Current Energy Landscape
Despite Somalia’s history of protracted conflict, its private sector has shown entrepreneurship and resilience, and succeeded in maintaining economic activity in a challenging environment. In the absence of an electric grid, privately owned and operated diesel-powered mini-grids were developed, which provide nearly all of Somalia’s electricity. However, these are concentrated in urban areas, where 57.2% of the population has electricity access, versus 11.6% in the rural areas where most of the population lives.
In rural areas, charcoal and firewood make up about 85%-90% of energy used. These biofuels provide unhealthy and low-quality lighting, without any additional energy services. Consumption at this magnitude also contributes to deforestation and Co2 emissions.
Several barriers – financial, logistical and environmental – stand in the way of reaching universal electricity access through diesel powered mini-grids alone. Inability to pay for the electricity provided by these mini-grids is a significant factor. Whereas nearly 70% of the population lives below the poverty line, the cost of electricity in Somalia is amongst the highest in the world, at $0.5 – 1 per kWh.
Off-grid solar can help to address this affordability issue and respond to the need for decentralized electrification with 65% of the population being nomadic, and about 2 million internally displaced people.
Challenges in the Current Off-Grid Solar Market in Somalia
Consumer awareness and acceptance of off-grid solar in Somalia is generally high, and the price is lower than the alternatives. An estimated 100,000–150,000 off-grid solar products are sold annually, according to World Bank research.
Unfortunately, awareness of the importance of purchasing quality products and how to identify them, generally lags consumer awareness about off-grid solar more generally. Most of the currently available products are poor-quality and thus carry the twin risks of undermining consumer confidence in this technology, and of placing financial strain on consumers who invest scarce funds in products that fail to perform as promised.
In Somalia, non-governmental and aid organizations procure and distribute lanterns and solar home systems in relatively large numbers for free, or substantially reduced costs. While this approach meets immediate needs, it hinders sustainable market development as the population becomes more reluctant to pay for something they believe they will eventually receive for free. Where poor-quality products are distributed, consumer confidence in off-grid solar solutions is also significantly undermined. Lighting Global has released a guidance note on procuring off-grid lighting for humanitarian aidto help organizations mitigate these risks.
In addition to these challenges, existing solar businesses are constrained in accessing finance from local commercial banks, which still consider the off-grid solar sector to be relatively unknown and risky. Further, foreign-based distributors and manufacturers perceive high risk to doing business in Somalia and rarely offer credit to local suppliers. This leaves businesses to largely self-finance and limits their ability to grow and scale.
Lighting Africa’s Approach
Lighting Africa will address these challenges by working to improve the enabling environment for off-grid solar businesses, improve affordability, and protect consumers.In order to determine how best to do this, and to contribute to universal energy access in Somalia, Lighting Africa first carried out an in-depth off-grid solar market assessment and identified key opportunities and challenges in the country’s energy sector.
The Somali Electricity Access Project has significant potential to improve the quality of life – particularly health and education outcomes – of thousands of Somalis, who will now have access to reliable and affordable electricity through high-quality off grid solar products.”
– Hugh Riddell, Country Manager, Somalia
Our findings, together with extensive stakeholder consultations, were used to inform the development of the World Bank’s Somali Electricity Access Project (SEAP).
SEAP aims to expand access to electricity in targeted urban, peri-urban and rural communities in Somalia. SEAP will work through three primary avenues to support the stand-alone solar market to achieve this goal:
Consumer awareness and citizen engagement campaigns around the importance of quality solar products, and how to identify them, will be carried out.
We will work with government agencies to build their capacity to increase the availability of, and demand for, good quality products, and develop favorable policy and regulatory interventions aimed at increasing quality-verified sales.
The project will increase access to finance for local off-grid solar entrepreneurs by providing grants for market building activities aimed at affordably reaching more challenging consumer segments with products meeting Lighting Global Quality Standards. These seed and expansion grants will incentivize the private sector to establish and scale up operations, including adoption of innovative models such as Pay As You Go (PAYG).
SEAP will achieve electricity access for at least 21,500 households (around 113,900 people).