Technology rewrites Africa’s energy future
New disruptive technologies are changing the way that energy generation and distribution is understood and funded in Africa.
These changes have profound implications, far beyond the energy sector. African policy makers, governments, banks, investors and global funders need to take stock of these changes and re-look at how energy is conceived and managed on the continent.
“The good news is that technology-driven change is likely to see Africans play a far larger role in building, shaping and benefitting from energy on the continent,” says Rentia van Tonder, Head, Power at Standard Bank.
New technologies are set to expand access to energy beyond Africa’s urban centres. This holds the potential to include Africa’s extensive rural population in meaningful economic participation, sustaining the African growth narrative for generations to come.
Small, easy-to-install, home solar, for instance, is making energy affordable to rural populations, and challenging banks to come up with less costly – and digitally delivered – funding solutions, “geared to individuals seeking access to energy – and the economic opportunities that this brings,” says Ms van Tonder.
When new storage technologies, currently attracting heavy early-phase funding from US investors, is added to the mix, individuals will also be able to store – and potentially even sell – their own energy.
Since the bulk of Africa’s rural population has, historically, been excluded from Africa’s limited and urban-focused grids, home technologies delivering and storing affordable and privately owned off-grid solutions, also have the potential to take energy generation and supply off government balance sheets.
This will mean that the days of building vast generation and distribution networks are likely not to dominate as in the past. Instead, “the future will see smaller, localised, and even privately-owned off-grid generation, storage, distribution and sale of energy,” says Ms van Tonder. This will involve a far wider mix of technologies and suppliers - and a far wider range of funding and payment mechanisms.
Making renewables part of a diversified energy mix also provides utilities a way of continuing to attract funding – by using new technologies to sustainably diversify their generation and supply networks, including off-grid and end-user funding elements.
Other opportunities for African utilities include regional integration of generation and distribution. “Selling and supplying energy cross-border to multiple markets significantly reduces the risk and cost of funding utility debt on the continent,” adds Ms van Tonder.
If regional integration is blended with renewables and off grid, banks stand a much better chance of being able to help utilities better manage long term sustainability given the flexibility.
As such, this disruption comes at exactly the right time in Africa.
In today’s less predictable global environment the funding of large long-term energy projects is seen as risky. In Africa too, perceived risk is a growing challenge, particularly when it comes to funding existing energy utilities and traditional large power generation and distribution projects - especially those based on coal and also hydro. “As global investment mandates increasingly include sustainability criteria, traditional sources of African energy, like coal, may struggle to find funding,” explains Ms van Tonder.
Smaller, renewable, off grid solutions, supported by new storage capabilities offer sustainable alternatives that pose less risk and have shorter and cheaper construction and delivery periods. They can also be, “funded in local currency through affordable end-user payment structures – rather than via hard currency-based long term debt,” says Ms van Tonder.
All this reduces risk.
In response to these rapid technology-driven changes, both African energy policy as well as the way bank’s structure – and fund – energy projects is likely to undergo significant change.
For now, development finance institutions (DFIs) have taken the lead in funding smaller, more innovative, off grid renewable - and largely community-based - projects.
Augmenting these new technologies with supportive government policy and innovative banking and funding solutions holds the potential to expand and sustain growth in Africa. “This will allow Africa to truly begin setting and driving its own development agenda – and growth story,” adds Ms van Tonder.
Standard Bank is working quickly across its 20 African markets to understand the full implications – and potential – of these developments for African growth.
Certainly in East Africa, flexible and sustainable off grid renewable energy solutions are already having a measurable impact on rural communities. With home solar increasingly affordable to many households, East Africa’s hitherto economically excluded rural populations now have the potential to access energy affordably.
To date much of the African growth narrative has revolved around population migration into urban centres. As young and newly urban populations’ access energy, finance and consumer goods in Africa’s rapidly expanding metropoles new opportunities, markets and industries develop. If the growth that this trend has driven could be replicated amongst Africa’s vast rural population – through the provision of affordable energy off grid, Africa’s growth potential gets significantly bigger and much more sustainable.
This also means that the continent’s growth narrative becomes a lot more locally, rather than globally, driven,” adds Ms van Tonder.
In achieving this, the key question to answer is, “how does Standard Bank – as an African Bank - become more relevant in funding the small, the local and the private?” says Ms van Tonder.
The good thing about all this change is that the generation and distribution of energy in Africa will become less costly. Also, if supported by the right government policy, energy generation and distribution costs can be removed from government budgets. This will free up national budgets for the provision of essential services.
While Africa’s energy landscape is being severely disrupted by new technologies, this disruption, if managed correctly, presents exciting opportunities for Africa’s economies and people.
5 minutes with... Janthana Kaenprakhamroy, CEO, Tapoly
Founder and CEO of award-winning insurtech firm Tapoly, Janthana Kaenprakhamroy heads up Europe’s first on-demand insurance platform for the gig economy, winning industry awards, innovating in the digital insurance space, and leading with inclusivity.
Here, Business Chief talks to Janthana about her leadership style and skills.
What do you do, in a nutshell?
I’m founder and CEO of Tapoly, a digital MGA providing a full stack of commercial lines insurance specifically for SMEs and freelancers, as well as a SaaS solution to connect insurers with their distribution partners. We build bespoke, end-to-end platforms encompassing the whole customer journey, but can also integrate our APIs within existing systems. We were proud to win Insurance Provider of the Year at the British Small Business Awards 2018 and receive silver in the Insurtech category at the Efma & Accenture Innovation in Insurance Awards 2019.
How would you describe your leadership style?
I try to be as inclusive a leader as possible. I’m committed to creating space for everyone to shine. Many of the roles at Tapoly are performed by women and I speak at industry events to encourage more people to get involved in insurance/insurtech. Similarly, I always try to maintain a growth mindset. I think it’s important to retain values to support learning and development, like reliability, working hard and punctuality.
What’s the best leadership advice you’ve received?
Build your network and seek advice. As a leader, you need smart people around you to help you grow your business. It’s not about personally being the best, but being able to find resources and get help where needed.
How do you see leadership changing in a COVID world?
I think the pandemic has proven the importance of inclusive leadership so that everyone feels supported and valued. It’s also shown the importance of being flexible as a leader. We’ve had to remain adaptable to continue delivering high levels of customer service. This flexibility has also been important when supporting employees as everyone has had individual pressures to deal with during this time. Leaders should continue to embed this flexibility within their organisations moving forward.
They say ‘from every crisis comes opportunity’, what opportunities do you see?
The past year has been challenging, but it has also proven the importance of digital transformation in insurance. When working from home was required, it was much harder for insurers to adjust who had not embedded technology within their operating processes because they did not have data stored in the cloud and it caused communication delays with concerned customers at a time when this communication should have been a priority, which ultimately impacts the level of customer satisfaction. This demonstrates the importance of what we are trying to achieve at Tapoly in driving digitalisation in insurance and making communication between insurers and distribution partners seamless.
What advice would you give to your younger self just starting out in the industry?
Start sooner, don’t be afraid to take (calculated) risks and make sure you raise enough money to get you through the initial seed stage.