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Business trends

Home solar business brightens in Africa

Startups and trading houses bring power to those off the grid -- profitably

Solar panels are installed on the roof of a small shop in Kenya. These kiosks often rent solar powered lanterns to households for about the same price as it costs to fuel a kerosene lamp.   © Getty Images

TOKYO -- People living in areas without electricity in Africa are beginning to enjoy modern conveniences, thanks to solar powered gadgets they can rent from small shops.

In Tanzania, solar-powered kiosks display rows of orange LED lanterns. The kiosks have partnered with Wassha, a Japanese startup that originated with the University of Tokyo, to offer electric gadgets to customers who otherwise would not be able to run them.

Wassha lends solar panels to kiosk operators, along LED lanterns and other devices free of charge. The kiosks rent the lanterns out to customers and send Wassha the rental fees by smartphone. The lanterns are charged using solar photovoltaic systems installed at the shops.

The lanterns rent for 500 Tanzanian shillings (22 cents) a night, about the same as fuel costs for a kerosene lamp. In addition to providing light, the lanterns can be used to charge mobile phones. And they do not cause the health problems associated with burning kerosene. Wassha hopes to increase the supply of solar powered lanterns by 80% to 2,000 by the end of the year, and to 10,000 within three years.

An off-grid power source that uses small solar panels installed on rooftops is called a solar home system. This distributed form of power generation is called the "democratization of energy" by proponents. According to the World Bank, the global market for solar home systems was worth $1 billion in 2016 and is expected to grow to as much as $8 billion by 2022, led by rising demand in Africa.

Specialized providers of solar home systems began to emerge around 2013, mostly in Africa. These small power systems have sprouted up on the continent because of the widespread use of e-wallets and falling prices for solar panels and other solar home system equipment.

Big European energy companies are taking an interest. Royal Dutch Shell, a British-Dutch oil and gas giant, invested in Ugandan company SolarNow in 2017. SolarNow provides solar home systems to more than 25,000 customers in Uganda and Kenya. Electricite de France, France's biggest power company, moved into Togo in 2018 through a joint venture with Bboxx, a British solar power company. EDF is aiming for a 35% market share 35% of the solar home market in the West African country by 2024.

Engie, a French utility, in 2018 acquired Fenix International, which provides home solar systems in Uganda, Zambia and other African countries.

Japanese trading houses are also investing in companies that operate power generation businesses. Marubeni took a stake in Wassha in 2018 and, in June of this year, took a stake in Azuri Technologies, a British company that sells solar panels, rechargeable batteries, TVs and other products on an installment basis in Africa. Marubeni plans to become the largest shareholder in Azuri.

Mitsui & Co. and Sumitomo Corp. have bought into M-Kopa Solar, a Kenyan company that sells solar panels and related products on an installment basis in Africa. M-kopa has solar home system contracts with 800,000 households and hopes to raise that to 1 million households by 2020.

Mitsubishi Corp. rents solar panels and rechargeable batteries to households in Cote d'Ivoire, in partnership with EDF. The trading company plans to apply business models that have been successful elsewhere, utilizing its corporate network.

With emissions controls on coal-fired power plants tightening, especially in developed countries, demand for solar power is growing apace. This will also promote the spread of solar home systems. When light comes to off-grid areas, economic activity can continue after dark -- at restaurants, recreational facilities and other businesses. This should spur economic growth in Africa and lift consumer spending on the continent.

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