By Tracy Dolan, Head of Knowledge and Communications, EEP Africa and Lauri Tuomaala, Head of Portfolio and Finance, EEP Africa
The number of electric vehicles in Africa has the potential to increase significantly by 2030. The challenge, however, is in charging infrastructure, powered by renewable grid-tied or off-grid solutions, keeping pace with market interest. Dolan and Tuomaala from EEP Africa, the clean energy financing facility hosted and managed by the Nordic Development Fund (NDF), with funding from Austria, Finland and NDF, unpack this challenge.
The global market for electric vehicles (EV) is multiplying. This growth is due to revolutionary improvements in technology (resulting in lower costs) and the urgent need to address climate change. Governments worldwide are announcing phase-out dates for vehicles with internal combustion engines (ICE) as part of their national climate plans.
Major car manufacturers are also making ambitious commitments to producing EVs – Volkswagen pledged $91 billion last year, and GM recently announced a $20 billion investment in the technology. Spurred partly by tax incentives, the EV market share for new cars already exceeds 50% in a few countries, such as Norway and Sweden, and is rising sharply across Europe and Asia. By 2030, EVs are expected to make up 35% of global vehicle sales.
The EV market is still nascent across Africa, increasing investor interest and engagement in the sector and momentum for growth. National and city governments are including bold EV targets in their plans to reduce greenhouse gas emissions and improve air quality and health. Investors and private sector developers are exploring market opportunities in multiple countries, and the global shift will lead to more used EVs entering the African market.
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An estimated 80-90% of vehicles imported to Kenya are second-hand, and importing cars more than eight years old are banned. However, this mismatch means that policymakers and investors need to work together to ensure that Africa does not become the dumping ground for polluting vehicles but rather grows its EV market in parallel with global trends during the next 5-10 years.
As battery and charging technology improves and associated costs come down, the main barrier to the EV sector in Africa is the lack of reliable electricity and infrastructure. Gas stations are located at frequent intervals in suburban areas and major highways, but charging stations for EVs are rare and only found in large urban centres. The distance EVs can travel between charges is lengthening with every new model. Still, a well-planned network of charging stations with sufficient energy capacity is urgently needed for the market to grow.
In many African countries, the national grid is already under severe strain and will need significant investments in grid capacity and grid integration to handle demand from electric mobility. Transportation services such as minibuses and motorcycle taxis will not switch to electric motors without an extensive and secure network of electricity access in their area of operations.
Consumer demand for EVs is unlikely to grow under the existing pattern of weak systems and frequent brownouts. The lack of favourable regulatory and tax policies also inhibits consumer demand. Studies in more developed markets clearly indicate lower costs for EVs’ overall lifecycle than ICE cars. But without subsidies or tax incentives to make the initial purchase more affordable, market development might be stalled.
However, this challenging situation can lead to a positive transformation in both the transportation and energy sectors in Africa. A focused shift towards EVs through enabling policies, targeted investments and market incentives can catalyse the growth of smart grids and provide energy storage solutions for solar PV, wind, hydropower and other renewable and clean energy plants.
The increased demand for electricity will benefit network design, smart metering and tariff structures by encouraging offpeak use. As smart EV charging using cloud-connected devices develops, it is also possible for excess energy from EV batteries to be fed back into the grid. Some companies are already integrating vehicle-to-grid (V2G) technology that enables bidirectional charging, allowing EVs to help stabilise the power grid during spikes in electricity demand.
This charging is already happening in South Africa, the market leader for the EV sector on the continent. Although still a small share of the market, both BMW and Nissan are selling new EVs in the country. In addition to home charging units, BMW also sells solar carports and signed a memorandum of understanding with the government to roll out public charging infrastructure. The national uYilo eMobility Programme has also launched an initiative to incorporate fast chargers and V2G capability into the smart grid ecosystem.
The quickly growing decentralised renewable energy (DRE) sector also has a vital role in developing the EV market. Growth in both industries can be a winwin, increasing clean energy use and creating more sustainable and resilient infrastructure.
