- Renewable Generation
- Solar Power
Out with the Old, In with the New: Microgrids and Blockchain Electrify Sub-Saharan Africa
With Sub-Saharan Africa’s household electrification rate at the lowest in the world, boosting access to electricity is a key development issue for the region. Unfortunately, last-mile distribution and rural grid extension have proved prohibitively expensive as all but two public electric utilities in Sub-Saharan Africa run quasi-fiscal deficits. While it is important to note that this is partly the result of non-cost reflective tariff structures, major system underperformance, transmission losses, power theft, customer payment delinquency, and general mismanagement—the reality remains that every time utilities connect an additional customer, they lose money.
Only 30% of countries in the region have stated rural electrification targets. While reliance on a combination of government subsidy and granting monopolies to state-owned utilities has worked in the past, this long-standing model is failing in Sub-Saharan Africa. By supporting distributed private-sector business models, many countries in the region can cost-effectively expand rural access to electricity without going further into debt.
Sun Exchange and Powerhive Partner
Earlier this year a new business model was launched by South African-based Sun Exchange, a peer-to-peer solar equipment leasing marketplace, and Powerhive, a US-based minigrid solutions provider, as a means of increasing private investment in and deployment of minigrids across Sub-Saharan Africa. Under this new partnership, Powerhive will be the exclusive recipient of solar project pre-financing earnings from Sun Exchange’s SUNEX digital token sales. The funds will be used to build rural electrification solar-powered minigrid projects, after which the panels will be offered for sale to Sun Exchange members.
During the crowd-selling round, solar panels are sold by the single solar cell for as little as $5. In return, solar cell owners are able to earn profits from the electricity generated by the project. Sun Exchange members receive 20-year solar cell lease rental payments in either Bitcoin or local currency and are entitled to 1 SUNEX token for every $10 that they spend on the platform and 1 SolarCoin (SLR)—an alternative digital currency—for every 1 MWh of electricity produced. Moreover, SUNEX tokens can be placed into the company’s solar project insurance fund that safeguards against lease default—an area of risk that is not currently covered by traditional insurance products. According to Sun Exchange, when fully subscribed, this model is projected to catalyze $23 million of capital. That capital will then be used to finance nearly 150 new solar-powered minigrid projects that will provide electricity to 175,000 people currently living without it.
The Path Forward
The partnership between Sun Exchange and Powerhive is just one example of how blockchain is engendering the development of new business models for energy companies. Another company, Greenum Network, is using blockchain to develop a peer-to-peer energy trading platform that is being piloted in Europe, the US, and Africa. As the technological forces of distributed renewable generation, cheaper batteries, and blockchain cryptocurrencies converge—the deployment of microgrids as a means of expanding electricity access will likely increase. Guidehouse Insights’ report, Market Data: Microgrids, notes that remote microgrids are well-positioned for growth—with capacity and implementation spending expected to grow in the Middle East & Africa at an annual growth rate of 24.6% and 23.8%, respectively.
As business models continue to evolve, it is important for companies in this space to engage with the communities they are working in to ensure that they are providing the best solutions. For Sun Exchange, this involves developing a pathway for local renters to buy the systems from investors and become the full owners of their own energy generation—ensuring communities in Sub-Saharan Africa reap the benefits of these technologies long-term.