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Last edit: December 9, 2021
This memo is intended to help a broad group of donors develop an aligned program informed by the following messaging from key actors in the solar water pump and irrigation (“SWP”) sector regarding the agriculture-energy nexus as an input to the upcoming COP26 and future COP27 in Africa. We, as leaders in the SWP sector, hope that this industry perspective also helps inform funding mandates that can have an outsized impact on the future of this planet.
Much of the analysis presented in this memo uses data from smallholder farmers (SHFs) or small farms in Kenya. This is because most SWPs in Africa are sold in Kenya and a majority of publicly available reporting has been done on the impact of SWPs in Kenya. The companies that have written this memo have sold SWPs in over a dozen countries in Africa and confirm that the data presented here is representative of the larger African context. For the purposes of this memo, when referencing SWPs, it is implied that the memo is referencing small-scale (<2 hectares) SWPs.
Productive Use Leveraging Solar Energy (PULSE) offers multiple solutions that simultaneously support energy access, food security, poverty alleviation, and climate adaptation and mitigation. Dozens of productive-use solar products and appliances exist across the agricultural, industrial, commercial, and social/public sectors. SWPs, and specifically those that service small farms (~2 hectares), have been identified in a 2019 IFC report as having high commercial readiness in comparison to other PULSE products. This report suggests that while small-scale SWP technologies are well developed and available, affordability and market development are barriers to uptake.
Investment in SWPs offers the highest point of leverage across PULSE appliances due to their outsized increase in farm productivity paired with high commercial readiness. The potential for SWPs, however, is limited by price. While the cost of SWPs for 1-3 acres has decreased by 97% in the last nine years, most smallholder farmers still cannot afford them. What is clear is that we need many, many more SWPs in the hands of smallholder farmers, and to do this, we’ll need enabling environments in which SWP companies can thrive, as well as involvement from financing institutions from global foundations to local banks.
Stimulating demand for SWPs means increasing affordability, and end-user subsidies have been identified as the highest impact pathway to increasing farmer access to SWPs. Because end-user subsidies will be the biggest driver of demand for SWPs, and increased demand necessitates a larger workforce to build increasingly efficient and robust operations, private-sector companies will be forced to improve credit models, hire more people, build more serving infrastructure, launch in new markets, and raise more equity and debt to support their growth - subsidies will force equity-driven growth. It is imperative, however, that subsidies be designed intentionally and sustainably to minimize long-term market distortion, ensure equitable access, and pave the way for a future unsubsidized and scalable SWP market.
The Sub-Saharan Africa SWP industry has the potential to be a multi-billion dollar industry, serving millions of smallholder farmers and contributing to a healthier, more resilient, and cleaner world, but getting there will require market development investment from multiple stakeholders. With aligned and targeted investment strategies, actors across the ecosystem can catalyze the scaling of solutions including SWPs to realize a common vision of global food security, economic empowerment, and climate resilience.
Called “PULSE” by the IFC, productive use of solar energy presents the “next frontier” in the sub-Saharan African solar energy access sector. Historically dominated by consumptive-use appliances (e.g. lighting, household appliances), solar technology is now poised to meet demand for income-generating activities, namely agriculture practices. And, as the IFC’s *The Market Opportunity for Productive Use Leveraging Solar Energy (PULSE) in Sub-Saharan Africa* report suggests, the combination of low rural electrification rates, under-mechanization of agricultural production, and prohibitively high costs of alternative energy sources (namely diesel), results in high potential demand.