Insiders predict agricultural companies could become major adopters of solar power in Africa as farmers seek to improve the cost and reliability of energy supplies.
According to a report from GreenCape, a nonprofit organization, the market for renewable energy in agriculture last year was worth up to 960 million South African rand ($61 million at today’s rates) in South Africa alone.
One in 10 South African solar installations are in the agricultural sector, the report states, and the market is expected to grow at 10 percent a year.
Frank Spencer, a board member at the South African Photovoltaic Industry Association, said solar is seeing “exponential growth” in the agricultural sector.
“The electricity demand and supply profiles of the agriculture sector make solar PV a perfect fit,” he said in an email. “We envisage this trend to continue as solar PV technology matures and the costs continue to decrease.”
Given the cost and reliability of solar generation during the day in Africa, “this kind of application is applicable wherever there is daytime usage of electricity throughout the year,” he said.
While the term “agricultural solar” often refers to the co-location of PV projects on the same land where crops grow or livestock grazes, in Africa, the location aspect isn’t the primary focus. Instead, it’s the fact that businesses mainly use solar electricity to pump irrigation water and to chill produce before shipping it.
Solar as a source of low-cost, reliable power
In both situations, PV can be more reliable than grid supplies and cheaper than diesel generation, said Edwin Masimba Moyo, executive chairman at Nhimbe Fresh Exports of Zimbabwe, in an interview.
One of Africa’s top exporters of blueberries, strawberries, raspberries and peas, Nhimbe Fresh has been blighted by grid outages that can take as long as several weeks to be resolved, leading to loss of irrigation or spoilage of goods that have to be refrigerated after picking.
Until now, Nhimbe has relied on diesel gensets to ride through grid outages. But the cost of diesel can be significant — up to $800,000 a year. “It’s a big number,” Moyo said.
To overcome this problem, Nhimbe is procuring around 1.9 megawatts of solar plus a 3.9-megawatt-hour battery system for its farm, pump sites, pack house and cold storage.
The system is being procured via Sun Exchange, a peer-to-peer solar leasing platform that allows international investors to buy into PV projects for commercial and industrial-scale customers in Africa.
Nhimbe is Sun Exchange’s second foray into agri-PV, following a project to install a 473-kilowatt system at Boland Cellar, one of South Africa’s largest wine companies. The PV system delivers a quarter of Boland’s energy requirements, cutting its electricity bill by 34 percent.
“Until recently, Sun Exchange has focused on schools and small business projects,” said the platform’s founder, Abe Cambridge, in an email. “But in the last quarter alone, we’ve hosted crowd sales for two agribusinesses, with more in the pipeline.”
Solar is rapidly becoming an important tool for reducing the operational costs of African farms, he said. “Many farm activities take place during the day, when solar power is readily available,” he commented.
“Having a solar system perfectly aligns with the operational nature of farms, significantly reducing power requirements. Many farms have cold stores, and these tend to require the most energy during the day or when it is hot, which also happens to be when solar generation is at its highest.”
New funding models to unlock fallow capacity
Moyo said Sun Exchange’s funding model was a decisive factor in enabling Nhimbe’s move to solar. The benefit of the concept is that the upfront costs of purchase and installation are borne by Sun Exchange investors, who then profit from electricity payments made by the customer.
“This allows farms and agribusinesses to go solar with no equipment, installation, insurance or ongoing operational costs,” said Cambridge, resulting “in an immediate energy-cost reduction of at least 20 percent and average savings of over 40 percent over the full 20-year lease term.”
Other procurement options are available as well. Spencer with the South African Photovoltaic Industry Association said the most common model is to purchase a solar system outright, which yields a payback period of between three and five years.
Another model that may be viable for agricultural PV in South Africa is the property-assessed clean energy scheme, which allows asset owners to finance the upfront cost of energy and then pay the costs back over time through a voluntary assessment and with debt tied to property.
Mixing solar with crops vs. rooftop and greenfield alternatives
Access to finance will be likely to further increase agri-PV’s momentum in Africa. But it remains to be seen whether the purported benefits of pairing PV with farming can be replicated in other parts of the world — particularly when solar panels are sited directly on farmland.
One BloombergNEF study in China, where several gigawatts of PV are co-located with agriculture, found the main reason for the pairing was limited land availability in regions with strong electricity demand and grid resources. The situation wasn’t optimal for farming or for PV, the study found.
“The problem with a global analysis of anything to do with agriculture is it differs by the climatic conditions, the crop you want to grow [and] the availability of labor and machinery,” Jenny Chase, head of solar analysis at BloombergNEF, wrote in an email. “It can even differ by year.”
As a result, she said, when it comes to agriculture and PV, “I am cautious and for now think that the best place to put solar panels is on an opaque roof that you know will be standing for at least 30 years.”