA figures show.
However, what has long been decried as a major obstacle to Africa’s development is viewed as an opportunity by entrepreneurs, such as Nir Marom, cofounder of Lumos Global, the Dutch start-up that built and sold Kouame his kit.
“I read an article about people paying US$0.50 a day for kerosene and candles, and that just didn’t make sense,” Marom said. “I said I can give them 4 kilowatt-hours for the price of kerosene. And that started everything.”
Lumos Global’s kits, which cost about US$600, include a solar panel linked to a battery that supports power sockets, a mobile phone adapter and LED light bulbs.
Kouame, who paid 30,000 CFA francs (US$57) upfront for his kit, is now leasing-to-own. A digital counter on the yellow battery pack tells him when he needs to top up his account using his mobile phone.
If he does not pay, the kit, which also houses a global positioning system, shuts down. However, in five years, he will own it outright and his solar power will be free.
“Five years is nothing,” he said, already weighing the option of another system to run a large freezer sitting empty and unplugged in the corner of his living room. “So my wife can do a little business.”
Pay-as-you-go solar home systems (SHS) like Kouame’s have been the main driver of off-grid power expansion in Africa.
In 2010, when most purchases were limited to simple lighting systems, customers spent US$30 to US$80 on average over a product’s lifetime, according to GOGLA, an independent off-grid industry association. Now it is US$370 to US$1,120.
Global revenues from the pay-as-you-go SHS sector were US$150 million to US$200 million in 2016, GOGLA estimates. That is expected to jump to US$6 billion to US$7 billion in 2022.
Most of the main players in West Africa cut their teeth in East Africa, drawn by the widespread use of mobile money transfers, a key element of the pay-as-you-go off-grid model.
Success there drove annual sector-wide growth of about 140 percent from 2013 to 2016.
However, as the East African market becomes more crowded and mobile money services spread across the continent, many are now heading west.
“I remember doing a market sizing very early on and from a number of metrics West Africa was a better market,” Off-Grid Electric chief executive officer Xavier Helgesen said.
About half of the overall African off-grid population are in West and Central Africa, according to the IEA.
Nigeria, sub-Saharan Africa’s biggest economy and most populous nation, is alone home to about 90 million people with no grid access.
Lumos is an outlier to the extent it picked West Africa as its first market. It launched in Nigeria in 2016 and by the end of last year had sold 73,000 kits and was averaging 16 percent month-on-month revenue growth.
Late last year, it expanded into Ivory Coast, French-speaking West Africa’s largest economy.
Still, despite the rapid growth to date, off-grid solar start-ups say more must be done to improve the capacity of solar home systems and to bring down their cost so the sector can reach its full potential.
“I don’t believe off-grid electrification is a stopgap,” d.light director of partnerships Jamie Evans said. “I believe it’s here to stay.”
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