The case of dark cities in Africa
Harnessing Africa's Energy Potential to Illuminate the Future
🌟Good morning, entrepreneurs & tech enthusiasts!
Electricity can be considered the single modern marvel that has most dramatically shaped human civilization. From banishing darkness with lighting to powering healthcare and medical advancements to driving the digital age through communication and connectivity, electricity enables industry and manufacturing.
The Darkness We Face
While electricity is a cornerstone of modern life, it's tragically absent for over 600 million people in Africa. That's a staggering 38% of the population facing the harsh realities of life without power. The crisis hits hardest in sub-Saharan Africa, where 550 million people lack access, and a staggering 70% of rural areas remain in darkness. Ironically, this energy-starved continent is blessed with abundant energy resources. From oil-rich nations like Nigeria and Angola to the year-round sunshine bathing the continent, Africa holds enormous potential for power generation. With Africa's population being the world's fastest-growing, set to double by 2050 to reach more than two billion, the need for cost-efficient and sustainable energy sources is critical for the continent's socioeconomic development.
The impact of having no access to electricity includes obvious setbacks in healthcare, education, and manufacturing. In countries such as South Africa, Zimbabwe, and many others, industrial output is affected by load shedding.
Why the Gridlock
Africa gets most of its electricity from fossil fuels (primarily coal) and hydroelectric power. Most energy generation entities are state-owned and dilapidated, inherited from European colonialists with little investment in modern infrastructure ever since. Financial constraints are the main limitation to upgrading existing utilities. In hydroelectric plants, the cost of adding 1MW to the grid is around $5 million.
The cost of building new or upgrading Africa's power grids is astronomical. Research shows that building a new coal power plant ranges from about $2,500 to $4,500 per kilowatt ($2.5 to $4.5 million per Megawatt (MW), depending on technology and location. Operational costs for fuel, maintenance, and other expenses further increase the price tag. Hydroelectric power is similarly expensive, with costs ranging from $1 million to $5 million to add just 1MW to the grid. As a result, most African utilities, often state-owned, struggle to add more capacity.
Africa's current total electricity generation is estimated to be around 800 Terawatt-hours (TWh) per year. Hydropower dominates, providing approximately 60% of power. Coal, gas, and oil contribute significantly, at an estimated 30-35%. Thanks largely to global demand for climate-friendly energy, renewables including solar, wind, and geothermal are growing, making up roughly 5-10% but increasing steadily.
For 600 million Africans, access to electricity is far from ideal, and this figure could reach 1.2 billion by 2050 if the power grid isn't dramatically improved. Experts estimate that Africa needs to double or even triple its current electricity generation to achieve universal access, meaning an additional 300-900 TWh per year. The major problem? Money. Power generation is capital-intensive and takes time to become profitable. However, that hasn't deterred some innovators.
The Entry Barrier
Unlike software, which can be built on a small budget, in a garage, the energy sector is very cacapital-intensiveRegardless of your fuel source, you need infrastructure: power plants requiring large-scale construction with specialized equipment, and the grid (power lines, substations, etc.) to transport energy over long distances. Developing and deploying new energy technologies, especially renewables, often requires significant R&D investment. Securing access to oil fields, coal mines, or optimal wind/solar sites can involve substantial upfront costs and negotiations.
Let There Be (Solar) Light
The almost $300 billion global solar energy industry, combined with breakthroughs in battery storage, offers a cost-efficient, long-term, and climate-friendly solution. In Africa, solar is the primary focus of disruptive energy startups. These disruptions are coming in different forms.
Pay-As-You-Go Solar Solutions: This allows off-grid households to purchase solar lighting systems, phone chargers, and other small appliances in installments using mobile money platforms. It's bringing basic electricity to millions. Startups like M-KOPA (Kenya/Pan-African), SunFunder (Kenya), and Zola Electric (Tanzania) are leading the way.
Solar Irrigation Systems: These replace diesel or petrol-powered water pumps for agriculture. This reduces reliance on expensive fossil fuels, empowers farmers, and potentially boosts yields. Startups like SunCulture (Kenya) is prominent in this space.
Solar-powered Mini-Grids: These localized grids are powered by central solar photovoltaic (PV) systems and batteries, providing electricity to clusters of homes and businesses in un-electrified areas. This bridges the gap between individual solar solutions and large-scale grid expansion. Startups pursuing this model include Daybreak Power (Nigeria), Powerhive (Tanzania), and Zola Electric, which also offers mini-grid solutions.
Innovative Financing Models: Startups are developing creative financing solutions like microloans, carbon credits, and partnerships with NGOs to make solar power systems more affordable for low-income households. This unlocks solar power for those who cannot afford upfront costs. Examples include PEG Africa (Ghana) and SunFunder (Kenya).
Solar-Powered Appliances: Companies are developing and promoting efficient, solar-powered lights, TVs, and even refrigerators. This increases the utility and value of solar home systems, improving quality of life. Sun King (Netherlands/operating in Africa) is one startup offering solar-powered appliances alongside its systems.
Funding The Future
McKinsey studies show that Africa needs just under $3 trillion in cumulative capital expenditure between 2022 and 2050, mostly channeled towards green energy sources. This is a staggering sum given Africa's current GDP of roughly $3.1 trillion – a dramatic shift is needed, and there's been some notable action.
In 2023, $380 million was invested in energy startups, with notable raises by Sun King and M-Kopa. 2024 so far is seeing a sluggish start for Africa, with 120+ startups raising a combined $466 million in the first quarter, with only $49 million invested in energy startups.
The Question of Money
While $3 trillion is a daunting figure, incremental steps can make a huge difference. Many African farmers already use solar power to pump water from the ground, and some are innovating by turning farm waste into fuel. Personal, commercial, and governmental investments could all play a role in the solution.
Sufficient funding has the potential to electrify Africa and ensure access for the 600 million people currently without power. Getting there is difficult, with the immense material investment required. $120 billion invested annually in energy until 2050 seems insurmountable, but the combination of need, necessity, and innovation could yield significant progress toward solving this profound problem.
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