20 Oct

West Africa business should turn to solar for their bottom line

“Honestly, I’m surprised this place even runs,” says the technical director of a multinational consumer goods company, with a large factory on the outskirts of Lagos, Africa, as he gestures at the flickering lights above his head.

“Besides the high cost of our diesel power, we have at least six power outages from the grid everyday,” he explains.

This frustration is shared by businesses across west Africa, including in major economies like Ghana, Nigeria, Senegal, and Cameroon.

Distributed solar generation – where households or businesses generate and consume their own solar power rather than obtaining it from centralised power plants – is being touted as a solution to the region’s power problems.

However, so far it has had disappointing traction. Solar currently accounts for less than 1 percent of the generation capacity in west Africa, with no solar generation contracts signed by any businesses prior to late 2016.

A key challenge for solar is that it is impossible to control when the sun will shine. This leads to mismatches between the amount of power produced by a solar plant and the power needed by the consumer.

Also, unlike more developed markets, most African governments do not offer tax credits for solar or net metering credits, which would allow excess power to be sold profitably back to the national power grid.

However, the tide is turning. Solar is finally beginning to deliver on its promise. Three trends have driven the rise of commercial and industrial scale solar in west Africa.

First, affordability has improved dramatically. The price of solar panels have dropped 80 percent over the last eight years.

Second, electricity prices in the region remain at historic highs. The cost of power for large businesses in west Africa typically ranges between 0.14-0.25 $/kWh, compared to a range of 0.09-0.14 $/kWh in Kenya, Tanzania and Uganda.

In places such as Ghana and Nigeria, tariffs have dramatically increased in recent years as cash-strapped governments and utility companies have been forced to reduce legacy subsidies.

Read more: West African business should turn to solar for their bottom line

 

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