Pay-as-you-go models address energy poverty in Africa

Out of the more than one billion people in the world who have no access to electricity, 600 million are from Sub-Saharan Africa. This translates to a 40 percent electricity access rate for the entire continent, the lowest in the world.

Up to three quarters of them are in rural areas and low cost urban dwellings relying on expensive and life-threatening sources of energy among them kerosene and firewood. On average these households spend over 30 percent of their income on a form of energy like kerosene. Reports estimate that African rural households spend $10 billion each year on energy related products including candles, kerosene and charcoal and pay up to 80 times more for energy compared to people in Manhattan or London. The poisonous fumes from burning firewood kill over 600,000 people annually, half of them being children according to the World Health Organization. Up to two thirds of adult females suffering cancer in developing nations do not smoke in what is attributed to breathing the toxic fumes which the WHO estimates are the equivalent of smoking two packets of cigarettes each day.

Unexploited sources of renewable energy

Connecting the rural people to the national grid has proven expensive due to the vastness of the continent, the distance between homes and rough terrain. Even ambitious projects like Kenya’s last mile connectivity haven’t achieved much.

Yet Africa has some of the most unexploited sources of renewable energy worldwide. The continent receives more hours of sunlight across the year than any other. In fact seven of the ten sunniest countries on earth are in Africa, including Sudan, Chad, Niger, Kenya, Madagascar, South Africa and Egypt.

Now innovative models are exploring ways of tapping this abundant solar energy and the ubiquitous mobile money technology to reach the under-served communities across the continent.

The Pay as you go, PAYG, business model of energy access has been a roaring success especially in East and West Africa. Under this arrangement companies lease solar home systems to customers. A basic system has a battery, solar panel, a charge controller. LED bulbs and mobile charger. Customers commit to an upfront amount for the system which acts as security and then are able to pay for the energy they consume on daily, weekly or monthly basis with daily rates averaging between $0.30 and $2.00 depending on usage. Should a customer feel the need to increase their energy needs more solar panels are added to the system. Payment is done through mobile money platforms like MPESA or through scratch cards. The model has expanded to small businesses like bars and salons allowing them to operate on extended hours, save on electricity costs and expand their businesses. The renewable energy companies also allow for flexible payment terms to entice customers and reduce the risk of defaults in payment.

“The pay as you go model has revolutionized access and consumption of electricity especially to a bulk of Africans who have hitherto been locked out of conventional energy. Embracing renewable energy has now allowed storing of power at home rather than transmitting and distributing electricity from the conventional national grid which ultimately brings down cost. It is one of the most cost effective and sustainable ways ever of addressing the energy poverty in Sub-Saharan Africa”, said Bakari Hussein a Renewable Energy and Climate Technologies Investment Analyst.

Over 20 companies among them M-Kopa, Bboxx, d.Light, Mobisol and Nova Lumos are active in this space and have cumulatively raised more than $360 million to provide PAYG in East and West Africa. They serve over 700,000 customers.

Addressing energy poverty

For Eunice Mwikali a social worker in Eastern Kenya, her salary was traditionally split between paying school fees for her three children, meeting basic family needs and the cost of kerosene which she said eats into her budget: “I could spend up to $50 every month on kerosene alone because my children needed to study. It was really taking a toll on my income but I had no choice. The government said it was working on connecting us to the national grid but we were required to raise $300 for the initial installation. I couldn’t afford that kind of money,” she recalled. When she was introduced to the purchase of solar kit by a friend she paid the initial $20 to acquire the system and has now purchased two more, one for her mother and another for a salon business she recently opened. “I have managed to cut the cost of fuel by more than half and I am able to do so many things including listening to radio, charging my phone and lighting. The solar system is also very reliable because there is so much sunlight in our area”, she said.

Rukoki prison in rural Uganda has traditionally relied on kerosene lamps in prisoners’ wards. But working with Bboxx, a British company that designs, distributes and finances plug and play solar systems for the African market, the prison was able to install solar kits and power the entire facility, the first time since it was established.

Experts now say that investments from foreign development investors coupled with African governments’ commitment are enough to power the renewable energy revolution in Africa and address the energy poverty as it has done in countries like Bangladesh. With $750 million in investments from development partners the country was able to distribute 3 million home solar systems to rural communities, with 13 million people being connected to power for the first time between 2003 and 2014. The country remains a classic case of how renewable energy can reach a large population and transform lives.

“It ultimately makes business and economic sense and should be the focus of governments across Sub Saharan Africa. The sun is in plenty, it is free and is going nowhere. Why not tap it to meet the energy needs of millions who deserve this,” argued Hussein.