Nigeria unexpectedly cut its Monetary Policy Rate (MPR) by 100 basis points from 12.50% to 11.50% in an attempt to boost the economy by providing cheaper credits. Analysts, who see the rate cut as suppressing bond yields, aren’t exactly confident this will work.
African grid operators that don’t open up to solar risk being left behind
African grid operators that don’t put solar power onto their systems risk being bypassed as prices for solar production and storage continue to fall, John van Zuylen, CEO of the Africa Solar Industry Association, tells The Africa Report.
There are already many places where solar energy is the cheapest option says Van Zuylen, who is based in Kigali. That means the prospect of “a significant uptake of solar in the African energy mix, grid-connected but probably mostly off-grid. By rejecting solar, the national utilities may create themselves a new problem: losing their reliable customers.”
Less than 1% of the world’s solar capacity is in Africa. According to the Institut Montaigne in Paris, sub-Saharan Africa is the world’s only region where demographic growth since 2000 has been faster than the speed at which populations are being given access to electricity.
- Only around 10 solar power plants of more than 5MW have been connected to the grid in the whole of sub-Saharan Africa, excluding South Africa, the Institut says.
- Africa has been largely absent from the global solar power plant deployment, which constitutes a “collective failure”, the Institut argues.
- It’s only going to get worse if nothing is done: in 2040, almost 95% of the world’s population without access to electricity will be in sub-Saharan Africa, the Institut says.
Many African national grids are in poor condition and cannot absorb more than 20-30MW in a single location, limiting opportunities, Van Zuylen says.
- For grids that don’t have these technical constraints, questions about risk-sharing, government guarantees and bankable off-take agreements have significantly limited the number of projects coming to fruition, he adds.
- Meanwhile, solar home systems and mini-grids still require heavy subsidies to provide electricity at affordable prices for rural populations, which are often the ones with the lowest available income.
National grids are best placed to do something about it. According to a global outlook for solar power to 2024 published by SolarPower Europe in June, African utilities with access to an urban customer base may be able to finance connections for poorer rural households by subsidising them with revenue collected in cities.
- Projects situated near these urban centres are more bankable due to economies of scale, the possibility of future capacity expansions and a lower risk of under-utilisation, SolarPower Europe says.
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Some countries are becoming supportive of solar. Van Zuylen points to the example of Senegal, which this month removed VAT on all solar products, including water pumping systems.
- The decision is part of a strategy that seeks to achieve universal access to electricity in Senegal by 2025.
- Institut Montaigne says that of the 10 plants connected to sub-Saharan grids, four are in Senegal.
The best thing to do for grid operators is to “guide and accompany a smooth integration of solar in their grids,” Van Zuylen says. “If they do not do so, it could very well be that more and more customers will gradually disconnect from the grid completely as solar plus storage is not only reliable but also increasingly cost-competitive.”
The Bottom Line
Foot-dragging national grids risk being left behind as falling prices for solar and storage equipment have the potential to be a game-changer.