Off-grid energy opportunities in West Africa

LIVING OFF-GRID

IEA estimates that 530m Africans will still live off-grid by 2040 although 950m will have gained grid access

Sources: Global & Africa data: Off-grid market trends report, 2016 ECOWAS data: based on World Bank electricity access data

Click to edit Master title style ESTIMATED ANNUAL SPEND ON OFF-GRID

LIGHTING & PHONE CHARGING (2014, USD BN)

Source: Bloomberg New Energy Finance, UNEP, GSMA, World Bank

AFRICA

Note: mobile phone charging assumption: one weekly charge at $0.15. Technology breakdown is based on UNEP estimates for 2010. Solar lighting expenditure refers to Lighting Global quality-verified products only.

10.80.8

0.8

2.0

2.4 0.1 17.0

KeroseneKerosenelamps

Batterytorches

Candles Mobile-phone

charging

Pico-solar

Total

People living off-grid spend an estimated USD 17 billion annually on alternative sources of energy

0

20

40

60

80

100

120

140

160

180

200

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Eth

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Tanza

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Ken

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<2 2-10 10-20 20-50 >50 Total off-grid populationDaily per capita income in $:

ESTIMATED POPULATION BY PER CAPITA INCOME LEVEL (USD/DAY): AFRICA

Note: Income levels are expressed in 2011 purchasing power parity dollars. Source: Bloomberg New Energy Finance, World Bank, Pew Research Center

The majority of people living off the grid have a daily income of less than $2

A large share of the population with $2-10 daily income is likely to live off-

grid

Off-grid opportunity: growing menu of technology and business models for ALL

5

Makes off-grid electricity more attractive and available – both for the poor and better-off households

Overlapping technologies and business models to choose from

Possibility to satisfy varied income levels and geographic/demographic

conditions

Makes it easier to climb the energy ladder

Device sales (mostly lanterns)

PAYG Rent to own… (lanterns/SHS)

PAYG fee for service (kits/SHS)

Village micro-grids

Larger grid-quality mini-grids

Grid

• Expanding fast

• Allows customers to

afford higher service

level

• Scalable business

model

• Most investment ready

Mapping the Off-Grid Opportunity

Definition of mini-grid

8

For the purposes of this program, the term ‘mini-grid’ is amply defined and includes the following: • A mini-grid is defined here as a small power source that utilizes hydropower,

solar photovoltaic, biomass or any other energy source (or a combination of sources, or ‘hybrid)’ that supplies a local distribution grid connected to domestic, business and institutional customers in a defined area

• Hybrid mini-grids use multiple generation technologies or resources in order to improve reliability of supply

• Mini-grids can be either stand-alone or connected to the grid

• Operated by private entities

• Other terms that are often used interchangeably with mini-grids include micro-grids, small power producers (SPPs), etc.

..and to attract the investment required to grow, mini-grids must have certain characteristics…

Demonstrated (or believable)

profitability

Robust business model

Experienced team

Steady revenues

Manageable costs

Ability to generate income, without over-reliance on (often unpredictable) subsidies

Understanding of the market

Credible approach to serving customers

Clear strategy for long-term growth

Knowledgeable leaders

Good management with deep sectoral expertise

Well-trained workforce

Source: IFC analysis

Capturing the mini-grid opportunity in Africa

Source: IFC analysis

• Mini-grids are considered to be technically- and commercially viable for high-density populations (>125 people per km2).

• In some countries, mini-grids represent a viable option to improve access to electricity.

• Most countries have limited access to electricity via the national grid.

• Countries face financial limitations to extending the grid

• Government and other players need to establish a strong enabling ecosystem to support mini-grid penetration

How to help companies to effectively capture mini-grid opportunities in the region?

… joint initiative of IFC and the World Bank to accelerate the development of markets for clean off-grid energy products in sub-Saharan Africa. … mobilizes the private sector to build sustainable markets that will provide millions of people in Africa not connected to grid electricity with clean, affordable, quality lighting products, most of which are solar powered.

Lighting Africa

Pro

fita

bili

ty

Break even

Maturity Proof of concept Business model development

12

CATALYZING MARKET DEVELOPMENT AND TRANSFORMATION, NOT DELIVERING SERVICES

Market

Intelligence

Quality

Assurance

Business

Support

Consumer

Education

Catalyzing

Venture

Financing

Catalyzing

mainstream

Investment with

Financial

Institutions

Lighting Africa operates along the market transformation curve,

focusing on specific market support/development activities

Addressing regulatory constraints

Technology/Business model advancement

Advisory Services

Investment

CATEGORIES OF PICO-PV & SHS

Category by Power

Category by Services

Corresponding Energy Access Tier

Pico PV

< 1.5 Wp “Task Light” Single Light only

Systems can provide a person with basic lighting access and contribute to meeting a person & households Tier 1 Electricity Access needs

1.5 – 3 Wp “Area Lighting & Mobile” Single Light & Mobile Charging

More powerful systems provide Tier 1 Electricity Access to at least one person and contribute to meeting a households Tier 1 Access

3 – 10 Wp “Solar Lighting System & Mobile” Multiple Light & Mobile Charging

Systems provide Tier 1 Electricity Access to more than one person, up to a household

SHS

11 – 20 Wp SHS, Entry Level (3-4 lights, mobile charging, radio, fan etc)

Systems provide Tier 1 Electricity Access to a household

21 – 49 Wp SHS, Basic capacity (as above, plus power for TV & extended capacity)

More powerful systems can provide Tier 2 Electricity Access to a household when coupled with high-efficiency appliances

50 – 100 Wp SHS, Medium capacity (as above, plus extended capacities)

Systems provide Tier 2 Electricity Access to a household

> 100Wp SHS, Higher capacity (as above, plus extended capacities)

Systems provide Tier 2 Electricity Access to a household

ECONOMICS OF PICO-PV

Payback period for $13 solar light (in months)

Source: Off-grid solar market trends report, 2016 Assumptions – Kerosene is the reference technology. 3.85 hours use per day, at 0.03 litres/hour and latest available kerosene retail prices

A FEW LESSONS LEARNT

Quality Assurance: critical to prevent market spoilage. Quality bureaus have a big role. Market Intelligence: need to understand the consumers Consumer Education: helps build awareness, knowledge & adoption Business Development: without deep retail distribution, gains may be lost Access to finance: The entire value chain needs A2F. Work with (M)FIs, Development institutions Policy: Government support to remove barriers, e.g. tariffs, VAT, business bottlenecks Recognition of the potential of the off-grid products to help change lives Off-grid is one of the options – grid & off-grid can be complementary Impact: Off-grid energy products can have a great impact on people’s quality of life (health, savings), business, educational outcomes, social life.