Towards Universal Energy Access: The Future of Off-Grid Solar in West Africa

The study on off-grid solar (OGS) in six West African countries highlights the sector's potential to bridge energy gaps but identifies financial, regulatory, and market challenges. It recommends a Risk-Sharing Facility, policy reforms, and capacity-building to scale OGS adoption and achieve universal electrification by 2030.

The market study on scaling up off-grid solar (OGS) in Benin, Burkina Faso, Côte d’Ivoire, Ghana, Senegal, and Togo was conducted under the Compact with Africa Green Business Fund and led by the World Bank, with research contributions from CIDR Pamiga, ECREEE, BOAD, IFC, and various local experts. The study provides an in-depth analysis of the energy landscape in these six countries, where electricity access remains highly uneven. While Ghana leads with 86% electricity access, Burkina Faso lags at only 19%. The disparities are even starker in rural areas, where access rates range from 4.7% in Burkina Faso to 74% in Ghana. Given the high costs and logistical challenges of extending national grids to remote areas, OGS solutions are increasingly recognized as key to achieving universal electrification. The Global Off-Grid Lighting Association estimates that 307 million people in West Africa could benefit from OGS, with 213 million completely off-grid and 94 million facing unreliable grid connections. However, some countries, such as Côte d’Ivoire and Ghana, where grid extension is prioritized, show less enthusiasm for OGS expansion.

The Policy and Regulatory Landscape: Progress and Gaps

At the regional level, ECOWAS and WAEMU have adopted policies to accelerate renewable energy adoption. The ECOWAS Renewable Energy Policy (EREP) and the Energy Efficiency Policy (EEEP) set ambitious targets for increasing renewables and creating a harmonized electricity market. The 2023 adoption of six regional standards for stand-alone solar systems and mini-grids is a significant step toward ensuring product quality and consumer confidence. Nationally, all six countries have policies supporting renewable energy, but OGS is often treated as a secondary priority. Benin’s National Electrification Strategy and Off-Grid Electrification Master Plan target 70% electrification by 2026. Burkina Faso’s reforms facilitate private sector participation in rural electrification, while Côte d’Ivoire focuses primarily on grid extension. Ghana, one of the most electrified nations in sub-Saharan Africa, offers tax incentives and competitive procurement schemes through its Renewable Energy Master Plan. Senegal’s Emerging Senegal Plan aims for universal electricity access by 2025, backed by regulatory reforms that encourage private investment. Togo’s National Electrification Strategy envisions 100% electrification by 2030, with strong emphasis on mini-grids and stand-alone systems.

Despite these efforts, policy implementation is slow and enforcement remains weak. Bureaucratic delays and incomplete regulations create uncertainty for investors and solar companies. In Ghana, net metering and solar tax exemptions exist but are poorly enforced. Togo’s CIZO program restricts tax benefits to specific companies, creating market distortions. Additionally, the inability to regulate substandard solar products weakens consumer trust. Governments also struggle to control the influx of low-quality solar equipment, which slows down market penetration and dampens consumer confidence. A lack of transparency in grid expansion plans further discourages private investment in off-grid solutions, as companies fear their installations may become obsolete if grid extension reaches their target areas.

The Off-Grid Solar Market: Growth and Challenges

The study analyzed 42 solar companies out of over 500 operating in the six countries, revealing that most fall into the "Tier 2" category, with annual revenues between $100,000 and $3 million. The market remains in its early stages, with many firms struggling to secure financing. The COVID-19 pandemic caused a 10% decline in solar lighting sales and a 23% drop in solar appliance sales due to rising costs, supply chain disruptions, and reduced consumer purchasing power. The most sold products are solar lanterns, small solar home systems (SHS), and solar water pumps. There is increasing interest in productive use appliances (SPUEs) such as solar mills, incubators, and dryers, which could drive future market expansion.

Despite growing demand, financing remains a major challenge. Only 20% of solar companies have formal agreements with financial institutions for end-user financing. While microfinance institutions (MFIs) provide financing to individual consumers, commercial banks dominate lending to solar companies but offer short-term loans with high interest rates, making them unsuitable for businesses requiring long investment cycles. High collateral requirements, short repayment periods, and interest rates ranging from 8-14% in WAEMU countries and 30-40% in Ghana make borrowing difficult for small solar companies. Although international funding sources such as the AfDB’s Facility for Energy Inclusion and Proparco’s SUNREF program provide some relief, these funds largely benefit a handful of well-established firms, leaving early-stage businesses underserved.

Financing Solutions: The Role of a Risk-Sharing Facility

To address financing barriers, the study proposes the creation of a dedicated Risk-Sharing Facility (RSF) to encourage banks to provide better loan terms to solar companies. The RSF would offer three guarantee structures:

• First-loss coverage (10-20%): Covers initial loan losses to reduce risk for financial institutions.
• Pari passu coverage (50-80%): Shares loan losses between financial institutions and the facility.
• Hybrid model (5-10% first loss + 50-60% pari passu): A combination that balances risk and coverage effectively.

Additionally, financial institutions need technical assistance to better understand the solar market and develop tailored financial products. The RSF aims to support smaller, locally owned solar companies (Tier 2 businesses) that currently struggle to access financing. By offering structured guarantees and performance-based incentives, the RSF would make lending to the solar sector more attractive for banks and investment funds.

Scaling Up the Off-Grid Solar Sector

Beyond financial support, capacity-building and training programs are critical for strengthening the OGS ecosystem. Solar companies need business development assistance, financial management training, and market analysis support. Financial institutions require training in assessing solar business models and managing lending risks. Governments and regulators need support in enforcing product quality standards, streamlining tax incentives, and conducting awareness campaigns to promote solar adoption. Public-private partnerships (PPPs) can also play a crucial role in expanding the sector, but existing policies must be revised to make long-term private investment more attractive.

The study highlights that OGS can play a transformative role in achieving universal energy access by 2030. Benin, Togo, and Senegal are identified as high-potential markets due to strong government backing and rising consumer demand. However, for the sector to scale effectively, financial mechanisms must be strengthened, regulatory frameworks streamlined, and consumer awareness campaigns expanded. A combination of risk-sharing facilities, concessional financing, capacity-building initiatives, and policy reforms will be necessary to unlock the full potential of off-grid solar energy in West Africa. With the right interventions, OGS can provide millions with reliable electricity, drive economic growth, and contribute to climate resilience in the region.