Off-Grid solutions are rising to provide Green Energy to Kenya's rural areas
By Frank Odhiambo
What is off-grid electrification?
An on-grid electric system relies on a centralized power generation and transmission with limited independence on how each can be done. For example, an on-grid system includes electricity supplied by governments from hydroelectric dams or nuclear plants. Each consumer has limited control over how much energy can be stored.
On the other hand, off-grid solutions can be monitored by individuals and they may adjust their energy consumption to reduce waste.
Off-grid solutions are becoming effective methods of increasing rural electrification in Sub-Saharan countries. The East African region hosts the densest rural off-grid electrification systems for solar energy suppliers with Kenya being the largest African market for solarisation. The brilliance of off-grid solarisation in Kenya has been through reducing reliance on government-supplied electricity - especially for those in rural areas. The following three factors have been essential in ensuring the prosperity of off-grid electrification in Kenya:
Global growth of the off-grid solar market
Declining manufacturing costs and increased appliance efficiency
Innovative business models
Global growth of the off-grid solar market
The trends of off-grid electrification show that it is both sustainable and profitable. Since the last decade, the global off-grid market for solar power has increased by over 1.75 billion dollars annually. This has allowed various off-grid solar companies to venture into untapped underserved rural markets and offer products at different prices. For instance, solar products, plug-and-play appliances and other solar home systems are generally cheap in East Africa and more stable in Kenya because of its competitive network of green off-grid companies. A 2021 study found that the penetration of off-grid companies in Kenya has led to decreasing economic costs and more environmental consciousness.
Because of this growth, companies are now moving into more rural geographies and under-electrified markets such as Kenya. Several providers in East Africa had started their operations in Kenya. For example, M-KOPA, runs a solar program through mobile-money transfers that provide television sets and other appliances across the region. Thanks to the global growth of off-grid markets, M-KOPA has enjoyed millions of dollars as foreign investment and a growing clientele currently at around 2 million. Such companies are able to create sustainable value chains in areas where the supply chain for electrification are inconsistent or non-existent.
Declining costs of batteries
The declining costs of raw materials have been essential in increasing off-grid energy services and products for the underserved in Kenya. Since batteries are generally the most expensive part of an off-grid energy system or appliance, the reduction of battery prices could lower the cost of off-grid products and services. The shift of products relying on bulky lead-acid to lighter high-density lithium-ion batteries has been as a result of the cost of lithium-ion batteries prices falling BY 87% over the last decade, as analysed by the research company, BloombergNEF.
Likewise, there has been an increasing demand for recycled lead-acid batteries. The prevalence of such products, while detrimental to the environment, has been due to their lower cost and ease to recycle. This increases the scope and scale of off-grid services that can easily be turned more sustainable with an increase in green investments.
Innovative Business models
Reinventing or coming up with business models that go beyond the need for energy have helped off-grid products assume some requirements of sustainable development. Most significant has been the Pay-As-You-Go (PAYGO) Business Model, where those who consume a service or product pay for it over a period of time as shown in the image below. The PAYGO business model reduces the cost of consuming energy as customers use installments to reach a point where they own a solar system or appliance.
Source: Lighting Global Report, 2020
A great example of the PAYGO business model is the company M-KOPA in Kenya. In 2019, solar-powered fridges provided to customers by M-KOPA saved Kenyans about $5. Food was preserved longer, reducing the demand for fossil fuel heating which reduced the strain on household incomes. Similarly, as Kenya has a large informal economy, M-KOPA solar fridges were assets for entrepreneurial activities where grocers were able to sell more than they would have.
An International example of an effective PAYGO model is IRENA. The International Renewable Energy Agency (IRENA) is an intergovernmental organization that supports countries in their transition to a sustainable energy future and serves as the principal platform for international cooperation.
We are entitled to have access to affordable and clean energy because every aspect of our lives needs sustainable change. In developing countries where most agricultural produce comes from rural areas, having significant off-grid energy consumption will support weak supply chains or create new ones. Conversely, lack of such energy access can disrupt agricultural supplies, energy supplies and the global steps being taken to a more just and sustainable world.
About the guest author:
Frank is an aspiring Kenyan international environmental policy specialist focussing on the intersections sustainability, circular economies and good governance. Out of the belief that the environmental can never be separated from the socio-economic, Frank is interested in how companies create value chains in situations where they were non-existent and the extents to which such actions are sustainable.