By Fitch Solutions

Key View:

  • Globally we expect to see over 1200GW of new solar capacity come online between 2022 and 2031 while the Sub Saharan Africa (SSA) region will represent just below 1% of this growth, despite exhibiting excellent solar potential.
  • Over our 10 year forecast period South AfricaZambia and Nigeria are the largest contributors to solar capacity growth in the region due to increased levels of electrification, grid access, investment security and renewables support.
  • With low access to electricity rates accompanied by the highest percentage of rural population, we see high potential for Decentralized Solar Systems in SSA. The region will be able to enhance electrification rates significantly by looking into alternate power technologies, such as off grid solar.
  • Our views are supported by ongoing initiatives to support off grid solar growth which are driven by mini-grid installments across Africa.

Globally we expect to see over 1200GW of new solar capacity come online between 2022 and 2031 while the Sub Saharan Africa (SSA) region will represent just below 1% of this growth, despite exhibiting excellent solar potential. The MENA and SSA regions are forecasted to have 26.1GW and 8.6GW respectively come online by 2031 which represent 2.2% and 0.7% of global growth respectively. The International Energy Agency (IEA) states Africa as having 60% of the best solar resources in the world, but only 1% of the world’s installed solar photovoltaic (PV) capacity. Further, Africa leads the way for long-term solar energy power output by slightly exceeding the threshold of 4.5 kWh/kWp per day. Low grid coverage and unreliability, as well as the lack of appropriate regulations, institutional frameworks, and policies for renewable growth in the majority of SSA nations, are the main obstacles in fast tracking growth of solar in SSA. Despite the region’s unfavorable conditions there has been growth in interest of decentralized solar systems from private power providers. The advantages of off grid systems not being connected to any utility’s power system and functioning independently makes them easier to implement in communities with poor grid connectivity.

While SSA does underperform on a global scale, the growth of solar capacity in the region will be the primary force driving growth in the regions non-hydropower renewables sector, accounting for 8.2% of growth between 2022 and 2031. Zambia and Nigeria will see robust growth in solar capacity, due to strong project pipelines. Mainly, the Serenje and Kaluluahi Solar Plants in Zambia are set to bring online a combined capacity of 400MW and Nigeria’s 360MW Gezhouba Lagos Solar Park coming online in 2023. The expansion will be largely credited to South Africa’s extensive pipeline of solar projects, which will increase the nation’s solar capacity from 6.3GW in 2022 to 11.2GW in 2031. South Africa’s dominance in solar capacity growth is due to better government support in the sector and the market having investment security. Additionally, South Africa has better grid access and high urbanization rates with only 32.7% rural population.

SSA continues to be overcome with low electrification rates, despite forecasted growth in total generation and capacity in the region. Africa’s poor electrification rates remain a problem for power sector development and the uptake of renewable power. African markets have the lowest access to electricity rates among the globe with a continental average of 73%. Sub-Saharan Africa (SSA) is disproportionately weaker with a sub-regional average of 48% grid access compared to MENA’s average of 97.4%. North African countries have high rates of electrification especially EgyptMorocco and Tunisia who have 100% access to electricity. These markets have better economic outlooks and boast fairly low transmission and distribution losses, compared to the SSA markets. TanzaniaDRC, and Mozambique are the markets with the lowest electrification rates in Africa. Whereas, Uganda, Zambia and Angola perform below the SSA regional average. However, we forecast that Zambia, Angola, Uganda and Tanzania will see some growth in solar capacity in the next 10 years. This will positively impact the market’s ability to increase access to the grid. In the region, Ghana, South Africa and Botswana maintain fairly high access to electricity (% of population) rates. With the region’s electrification below 50%, it is vital that SSA look towards supporting off-grid energy to communities. Transmission infrastructure projects can prove to be prohibitively expensive with many SSA markets facing challenging development conditions for such large capital-intensive projects.

Due to the high percentage of rural population, SSA creates large opportunities for off-grid solar investments. The off-grid solar sector has seen major growth in the region especially in Kenya. The Kenya Off-Grid Solar Access Project (KOSAP) in the past two years has provided just over half a million people with access to electricity through decentralized solar systems. The market still has high rural population rates and a low solar capacity growth forecast, however, Kenya’s electrification rate is high at 71.4%. Ghana is set to further grow off-grid solar, following the government signing a USD69.88mn financing agreement with the African Development Bank (ADB) to fund the implementation of a rural electrification project via decentralized solar systems.

Markets such as DRC and Ethiopia, that have low electrification rates, low forecasts for solar capacity growth and a significant percentage of their population being rural will benefit greatly from the implementation of off-grid solar. However, these markets have not received much activity in the off-grid solar sector. Although offering tremendous opportunity for off-grid solar, the DRC has unstable political and economic conditions therefore restraining investments in the market. In a bid to provide a better framework for household solar systems and other off-grid energy options, the Mozambican government adopted a policy governing the use of off-grid electricity supplies. Which are anticipated to be crucial in supplying energy to a sizeable portion of the rural population. However, the market has not attained any significant investments for off-grid solar.

Our views are supported by ongoing initiatives to support off-grid solar growth which are driven by mini-grid installments across Africa. These developments, while not the largest in terms for capacity could catalyze support and act as a proof of concept for future programs. Among these we highlight the following developments in the region:

  • As a way to solve electricity access, South African utility Eskom has plans to power South African households with microgrids. The plan includes micro-grids made of upcycled shipping containers that have been repurposed to include batteries on the inside with solar panels on the outside.
  • The African Development Bank announced that European and US donors will provide USD20mn of concessional cheap loans to support off-grid solar companies in Sub-Saharan Africa.
  • Winch Energy Ltd’s project to install 49 mini-grids plus portable batteries in Sierra Leone and Uganda is close to completing. The project is rolling out remote power unit mini-grid solutions that will connect over 55,000 people with electricity for the first time.
  • Six new solar mini-grids in Nigeria, each with a 50 kW generation capacity, are being put into service by the American company Husk Power. The facilities will serve Nasarawa State’s commercial and residential areas.
  • On Idjwi Island in the DRC, InfraCo Africa and Equatorial Power (EP) agreed to jointly create four new mini-grids and four agri-processing hubs (APHs). In southeast Rwanda, the companies will also create four solar mini-grids and three APHs. The mini-grids, which range in size from 60 kW to 85 kW, will also include battery energy storage to assist balancing erratic solar power during the two countries’ wet seasons.

Requests have been made for the COP27 leaders to create more concrete plans and procedures to boost financial and investment flows to developing nations in order to help them handle their difficulties with energy security and climate change. We believe off-grid solar presents the most opportunities to address these challenges in raising money for grid access enhancements. As mini-grids have largely become the most affordable way to provide high-quality electricity to towns without grid access due to the decline in price of off-grid solar energy, which has decreased from USD0.55/kWh in 2018 to USD0.38/kWh. We therefore highlight future initiatives from global climate policy leaders will need to focus at delivering systems that address or work in conjunction with the structural grid connection challenges in the region.

This article has been sourced from Fitch Solutions and can be accessed here