news analysis advocacy

Support AfricaFocus and independent bookstores!

Make non-profit your first stop for buying books.
See books recommended by AfricaFocus.


Visit the AfricaFocus
Country Pages

Burkina Faso
Cape Verde
Central Afr. Rep.
Congo (Brazzaville)
Congo (Kinshasa)
Cτte d'Ivoire
Equatorial Guinea
São Tomé
Sierra Leone
South Africa
South Sudan
Western Sahara

Get AfricaFocus Bulletin by e-mail!

Format for print or mobile

Africa/Global: Scaling Up Solar

AfricaFocus Bulletin
March 21, 2017 (170321)
(Reposted from sources cited below)

Editor's Note

Even in the United States, where action on climate change is under threat from aggressive assault by climate deniers in the Trump administration and Congress, renewable energy is projected to continue to advance rapidly, on the basis of its still growing cost advantages over fossil fuels. According to a report just released by GTM research, the US total solar market, already supplying the largest share of new power production, is poised to triple over the next five years. The prospect for renewable energy to power increased access to electricity in Africa is also dramatic, according to a new report from the Africa Progress Panel.

In both developed countries and in regions where hundreds of millions lack any access at all to electricity, the technical capacity for rapid massive expansion of renewable energy supplies has already been demonstrated. Scaling up, however, requires financial innovation as well, and that still depends in large part on public policy as well as private sector financing. Fortunately, in Africa as well as at the global level, recognition of the potential benefits is growing almost as fast as technical innovation.

This AfricaFocus Bulletin contains opening remarks by Kofi Annan on the launch of a new report by the Africa Progress Panel: "Lights, Power, Action: Electrifying Africa." The full report stresses the central role of off-grid and mini-grid systems in providing access to electricity for the estimated 620 million Africans currently without such access. The report, too long and complexly formatted to be excerpted here, is available in pdf format (

While acknowledging the role of extending the grid and some continued reliance on large-scale power-production projects, the report's emphasis is the demonstrable untapped potential for scaling up both small-scale household systems and community-level minigrids, both of which have been demonstrated in practice as cost-effective.

Also included is the executive summary of a World Resources Institute study published in December 2016, focusing particularly on the remarkable success and even-greater potential of "pay-as-you-go" solar systems, using the case studies of Kenya and Tanzania. The principal obstacle to scaling up, the study concludes, is not technical but rather financial. New forms of financing and seed funds have enormous potential for expansion.

For previous AfricaFocus Bulletins on climate change and energy, visit

++++++++++++++++++++++end editor's note+++++++++++++++++

Opening remarks by Kofi Annan, Chair of the Africa Progress Panel, at the launch of "Lights, Power, Action: Electrifying Africa" in Abidjan, Côte d'Ivoire on 13 March 2017.

Africa Progress Panel

Distinguished Guests, Ladies and Gentlemen,

I am pleased to be with you in Abidjan this morning.

Achieving universal access to modern energy is critical to Africa's transformation.

The Africa Progress Panel, which I chair, welcomes the opportunity to collaborate with the African Development Bank and other key stakeholders in pushing for the changes we need to see.

It was in that spirit that I gladly accepted President Adesina's invitation last year to serve as a lead champion of the New Deal on Energy in Africa. His leadership in positioning the AfDB at the forefront of the New Deal process is precisely what is needed to change the game for Africa.

The Africa Progress Panel first drew attention to the need for bolder action to electrify Africa faster in our 2015 Report: "Power, People, Planet: Seizing Africa's Energy and Climate opportunities". Two years later, this need remains as urgent as ever.

Nearly two-thirds of Africans – 620 million people – still do not have access to "affordable, reliable, sustainable and modern electricity", the energy goal that is central to Agenda 2030.

Africa's energy deficit continues to stifle economic growth, job creation, agricultural transformation, and improvements in health and education. Meeting Sustainable Development Goal 7, the energy goal, is a pre-condition for achieving many of the other goals.

The good news is that we are no longer in the dark, so to speak, about how to tackle this challenge.

In several countries, including Ethiopia, Kenya, Morocco and South Africa, renewable energy makes up an increasingly important share of national power generation.

There are also a number of promising initiatives aimed at providing electricity across borders, mostly drawing on renewable resources such as solar, wind and hydro power.

