Africa’s growing investment potential extends beyond Fintech to sectors such as eCommerce, HealthTech, and EdTech. In our latest blog we look at how a twofold increase in commercial and industrial solar in the coming years can help power Africa’s move to e-mobility.
Africa’s transition to electric two-wheelers
When people think about electric vehicles, Tesla is usually the first thing that comes to mind. However, in emerging markets, two-wheelers are a major mode of transportation. Gogoro, a Taiwanese electric two-wheeler company, has shown a viable path in these markets, blazing a trail for several African firms following in its footsteps.
In Sub-Saharan Africa, two-wheelers are the most common mode of personal transportation due to a lack of reliable public transportation networks and increasing urbanisation. While the African vehicle market has been growing at approximately 5% during the 2020s, two-wheelers are rising in popularity at an even faster rate of 12.5%. Nevertheless, the industry is still primarily dominated by used and outdated vehicles, with a quarter of Nigerian imports being nearly 20 years old (for example).
This gives rise to two closely related issues:
- Older engines emit more pollutants into the air, which can be a significant source of cardiovascular and respiratory diseases.
- Older engines are less efficient, making fuel costs a sensitive issue for consumers and governments – as evidenced by Nigeria’s expenditure of $7.5bn on fuel subsidies during the first half of 2023.
Hence, electric two-wheelers can help improve public health and government finances and they can achieve this at less than half the price of fuel per day when compared to a combustion engine. Battery swapping is a critical enabler, as riders may not have access to charging infrastructure or the required funds to purchase a battery.
Across Africa, numerous companies are now focusing on solving various aspects of this challenge, from manufacturing electric two-wheelers and building battery-swapping infrastructure to creating fleet management tools for courier and taxi companies. By rolling-out their fleets and battery-swapping infrastructure at similar paces to ensure convenience for customers and improve unit economics of the business, players could be best placed to win. We outline a select list of the the sort of companies that investors should keep an eye on below.
Max.ng, which runs the largest vehicle subscription platform for low-to-zero emission vehicles in Africa, has moved into electric bikes and scooters. The company offers several EV models for purchase and provides mobile charging points, battery swapping, and maintenance services across Nigeria and is using a $31m Series B round secured in 2021 to expand into Ghana and Egypt.
Ampersand creates cost-effective electric vehicles and charging stations for the 5 million motorcycle taxi drivers in Rwanda and East Africa. The company’s innovative battery-swapping system allows customers to access fresh batteries from any part of the network. These swaps are completed quickly, similar to refilling a gas tank. Ampersand’s swap managing networks maximise battery usage and longevity through live data analysis of battery sites, charge levels, and charging stations and can electrify motorcycle fleets without high capital costs.
Roam Electric is an electric vehicle manufacturer that grew out of a research project at one of Sweden’s top technical universities with a mission to implement electric mobility in emerging markets. The company’s Roam Air next-generation electric motorcycle is adapted and designed for the African market, focusing on affordability and performance. It’s tailored for commercial usages such as carrying passengers or cargo and is 60% cheaper to drive than gasoline bikes.
ARC Ride Global designs and builds Electric 2 and 3-wheelers and is developing a proprietary battery swapping and management platform. The company is rolling out an EV ecosystem in Nairobi and beyond, enabling the electrification of existing first and last-mile transport solutions to aid in the transition to clean energy mobility systems.
Cairo-based Shift EV is an electric mobility technology start-up that allows businesses to convert existing fuel-run vehicles into electric ones using its in-house designed and manufactured batteries. The company designs and manufactures state-of-the-art Lithium-ion battery packs that integrate seamlessly with existing chassis and remotely connect fleet vehicles to ShiftWare, Shift EV’s fleet operating system.
ShiftWare provides insights to fleet owners, operators and financiers into electric vehicle operations such as achieved savings, electricity consumed, emissions eliminated, available battery range, and mileage. Last year, the company secured an undisclosed Series A round led by their existing investors Union Square Ventures and Algebra Ventures. The funding will help propel the company’s operations beyond Egypt.
Commercial & industrial solar driving electrification
Off-grid solar has markedly impacted Sub-Saharan Africa’s electrification rate over the last decade, lifting it from approximately 33% to 50%, with Kenya reaching a remarkable 70%+ penetration. This has enabled households to access lighting, mobile phone chargers, TVs, fridges and other appliances.
