Illuminating a brighter future with solar home systems (SHS) in West Africa

10 Jun 2024
Illuminating a brighter future with solar home systems (SHS) in West Africa

Solar home systems (SHS) are revolutionizing energy access in West Africa, providing electricity to millions in remote areas where grid extension is challenging. Despite rising global electrification rates, West Africa still has 220 million people without electricity. SHS, particularly those below 100W, have significantly increased rural electrification and are proving to be crucial for powering homes, businesses, and essential services like healthcare and education.

West Africa, is witnessing a transformative shift through the adoption of solar home systems (SHS). These modular, renewable energy solutions are bridging the electrification gap, particularly in remote areas where extending the traditional grid is impractical. This article explores the dynamics of scaling SHS deployment, the factors shaping their future, and the critical barriers and opportunities in this evolving landscape.

Bridging the Electrification Gap

West Africa remains one of the least electrified regions globally. Approximately 220 million people lack access to electricity, with rural areas bearing the brunt of this deficit. Despite global improvements in electrification, the region has seen a decline due to rapid population growth outpacing electrification efforts. However, the past decade has seen rural electrification rates improve, thanks to the adoption of SHS and mini-grids.
Solar home systems, particularly those with capacities below 100W, have played a significant role in increasing rural electrification. Sales of these systems have surged, with 841,000 solar energy kits sold in the first half of 2023 alone, marking a 131% increase from 2016. These systems have lit homes, powered small businesses, and enhanced the quality of services in healthcare centers and schools, driving economic activities in remote communities.

The Future of Solar Home Systems

The rapid adoption of SHS has been driven by innovative business models that address the affordability concerns of rural customers. The high initial cost of solar systems necessitated the development of payment models like lease-to-own and pay-as-you-go (PAYGO). These models allow customers to make payments in installments, making SHS accessible to those with low purchasing power.

PAYGO, facilitated by the widespread adoption of mobile money services, has been particularly effective. For instance, in Nigeria, SHS provider Lumos leverages telecom company MTN's network to sell SHS units and facilitate payments. The ease of installation and maintenance of SHS makes them ideal for remote areas where building large grid infrastructure is challenging.

Looking ahead, SHS will need to adapt to growing energy demands. This may involve integrating SHS with larger systems like mini-grids or the main grid. Innovations such as net metering and energy-sharing technologies are already being employed to ensure future compatibility and sustainability.

Creating an Enabling Environment

Government policies and initiatives have significantly contributed to the growth of SHS in West Africa. The Economic Community of West African States (ECOWAS) adopted the Renewable Energy Policy (EREP) in 2012, aiming to electrify 25% of the region’s rural population through off-grid solar solutions. National policies, like Nigeria's National Renewable Energy and Energy Efficiency Policy, further support this goal.
Development partners and financing institutions have also played a crucial role. Programs like the Nigeria Electrification Project (NEP) and Liberia's Solar Home System Results-based Financing (LSHS-RBF) provide subsidies and innovative financing models to make SHS more affordable and accessible.

Barriers to Growth

Despite the progress, several barriers hinder the widespread adoption of SHS. Access to finance remains the primary challenge. SHS providers often struggle to secure financing, and when available, it is usually expensive. The long lead time associated with the PAYGO model exacerbates this issue, as funds are tied up in receivables for extended periods.

Supply chain disruptions, particularly those affecting imports from China, pose another significant barrier. The COVID-19 pandemic highlighted the vulnerability of relying on imports, causing delays in SHS deployment. Local manufacturing and assembly capacity is growing but not quickly enough to meet the region's needs.
Import duties and tax levies further increase the cost of SHS units, reducing their affordability. Harmonizing zero-import duty and VAT exemptions across the region could greatly enhance affordability and adoption rates.

Attracting Investment for Off-Grid Solar

Financing from international development financial institutions, concessional loans, and impact investors has been crucial in supporting the SHS market. However, access to local currency debt financing remains limited, with commercial banks often reluctant to engage new market entrants.
Innovative financing models, such as blended financing and credit enhancement, are needed to attract private sector investment. By leveraging concessional funding to de-risk projects, stakeholders can unlock significant capital from local markets, reducing costs and expanding SHS deployment.

The journey towards universal energy access in West Africa hinges on the successful scaling of solar home systems. While significant strides have been made, challenges like access to finance, supply chain disruptions, and import duties persist. However, with supportive policies, innovative financing mechanisms, and strategic partnerships, the region can unlock the full potential of SHS. This will empower communities, drive economic growth, and illuminate a brighter future for all.

Interested in learning more about the transformative impact of solar home systems in West Africa? Dive deeper into the detailed insights and findings by reading the full industry report on 'The rise of solar home systems in West Africa'. Click here to access the report.

*Image Credit: Andersen Lab

 

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