Saturday Jan 28, 2023

Is the PayGo solar model the light in the dark? – ESI Africa


“Africa is simply tired of being in the dark. It is time to take decisive action and turn around this narrative: to light up and power Africa – and accelerate the pace of economic transformation, unlock the potential of businesses, and drive much-needed industrialisation to create jobs.”

These are the words of Akinwumi Adesina, President of the African Development Bank (AfDB), in his speech at the Africa Union Summit held in January 2016 while outlining the bank’s five development priority areas for Africa’s transformation including the Light Up and Power Africa initiative.

Enlit Africa (the unifying brand for African Utility Week and POWERGEN Africa) invites you to join the conversation 7-9 June 2022 in Cape Town, South Africa.

Africa will not achieve its development goals if it does not tackle its energy access challenges. The continent has the lowest electricity access rate globally at just over 40%. Fortunately, the continent is well endowed with renewable energy sources, and according to the Africa 2030: Roadmap for a Renewable Energy Future by the International Renewable Energy Agency (IRENA), African countries are uniquely positioned, and have the potential, to leapfrog to renewables such as solar, wind and geothermal.

Solar energy is the most cost-effective renewable energy, according to IEA’s World Energy Outlook 2020. It is now the fastest-growing source of electricity due to a drastic reduction in production costs – down by 80% from 2010. Moreover, prices are expected to reduce even further with technological innovations.

Have you read?
Here’s how to maximise Africa’s energy transition potential, IRENA report

While solar technologies are cost-effective in the long run, the high initial installation costs are out of reach for most of Africa’s rural communities. To counter this, solar companies have developed innovative financial mechanisms to make the technologies affordable, including the Pay As You Go (PayGo) model, which allows the customer to buy the systems in instalments after making an initial deposit.

According to GOGLA, the association for the off-grid solar industry, around 25-30 million people gained energy access with PayGo models between 2015 and 2020. Currently, over 40% of all sales of off-grid solar lighting products in Sub Saharan Africa are conducted through PayGo, reaching almost 50% in Kenya and 65% in Rwanda.

A study by 60 Decibels that surveyed over 5,000 PayGo home solar customers, showed that although the pandemic had a significant impact on incomes and household finances, they continued to value their solar products highly. Nearly 70% reported their systems contributed to a ‘very much’ improved quality of life, compared to the pre-COVID-19 benchmark of 54%.

Have you read?
Home solar system provider raises $260m to expand clean energy access

PayGo Solar and Financial Inclusion 

In Africa, 57% of adults have no bank accounts and are excluded from the financial system – a majority of whom are women. PayGo is a lifeline to the unbanked and unelectrified bottom of the pyramid households enabling them to get credit to access affordable and reliable energy to help improve their businesses and livelihoods.

Most solar companies have further enabled their customers to conveniently pay their instalments through their phones, encouraging mobile money adoption and leading to a virtuous cycle of financial inclusion. For example, in Uganda, 16% of off-grid solar PayGo customers used mobile money for the first time to purchase their solar products.

The companies also include accessories such as bulbs, torches, mobile phones and productive use technologies …….


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