Seventy-seven per cent — 592 million — of the 770 million people without access to electricity globally live in Africa. And although between 2014 and 2018, 24 million people have been connected to electricity, most people won’t have electricity by 2030.
According to the World Energy Outlook 2022, to achieve full connection by 2030, 100 million people have to be connected every year. However, going by the current pace of electrification, this will not be a reality by 2030, when an estimated 85% of the 672 million people without electricity will be from Africa.
Providing 672 million people with electricity
Connecting the population without electricity to the central electrical grid will cost a lot of money. The World Bank estimates it will take $17 billion annually between now and 2030 to connect low-access areas to the main grid.
But the road to electrification doesn’t have to be so steep. The World Energy Outlook suggests that a decentralised or off-grid system is a low-cost way to ensure people without energy access are connected.
While this system means that people without energy will not be connected to the central grid (off-grid), they will have mini-grids or stand-alone energy sources, ensuring that they have electricity until they are connected to the main grid.
Most of these decentralised systems are renewable solutions, such as solar-powered mini-grids.
However, this does not eliminate the need for funding. Companies manufacturing these solutions need money to provide affordable renewable energy to Africans.
This is where Nithio, an artificial intelligence (AI)-driven platform for clean energy investment, comes in, and it is only doing its part to ensure that by 2030 there will be fewer people without energy access.
Kate Steel, Nithio Co-founder and CEO, says the company uses AI to understand household credit risk better. According to her, failing to understand this makes it difficult to scale up solar energy.
The AI uses two data streams, “One that’s a piece of demographic information about households in different markets across Africa. We merge that with payments data so that we can build a predictive model of what attributes of households are indicative of different payment patterns.”
This means the AI can predict a household’s payment pattern based on its characteristics and demographics, including household size and income.
The technology helps inventors and companies supplying these energy solutions to know what to expect at the point of sale.
Since its inception in 2018, Nithio has made nine investments in its key markets in Kenya, Nigeria, and Uganda. It has provided funding for companies including Bboxx Energy Access Nigeria Ltd (BEAN), Winock, and d.light.
According to Nithio’s 2022 Impact Report, this funding has impacted 98,413 people, enabling them to have access to energy. The financing, consisting of $15 million in loans and $23 million in capital commitments, supports the company’s process from manufacturing to distribution.
Climate finance justice
While Nithio’s financial support could lead to more people getting connected to energy in Africa, it is not a challenge one company can take on alone.
According to the 2021 Global Landscape of Climate Finance, there was a global climate finance inflow of $632 billion between 2019 and 2020.
However, only a tiny portion of climate financing ($19 billion) went to Africa. It is important to note that the countries with the most funding, including the US, Canada, and Western Europe, were primarily funded by private finance. In contrast, 88% of Africa’s funding came from public institutions and governments.
Besides Nithio, few private entities are dedicated to funding Africa’s off-grid renewable energy sector. Apart from venture capital firms occasionally investing in solar companies, Shell-funded impact investment company, All On is perhaps the only company dedicated to funding renewable energy solutions.
While this reality underscores governments’ essential role in making off-grid electrification a reality, it also shows that the continent needs to get private entities within and outside Africa interested in funding off-grid renewable solutions.
Steel opines that more climate financing should be directed towards Africa because the countries getting the most finance can finance themselves.
Africa only generates about 3% of global carbon emissions and, like every other country globally, is being affected by climate change. Interestingly, it is ill-equipped to handle the changes.
“I think that’s where there’s this, in my mind, an injustice. Where Africa [that] has not been a high polluter and a higher emitter of carbon dioxide, would miss out on this investment that could help with economic development,” Steek said.
She added that while Africa doesn’t emit carbon dioxide as much as other regions, enough funding could help it continue on that path.
Africa’s inadequate energy distribution system makes off-grid systems like solar energy a viable solution for the continent. With a system that can help investors predict investment outcomes, perhaps more investors will look towards renewable energy for Africa.