Africa is sometimes called the continent of the sun, warmed by more hours of bright sunshine than anywhere else on earth. Yet solar penetration, despite its obvious potential, is low: the World Bank estimates installed solar power capacity in Africa to be half that of the UK.
Spotting an opportunity, entrepreneurs have braved regulatory hurdles, high import tariffs and an inexperienced customer base to establish solar companies on the continent that can cost-effectively supply renewable energy.
And for some, it pays off. Two of the top 20 companies in the FT and data provider Statista’s 2022 ranking of Africa’s fastest growing companies are solar power providers. “It’s a booming market, observes Hugo Le Picard, researcher at the Energy & Climate Center of the French Institute of International Relations (IFRI). “With a rapidly growing and urbanizing population, distributed solar systems are becoming the compelling choice for power generation.”
The appeal of solar is its cost and flexibility. Compared to other renewable energies, solar panels are relatively inexpensive and can be installed just about anywhere. This has prompted the private sector to invest heavily in solar power rather than hydro, geothermal and wind power, which have geographical limitations and cost more.
One of the first solar companies to launch in Egypt was KarmSolar, 19th in the FT ranking. Sitting in a Cairo café in 2011, its founders Xavier Auclair, Randa Fahmy, Yumna Madi and Ahmed Zahran came up with the idea of helping farmers in the oasis of Bahariya – not connected to the central grid – to supply water pumps water using solar energy instead of diesel generators. The company signed a contract with agricultural developer Fridal and built 33 wells for its farmland.
“At the beginning, the confidence was very low for solar, few customers could understand that,” says Sami Awa, head of electric mobility at KarmSolar. “We were one of the first players in Egypt [so] there was a lot of extra work we needed to do around education.
In 2015, the company saw that there were opportunities in solar beyond water pumps. They began targeting off-grid regions using a power purchase agreement (PPA) model, under which customers would repay infrastructure costs over a 30-year period as part of their utility tariff. electricity. Its first such contract was with Juhayna, a large dairy company, for a 1 MW station serving an 11,000 acre off-grid farm.
That same year, KarmSolar became the first Egyptian company to obtain an independent power producer license from its energy authority, allowing it to sell electricity from a large off-grid solar installation.
Since 2019, the main shareholder of the company has been the French multinational EDF Renewables and its activities have expanded to include water desalination, construction management and architecture.
Late arrivals have benefited from the falling costs of solar technology in recent years. Among them is GridX Africa, which was launched in 2016 and provides off-grid solar power to safari lodges, housing developments and farms in Kenya, Mozambique and Tanzania.
Co-founder Chalker Kansteiner says vast opportunities for innovation make doing business on the continent exciting. Many African countries do not have fully established centralized grid networks, he notes, so utilities and power infrastructure developers do not face a firmly entrenched status quo when introducing electricity. renewable energies.
“A big trend in power generation today, which can mitigate the impacts of climate change and improve energy security, is moving towards a more distributed energy system, where the private sector has a place,” he adds. -he.
For example, in January, Kenya suffered a nationwide blackout after pylons collapsed, affecting businesses, hospitals, services and other users for 24 hours. Off-grid distributed solar arrays were able to continue operating.
“That’s the promise of solar and battery technology,” says Kansteiner.
In West Africa too, solar power is gaining ground. Sixth in the FT/Statista ranking, the Nigerian company Starsight Energy, whose managing director, Tony Carr, has bet on renewable energies after 25 years in mining.
Carr officially launched Starsight in 2017 with an equity investment from Helios Investment Partners and Africa Infrastructure Investment Managers. This follows an 18-month proof-of-concept period during which the company targeted banks, persuading them to switch to solar from the diesel generators that are ubiquitous in Nigeria.
Starsight estimates that its sites receive an average of 12% of their electricity from the central grid, with the rest coming from other sources. Its purpose is not simply to provide electricity; it also aims to make organizations energy efficient, by assessing buildings and replacing lighting and air conditioning equipment with more efficient models, for a typical energy saving of around 20%.
“When we started, no one thought renewables could meet a bank’s energy needs,” Carr says. “In 2017, you could never get commercial funding for this type of business model. Now we have a queue of bankers around the block who want to lend us money.