A study commissioned by responsAbility and assessed by BloombergNEF shows that solar PV for both commercial and industrial sectors have a great potential for growth in sub-Saharan Africa not because of regulatory support, but because of the improving economics of solar PV.
The report suggests that a combination of high-energy costs and the reducing solar module prices is contributing to increased sales of solar directly to commercial and industrial customers in Sub-Saharan Africa.
Here are five (5) interesting findings of this report that was published on January 24th, 2019:
- The financial sector has not tapped this market yet and a majority of projects have been developed and sold for cash, without any type of financing. As such, any PPA or leasing applied for the PV projects have been done so with equity from the solar developer. The main barrier to faster solar PV development in Sub-Saharan Africa has been a lack of access to debt financing.
- With the reducing solar panel cost, on-site solar is now cheaper than the electricity tariffs paid by commercial or industrial (C&I) clients in seven out of the 15 markets in Sub-Saharan Africa that were studied by BNEF. According to BNEF analysis, C&I solar PV projects developed in these markets can produce solar electricity that costs between $0.10 to 0.14/kWh in Kenya, Nigeria, and Ghana. According to the report, it is possible for the industrial sector in such countries like Ghana to buy-onsite solar power for 29% less than the power from the grid, when they are operating seven days per week.
- In Sub-Saharan African countries like Nigeria that experience unpredictable power outages that can last between 4 to 15 hours, solar is a good candidate for businesses that want to improve their competitive edge in business. For instance, in Nigeria alone, there are at least 20MW of on-site solar projects. Because of these frequent power outages, a mix of solar PV and battery storage and diesel generators provide a great solution to ensure a stable power supply.
- Net metering is a concept that allows the stabilization of solar power with the grid instead of battery storage. However, net metering even though proposed in many of the Sub-Saharan countries, has been non-existent. Net metering would help to low the PV cost further because the host facility would feed surplus power into the grid and draw power from the grid at night. Currently, solar PV systems are designed so that all the electricity generated can be consumed directly by the host facility, especially for solar installations serving sites operating seven days per week.
- According to the report, another barrier to PV adoption has been the limited understanding of the benefits of on-site solar by potential customers, however, it appears to be improving fast. For example, developers in Kenya told BNEF that the sales cycle is shortening.
To this end, solar PV has great technical and economic potential for businesses in Sub-Saharan Africa. A combination of good regulation and financing instruments would help to increase investor confidence in the market and spur more growth for Solar PV installations. Here are some thoughts for consideration to grow this market segment:
- Engage the local financial sector and create standardized approaches for evaluating solar PV projects by the financial sector.
- Introduce leasing and third party financing that are standardized and regulated.
- Introduce net-metering good for reducing the energy demand of the country and improving solar PV profitability for the host facility.
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