First Pakistan… now Chad and Sierra Leone. What’s going on? 

Pakistan is experiencing an unprecedented solar surge that has caught the attention of the world (Washington Post, CNN, NPR, VOX). Installed distributed solar capacity skyrocketed to almost 50% of the country’s total installed capacity in less than two years.

Recent data suggests the beginning of a similar trend in select African markets. Ember reports that Chinese solar panel imports to Africa grew by 60% in just one year. Satellite data and project tracking databases suggest this surge can’t be explained by grid scale projects. The pattern in many countries isn’t gradual growth — it’s a sudden spike. For example:

• Chad and Sierra Leone imported more than half their total known installed capacity in a single year.
• Five other countries imported 10% or more.
• Sixteen imported 5% or more.

FIGURE 1: EMBER China Solar PV Export Explorer data showing the 12-month rolling average of Chinese PV exports.

But as distributed solar capacity has increased, so have concerns about unintended consequences — such as the destabilizing of already weak utilities and the transfer of grid costs from the wealthy (who can afford solar) to the poor (who can not).

This raises a critical question: How should leaders in these countries react? So far, the typical responses have been inaction or implementing early-stage policy measures other countries have used to simulate the distributed energy sector (e.g., net metering). Analysis is often driven by individual and polarized stakeholder perspectives — highlighting the overwhelming positive development to bring cheaper, more reliable clean power directly to African consumers, or the pending disaster for utilities that are already financially stressed. Effective policy making will require balancing costs and benefits to the full range of power sector actors now and in the future.

4 myths about Africa’s power markets that should influence how policymakers react

As a first step to a more nuanced policy dialogue, it is important to dispel some common myths regarding the integration of distributed energy resources into African power markets.

Myth 1: Africa is headed towards a distributed-only future, so we shouldn’t worry about the utility. 

• Reality: Yes, off-grid systems and mini-grids will play a much bigger role in Africa than in most other regions. But a fully decentralized system is neither feasible, efficient, equitable, nor globally competitive. Economies able to deploy solar and storage at scale through centralized systems will have a competitive advantage over those only relying on distributed, small-scale installations.
• What it means for policy: Distributed energy policies will be a critical component to Africa’s future competitiveness, but not if they are at the expense of a viable grid. Regulators must consider both short- and longer-term effects on local enterprises and macroeconomic impact as they establish distributed generation energy policies.

Myth 2: The solar panel import surge will lead to a boom in both utility-scale and distributed solar. 

• Reality: Sadly, that’s not what the data shows. Despite ambitious plans for 10 gigawatts (GW) grid-scale solar in sub-Saharan Africa by 2025, Ember points to satellite imagery indicating that only one project is currently under construction. Many of the countries experiencing explosive growth in solar panel imports have yet to overcome major barriers to utility-scale solar.
• What it means for policy: Low-cost, reliable grid power is a prerequisite for achieving a sustainable balance with distributed resources in many markets. Policymakers must move aggressively to implement critical power sector reforms that will enable the utility to operate more efficiently and transition to lower-cost generation sources such as wind and solar.

Myth 3: Scaling distributed power in Africa will save everyone money.

• Reality: It depends. A company in Nigeria that relies on diesel gensets can expect a payback period of around 6 months from a switch to solar. But what about those that can’t afford solar or don’t operate in a building that could support it? What type of costs can be expected to effectively integrate solar into fragile distribution systems that have been neglected for years? If not managed properly, utilities will be forced to recover more and more costs from a shrinking customer base, many of whom are already on subsidized tariffs.
• What it means for policy: Regulators must avoid policies that subsidize those who adopt solar while passing on additional costs to those who don’t. African governments are already struggling with unsustainable debt loads and can’t be expected to step in to further subsidize the power sector.

Myth 4: A surge in distributed solar will lead to an immediate exodus of customers from the grid. 

• Reality: Not everywhere, and not immediately. In fact, in 17 African countries, diesel generator capacity exceeds grid-scale generation. Replacing diesel with solar is a huge win — cheaper, cleaner, and healthier. In the short term, replacing or hybridizing existing captive power is likely one of the fast-growing markets for solar. In addition, a portion of the imported solar panels will help power off-grid customers, without impact on the grid. However, if current trends continue, that tipping point will come — particularly for markets with expensive grid power.
• What it means for policy: Replacing captive power may buy regulators some time before a solar surge erodes utility revenue, but it is not a reason for inaction. Regulators and utilities must devise schemes that will allow utilities to track distributed solar installations on the system as a first step to effective grid integration.

In truth, the distributed solar surge is both a cause for celebration and a call to action. 

This trend highlights the failure of many traditional grid systems — utility power is too expensive and too unreliable — and the urgent demand for alternatives. Absent smart policies, this surge could pose an existential threat to utilities and, by extension, to equitable, globally competitive energy access. But electric utilities can not be destroyed, they must be reformed. And regulators are right to proceed deliberately and not add additional fuel to what could become an uncontrollable fire. Power sector reforms are almost always instigated by a crisis — and a surge in distributed energy resources might be just what the doctor ordered.