Solar panels on roofs are reversing the energy access trend in Africa

October 24, 2023

After the number of people without access to energy increased for the first time in several decades in 2022, the trend has turned positive again in 2023, according to figures from the IEA’s World Energy Outlook, launched 24th October. Norfund is investing in several companies that offers simple solar installations that can be payed via mobile phones.

“We see that this business model is now really making a significant contribution, and over recent years we have invested in a number of such companies which improve quality of life and employment opportunities through energy access,”

Birgit Edlefsen, investment director in norfund

745 million people lack access to electricity

The World Energy Outlook from the International Energy Agency (IEA) annually highlights global energy challenges ahead of the UN climate conference, COP, which this year takes place in Dubai. Last year’s report showed that the number of people without access to energy increased by around 6 million to about 760 million. However, this year’s report shows the number is expected to drop to 745 million in 2023.

80% of those lacking electricity, 600 million people, live in Sub-Saharan Africa, where simple solar installations with batteries and energy-efficient solutions are making particularly important contributions to increasing access. The IEA estimates that the number of people with access to such solutions in Sub-Saharan Africa has increased by about 25 million since 2019, surpassing 45 million in 2022. This means these systems now provide electricity to 4% of African households. So-called mini-grids provide electricity to 2% of the population in Sub-Saharan Africa, while regular grid access provides for more than 40%.

Solar lantern from Sun King provides light to a tailor.

“Access to energy is a prerequisite for job creation, economic growth, and improved living standards in developing countries, and this is therefore an important focus area for us,” says Edlefsen.

1.8 million new households gained access to electricity through the companies Norfund invested in within so-called off-grid and mini-grid in 2022, shows Norfund’s annual report.

Investment in Sun King to provide further access

Norfund is now investing 20 million dollars in a securization instrument that provides working capital to Sun King Financing Limited, to increase access to energy in Kenya. The company is one of the largest providers of solar home systems and has already powered over 100 million people in Africa and Asia.

“Reduced prices on solar panels, batteries, and energy-efficient solutions, have made it possible to develop a business model for solar home systems that has now matured enough to build economies of scale, but it depends on access to affordable capital, and here we see that Norfund can make important contributions,” says Edlefsen.

These solar-powered lights is both safer, cheaper and brighter than a kerosene lamp.

Norfund has previously provided similar instruments for other companies in the solar home system space and has been a front runner in realizing these kind of securitization transactions.

Sun King customers can choose to split payments into affordable installments, which can be made via mobile or cash for as little as $0.15 per day. Their Sustainable Financing Framework shows that about half of the Kenyan customers are women, most of whom are accessing formal financing products for the first time.