We now need to see more of them deployed at far greater scale to bring power and light to Africans who still lack modern energy.

That is the core message of the APP's new report, Lights, Power, Action: Electrifying Africa, which is launched today.

Traditional approaches to extending the grid are no longer viable as the main option for African countries. They take too long and do not meet the needs of our growing economies and societies. Instead, governments and their partners need to re-imagine their energy future.

We are not saying countries should immediately stop using fossil fuels and switch to renewable sources of energy. As our report clearly states, the cost of transitioning to renewables may be prohibitively high in the short term – especially for countries that use their sizeable endowments of coal and other fossil fuels to generate energy.

What we are advocating is that African governments harness every available energy option, so that no one is left behind. Each country needs to decide on the most cost-effective, technologically efficient energy mix that works best for its own needs.

To meeting rapidly growing demand, that energy mix will gradually progress towards greater use of off-grid household systems and minigrids. It should also lead to the emergence of more flexible, hybrid national energy systems that link grids to off-grid generation.

Mobile phone technology has already helped Africa to leapfrog over conventional technology and to improve financial and social inclusion. In the same way, we foresee that innovation will bring millions of Africans into the energy loop, leading to better health, better education, better access to markets, and better jobs.

Off-grid electricity generation used to be regarded in Africa as a stop-gap measure – a way to power a few lights during the long wait for a grid connection. In recent years, the number of households connected to off-grid power has soared, improving millions of lives while relieving a chronic shortage of power.

Some of these home systems may in future connect to grids through buy-back schemes, enabling households to earn extra cash from the power they generate. Such arrangements are already working in Australia, some parts of Europe and the United States. Overall, however, policy and regulatory environments in Africa need to improve considerably to make such linkages reality.

As we document in our new report, off-grid solar products can act as rungs on an "energy ladder", providing a range of energy services to households and enterprises with different energy needs and incomes.

Mini-grids can also offer sustainable permanent alternatives to connecting to the grid, especially as reliable and affordable products come on-stream that are attractive to small and mediumsized enterprises as well as communities operating far from the national grid.

The agenda is clear and the challenges are well known.

As well as leading the way in promoting wider use of off-grid and mini-grid technology, African governments must continue to work hard to transform national energy grids that are often unreliable and financially fragile.

Many energy utilities are mismanaged and inefficient. A lack of accountability and transparency in their governance also nurtures corruption.

Electricity theft at staggering scale is often the result of this malpractice; rolling black-outs are the result of mismanagement. All continue to feed a deep sense of frustration among citizens.

They also highlight why power provision has become a highly political issue in several countries.

Poor energy governance reflects the wider governance deficit that threatens to derail development efforts in a number of countries.

So what do African governments and their partners need to do to make this vision of an empowered Africa a reality?

Africa's leadership, in both public and private sectors, needs to step up and champion the "energy for all" agenda.

Governments need to intensify their efforts to put in place regulatory environments that give the energy sector incentives to deliver on its transformative potential.

The private sector, African and non-African, should be encouraged to enter energy generation, transmission and distribution markets, deepen linkages throughout the value chain, and build the investment partnerships that can drive growth and create jobs.

While the onus is on African leadership and ownership of this agenda, Africa's energy future is also an issue of global relevance. Although Africa only accounts for a tiny fraction of global emissions, it wholeheartedly embraced the Paris climate agreement's overarching ambition – limiting global warming through unshakeable and progressive commitment to a low-carbon planet.

The Paris commitment has led the industrialized countries to pledge billions of dollars to supporting the low carbon transition, in Africa and elsewhere. However, and as we have repeatedly highlighted in our reports and our public advocacy, very little of that money is moving yet.

Ladies and gentlemen,

As our new report shows, where there is good leadership, there are excellent prospects for energy transition, and leaders in a number of countries are demonstrating the levels and intensity of political will needed to address these serious and persistent problems.

We urge governments to put in place the integrated plans and policies that can scale up Africa's energy transition. The success of countries such as Côte d'Ivoire, Ethiopia, Morocco, Rwanda and South Africa shows what can be achieved.

