The powering of productive use of energy (PUE) appliances, and equipment in rural sub-Saharan Africa (SSA) presents a $1.2 trillion investment opportunity in off-grid renewable energy systems over the next ten years. This is according to new analysis in a recent report called The Capital Required to Maximise the Productive Use of Energy in Sub-Saharan Africa.
The report was released by the Powering Renewable Energy Opportunities (PREO) programme, an initiative funded by the IKEA Foundation and UK aid via the Transforming Energy Access platform, and delivered by the Carbon Trust and Energy 4 Impact.
PUE refers to the type of energy demand that generates revenue, increases productivity, enhances diversity, and creates economic value.
An estimated investment of $662.3 billion is required for the acquisition of PUE equipment and appliances, while the remaining $528.9 billion will facilitate investment in solar photovoltaic (PV) energy systems to power the equipment and appliances over the next decade.
Off-grid opportunities in the agricultural value chain & e-mobility
The agriculture value chain accounts for nearly 75% of rural economic activity and represents the largest opportunity for PUE capital investment. From the 47 PUE equipment and appliances identified, water pumps, solar dryers, freezers, milling machines and oil presses account for 88% of the value of the market opportunity.
“We estimate that an investment of $52.9 billion per annum is required to power PUE activities in rural SSA. Our estimate does not include the charging infrastructure required for powering transport-related PUE equipment. Other industry estimates on electrification investments do not refer to the capital expenditure required to power PUE equipment and appliances,” the PREO report says.
“The International Energy Agency (IEA) says an annual investment of $40 billion is required for global universal energy access. It covers low tier energy access meant for lighting and cooking and is not necessarily for productive use,” the PREO report adds.
The Powering Renewable Energy Opportunities (PREO) programme enables African businesses to harness clean energy to improve incomes, build climate resilience and reduce reliance on fossil fuels. To date, the PREO programme has funded 23 private sector and non-profit enterprises that demonstrate the business and impact case of PUE in multiple sectors.
In e-mobility, PREO says it has demonstrated viable payback for investment over a little more than two years through a daily leasing model of e-motorbikes. Its projects have created jobs, created opportunities for women, boosted local production capacity, and created supply chain opportunities. Emissions associated with the use of fossil fuels in conventional internal combustion engine motorbikes have also been avoided while running and service costs have come down by 68% and 33% respectively.
Cooling for food companies supported through PREO have shown that off-grid cold storage directly aggregates smallholder farmers and achieves breakeven at a 72% utilisation rate. The cooling units reduce agricultural waste by a third, and client farmers typically pocket 20% more for their produce when using the service. Over six months, client farmers sold 2 550kg more produce, resulting in $11 460 additional income.
In primary healthcare, companies supported by PREO show that by adopting solar, facility downtime can be minimised by as much as 40%, and revenues improved by up to 20% through serving more patients and introducing electricity-powered medical devices and other healthcare services. Investment will attract capital for more off-grid implementation and is a model that may be applied elsewhere.
“Stimulating greater demand for renewable energy and boosting investment in productive use equipment and applications is a critical way to support business opportunities, grow local economies and create jobs in sub-Saharan Africa,” Jon Lane, Associate Director at the Carbon Trust says. “However, traditional forms of investment in energy access often fall short of bridging the gap between the high cost of supplying renewable energy to off-grid communities and building consistent and reliable demand from businesses or households. We hope the release of these reports not only highlights the scale of the investment opportunity available, but also confirms the economics and social benefits that can be delivered.”