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Most minigrid developers struggle to stimulate enough local demand for energy to achieve profitability and grow the sector without donor support. Building charging infrastructure in off-grid areas could provide an anchor client for a minigrid and open up the local transportation market to EVs. In rural areas, another option is solar energy hubs or kiosks. These could be constructed at regular intervals, providing EV charging services for drivers and energy solutions such as rechargeable lights or battery rentals for the local community. Collaboration between energy providers and EV companies could lead to efficiencies in both core businesses.
With the lowest levels of private car ownership per capita, the transformation to EV in Africa will depend on electrifying a wide range of vehicles, including e-bikes, motorcycles, three-wheelers, minibuses, four-wheel drives, fishing boats and water-buses. Electrifying two and three-wheeled vehicles can also lead to a more dramatic impact. Changing all the cars in Kampala to EVs would not make as big a difference in emission reductions and health benefits as transforming all boda-boda taxis to e-motorcycles.
There are several innovative local and international companies targeting these markets, especially in East Africa. One of EEP Africa’s first investments in e-mobility was in 2015 for a start-up in Kenya called Solar-E-Cycles. Since then, the sector has grown tremendously, and we received many high-quality e-mobility projects in our 2020 call for proposals. Beyond simply replacing diesel and gas with electric motors, companies are looking more broadly at developing charging infrastructure through minigrids or solar stations and integrating e-mobility solutions in agricultural and fishing value chains.
Ground-breaking companies financed by EEP Africa
Zembo is an e-motorcycle start-up in Uganda. In just two years, the company has sold over 200 of its e-motorcycles to boda-boda taxi drivers and established over 15 battery swap and solar charging stations in Kampala. Zembo collaborated with SafeBoda, a local ride-hailing app with a reputation for reliable drivers, to facilitate their entry into the market. In 2020, as part of a UNEP-funded initiative, the Kampala city government partnered with Zembo to add e-bikes to its official fleet, open a new charging station and secure jobs for young people in city-affiliated youth groups. The company sees the most significant potential for future growth in the batteries and charging stations. In the next few years, Zembo aims to have a network of stations across Uganda and expand to other countries in East Africa.
Mobility for Africa is a women-led start-up providing smallholder farmers with e-tricycles to transport their produce from farm to market. After a successful pilot in Zimbabwe, funded by the Toyota Mobility Foundation, the company is now bringing its community-based business model and product to rural Tanzania. Mobility for Africa is partnering with Rift Valley Energy to harness energy from hydropower plants for the main battery recharging stations. Additional charging locations will utilise containerised solar PV systems.
EkoRent Africa is an early-stage Finnish company that launched NopeaRide, the first all-electric taxi service in Africa, in 2018. The company is now scaling up operations by developing a 160kWp solar charging station in Nairobi. The station will have a parking area and chargers for a fleet of taxis, increasing the number of drivers and serving radius. The plant will have the potential to power up to 1.4 million kilometres, and the company plans to sell excess energy to a local shopping mall. With significant new financing from InfraCo Africa, EkoRent will also triple its fleet of EVs and expand charging infrastructure across the city.
ASOBO is a start-up in Kenya focused on leasing outboard engines and batteries (e-boarders) for fishing boats on Lake Victoria. The batteries are recharged at a local minigrid, and the battery swap with PAYG costs fishermen 20% less than petrol. After testing the business model in 2019, the company aims to distribute 400 e-boarders in the next two years and eventually expand to fishing communities on the Uganda and Tanzanian sides of the lake. The Shell Foundation is also investing in Asobo’s growth and the development of new solar charging hubs.
As a final note, the scale-up and replication potential of all these business models is enormous. Discussions with investors in the off-grid space show high interest in e-mobility and plans for increasing investments in the sector. When combined with smart grid expansion, the EV sector can catalyse transformational development in Africa. ESI