Achievements at the national level are essential but only part of the solution. To fully address the energy challenges, governments must collaborate more closely on a continental scale. Improved cross-border power trade is crucial to realising Africa's energy potential. Yet less than 8 per cent of power is currently traded across borders in Sub-Saharan Africa.

There is a glaring need to adopt a more continental approach to power infrastructure development and management in order to accelerate regional power integration.

This must involve a greater pooling of electricity resources and harmonisation of national grids. Massive increases in investment in regional transmission infrastructure and the development of new power trading arrangements are also essential.

The ultimate goal should be to interlink Africa's numerous and fragmented power initiatives to create a single pan-African power grid.

We know what is needed to reduce and ultimately eliminate Africa's energy deficit. Now we must focus on implementation.

The time for excuses is over.

It's time for action.

Stimulating Pay-As-You-Go Energy Access in Kenya And Tanzania: The Role of Development Finance

World Resources Institute

Issue Brief

December 2016

Sanjoy Sanyal, Jeffrey Prins, Feli Visco, and Ariel Pinchot

Executive Summary

Nearly 620 million people in sub-Saharan Africa lack electricity access. Improving access to affordable and reliable energy is critical to reducing poverty and improving quality of life (IEA 2011). To improve energy access, it is important to develop financing and payment schemes that fit consumer energy budgets. "Pay-as-you-go" (PAYG) business models harness technology to provide a "one-stop-shop" solution for consumer finance and energy products. The PAYG model originated in Kenya, and addresses the key challenges of extending end-user finance and collecting payments from remote customers who often have erratic and limited cash flow. PAYG companies, at this point, typically provide basic lighting and mobile phone charging services. The technology can play an important role in expanding access to electricity services to remote and lowincome populations.

This issue brief draws on findings from desk research, workshops, and inter views with PAYG companies, donors, and development finance institutions (DFIs) active in energy access in East Africa to assess how PAYG companies have stepped up to serve the approximately 35 million people in Kenya and 36 million people in Tanzania who lack access to electricity, as well as additional millions who are underserved. Our paper also draws on interviews with stakeholders involved in Bangladesh's IDCOL program to provide insight into how DFIs and donors supported the Bangladesh program, in order to elicit lessons relevant to the Kenyan and Tanzanian contexts. We chose Bangladesh's IDCOL program as a reference point for two reasons: the energy enterprises in Bangladesh perform the same one-stop-shop role as the PAYG companies, and IDCOL provides an example of where DFIs have played a significant role in channeling finance (US$750 million) to achieve substantial energy access goals (three million solar home systems).

Given the nascent stage of most energy access markets, much of the existing PAYG literature focuses on analyzing the innovative variations of business models as well as factors that could improve the enabling environment. However, market players in both Kenya and Tanzania have evolved beyond an early-stage pilot phase. These pioneering companies have successfully raised grant, equity, and-- more recently-- debt finance to pilot, develop, and scale their businesses. According to our estimates, they have reached more than half a million households through rapid sales growth. The market overall is also evolving, as suggested by the participation of 52 international private sector investors--ranging from foundations to large companies--and five debt deals struck in 2015, the largest of which was a US$45 million raise by one company. Market leaders such as M-KOPA, Mobisol, and Off-Grid Electric have begun expanding into regional markets.

While encouraging progress has been made, the addressable markets in Kenya and Tanzania are much larger than those reached by existing companies so far, and the products they offer need to be larger in capacity if they are to provide more than basic lighting and mobile charging. PAYG companies will require about one billion dollars across these two countries to scale for broader impact. Therefore, this issue brief focuses on how this broader impact can be created. We look at how successful PAYG businesses operating in Kenya and Tanzania have raised finance and the constraints faced by the industry, and we propose recommendations for how donors and DFIs can continue to support the development of these markets.

Currently, the various types of capital (debt, impact equity capital, grant) that PAYG companies need are available almost exclusively from international investors. Local financial institutions in Kenya and Tanzania have been hesitant to provide financing to PAYG customers: they perceive PAYG companies as earlystage, risky businesses and are unfamiliar with the technology as well as the creditworthiness of rural consumers. The absence of local capital sources to some extent explains the fact that almost all the successful PAYG companies are foreign owned and foreign managed. Local companies often lack the initial resources, as well as the networks and skills, to raise both early-stage capital and develop complex financial structures to raise debt capital from international markets. Local companies are also hesitant to take on foreign currency risk.

