Rwanda: $1.2 Trillion Needed to Disrupt African Agriculture Through Off-Grid, Renewable Solutions
By Yariv Cohen
Decentralised energy solutions, especially solar home systems, have become more standardised and accepted in the past decade and adoption of these products is now widespread worldwide. Many African countries’ electrification strategies encompass decentralised renewable energy as a critical component in achieving nationwide energy access, as it is now the most accessible, scalable, and affordable option.
Looking at the decentralized revolution, electricity is only one, albeit crucial, aspect, and Productive use of energy, PUE, is slowly but surely becoming a decentralized phenomenon. PUE has various definitions, and broadly includes activities that generate revenue, increase productivity, enhance diversity, and create economic value through improvements in quality of life through electricity for education, healthcare, internet access, and other social services. It is actually an old term used way before decentralized energy solutions became prominent.
With the solar sector becoming increasingly meaningful across Africa, several recent developments have led to increased interest and emphasis of sector stakeholders on researching and promoting PUE. First, the increasing number of people with access to high levels of electricity (Tier-2 and beyond, which means >20W, >4 hours a day, and >2 hours at night time) have increased emphasis on translating energy access into new opportunities for income generation and sustainable socio-economic development in rural communities. Another critical factor is the financial one, as Pay-As-You-GO (PAYGO) models and the growing availability of mobile-money services, alongside technological innovation and decreasing costs of solar panels, contribute to PUE products becoming affordable for low-income consumers.
At least $1.2 trillion is required to facilitate investment in the acquisition and powering of productive use of energy (PUE) appliances and equipment in rural sub-Saharan Africa (SSA) over the next 10 years, according to new research published by PREO, The Powering Renewable Energy Opportunities Programme, supported by the IKEA Foundation and UK aid.
How would that sum, or any other investment in the field, affect sub-Saharan Africa? Let’s take a look.
PREO’s research findings translate to a needed investment of $120 billion a year for the next decade; $ 662.3 billion is required to acquire PUE equipment and appliances, while the remaining $528.9 billion will facilitate investment in solar photovoltaic (PV) energy systems to power the equipment and devices.
Zooming in on Africa’s most important sector, which accounts for 75% of rural economic activity, the agriculture value chain represents the most significant opportunity for PUE capital investment. Equipment and appliances identified, including water pumps, solar dryers, freezers, milling machines, and oil presses, account for 88% of the market opportunity value.
Agriculture in Africa is a vital force, specifically in rural communities, crucial to all aspects of day-to-day living. With more than 80% of SSA’s rural inhabitants working in the sector, local farming provides income and food for hundreds of millions.
But albeit crucial, the sector is severely infertile. Today, only 5% of Africa’s arable lands are adequately irrigated, and the effects of climate change encompassing harsh weather conditions are already causing extreme damage. As the continent’s populations continue to grow, expected to reach more than 2.5 billion people by 2050 (by then, 25% of the global population), food and income security become more important than ever.
PUE solutions for agriculture are already changing the landscape in small doses. Solar-based water pumps, for example, have been found to increase yields by up to 3 times, increase the harvesting season by 1.5, and increase household income by up to 75%. “We used to sell 200kg, and now it is 500kg”, says Mukamparaye Jeanne from Kivomo in rural Rwanda, who has been using Ignite’s solar-based pumps since 2019. “Before, we used a generator and petrol to fuel it, extremely expensive and not even half as beneficial.” Jeanne, 63, lives with her husband and 4 children. The family has a farm, and they grow Irish potatoes, beans, passion fruit, peas, strawberry, yams, cassavas, and maize. For their 6-people household, like many others in the region, every increase in productivity and income is significant.
The International Finance Corporation (IFC) estimates the total Sub-Saharan Africa market for agricultural PUE products to be $11.3bn. The Efficiency for Access Coalition estimates that solar water pumps can reach up to 1.6 million households in sub-Saharan Africa by 2025 and as many as 2.8 million homes by 2030, a value of approximately $1.6bn by 2030.
Market growth and overall adoption depend on the customer’s ability to pay for the products, where outside investments become crucial. PAYGO is often not enough for smallholder farmers who only make money during harvesting season, requiring more creative solutions; hence
funds will be used to make solar panels and PUE solutions available for the people who need them the most, establishing inclusive, affordable financing schemes.
Financial support would need to be patient capital, with no expectation of turning a quick profit, ensuring the investment is sustainable, and supporting long-term economic growth and development in rural SSA.
The writer is an entrepreneur and investor, leading sustainability-driven companies in Africa and the Middle East.
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