U.S. Entrepreneurs Target Africa’s Solar Opportunity

A slew of VC-funded, American solar energy startups seek to profit by electrifying African communities, per Bill McKibben in the latest issue of the New Yorker :

• “Solar electricity…has become inexpensive, in part because the price of solar panels has fallen at the same time that the efficiency of light bulbs and appliances has dramatically increased.”
• “One of the biggest obstacles to the growth of solar power in the region is the lack of available cash, many of these companies are essentially banks as well as utilities, providing loans to customers who may have no credit history.”
• “It will be years before it makes financial sense for solar companies to expand to the most remote and challenging regions of the continent. As new companies launch, they will need an infusion of … ultra-high-risk capital.”
• “The gush of money may be too much, too fast for a sector that still has not fully solved core business model issues and may struggle under the high growth expectations and misaligned incentives of many venture capitalists.”

Why it matters:

Globally, over a billion people live without electricity. Close to half of these are poor households across Africa:

Falling solar prices have made solar power particularly attractive to investors targeting opportunities in both developed and developing countries:

However, on-ground realities force innovators, foreign and local, to innovate their business models, with company financing and ‘Pay-As-You-Go’ models particularly popular across Africa:

Caution: “The push for quick returns on investment could lead some companies to try to squeeze more out of poor households and … [try] to make money off the backs of the poor in a dubious way.”