Technological barriers to the PAYG business are falling, and the sector is likely to see the entry of a larger number of companies. This is not yet happening, because access to finance remains a key entry barrier, particularly for locally owned and managed companies. Finance is most critically needed to build out marketing, sales, and service infrastructure and to provide customers with financing. The relative lack of access to finance results in fewer companies and less competition in the PAYG sector.


DFIs and donors have a role to play in supporting local financial institutions to extend local currency debt. In Bangladesh, international DFIs and donors channeled funds for energy access through IDCOL, a government-owned financial intermediary. IDCOL also played a strong role in market development. The market support roles played by IDCOL can be adapted to the Kenyan and Tanzanian contexts. The debt- financing role in Kenya and Tanzania can be played by commercial banks from the very beginning. Involving commercial banks would have the advantage of ensuring that funds are available to the sector even after donors withdraw. ...

Drawing on the success of the IDCOL program and the unique needs of PAYG companies, we offer recommendations targeted primarily to DFIs and donors regarding how they can support local financial institutions in their efforts to expand energy access in Kenya and Tanzania.

  • International DFIs and donors can leverage their long relationships with local financial institutions in Kenya and Tanzania to stimulate local finance for the PAYG sector. DFIs and donors can provide guarantee schemes and lines of credit to local banks. This support would help banks develop a deeper understanding and familiarity with PAYG business models, and make finance more accessible to local companies. International DFIs and donors can "crowd in" private sector investment in PAYG by channeling their investments through fund of funds run by professional impact investors and incentivize PAYG companies to invest in targeted marketing and distribution infrastructure through results-based financing. DFIs and donors can also provide technical assistance to public organizations to support capacity building in monitoring and verification.
  • Local commercial banks can begin to explore the PAYG sec- tor, and understand company cash flow patterns, through the provision of short-term trade finance. They can also explore mechanisms such as a debt ser vice coverage account to partially cover for default risks.
  • National governments can provide support through a suite of policy and regulatory measures to unlock domestic commercial financing for distributed renewable energy including, for example, the development of mechanisms to coordinate roles of institutions in this space and encourage private sector activity by setting clear national priorities and releasing grid extension plans to the public.
  • Private sector investors can help companies to access different types of capital and partnerships in response to evolving business needs. This may include support for raising capital from local commercial banks. Foundations and family offices can provide loss guarantees to local banks.
  • Private sector PAYG businesses can adopt standardized accounting standards to assist in transactions with local banks.

The scope of this issue brief is confined to analysis of financing in support of PAYG solar home system companies. While we recognize that PAYG products providing lower-level energy services are not comprehensive solutions to the energy access challenge, we believe that our recommendations will also support the broader energy access sector, including mini- and micro-grids.


The Imperatives of the Electricity Access Challenge

Nearly 1.3 billion people, or 18 per cent of the world's population, still lack access to grid electricity (IEA 2014a). An additional one billion are "under electrified," a status charac terized by unstable grid connection with regular power outages (A.T. Kearney and GOGLA 2014; IEA 2013). Sub-Saharan Africa bears a disproportionate share of this burden. Over 620 million people, nearly two-thirds of the region's population, are without electricity access (IEA 2014b). Increasing access to afford- able and reliable energy services is fundamental to reducing poverty and improving other human development indicators (IEA 2011).

Electricity access has long been measured by the physical connection of a household to grid electricity or the presence of a nearby electric pole. This binary definition of electricity access has increasingly come into question in recent years, because it fails to capture the quality of electricity services received by end users. In response, the World Bank's Energy Sector Management Assistance Program (ESMAP) has developed a multi-tier framework for defining and measuring levels of energy access. Under this approach, access to electricity refers to the ability to obtain electricity that is characterized by the following attributes: "adequate, available when needed, reliable, of good quality, affordable, legal, convenient, healthy and safe for all required applications across households, productive enterprises and community institutions" (Angelou and Bhatia 2015).

