Circular economy principles in Africa: the case of off-grid solar in Kenya

Introduction

In recent years, the term “circular economy” has gained a significant presence and has become a central piece of numerous policies in industrialised countries (e.g., the EU Circular Economy Package). Most countries in the world have recognised that the great environmental and societal challenges of our time can only be mastered by a fundamental change in our economic systems towards a truly sustainable approach. Both the 2030 Agenda for Sustainable Development, with its 17 Sustainable Development Goals (SDGs), and the Paris Agreement make clear statements and set clear goals for such a transformation.

A circular economy is a system that creates value by designing out waste and keeping products, materials, and components in use for longer.¹ This entails designing products so that they are used for longer and can easily be reused, repaired, remanufactured, and recycled (Figure 38.1), keeping the materials, energy, and effort put into manufacturing the products in use.

However, design of the products on its own is not enough, and designing a circular system also requires new business models to capture new opportunities, reverse logistics and infrastructure to collect the products and treat them to recover materials in a safe way, and policies and other favourable system conditions to shift incentives (Ellen MacArthur Foundation, 2019).

The role of off-grid solar products and the societal benefits

The societal benefits of off-grid solar solutions are undeniable. Off-grid solar is a healthier, safer, and cheaper alternative to kerosene, batteries, and candles and has the potential to lead to job creation both within the off-grid solar value chain and for people using solar home systems in small businesses. This will also lead to broader societal benefits, including improved education, health, employment opportunities, and the environment.

Off-grid solar systems have the potential to change the lives of hundreds of millions of people in remote areas. While approximately 789 million people lack access to electricity globally (1EA et al., 2020), it is estimated that off-grid solar systems benefit over 120.3 million people, also leading to the phase-out of 18.6 million sources of traditional lighting (e.g., candles, kerosene, battery-powered torches); 28.6 metric tonnes (Mt) of greenhouse gases have been avoided, and $5.2 billion has been saved on lighting and phone charging costs (Lighting Global and GOGLA, 2018).

Figure 38.1 Circular economy system diagram

Source: Circulab

Millions of products are being placed in the market every year (GOGLA, 2019), and while these applications are relatively durable, inappropriate disposal or treatment after use can result in the exposure of people and the environment to harmful substances. For example, components such as batteries have been found to be frequently disposed of informally into the surrounding environment (Bensch et al., 2015), and such informal practices also have direct health and safety impacts on the recyclers themselves (WHO, 2017). At the same time, there is huge value in keeping these products and the materials in them in use. Looking only at materials, off-grid solar products contain a wide range of valuable metals, such as copper, steel, and aluminium, and also many critical raw materials' (Magalini et al., 2016). The rapidly increasing rate of off-grid solar system production highlights the need to create a system where those products and the resources that compose them are kept in use for as long as possible: a circular economy of off-grid solar applications.

Key drivers for adoption and market penetration

Policy is one of the key drivers in the emerging market, especially if we consider Africa, as off-grid technologies are central in achieving the ambitious access to energy plans of local governments: for example, in Kenya, the national government has set out plans to achieve universal energy access by 2020 and has made significant headway towards this goal, with access to grid connections nearly doubling from 25% to 46% from 2011 to 2015 (USAID, 2016). However, with 64% of Kenyans not having access to grid electricity and a strong private sector with a stable and supportive government, Kenya is one of the most vibrant markets for the solar industry in Africa, with oft-grid solar products reaching 52% (GOGLA, 2018) of off-grid and unreliable-grid households. Between 2014 and 2018, the Global Oft-Grid Lighting Association (GOGLA) members alone (who account for more than 60% of the market) sold more than 4 million products in Kenya, which is almost equivalent to sales in the other East African countries (Ethiopia, Rwanda, Tanzania, and Uganda) combined.

At the same time, Kenya is also leading the way in introducing innovations and new business models, such as mobile money or pay-as-you-go (PAYG) models, which address the affordability of higher-quality off-grid equipment for domestic use and have seen a huge rise in the uptake of solar powered equipment such as radios, torches, televisions, and recently even white goods.

While in Europe, lease, pay-per-use, and other business models are currently discussed and only tested in very few cases on a larger scale, the solar power industry in developing countries and emerging economies has proved very flexible. It has had to overcome various difficulties related to marketing of products and systems with high upfront costs (e.g., solar home systems) and in direct competition with other, partly subsidised energy options (e.g., kerosene) in rural contexts where the purchasing power, access to credit, and credit history of customers was and still is close to zero. In this context, the industry developed alternative business models compared to the direct sale of equipment typical of the electronics sector.

Two main business models can be identified:

• • Models where the appliance is purchased. This includes direct cash purchases or sales “aided" by financing institutions or by providing access to credit mechanisms. This business model is typically applied for smaller systems such as solar lanterns and small solar home systems, which often represent the entry point on the energy ladder.
• • Models where the appliance is leased or the ownership is progressively transferred after a period of time (lease-to-own). Those models where customers pay for the product over time are commonly referred as PAYG. All these models usually use a mechanism that allows remotely disabling a system when payment is overdue, and devices are engineered with specific hardware and software solutions to enable this. In addition, payment is usually done by mobile money.