African PV: Pie or trap?

REVIEW: The PV sector has been enduring a harsh winter, but some firms now see Africa as a promising new territory. Analysts predict the African market will expand rapidly, increasing from 160MW in 2012 to 1.4GW by 2017—a growth of eight times in just five years. This potential has drawn significant attention from Chinese enterprises, yet caution remains high.

Is this massive opportunity too good to be true? Can Africa become a viable growth engine for Chinese companies? Industry insiders remain divided.

8 Times the Future?

News of China's PV products making waves in markets like the U.S., Europe, and India continues to surface. As traditional markets face saturation, developing regions have emerged as the next frontier. Among them, Africa stands out as a promising candidate for revitalizing the industry.

"We've analyzed the global PV landscape," noted IMS Research analyst Xie Feng. "By 2016, global PV installations are expected to surpass 50GW. The Middle East and Africa are showing strong signs of growth, rising from 1.6GW in 2009 to 4.9GW in 2012."

Globally, over a billion people still lack access to electricity, with 80% of them living in sub-Saharan Africa. With its abundant solar, wind, and geothermal resources, Africa is ripe for renewable energy development. However, the region's low starting point and sluggish overall progress underscore the challenges ahead.

Chinese PV firms have a theoretical edge in the African market. Thanks to favorable sunlight conditions, vast areas suitable for solar farms, and the region's massive energy deficit, Africa holds immense untapped solar potential. Coupled with China's global leadership in PV technology, cost-effective products, and extensive experience in installation, this creates a solid foundation for success.

"Africa offers excellent solar conditions," said Peak. "Countries like South Africa, Morocco, and Egypt boast superior sunlight. Add to that Africa's affordable labor and land, and you have a compelling competitive edge."

Solar power depends heavily on photovoltaic cell efficiency, tracking systems, and regional latitude and sunlight quality. Given Africa's abundant solar resources, photovoltaic power generation could produce double the output compared to Central Europe using the same arrays.

IMS Research forecasts rapid growth in Africa's PV market, expanding from 160MW in 2012 to 1.4GW by 2017. This represents a golden opportunity for Chinese firms to replicate their success in Europe and America.

African nations have also extended invitations to Chinese companies. For instance, Uganda's government delegation visited China in late October to promote PV investments, emphasizing tax exemptions and land support. Meanwhile, Huang Wenhang of China's National Development and Reform Commission announced plans to include PV products in South-South cooperation initiatives for Africa.

Cautious Optimism

Despite the vast potential, African markets remain challenging. In 2011, China's PV exports totaled $35.8 billion, with Europe accounting for 57%. By comparison, Africa accounted for less than 1%. While Yingli Group's sponsorship of the 2010 World Cup in South Africa marked an entry point, progress has been slow.

Years ago, experts urged Chinese PV firms to diversify into emerging markets like South America, Southeast Asia, and Africa. Unlike Europe and America, where markets are stable but crowded, Africa presents a low-threshold, high-demand environment. Absent local competitors and anti-dumping concerns, Africa seems ideal. Yet, concerns about security, policy instability, and economic challenges persist.

"Yingli tested the waters in Africa, but results were underwhelming due to security issues, economic uncertainties, and unclear policies," stated Yingli's PR department.

Currently, Kenya hosts the largest Chinese project—a 50MW plant. Most others are smaller initiatives aimed at testing the market. "This market isn't suited for large-scale investments," explained one expert. "It's better suited for agile, short-term projects by small and medium-sized enterprises."

Even established players like Trina Solar remain cautious. In November 2011, they partnered with Innovation Africa to install solar systems in clinics across Tanzania. Their recent donation of solar modules to Malawi highlights their cautious approach.

"We're focusing on public welfare projects in Africa for now," confirmed Fan Lifeng of Tianhe Solar. Challenges like weak infrastructure and limited financing must be addressed before larger investments can be made.

One notable exception is Suntech, which committed over $350 million to construct a 100MW solar farm in South Africa in 2012. Their bold move reflects confidence in the continent's potential.

In summary, while Africa offers immense opportunities, it demands careful navigation. Success will hinge on overcoming logistical, financial, and political hurdles. As one analyst put it, "The pie is there, but it’s not without traps."