The Future of Energy in Sub-Saharan Africa
Energy is the lifeblood of modern civilisation.
Stable electricity across Sub-Saharan Africa is a much-needed driver for the economic prosperity of the continent.
With the numerous debates about energy access across Africa, it has become more apparent that there is no Holy Grail solution. To bring about change, we need changes in regulations, a combination of innovative approaches and technological advancement amongst other things. There is no quick fix.
The Future of Energy in Sub-Saharan Africa
Stears, a Nigerian intelligence company published a report on ‘The Future of Energy in Sub-Saharan Africa’, in partnership with TechCabal. It provides an in-depth analysis of the patterns & drivers of off-grid renewable electrification in Sub-Saharan Africa.
Ignite Energy Africa interviewed Michael Famoroti, the Chief Economist at Stears and head of the Stears Data Advisory & Consulting Practice.
“There is the economic potential that proper electrification would unlock across the continent by allowing people to work for longer, store more goods, etc. There are health benefits from street lights, when people stop using kerosene lamps, and so on. Electricity makes a significant contribution to the quality of life all around the world and that will be the biggest change for Sub-Saharan Africa. Stable electricity will remove one significant production constraint in the region and increased productivity can really supercharge growth.” — Michael Famoroti
Growing up with interrupted power supply
Nigerians are jolly people. We often know how to turn our frustrations into songs and jokes. Each time, we experienced power cuts which were rather frequent, we said: “NEPA has taken light”. Whenever power came back, we shouted, “Up NEPA!
*NEPA, the National Electric Power Authority which is now known as The Power Holding Company of Nigeria, governs the use of electricity in Nigeria*.
“Most people growing up in the 1990s and 2000s would have had similar experiences. One that sticks out for me is how normalised generators were in Lagos in particular. In a way, that hid the underlying electricity problem for some people, although NEPA was often the punchline of many jokes. I think that’s another way the entire situation was normalised. Once you can joke about something, on a subconscious level, you have adapted to it.” — Michael Famoroti
Interview with Michael Famoroti
Hi Michael. How easy was it to find energy data for the report?
Data availability is a general challenge in Sub-Saharan Africa and this was no different. However, we understand the value of collating, aggregating and analysing data for businesses, investors, and governments so we have built the capacity to do this over the last few years.
Stears Data specialises in research, data collection and analytics. Our data solutions include providing clients with access to proprietary demographic and economic data, as well as research and advisory services to extract insight from client data. All of this is important to say because the problem is not just the availability of data but also having the tools to analyse available data.
At Stears Data, we have a mix of researchers, economists, data scientists and software engineers that can handle and analyse different types of datasets and that proved very useful in preparing the report.
We set up the knowledge and innovation hub, Ignite Energy Africa to help shape Africa’s energy future. Which knowledge gaps did you identify when conducting research for your report?
One significant issue is that a lot of Sub-Saharan African countries are still unclear about the economic viability of utility-scale electricity generation through different renewable sources. Hydropower is still the most popular electrification method and although many countries would benefit from including wind, geothermal and other renewable sources in their energy mix, not enough work has gone into assessing how this would compare with traditional electricity sources.
Another significant gap is in understanding how consumers use and pay for electricity. Policymakers tend to focus on how consumers interact with the utilities and ignore private generators.
Image Source: the IKEA Foundation
Do you believe Sub-Saharan Africa is ready to adopt this on a large scale?
It is important to remember that electricity is a capital good — it tends to repay the customer’s investment, particularly when it comes to commercial and industrial users. Off-grid renewables have significant potential in the market but the economics have to be correct because affordability is still a big issue.
As policymakers and off-grid operators overcome this affordability issue through enabling reform and innovative financing, then we should see the East African off-grid solar story replicated in more parts of the region. African policymakers are optimistic because the cost of renewable electricity generation is falling around the world but it is important to remember that the local business environment will play a more significant role in determining the cost for electricity end-users.
Sub-Saharan Africa will not benefit from cheaper solar modules if transport and maintenance costs remain high.
On a high-level, what were the key insights in the report?
1. The economics have to be right for renewables to work. Affordability and financing remain a challenge in the industry for both producers and consumers so novel solutions to boost product affordability and consumer spending power will further spur industry growth.
2. Off-grid renewables will play an important role in electrifying the continent. Put simple, off-grid solutions offer a useful alternative in the SSA context, given low rates of rural electrification, high levels of bureaucratic inefficiency, and fiscal constraints.
3. Figuring out where and why off-grid renewable solutions will work is a difficult business. This report creates and analyses multiple maps of the region to understand and predict the pattern of off-grid renewable electricity adoption in the region.
Off-grid solutions have only captured a fraction of the addressable market, even in larger markets like Kenya and Nigeria.
Why should investors, policy-makers, energy companies and energy enthusiasts purchase the Stears report?
The report provides an in-depth analysis of the patterns & drivers of off-grid renewable electrification in Sub-Saharan Africa. It helps investors, operators, and policy-makers to better understand the conditions that precede and promote the rapid adoption of off-grid renewables and where they can be found on the continent. The report also uses maps to visualise the markets for electricity, solar PV technology, and green mini-grids in the region.
At Ignite Energy Africa, we are invested in the future of energy in Africa and the room for growth and innovation. As Famoroti said, “The success of Independent Power Producers (IPPs) is a reminder that the electricity value chain can work in Nigeria; we just need to put the right regulations and make the right investments.”
You can purchase the Stears report here and follow Ignite Energy Africa on Instagram @IgniteEnergyAfrica.
