HomeRegional NewsAfricaProductive use of energy market opportunities in Africa significant

Productive use of energy market opportunities in Africa significant

Increasing the Productive Use of Energy (PUE) is a way of creating energy to unlock the necessary jobs and incomes and deliver social impacts within local communities that Africa so desperately needs.

Two reports released today by the Power Renewable Energy Opportunities (PREO) Programme outline the business case for investment into productive equipment and appliances and the scale of the investment opportunities that exist.

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The PREO programme enables African businesses to harness clean energy to improve incomes, build climate resilience and reduce reliance on fossil fuels. To date it has funded 23 private sector and non-profit enterprises that demonstrate the business and impact case of PUE in multiple sectors. PUE refers to the type of energy demand that generates revenue, increases productivity, enhances diversity and creates economic value.

The PUE market opportunities existing in sub-Saharan Africa is significant. The Capital Required to Maximise the Productive Use of Energy in Sub-Sahara Africa report contains an analysis that estimates $1.2 trillion is required over the next 10 years to ensure the necessary level of productive, revenue generating demand is created to improve the economics of off-grid renewable energy. This $120 billion a year investment is significantly more than the estimated $40 billion required annually to achieve global universal access on the same timeline, the report says.

PREO’s business case for investment is backed by results as it releases the first data from projects they have been supporting via the programme. The Power of the Productive Use of Energy – an Impact Investment Frontier report details the outcome of six pilot projects in e-mobility and transport, cooling for food and healthcare.

Using productive use of energy to create green opportunities

Funding from PREO has enabled businesses to demonstrate business model viability while gathering critical business information and securing commercial scale-up capital. Each of the projects uses PUE equipment or appliances to create business opportunities and grow local economies.

In e-mobility PREO demonstrated viable payback for investment over just more than a two-year period, through a daily leasing model for e-motorbikes. The projects created jobs and opportunities for women, boosted local production capacity and created supply chain opportunities. The e-motorbikes avoided the fossil fuel emissions associated with conventional internal combustion engines and running (68%) and service costs (33%) depreciated considerably.

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Cooling for food companies supported through PREO have shown that off-grid cold storage directly aggregates smallholder farmers and achieves breakeven at a 72% utilisation rate. The cooling units reduce agricultural waste by a third, and client farmers typically pocket 20% more for their produce when using the service. Over six months, client farmers sold 2,550kg more produce, resulting in $11,460 additional income.

productive use of energy graphic
Findings from six PREO projects. Infographic: PREO.

Bridging the funding gap

In primary healthcare, companies supported by PREO show that by adopting solar, facility downtime can be minimised by as much as 40% and revenues improved by up to 20% through serving more patients and introducing electricity-powered medical devices and other healthcare services. Investment will attract capital for more off-grid implementation and is a model that may be applied elsewhere.

Jon Lane, Carbon Trust associate director: “Stimulating greater demand for renewable energy and boosting investment in productive use equipment and applications is a critical way to support business opportunities, grow local economies and create jobs in sub-Saharan Africa.

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“However, traditional forms of investment in energy access often fall short of bridging the gap between the high cost of supplying renewable energy to off-grid communities and building consistent and reliable demand from businesses or households. We hope the release of these reports not only highlights the scale of the investment opportunity available, but also confirms the economics and social benefits that can be delivered,” said Lane.

The Capital Required to Maximise the Productive Use of Energy in Sub-Sahara Africa and The Power of the Productive Use of Energy – an Impact Investment Frontier are available online.

PREO is funded by the IKEA Foundation and UK aid via the Transforming Energy Access platform, and delivered by the Carbon Trust and Energy 4 Impact.

Theresa Smith
Theresa Smith is a Content Specialist for ESI Africa.