The framework measures electricity access across five tiers; each tier reflects a specific level of performance of an electricity supply system defined by the attributes. Tier 1 and Tier 2 are the low-power capacity levels (minimum 3W and 50W, respectively). At Tier 1 level, electricity access is defined as providing lighting and mobile charging for a minimum of four hours per day. At Tier 2 level, access additionally includes the ability to power a fan and/or television for four hours (see Annex II).

The PAYG businesses that we study in this issue brief provide electricity access mainly at the Tier 1 and Tier 2 levels through standalone solar home systems (SHSs). The standalone solar system comes with a battery, a charge controller, a solar panel and LED (light emitting diode) bulbs, and a mobile charger. Larger systems (typically 50W and above) can potentially connect direct current (DC) appliances such as a television. Even at lower tiers of electricity access, there are numerous household-level benefits. These benefits stem from the fact that the SHSs replace alternate sources, which are often very expensive.

Previous WRI research conducted in collaboration with the International Institute for Applied Systems Analysis indicates that household kerosene use is significantly lower for house- holds with SHSs, even when compared with grid customers. While 80 percent of households with access to grid electricity continue to use kerosene, only about 25 percent of homes with SHSs use kerosene. The reliability of SHS electricity supply may explain this finding (Rao, Agarwal, and Wood 2016). Other research indicates benefits such as prevention of GHG emissions (both carbon dioxide and black soot) (Kaufman et al. 2000; Wang et al. 2011), increased household disposable income because of reduced spending on kerosene and candles (Mills 2005; Tracy and Jacobson 2012), health benefits such as reduced accidents and indoor pollution (Mills 2014; Samad et al. 2013) and social benefits such as increased evening study hours for children (A.T. Kearney and GOGLA 2014; Khan and Azad 2014; Samad et al. 2013).

The Importance of "Pay-as-You-Go" (PAYG)

Previous WRI research has underscored the importance of designing financing and payment schemes that fit consumer energy budgets. The research notes that energy enterprises have to design innovative financing and payment schemes to encourage consumers to purchase their products, because customers are accustomed to buying energy in small increments (Ballesteros et al. 2013). ...

PAYG is a technology-driven method that allows consumers to pay the lease amount for a given energy system or pay a fee for the service of using the system. It uses information technology to enable remote activation with payment receipt (Alstone et al. 2015). PAYG includes a range of business models, which differ as to how payments are accepted and to whom the ownership of the system ultimately devolves. From the consumer's point of view, the PAYG model offers a one-stop shop, where the product and the financing are available from the same source. The willingness of companies to finance products gives customers confidence in the new technology. Indeed, energy companies have tried to partner with microfinance institutions (MFIs) but often with limited success. The energy service companies have typically been smaller than their counterpart MFIs, and partnerships have been hard to manage given the differing expectations of the two parties. In Kenya, for example, consumers could not access technical maintenance services from the energy companies, which were limited in their geographic outreach. The poor after-sales service left many customers dissatisfied with their products, which in turn led to a refusal to repay loans (Rolffs, Byrne, and Ockwell 2014).

The benefits of the PAYG model in providing a one-stop-shop solution to customers are several. As we have already noted, the offer of finance by the energy company instills trust in consumers regarding the quality of the product. Operational efficiency is improved because there is no need for coordination between finance providers and technology providers. With PAYG, the companies are able to provide longer-term loans than those usually offered by MFIs. PAYG models also allow the provision of relatively large credit amounts (to cover the cost of the renewable energy system) to consumers whose credit worthiness may be unknown. The credit risk is partially mitigated by the incentive system that links payments to service provision. PAYG approaches, which use mobile communication technologies, also reduce the costs associated with collecting repayments (Rolffs, Byrne, and Ockwell 2014). Finally, PAYG enables significant data collection. This gives enterprises the advantage of understanding product performance and consumer behavior (Alstone et al. 2015).

AfricaFocus Bulletin is an independent electronic publication providing reposted commentary and analysis on African issues, with a particular focus on U.S. and international policies. AfricaFocus Bulletin is edited by William Minter.

AfricaFocus Bulletin can be reached at Please write to this address to subscribe or unsubscribe to the bulletin, or to suggest material for inclusion. For more information about reposted material, please contact directly the original source mentioned. For a full archive and other resources, see

Read more on |Africa Peace & Security||Africa Economy & Development||Africa Climate Change & Environment|

URL for this file: