Solar offers huge opportunities to African startups

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Running businesses specialising in the provision of affordable solar power to off-grid communities in Africa offers huge opportunities to entrepreneurs.

This is according to Uvie Ugono, chief executive officer (CEO) of Solynta Energy, which installs solar systems for homes and businesses in Nigeria and Ghana and is planning to expand to South Africa this year, and Sachi DeCou, co-founder of Juabar, which designs and builds solar charging kiosks before leasing them to Tanzanian entrepreneurs.

Disrupt Africa has reported before on the high levels of investment coming into African solar startups, and the figures back up the scale of the problem they are looking to tackle, and thus the size of the opportunity.

According to the International Energy Agency (IEA), 585 million people in Sub-Saharan Africa lack access to electricity, with the continent home to 48 per cent of the global population that has no access to electricity. The region on average has a grid access rate of 20 per cent. Yet in sustainable, easy-to-maintain and increasingly cheap solar, many feel they have found the answer to the problem.

Ugono, in fact, says the potential of solar in Africa as a source of power is “absolutely enormous”.

“Africa receives approximately 49 per cent of the total solar energy on earth, and also has the lowest energy capacity per capita in the world,” he said.

“Further, the general lack of conventional electricity infrastructure lends itself to the rapid deployment of solar, given its standalone nature. In Nigeria, for instance, there’s currently an energy deficit of 170,000 megawatts, the majority of which can and should be filled with solar energy.”

 

DeCou says recent innovations in battery storage and the falling cost of solar panel technology had made solar increasingly accessible in Africa.

“Much of my solar work has focused in Tanzania where there is limited existing electricity grid and a dispersed population, making decentralised solar electricity solutions ideal. With the lower cost of solar panels and increased adoption of pay-as-you-go technology, allowing for payments to be made in installments over time, the potential to reach individuals with limited access to cash on hand opens up additional opportunities,” she said.

She advised, however, startups to understand how their particular product or service fits into the existing ecosystem, and the types of partnerships needed in order to effectively implement a solution in a certain market.

“There is a lot of new technology coming out from new pay-as-you-go solutions to new batteries for electricity storage, which makes it an all the more exciting time to engage,” she said.

DeCou commended Tanzania and other East African countries for offering VAT exemptions on imported solar products imported into the country. She said governments have historically been focused on centralised electricity solutions, prioritising larger scale installations tied into the central grid, but said this is changing as costs come down on solar.

“Off-grid solar solutions have become a technically and financially viable alternative to the electricity grid. Decentralised off-grid solutions are a vital part of the medley of electricity solutions required to approach universal electricity access. The prioritisation of new and ongoing public-private partnerships could benefit the industry,” she said.

Ugono, however, called for more from governments, saying Africa should be competing with China as the epicentre of global solar manufacturing.

“African Governments have still not fully realised the enormous potential of solar energy, not just as a viable way of solving their power shortages, but also on the manufacturing side, and the potential for massive job creation,” he said.

Nonetheless, African solar startups are certainly proving attractive to investors currently. Kenyan startup M-KOPA Solar recently closed its fourth round of investment through a US$12.45 million equity and debt deal led by LGT Venture Philanthropy, while Ugandan startup SolarNow last year secured US$3 million in investment. Another East African solar provider benefitting from investment is Tanzania’s Off Grid Electric, which secured US$16 million in funding.

More investment into African solar is set to follow from the likes of the US-Africa Clean Energy Finance (ACEF) initiative, Dubai-based Access Power and French renewable energy investment firm EREN, and the City of Johannesburg.

Ugono and DeCou called for more of the same if the sector was to really fulfill its potential.

“Financing support is far and away the most critical support required to enable the growth of solar In Africa, Ugono said.

“Giving customers the ability to pay for their solar systems over a two-year period will dramatically increase the take up of the technology, as it becomes more affordable for them. This requires significant access to capital for solar providers, to enable them to stock the product in the first instance. However, the local banking system does not yet support solar energy, making it difficult to bridge this problem.”

DeCou, meanwhile, called for more access to affordable growth capital.

“Smaller startup loans, grants or equity investments would facilitate faster growth across the industry,” she said.

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Passionate about the vibrant tech startups scene in Africa, Tom can usually be found sniffing out the continent's most exciting new companies and entrepreneurs, funding rounds and any other developments within the growing ecosystem.

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