A New Solution to Power Africa: Productive Use of Renewable Energy
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Access to electricity in sub-Saharan Africa has improved tremendously over the last decade, reaching 49.4% of the population in 2022, up from 33% in 2010. Yet, while electricity access has grown, electricity consumption has not.
While this would be considered a good thing in much of the world, for Africa, it is a discouraging indicator of lagging economic development. Despite growing access, per capita consumption of electricity (excluding South Africa) still averages only 124 kilowatt-hours (kWh) a year. This is roughly equivalent to the energy needed to power three light bulbs in a household for about a month.
These statistics reveal a significant development dilemma: Access to electricity is meaningless if customers can’t afford to pay for it.
Take Kenya, for example, where about 78% of rural earners receive about $38 in monthly income. The current cost of electricity (Ksh. 31.75 ($0.20) per kWh) remains significantly higher than they can afford. And while this low electricity use holds back individual households, it also hampers greater expansion of electricity access. If utilities and renewable energy developers aren’t generating sufficient revenues from the sale of electricity, they won’t invest in installing more mini grids or further expanding the grid.
Fixing Africa’s Electricity Access-Consumption Mismatch: Productive Use of Renewable Energy
In part, Africa’s electricity expansion effort is undercut by well-meaning governments, non-profits and others targeting households, schools and health clinics — operations with low budgets and relatively low electricity demand. Some of these consumers may go months without using any electricity at all simply because it is too costly. What if in addition to directing energy at households, governments, impact investors and development financing institutions invested in expanding energy-intensive services and boosting local incomes so people can better afford electricity? This is the idea behind the Productive Use of Renewable Energy (PURE) concept.
Productive Use of Renewable Energy, or PURE, invests in expanding access to energy in areas that help generate more revenue for rural communities, while spurring demand for clean electricity. Done right, PURE is a virtuous cycle that not only boosts clean electricity use, but supports low-carbon economic growth, creates employment opportunities for growing youth populations, and increases income for rural communities.
For example, say a government or development organization invested in expanding solar-powered irrigation, as well as equipment that adds value in agricultural processing, such as flour-milling machines. These technologies would increase local electricity demand, boost agricultural productivity, enhance food security, create new employment opportunities, and enhance local incomes. Higher incomes improve communities’ ability to pay for electricity, which in turn improves the confidence of energy developers and investors to further expand the grid or, even better, deploy clean energy systems like solar-powered mini grids to meet growing demand. Quality of life improves throughout the community and access to low-carbon energy rises.
PURE Opportunities Abound, but Implementation Lacks
Where PURE has been deployed, results are impressive. For example, over the last three years, WRI Africa has collaborated with local partners to integrate clean energy in the agriculture and healthcare sectors, with the aim of demonstrating the economic, social and environmental benefits of decentralized renewable energy. In Tanzania, WRI partnered with the Tanzania Traditional Energy Development Organization (TaTEDO) to retrofit a diesel-powered generator previously installed by the district government of Chamwino to assist mango farmers with irrigation. By the time WRI intervened, farmers had abandoned the generator due to the high cost of diesel. After retrofitting the generator with solar power and beginning irrigation again, farmers increased mango production by an average of 185% per tree — from about 35 fruits per tree to nearly 100. The project has also helped reduce the distance farmers must travel in search of water for domestic use and livestock, while also improving their resilience and incomes by allowing them to intercrop their mangos with other high-value crops. Now they can better afford to use the clean power they have access to, as well as use more electricity if and when it’s needed.
Another example is the Powering Renewable Energy Opportunities (PREO) Programme by Energy for Impact (E4I) . The program helped drivers shift from conventional internal combustion engine motorbikes, commonly known as boda boda, to electric motorbikes. The switch lowered riders’ operational as well as service and maintenance costs by 68% and 33%, respectively, while increasing demand for electricity.
PREO also assisted health clinics in adopting clean energy as a stable power source. Use of distributed renewable power reduced operating costs and allowed clinics to provide a range of services that rely on electricity, including sample processing, vaccine storage, telemedicine and digital patient records. Rural healthcare facilities working with E4I improved their monthly profits by an average of $250.
