To get a sense of how little electricity people use in sub-Saharan Africa, imagine each person there turning on a single 50-watt light bulb. That alone would instantly double electricity consumption. Nigeria, with 240m people, generates less electricity than the American state of Wyoming, which has 0.6m inhabitants. Uganda, with 50m people, produces less than Latvia, which has a population of 1.9m. Around 600m Africans have no electricity at all. Without more power, the continent will never grow rich.
This is usually framed as a supply problem. But it is also a question of demand. When power is priced to encourage investment in generation, many African households cannot afford to buy it. But if prices are too low, neither private investors nor state firms will build the necessary infrastructure. As solar power makes electricity cheaper, that conundrum should ease somewhat. But it will not disappear.
African utilities rarely cover their costs. In Kenya, a typical case, some 25% of juice is lost to technical hitches, theft or unpaid bills. A deeper issue is pricing. “It is the tariffs people pay that is the return on investment,” says a manager at a privately owned distribution company in Nigeria. There, as in many other African countries, state-regulated tariffs are too low for firms to attract the capital they need.
They do not look low to consumers, though. Tariffs in Africa are typically higher than in poor countries elsewhere, pushed by the steep cost of capital. In 2005 Uganda granted a near-monopoly on electricity distribution to Umeme, a private firm created for the purpose. Efficiency rose and finance flowed in. The catch was that the government had guaranteed a 20% return on investment to win over wary funders. The terms proved so politically unpalatable that distribution was taken back into state hands when Umeme’s concession expired this year.
The rich, who use the most power, could probably pay more. Last year Nigeria’s government tripled rates for the biggest buyers, who now pay as much per kilowatt hour as the average American. But many Africans “cannot afford modern energy”, says Murefu Barasa of EED Advisory, a consultancy in Kenya. The International Energy Agency (IEA) estimates that 220m people cannot pay for enough power to run a phone charger, a radio and a few lights. Lack of funds is one reason why nearly half of African households that live close to a grid are not connected.
The falling cost of generation, thanks to solar power, is beginning to change that picture. Globally the “levelised” cost of solar electricity, which accounts for capital and operating expenditures per unit of energy, fell by 21% in 2024 alone, estimates BloombergNEF, a data provider. In South Africa, solar electricity costs about a quarter as much as coal, which makes up most of the energy mix. Countries in the Sahel could also make big savings by switching from heavy fuel oil to solar.
In the year to June African countries imported 15GW of solar panels from China, calculates Ember, a British think-tank. That is like adding four Kenyas of generation capacity—when the sun shines. Mini-grids and rooftop panels light up villages that the grid cannot profitably reach.
But even though solar panels are easing Africa’s electricity conundrum, they cannot fully solve it. The cheapest use of panels is to build large solar farms to supply the grid. But roughly half of new non-residential solar capacity in Africa over the past two years was installed by firms opting to make their own power. That helps them beat blackouts, but it is less efficient than large-scale generation. It also exacerbates the demand shortfall: if utilities lose their most lucrative customers, more costs have to be passed on to everyone else.
Utilities therefore need to generate demand, not just electricity. Customers in Senegal are willing to pay more for power when supply is more reliable, finds a new study by Abdoulaye Cissé, a Senegalese economist. That in turn means investing more in power lines to move electricity around, and in regional agreements to trade it across borders. Fourteen west African countries now share power through an interconnected grid. Several countries, from South Africa to Uganda, are inviting private investors to improve transmission.
Increasing demand still requires public money, whether in the form of cheap finance for project developers or help for the poorest to pay their bills. That is especially true of rural electrification, which has relied on subsidies all over the world. Of the $2.4bn of finance committed to new connections in Africa in 2023, three-quarters came from multilateral funds. Among the largest are the World Bank and the African Development Bank, which want to connect 300m people by 2030.
With public money in increasingly short supply following Western aid cuts, some experts reckon that hooking up more houses is not the best way to boost demand. Many new customers buy so little that utilities lose money for each home they connect. A better way might be for policy to focus on firms, which generate jobs and growth. As incomes rise, so will electricity use. Worldwide, the secret to widening access to power has not been reforms so much as simply getting richer. ■
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