East Africa: Solar Energy is a Gold Mine Investors in the Region Will Soon Scramble for

opinion

The d.light Solar Africa managing director Jacob Okoth spoke to Allan Olingo about the region's uptake of renewable energy technologies as solar firms move to bridge the power deficit.

Favourable policies have a big role in accelerating solar penetration across the continent.

In fact, the favourable policy environment for solar in East Africa has enabled the region to lead the way for solar compared with other parts of Africa, where high taxes, subsidies on alternatives like kerosene and other unfavourable policies have created barriers.

If other countries in Africa were to emulate the successes and policies of what countries in East Africa have done, it would accelerate growth.

The off-grid solar segment combines an array of benefits: It creates significant local employment; it has massive health and social benefits; and also had positive environmental benefits by providing energy to millions of people with no carbon emissions.

Because of the significant social benefits created by solar energy, there is a good alignment between policy makers and the companies in this sector.

Do you believe that East Africa has effective renewable energy policies that will encourage companies like yours to invest in the sector?

We feel that the region is moving in the right direction as far as renewable energy is concerned and that policies are enabling the market to continue to grow and encourage new entrants.

The solar energy sector today has dynamics similar to those of telecom sector had 15 years ago.

In East Africa, Kenya is leading the way in the solar revolution, but even in Kenya, only 5 per cent of the potential market for solar home systems connectivity has been realised, meaning that 95 per cent of the market is yet to be unlocked.

Furthermore, those East Africans who are connected to the grid have to deal with frequent power cuts and relatively high electricity costs, whereas solar can provide consistent and reliable energy access.

What challenges do solar firms face in the region?

So far, virtually all funding for the sector has come from outside Africa -- primarily Europe and the US -- as local banks are afraid the risks are too high.

Encouraging local financial institutions to join hands with us will be a critical next step in growing the off-grid solar business. We also have challenges in dealing with counterfeits in the market.

Your firm received $91 million in equity financing from a consortium led by Inspired Evolution and the European Investment Bank. How do you plan to use this?

This capital will enable the company to fulfil its mission to make clean energy products available and affordable.

We are significantly investing in research and development, including making new solar solutions and solar-powered appliances.

We are also expanding our reach through opening new country offices, and within existing countries, we are going to the last mile by opening up local offices and service centres.

The Pay-As-You-Go model enables us to make solar home system solutions affordable for our customers by allowing them to pay over time.

Significant amounts of capital are required to enable us to continue providing these financing plans for our customers as we grow.

Innovation is important. How is it working for you?

The East African market for solar is growing rapidly. In parallel, there are exciting developments in technology for solar power generation, energy storage and efficiency of devices.

It is our desire that every customer segment in the market is offered a product that meets their needs and is affordable for them. We will also be bringing to market new efficient appliances that can be powered by solar.

Has it been easy for solar firms to navigate the murky waters of government bureaucracies across the continent?

Since we offer products that do not require subsidies or government funding, our interaction with local governments has been fairly limited.

Our government outreach is mostly done through multi-stakeholder initiatives such as IFC's Lighting Africa programme, the US government's Power Africa programme and the off-grid industry association Global Off-Grid Lighting Association.

We have found particularly in East Africa that local governments have been forward-thinking and supportive of creating a business environment conducive to companies that are enabling the solar revolution, primarily by maintaining low taxes for solar products and cracking down on counterfeits.

This has resulted in massive local employment -- a recent study has shown that the off-grid industry has generated 77,000 jobs in East Africa and is projected to grow to 350,000 jobs in the region by 2020.

This has also resulted in massive social impact in the region with tens of millions of people in East Africa being able to enjoy the benefits of upgrading their off-grid homes to solar-powered homes.

Children are now able to study at night while adults can extend their number of productive hours in the evening.

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