African grid operators that don’t put solar power onto their systems risk getting outgalloped as solar production and storage prices continue to fall.
There are already many places where solar energy is the cheapest option. That means the prospect of a significant uptake of solar in the African energy mix, grid-connected but probably mostly off-grid. By rejecting solar, the national utilities may create themselves a new problem: losing their reliable customers.
Less than 1% of the world’s solar capacity is in Africa. According to the Institut Montaigne in Paris, since 2000, sub-Saharan Africa is the only region in the world where demographic growth has been faster than the speed at which populations get access to electricity
In the whole of sub-Saharan Africa,excluding South Africa, only about 10 solar power plants with more than 5MW connect to the grid.
Africa has been largely absent from the global solar power plant distribution, making it a “collective failure”.
It only gets worse if nothing is done. In 2040, almost 95% of the world’s population without access to electricity will be in sub-Saharan Africa, the Institut says.
Many national grids in Africa are in poor conditions. They cannot absorb more than 20-30MW in a single location, limiting opportunities.
For grids lacking these technical constraints, questions about risk-sharing, government guarantees and bankable off-take agreements have significantly limited the number of successful projects.
The Need for Subsidies
Meanwhile, solar home systems and mini-grids still need heavy subsidies to provide electricity to rural populations at affordable prices. Rural areas are often the ones with the lowest available income.
National grids are in the best position to act. According to a global outlook for solar power to 2024, African utilities with access to an urban customer base may be able to finance connections for rural households by subsidising them with funds collected in cities.
Projects located near urban centres are more bankable due to economies of scale, the possibility of future capacity expansions and a lower risk of under-utilisation.
Some African countries are becoming supportive of solar. A good example is Senegal, which this month removed VAT on all solar products, including water pumping systems.
The decision is part of a strategy to achieve universal access to electricity in Senegal by 2025.
Of the 10 plants connected to sub-Saharan grids identified by the Institut Montaigne, four are in Senegal.
The best thing to do for grid operators is to guide and accompany a smooth integration of solar in their grids. However, failure to do so could lead more customers to gradually disconnect from the grid completely. This is because solar plus storage is not only reliable but also increasingly cost-competitive.
Hesitant national grids risk being left behind since solar and storage equipment prices are falling, and are a possible to be a game-changer.
Traditional business models of energy grid operators are under great pressure due to global technological innovations and the transition to renewable energy. Renewable energy is replacing fossil fuel generation. Energy grids are changing from a top-down centralised system to a more interactive, decentralised and fragmented one.
This is to say that energy consumers of the future will have a greater say in how and where their energy is generated. With this in mind, smart grids are very vital to grid operators.
However, energy grid operators can play (within the legal boundaries) an important role in this energy transition from traditional to smart grid.
All of these developments mean grid operators must be increasingly alert and swift to adapt to this turbulent situation.