Stand Alone Solar (SAS) Market Update East Africa

Africa Clean Energy

Solar has been hailed as one of the breakthrough solutions that will drive economic development in Africa. Experts have identified stand-alone solar as a cost-effective solution to the electrification challenges in Sub-Saharan Africa (SSA) where 548 million people still live without electricity. In recognition of this, governments in countries like Ghana, Ethiopia, Kenya, Nigeria, Zambia and Malawi have added solar home systems (SHS) to their national electrification plans. Some of these governments have gone ahead to roll out programmes like the Solar Naija that aims to reach 5 million people with SHS and promote local assembly for the same.

The potential for solar energy to address pressing problems in Africa will increase as more innovations that use decentralized power are developed. It is therefore an opportune time for governments, companies and development actors to double down their efforts to support solar solutions and thereby herald a new ‘solar era’ for Africa.

Here are the latest Market Updates for East Africa:

Kenya

The country will need at least 2.2 million solar home systems (SHS) to achieve universal access by 2022With the government-led Kenya Off-Grid Solar Access Project (KOSAP) programme expected to provide at least 250,000 SHS by 2023, there is a big potential for the private sector and other players to participate. The pay-as-yougo (PAYG) model also provides another option to help attain the target in a country where mobile penetration is over 90 per cent and at least 95 per cent of households have access to one of the available mobile payment platforms.

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Rwanda

Prior to the pandemic, Rwanda enjoyed impressive economic growth, exceeding 8 per cent Gross Domestic Product (GDP) growth in 2018 and 2019 that was driven by strong public investment. During the pandemic, Rwanda implemented well-coordinated preventive measures, including lockdowns, and has largely successfully controlled the spread of the virus. Nevertheless, serious economic challenges lie ahead, with significant slowdown of core economic sectors such as services and industry. The government has responded with an economic stimulus package and instructed commercial banks to ease loan repayment conditions.

Rwanda has made impressive progress toward its energy access targets, from less than 10 per cent with access to electricity in 2009 up to 56 per cent in 2020 (of which 15 per cent are off-grid connections). The government has committed to electrifying 48 per cent of the population through off-grid solutions and 52 per cent through on-grid connections by 2024. In 2019, it published the National Electrification Plan (NEP) and the Ministerial Guidelines for Minimum Standards for Solar Home Systems (SHS). While both documents caused uncertainties in the sector, the government has now provided further clarification on which SHS systems are eligible and in which off-grid areas they may be sold. The Off-Grid Monitoring Information System (OMIS), which is in the final stages of development, will track all SHS deployed in the country. The system will be managed by the Energy Development Corporation Limited (EDCL).

SHS sales witnessed a slowdown in the last two fiscal years. Off-grid market sales witnessed a gradual decline from about 86,000 systems sold in 2017/2018 to 83,000 in 2018/2019 and 62,000 in 2019/2020. This is primarily attributed to the COVID-19 pandemic, affordability constraints and the uncertainty and delays in the development of the Minimum Standards for SHS. During the lockdown between March and April, stand-alone solar (SAS) companies were largely unable to operate, other than provide after-sales support, and imports came to a halt.

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Tanzania

Being a leading market for SAS, Tanzanian (like many others) has been heavily impacted by COVID-related sales declines, layoffs, furloughed workforces and increased operational costs.3 Other challenges facing the sector have recently included:

  • Government bias toward large grid-focused energy access projects,
  • Limited data on SAS potential market segmentation, both off-grid and on-grid, and consumer willingness to pay,
  • Uncertainty surrounding the regulation of pay as you go (PAYG) companies as financial institutions by the Bank of Tanzania (BoT) under the Microfinance Act of 2018, clarified during a BoT-PAYG company roundtable discussion in November 2020,
  • Limited financing for both consumers and SAS companies, or difficulty accessing available financing opportunities, both grant and commercial, due to high eligibility requirements,
  • Limited capacity by the Tanzania Renewable Energy Association (TAREA) to deal with issues of concern between the government and private sector, including growing mistrust by government of perceived lack of transparency in the private sector,

In 2019, more than 60 per cent of the Tanzanian population was still not connected to the grid even after ambitious grid extension initiatives, indicating a potentially large market for SAS solutions.

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Uganda

There is government support for off-grid electrification programmes, although there seems to be a tendency among government officials to favour grid extension over off-grid solutions. Lack of coordination among and within several ministries and government bodies hampers the effective implementation of (off-grid) energy policies.

Other issues related to creating an enabling environment include:

  • The Renewable Energy Policy (REP) is about 14 years old and needs to be updated. A revised policy is currently being worked on.
  • UNBS needs to be supported in developing and enforcing quality standards. It is in the final stages of developing a standard for SHS and pico-solar products – largely plug-and-play products.
  • An interim quality assurance framework has been put in place to guide public funding of off-grid solar programmes that use assembled solar components. This framework, which also adopts IEC standards for products, is expected to be adapted into a national Quality Assurance Framework and Code of Practice in the second quarter of 2021.
  • The current solar products tax and duty exemption scheme is not uniformly applied by the Uganda Revenue Authority (URA).
  • To a certain degree, there is mistrust between government and the private sector, building over time as the result of a perceived lack of transparency on both sides.

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Source: Africa Clean Energy