Six hundred million people in sub-Saharan Africa are living without electricity.
In June 2016, Power Africa, USAID, the Shell Foundation, and the U.K. Department for International Development (DFID) joined forces with an ambitious but achievable goal—to accelerate growth in Africa’s off-grid energy market and bring clean, modern, affordable electricity to 20 million households. Achieving this goal was never going to be easy, but we saw an opportunity. Innovative pay-as-you-go (PAYG) solar companies were rapidly expanding across Africa, offering low-income customers new ways to access and pay for electricity. We launched the Scaling Off-Grid Energy (SOGE) Grand Challenge for Development to signal to the market that it was time to make this leap—bringing energy access to millions.
Since our launch, SOGE partners have:
- Made 40-plus investments in growing companies, which is projected to generate 4.8 million connections.
- Launched a competition for off-grid refrigerators with our partners at the U.S. Department of Energy and Global LEAP Awards.
- Launched a market-wide acceleration approach in the off-grid sector in Nigeria and Uganda.
- Welcomed the African Development Bank as a founding partner, following their hosting of the "Off-Grid Revolution" workshop in Abidjan in March 2017.
Though we have achieved a great deal, we still have much more to accomplish. Learn more about our progress-to-date below and follow @ScalingOffGrid on Twitter for the latest updates.
Director, Scaling Off-Grid Energy Grand Challenge for Development—U.S. Agency for International Development
Most financing for off-grid energy companies in sub-Saharan Africa is limited to a few mature companies operating in East African countries with the most developed markets and lowest currency risk. High potential companies across Central and West Africa continue to be underfinanced, leaving a “pioneer gap” in financing for early-stage, innovative companies.
SOGE partner programs support high-potential enterprises that provide off-grid energy solutions to low-income households across sub-Saharan Africa. We bring together donors and investors to coordinate investments, incentivize technological innovation, support early-stage companies, and develop critical elements of the off-grid ecosystem.
Core activities include providing catalytic grant funding and advisory support to help off-grid energy companies expand geographically, test new business models, and tap into private financing. We do this through open calls for innovation, partnership, and other investment opportunities.
ONGOING INVESTMENTS ARE MADE ON A ROLLING BASIS BY USAID, POWER AFRICA, DFID AND THE SHELL FOUNDATION :
- 2016 Development Innovation Ventures Enterprise Grants: 8 awards (21 applications)
- 2017 Private Sector Investment Program: 415 inquiries, awards to be announced Fall 2017
- 2017 Renewable Energy and Adaptation to Climate Technologies Window
TYPES OF INVESTMENT:
SOGE donor programs invest in innovative business models and technology, new market expansion, and innovative consumer financing to increase access for low-income customer bases.
- Projected 120,000 connections from USAID-supported Year 1 grantees
- Over 20,000 solar household system sold by USAID-supported grantees in first 6 months of 2017
- 228 jobs created to date
- Secured long-term local currency debt to be made available to social enterprises working in the energy sector in order to accelerate their scale and impact
- There is overwhelming demand for early-stage financing in the off-grid energy sector to provide seed funding for promising new businesses to enter new markets and expand.
- Both early-stage and mature companies lack local finance options.
- There are an increasing number of off-grid solar companies in West Africa, especially Nigeria and Senegal.
- Mobile payments are increasingly a key factor in company ability to scale, yet limited by country-specific regulatory restrictions or penetration.
- Lack of standardized performance data prevents investors from gaining sufficient market insights and analysis needed to close deals.
Ghana, Cote d’Ivoire /$150,000
PEG Africa provides PAYG solar home solutions to customers in rural Ghana and Cote d’Ivoire. With funding from SOGE partners, PEG Africa is testing out three different repayment tools: assisted mobile money payments, the use of mobile money short codes, and direct sales through PEG Africa partner shops. With the assisted payment system, PEG Africa customers contact a call center and work with an agent to make a payment through their mobile money wallet. Seventy-six percent of PEG Africa’s customers now use this solution. The mobile short codes create a shortcut for customers to make payments without following a complicated decision tree, accelerating their payment frequency. In making direct sales through partner shops, PEG Africa is engaging with new partners throughout the country to refine its approach and grow its customer base.
PEG Africa is also experimenting with different incentives to encourage timely customer payments. For example, PEG Africa offers health insurance to customers who meet their payment schedule. By offering this incentive, customers are changing their payment behavior to qualify for this benefit. Looking ahead, PEG Africa plans to continue iterating its approach to mobile money solutions and begin expanding throughout West Africa.
Research shows that once the initial challenge of simply providing energy access has been addressed, the next challenge is that customers often seek additional capacity to power household appliances, such as refrigerators, televisions, and irons. There are untapped opportunities for innovative businesses to grow these product lines.
SOGE builds consumer demand by encouraging innovation in off-grid energy products and services that customers want and need. This includes energy-efficient household appliances and digital financial services.
Core activities include running pay-for-results incentive prizes to spur innovation for off-grid energy products, such as low-cost, energy efficient research; conduct market research around innovative products customers want and need in the off-grid energy market; and support for the development of common payment platforms and new mobile money business models that augment off-grid access to mobile and automate payments.
Research conducted by USAID and partners indicated that refrigeration solutions are a product that off-grid households want - assuming availability of quality and affordable options. Off-grid refrigeration solutions, however, are very under-developed or unaffordable outside of the healthcare (vaccines) or large-scale agricultural markets, leaving a demand gap among households and small-businesses.
