Increasingly off-grid solar enterprises are creating big impact and significant sales outside the more established markets of East Africa and Asia. Power for All were fortunate to host a panel of expert speakers at the Global Off-Grid Lighting Association Annual General Meeting 2016 to learn about the opportunities and challenges of operating in Nigeria, Zimbabwe and Mozambique.
This article shares details of the session and insights from Ron Margalit, Principal, Impact Financing, Lumos, William Ponela, CEO, Zonful Energy and Casper Sikkema, Managing Director Sub-Saharan Africa, Solar Works!.
With 90 million people unelectrified in rural areas, and millions more with no—or intermittent—power in urban areas, the opportunities for alternative power provision in Nigeria are vast. In his talk, Ron Margalit, Principal at Lumos, estimated that there are 100 million diesel generators in use, which represent the largest diesel network in the world, with the potential off-grid market size at 7-10 million solar systems. Lumos is on pace to sell 70,000 by the end of the year—totaling 1.5 megawatts of power. The significant opportunities for continued and rapid growth are not, though, without their challenges.
Lumos spent years developing its proprietary technology and cracking a business model that fits the Nigerian marketplace, building a strong partnership with the country’s biggest wireless provider MTN. An example of this, is that Lumos systems are larger than most solar home systems available to off-grid consumers with a 80W panel that meets the desired needs of Nigeria/MTNs new and potential customers. As Margalit explained, “if you want to attract local partners you need to make it worthwhile for them and showcase that you are creating value”. The Lumos service allows MTN customers to subscribe to solar electricity on demand using their mobile phone. Given the huge market potential in Nigeria, Lumos has big hopes for the future and is not ruling out expansion to other countries under the right circumstances. Margalit advised, “you have a first mover advantage in a new market which makes it attractive, but it remains critical to have a product and model that works for that market.”
Zimbabwe: Zonful Energy
“Solar is contagious.” William Ponela, CEO of Zonful Energy set the scene for his presentation by profiling the burgeoning off-grid marketplace in Zimbabwe. In rural areas of the country only 14% of the population has access to electricity and even in urban areas, new homes are not being connected to the grid. Recent droughts have exacerbated the energy crisis in the country and have led to extensive load shedding and large gaps in supply. As Ponela noted, “Zimbabwe needs about 2,700 megawatts of energy a day, but it is only getting around 800”. This has led to significant emphasis and support for alternative solutions from the government—through tax holidays linked to quality solar, and supportive policy—as well as community leaders.
Although previous years saw dumping of off-grid solar products and large numbers of low-quality solar lights entering the market, trust in the technology is rebuilding. The large Zimbabwean diaspora is also recognising the opportunity to bring power to their own, or their family’s homes, and mobile/internet enabled payment systems allow those living overseas to easily purchase solar home systems and solar irrigation. Estimating the potential market size at $1.2-1.5 billion, Ponela noted that a lack of financing is a continued bottleneck for social enterprises and urged investors to take note; Zonful’s waiting list of thousands provides a simple demonstration of the huge unmet demand. Zonful has a backlog of 24,000 units of Solar Home Systems Ponela left the audience in no doubt: “Everyone should come to Zimbabwe”.
See slides from the Zonful presentation
Building trust in technology in earlier stage markets is challenging, but as Casper Sikkema explained when asked about the issue, “we deal with that by making affordable but aspirational products, something that people want. From our experience we know that people understand and know what good quality is, it is the cash availability factor that makes them buy the bad quality products. This is where the PAYGO model comes in”.
Solar Works! focus in Mozambique is still at that early stage but the South African and Dutch based company has had previous experience selling high quality products throughout Sub-Saharan Africa and recently launched the country’s first distributed energy service company (DESCO). Around 80% of the 28 million people in Mozambique are unelectrified. The intermittent nature of grid power means that there is also a significant back-up generation market creating another potential customer base for off-grid energy suppliers. Although there are no tax exemptions or policies yet in place to drive the off-grid sector, the government is supportive of efforts to increase electrification via distributed renewable technologies and Sikkema sees that SolarWorks! operations in Mozambique will help to create good practise. “We have sold over 100,000 products but the DESCO approach is relatively new for us as a company. However our shareholders and partners do have extensive experience with this business model and there is no precedent in the Mozambique market. This provides a great opportunity for us to build up operations in a way that works locally. The market is at an early stage but we have been involved for sometime and know there is a demand, so we will use our knowledge to make the most of the opportunities... and to deal with the challenges.”