UNLEASH SOLAR AND GET AFFORDABLE POWER

Amidst swelling costs and a heavy debt burden, Africa’s electricity utilities are struggling. To address the crisis South Africa's power utility Eskom has applied for a 20.5% electricity tariff increase. Zambia’s new government has announced the removal of subsidised electricity prices from January 2022. In Nigeria, the regulator NERC has announced that the implementation of Service Based Tariffs will result in electricity tariffs increasing up to 50 percent over the next 2 years. In Ghana, the state-owned energy utilities are suffering from a steadily growing debt which has already reached $7,5 billion. And so on.

Unfortunately, the story will not stop here. In 2021, we have seen a dramatic tripling in world coal and natural gas prices, combined with soaring oil and diesel prices. Many African countries have become dependent on imported fossil fuels to meet the growing demand for power. In 2022, energy users across Africa will be asked to foot the bill for the 2021 rise in fuel prices, through the index setting yearly tariff adjustments.

Luckily, a small but growing number of businesses across Africa have started the journey to take control of their energy bills. The Accra-based plastic-recycling company Miniplast is an example. In 2020 the company signed a 20-year Power Sales Agreement with Empower New Energy, partnering with our local development and construction partner Stella Futura. The tariff paid from the 0,7 MWp rooftop solar plant represents a saving on the energy bill of 20 %, and the 800 MWh of clean energy produced equals 400 tonnes of CO2 emissions avoided yearly. In addition, new jobs are created during construction, operation and maintenance and as a result of improved competitiveness of the client. The Miniplast story illustrates that Africa doesn’t have to wait for more soft financing from the rich countries to unleash the solar revolution.

Unfortunately, regulation prohibits energy-users in most African countries – with the exception of Kenya, Nigeria, Egypt, South Africa and a few others – to sign Power Purchase Agreements from private providers of solar energy. (In Ghana, the possibility is limited to large energy-users, so-called “bulk customers”). In the majority of Africa’s 55 countries, the only investment possibility is to set up a rental or a lease-to-own contract with the off-taker. Such contracts are also fine, but generally seen as less attractive to the energy-user than the PPAs most commonly used outside Africa. A second regulatory barrier holding back solar investments in Africa is the absence of net-metering. With the notable exception of South Africa and Egypt, energy-users in Africa have no possibility to valorize surplus electricity. In most parts of the world energy-users producing their own electricity have net-metering contracts with the local distribution company. This means that in periods when the captive power plant is generating more electricity than needed, during maintenance or holidays for example, the energy users can “sell” surplus electricity back to the local utility company. The absence of net-metering means that the energy-user needs to pay for all unused solar electricity, making the solar investment less attractive for the energy-user. Africa’s governments should study the lessons learnt from South Africa and Egypt, and make it easier for businesses to buy solar energy produced on their own rooftops and grounds.

Associations and important voices like AFSIA should continue to advocate the policy-changes that will fully unleash the solar revolution required to bring affordable power to the energy-users across Africa.

We would like to thank the African Solar Industry Association (AFSIA) for sharing this article in their 2022 solar outlook report. Click here to read more.