In 2016, SOGE in partnership with USAID, Power Africa, and DFID’s Ideas to Impact Programme launched the Global Light and Energy Access Partnership (Global LEAP Awards) Off-Grid Refrigerator Competition—a call for high-efficiency, low-cost, off-grid refrigerators.
The Competition offers innovation incentives to reward advancements in off-grid refrigeration technology, while also recognizing best-in-class, commercially-available off-grid refrigerators. Finalists will test their products for energy performance, quality, and reliability in accredited laboratories using internationally-accepted test methods. They will also be evaluated by a panel of off-grid market experts in laboratories and in the field against a set of comprehensive criteria, with the potential to win awards of $200,000 in three separate categories by the end of 2017. Two awards based on lab tests will be made by the end of 2017, with a third award based on field tests happening in Spring 2018.
“Off-grid refrigeration is one of the demand drivers for solar home systems and microgrids, and it holds unique potential to unlock economic and social progress for the 600 million people living off the grid in sub-Saharan Africa, and the over 1 billion lacking electricity globally. It can enable income-generating activities, prolong the nutritional value of food, diversify diets, and reduce the time that households spend shopping or gathering food. And as the Power Africa partnership works to expand the off-grid market, efficient refrigeration at affordable prices is a key component for future growth in solar home systems and microgrids.”
Local policies and regulation, as well as physical and technology infrastructure, limit the off-grid energy market’s growth in many sub-Saharan countries.
SOGE takes a holistic approach to market development, bringing together leading donors, investors, governments, companies and policymakers to share industry knowledge, aggregate resources, provide acceleration services, and test policies and regulations.
SOGE partners promote market-enabling interventions that help the off-grid energy industry grow, including smart regulation, quality standards, and performance measurement. We also address barriers such as low penetration of mobile money and high currency risks.
MARKET INTELLIGENCE: co-sponsored Reaching Scale in Access to Energy, a report with Hystra to evaluate the key barriers to, and and enablers of growth in the clean energy sector.
- Investors & donor partners: share insights to help investors and other donors seeking to invest in off-grid markets conduct due diligence, explore market opportunities, and understand market dynamics and risk.
- Governments: work in partnership to develop new policies, regulations, and activities that help stimulate the market to provide affordable products across different countries.
- Development finance institutions (DFIs): advise international DFIs on developing financing mechanisms and approaches that reflect market demand.
- Companies: share advice on market demand, expansion opportunity, new business models, and fundraising opportunities.
IN-COUNTRY MARKET DEVELOPMENT:
- Created local market accelerators that will build a network of off-grid investors, companies, and policymakers and grow the market. These accelerators will deepen collaboration across the sector, spur local investment, and share lessons.
- Convened an “Off-Grid Revolution” workshop in Abidjan to inform strategy on off-grid. The event brought together more than 150 participants in businesses, government, civil society, industry bodies, local financial institutions, key development partners, and investors.
- Created of Energy Access Compacts in five countries that improve policies and regulations to stimulate investment and to support businesses in home solar markets.
SOGE and its in-country partners have assembled the Scaling Off-grid Energy Cross-Sector Advisory Committee, comprised of 8-10 leaders from the diverse stakeholder groups identified in the off-grid energy system in Uganda.
Action to Date:
Advisory committee convening took place in June 2017, and a second is planned for August.
Completed local landscape and stakeholder mapping assessment.
Leading planning for an off-grid energy forum to be held later this year.
In coordination with key investors and donors in Nigeria’s off-grid energy sector, SOGE is launching in-country market interventions and advocacy efforts.
Action to Date:
Working with the World Bank’s Nigeria Climate Innovation Center, a business accelerator for early-stage companies.
Providing grant capital to early-stage companies delivering products and services to off-grid communities.
As we look to the future of the SOGE Grand Challenge for Development, we are excited for the year ahead. The PAYG household solar sector alone has reached over a million households across sub-Saharan Africa, and the market continues to expand rapidly into new geographies with new products and business models. At the same time, we are excited to see a maturing crop of pay-as-you-go companies establishing a foothold in the market. Still, access to affordable financing for local currency working capital and the slow progress of mobile money penetration in key markets continue to hinder the sector’s growth.
Future opportunities for the SOGE partnership to move the needle in the coming year include:
- Working with AfDB, Shell Foundation, Nordic Fund, and Lion’s Head to help bring AfDB’s $100 million debt facility for off-grid solar companies online
- Announcing the winners of the Global LEAP Off-Grid Refrigeration Prize and launching a results-based financing program to boost their distribution in East Africa
- Building a foundation of evidence to promote regulatory reform in Nigeria allowing companies to offer mobile payments for energy services
- Learning from the successes and failures of our innovators to highlight market insights and recommendations
- Continuing our market acceleration work through new Energy Africa Compacts and additional in-country activities in countries such as Nigeria, Uganda, and elsewhere.
But to accomplish these goals, we need to take an even more comprehensive view of the market and ensure that our work remains coordinated. We are proud to be in close coordination with our Founding Partners–Power Africa, USAID, Shell Foundation, DFID, and the African Development Bank–and look forward to strengthening our alignment with our aligned partners: Acumen, Microsoft, GSMA, and the United Nations Foundation.