Africa Amidst 2018 Global Solar Market Predictions

World Bank - Solar Market Predictions

GTM Research’s new Global Solar Data Hub projects that, “2018 will be the first-ever triple-digit year for the global solar market, with an anticipated 106 gigawatts of PV coming online”. This is consistent with the growth trends of the last few years, (including the 26% solar market growth for 2017) reported by different market monitors.

As solar sector growth strengthens around the globe, the world’s region with the most critical need for power and one of the most abundant solar irradiance – the African Region – will need to find its rightful place amidst the anticipated, positive movements in solar PV development for 2018. What then is Africa’s solar sector posture for 2018?

Since both funding as well as, technical capacity for African solar projects are mostly (and sadly) sourced externally; primarily from Europe, America and Asia, developments within the African space will continue to mirror global trends, once local economic and political constraints are properly factored or adjusted for. Both on-grid and off-grid solar appears promising within the continent but difficulties around poor ratings on general Ease of Business index in several countries may limit the speed of both on-grid and off-grid solar development.

Recently, there appears to be a global growth in solar funding, which has also been felt in Africa. Mercom Capital Group’s 2017 report for the solar sector suggests that:

Total global corporate funding into the solar sector, including venture capital/private equity (VC), debt financing, and public market financing raised, came to $12.8 billion, a 41 percent increase compared to the $9.1 billion raised in 2016.

The recent global growth in available finance for the solar sector (such as reported by Mercom Capital for 2017) has had direct impacts in Africa, since the number of planned utility-scale solar PV projects grew remarkably with several PPA’s signed and numerous auctions planned; broadly increasing the overall number of projects under development in the continent.

Similarly, global market downturns in some segments of the solar market in 2018, could also impact the African market negatively. Mercom Capital reports that “$2.4 billion was raised by 16 residential and commercial solar project funds in 2017 which was down 50 percent compared to $4.9 billion raised by 30 funds in 2016”. If this 2017 trend continues into 2018, the much desired expansion of the African off-grid solar (which is faster to deploy and more market-driven) may decelerate and this could impact the overall market in diverse ways. It is therefore essential that the continent’s recent growth strides in off-grid solar retains its momentum since the off-grid power market in Africa is huge. This huge market potential is due to off-grid solar’s suitability and affordability for electricity-starved rural communities in Africa (where the grid is yet to arrive). Rural households which make up a good percentage of the continent’s population, directly help to drive off-grid and commercial solar growth (with the later most attractive to semi-urban and urban industries and businesses).

Another market monitor, the 2018 solar market prediction by Bloomberg New Energy Finance (BNEF) reported potential global solar market growth with Africa expected to become one of the lead growth markets according to an analysis by PV Magazine:

Global solar PV installations are expected to reach at least 107 GW, up from BNEF’s estimated 98 GW in 2017. China will again lead the pack, with between 47 and 65 GW; however new countries in Latin America, south-east Asia, the Middle East and Africa are expected to become significant markets.

While Africa has become a notable solar market of interest, growth-slowing constraints remain and are likely to continue to emerge, especially on regulatory ambiguities and the level of development of local capital markets. This has contributed to sub-par speeds of solar development in Africa relative to the forecasted global pace. From a cost-competitive standpoint between solar power and rival fossil sources such as coal and natural gas, global predictions and growth projections may not necessarily apply to Africa due to certain regional peculiarities. For example, while there are several predictions that solar could achieve similar or greater cost-competitive structure in 2018, relative to coal and natural gas, Africa’s energy footprints which is filled with a historical preference for these fossil energy sources, pose meaningful constraints to full-speed and unfettered solar resource development in the continent.

BNEF’s 2018 report suggested that “greater policy certainty and a shrinking coal pipeline (will) help to drive renewables from 2019 onwards” (in terms of its relative cost). However, it may be possible in the African context that coal power development will expand rather than shrink in 2018 and beyond, while it may not directly influence the global competitive standing of solar relative to fossil; it will specifically limit growth in the markets where fossil power sources may be prioritized.

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For example, in spite of these already attractive competitive cost structures, some countries such as Nigeria are still considering the development of coal resources which is in abundance in that country. Similarly, the presence of enormous natural gas reserves in Nigeria – most of which are already developed and are providing power to the nation’s grid through turbines – will continue to attenuate the country’s interest in solar power. These are some of the domestic constraints to the attainment of possible/projected solar market growth within the continent.

In spite of the validity of global predictions for solar market, Africa’s solar power development opportunities and challenges will follow distinct patterns that reflect the continent’s peculiarities but which are however not completely unconnected with the global reality. Summarily, available data suggest that the African continent – despite the highlighted possible constraints – will continue to improve in the solar space. The share volume of power demand in Africa, occasioned by continent-wide poor generation capacity and dilapidated grid infrastructure, coupled with the widening campaign and awareness for clean technology, will continue to drive solar PV growth in Africa from diverse segments of the solar sector. comment

* Cover image credit: Flickr @worldbank

Chijioke Mama
Chijioke Mama is a Senior Energy Analyst, Strategy Consultant and Syndicated Columnist. Chijioke is one of the leading voices in Africa’s energy discourse, with over 60 research-based and investment-focused publications on energy matters in Sub-Saharan Africa. His core skills lie in energy investment and policy analysis/modeling for the Africa’s energy landscape, including solar power. Through EnergyDatar, a company he founded, he provides market entry/operational advice for solar investors in Africa. He has a Master’s Degree in Business Administration (MBA - Management) obtained in 2014, from the University of Lagos, in Lagos Nigeria. Chijioke is multi-lingual (Intermediate Spanish, Basic French and Fluent English) with good consulting & people skills.

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