Off-grid solar is now poised to do the same for commercial and industrial (C&I) users. C&I solar is projected to nearly double capacity by 2025, delivering deep cost savings by avoiding the expensive grid power and eliminating frequency and voltage fluctuations.
However, commercial and industrial solar still has a few challenges to overcome. Chief among them is the need for innovative financing solutions to avoid high up-front costs. A lack of modularity also makes it difficult to scale up as businesses grow. Several companies across the continent are working to solve these challenges, providing turnkey offerings with leasing, lease-to-own, power purchase agreements and other financing solutions.
Grips Energy is a renewable energy investor and contractor that develops reliable, affordable, and pre-financed renewables-based systems for companies across Africa. The company finances, owns and operates all required assets for its customers based on pre-financed contract models (lease, PPA, lease to own), providing de-risked renewable energy access.
Solarise Africa offers comprehensive solutions for designing, building, financing, and maintaining solar installations. Their Power Purchase Agreements (PPAs) offer a risk-free solution for businesses, with no upfront investment required. Customers pay per kWh, receiving all the benefits without the monthly operation, monitoring, insurance, and maintenance costs. The company’s Leasing solution enables businesses to pay a fixed monthly amount, with no upfront investment and no additional costs towards maintenance, servicing and insurance.
Starsight Africa (focused on West and East Africa) merged with Solar Africa (from South Africa) to create a pan-African player with 200+ MW of capacity and 40 MWh of battery storage. The combined group is backed by Helios Investment Partners and African Infrastructure Investment Managers.
KarmSolar is a solar power developer and electricity distributor that offers a range of solar-integrated multi-utility on and off-grid solutions to businesses in the industrial, agricultural, commercial, and tourism sectors across Egypt.
The company recently secured $3m in debt funding from HSBC to support the further development and rollout of the Farafra Solar Grid, its second microgrid solution. Targeting to become fully operational by Q3 2023, Farafra Solar Grid is a first-of-its-kind microgrid solution that utilises solar PV panels, battery storage system, and diesel generators in a centralised setup, operating under a usufruct agreement, then distributing the generated electricity to off-takers.
Equator Energy is a renewable energy development and construction firm dedicated to helping reduce expenditure on electricity. The company specialises in financing, constructing, and operating renewable energy projects (primarily solar and wind). They also offer project management, power purchase agreement (PPA) structuring, and financing services for renewable energy projects. The company operates across East Africa from Kenya, Gambia and Somalia to Uganda, Zimbabwe and South Sudan.
Zurich-based Candi Solar has developed an innovative financial and clean energy platform that enables distributed energy infrastructure in emerging markets to be built at scale. The company is pushing the frontiers of solar financing, creating pioneering solar ownership models through innovative contractual solutions that marry the best aspects of a standard Power Purchase Agreements (PPA) model with other advantageous elements to provide simplicity, lower risk, and higher value for customers.
As the fastest-growing Pan-African developer, distributor and financier of life-enabling technologies, Ignite Power offers highly affordable price plans by reducing the costs of essential services like power, water and other necessities. Their rural utility solution for energy poverty is a milestone in Africa’s history, as it caters to 80% of the population at prices that are truly affordable.
Affordable & reliable solar to fuel Africa’s e-mobility revolution
Sub-Saharan Africa’s per capita energy usage is roughly 30 times lower than that of Europe, at around 200 KWh per year compared to 6,500 KWh per year in Europe. This enormous disparity highlights Africa’s critical need for increased energy generation to bolster industrial output, and commercial and industrial solar can play a significant role in achieving this and several companies are already providing innovative solutions to meet growing demand.
We expect the potential in commercial and industrial solar in Africa to be significant, with the World Bank estimating a required cumulative investment of $90bn by 2030 for solar mini grids for Africa, making it a significant opportunity for investors to support the development of renewable energy while generating attractive returns.
With annual investment into African EV startups estimated by McKinsey to be less than $100m in 2021, investors have not been paying sufficient attention historically to this space and are underestimating how rapidly it will gain traction as C&I solar makes EV two wheelers more feasible.
In conclusion, the combination of solar power and EVs presents a promising opportunity to fuel Africa’s e-mobility revolution while addressing the continents energy and transportation challenges. By developing affordable and solar solutions, Africa can harness its abundant renewable energy resources to power its growing population and economy.
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