AFSIA has been tracking solar projects in Africa for several years and conducts a daily surveillance of new projects being announced, awarded and commissioned.
So far we have identified more than 6,200 largescale, Commercial and Industrial (C&I) and mini-grid project across the continent. Out of these 6,200, 2,400 are already in operation and are composed by C&I projects for more than 80%!
Not so long ago, the solar market was naturally dominated by large-scale projects which have been developed and built in a handful of countries across the continent.
C&I was already a reality, but represented a very small MWp capacity within the African total. But the market is clearly changing as C&I projects are now receiving a growing interest. Based on data collected by AFSIA, C&I could indeed represent 30-40% of all solar capacities installed in the coming years.
C&I catching the lion’s share of the number of solar projects in Africa is not a surprise though. Three main reasons are driving this evolution. First, more and more C&I end-users are now fully understanding the benefits of going solar. C&I end-users are by nature more acquainted with financial models, cost-benefit analysis, and long term projections than residential end-users or public servants. While it may have taken them some time to trust the quality of solar solutions, most of the C&I community is now educated about the benefits of solar energy and wants to jump on the bandwagon so they can enjoy cheaper and more reliable electricity to run their business.
But until now, the wide majority of these C&I projects has been delivered on a CAPEX basis, meaning that the end-user has had to pay the full amount upfront for the solar installation. This has definitely limited the number of projects that have been built so far as only a small percentage of companies possesses the required cash to make such an upfront investment, literally to purchase 25 years worth of solar electricity in 1 go.
Luckily, the international investment community has understood the opportunity as well and has developed a growing appetite for investments in C&I projects in Africa. This is the second driver of the African C&I boom.
African C&I projects are indeed considered as attractive investment opportunities as they are based on B2B negotiations (as opposed to B2G), they can be conducted and successfully closed quickly (faster than the lengthy government tenders) and they can offer interesting IRRs (as opposed to international tenders for large-scale projects where the international competition pushes IRR expectations to their lowest limits).
For all these reasons, C&I opportunities are generally considered as good and attractive deals. But their scattered nature and significantly lower ticket size per project may play against them from an investor’s point of view. This is where the 3rd main driver kicks in.
The challenge with financed C&I is to generate large enough portfolios of projects to attract investment partners. No matter how good the project is, it can be extremely difficult (if not impossible) to finance a single project because investors are looking for scale and being able to deploy large ticket sizes
This is now growingly made possible thanks to the rise of a group of continental C&I development champions such as Daystar Power, Starsight, DPA, or Total to name a few. These companies all have already delivered 100s of C&I sites across the continent and have put in place processes that allow for faster and more efficient roll-out of C&I projects. The financing deals announcements of some of these companies in early 2021 are very logical and announce an exponential growth not only of these project developers, but of the entire C&I segment.
Excerpt of: Africa Solar Outlook 2021, by AFSIA. Download the full document