Yet, these examples are few and far between. Like the wider clean energy sector, access to finance is a major bottleneck for PURE. Cost of productive use appliances, coupled with rural entrepreneurs’ risk aversion due to low-income levels, are major impediments. Additionally, the market for PURE solutions is still nascent; investors and financing institutions have not yet been able to identify and appreciate the full scope of opportunities. And many communities have limited capacity for running rural commercial enterprises and lack access to profitable markets.
Zooming In: Opportunities for PURE in Makueni County, Kenya
Yet PURE opportunities abound. PURE could be applied in almost any sector, including agriculture (such as through irrigation and grain milling); commercial and industrial activities (like carpentry, tailoring and welding); the service industry (including electric mobility, bars and restaurants, etc.); and healthcare.
WRI and Strathmore University, with support from UK PACT (Partnering for Accelerated Climate Transitions), supported Makueni County in southeastern Kenya to develop its energy plan. Makueni County has some of the lowest electricity access in the country, at only 25% of the population in 2022. Numerous opportunities for PURE exist which, if tapped into, could help stimulate demand for electricity, improve energy access and enhance rural economic growth.
Our mapping exercise identified significant investment opportunities in agriculture, such as $1.5 million of solar-powered dairy processing plants; 10 solar-powered cold rooms for crop preservation; expansion of solar-powered mango-drying technologies; 43 solar-powered irrigation sites costing $9.5 million; and two industrial parks to support agro-processing and fruit packaging. In the health sector, the county government is exploring use of solar energy for its two main health facilities, Makueni County and Makindu sub-county, to cut the cost of grid-provided power.
How to Move PURE from Idea to Implementation
Capitalizing on these opportunities and others like them requires changing the way policymakers, financiers and development groups operate. Four actions could push PURE to the forefront of the electricity access expansion movement:
1) Investors need to see where productive use opportunities exist.
Providing data and analysis that shows the location, size and ability of end-users to pay for energy would play a big role in growing finance for PURE. Geospatial platforms and tools such as WRI’s Energy Access Explorer can help provide such data and visualize where opportunities lie.
2) Unlock finance for investment in the PURE sector.
An analysis by PREO revealed that at least $1.2 trillion is needed to facilitate investment in PURE in rural sub-Saharan Africa over the next decade — about $120 billion annually. High risk perceptions by financiers, steep upfront investment costs, expensive technology, and an absence of end-user financing are some of the major challenges.
Innovative financing mechanisms can help mobilize funding from domestic and international sources. For example, PREO has proven how grants can lower the risks associated with early-stage business concepts, thus improving risk-return profiles for private capital investors. Further, the recent launch of an $11 million syndicated loan facility arranged by SunFunder to enable SunCulture to scale up renewable energy installations at smallholder farms through a Pay-As-You-Grow business model shows how innovative financing can unlock funding for PURE companies and end-users. WRI and our partners in Kenya, Ethiopia and Tanzania are collaborating with national and sub-national governments to help identify opportunities for unlocking domestic resources for the PURE sector through integrated planning and budgeting.
3) Empower local communities to pursue existing opportunities.
Communities can pursue PURE opportunities on their own, but they often lack knowledge in how to operate productive use technologies like solar-powered irrigation systems and solar milling machines, or how to develop business plans. Building local groups’ capacities through training and awareness, as well as providing real-time responses for operational and maintenance needs, could help. Village savings and loan groups and community cooperatives have historically been successful in rallying communities behind economic empowerment initiatives. Sub-national governments could also help — particularly through relevant government agencies or in partnership with development organizations.
4) An ecosystem-based approach can help provide sustainable and scalable solutions.
Scaling up PURE opportunities will require addressing other critical issues along the value chain. For example, in addition to providing access to PURE technologies, farmers may require training in agronomy, support with farm inputs, repair of the road networks to expand their access to markets, and business and financial products that meet their specific circumstances. An ecosystem-based model will therefore be critical during the design and execution of PURE programs.
Without more support for PURE, more Africans may find themselves connected to power, but disempowered to actually use it.
This piece is co-authored by H.E Mutula Kilonzo Junior CBS, governor of Makueni County, Kenya. Courtesy of WRI.
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