Diesel economy’s demise spotlights the opportunity for solar microgrids

For rural communities across India and Sub-Saharan Africa, villagers live with the same daily guarantee: the overwhelming din and stench of diesel generators coming from local micro-, small and medium-sized enterprises (MSMEs). A massive and, in many markets, heavily subsidized, diesel economy has been built up in rural Asia and Africa in recent decades, mainly due to the failure of state-owned power grids to serve rural businesses and households reliably. And that failure has left entrepreneurs and farmers no other choice but to buy expensive and polluting diesel generators and fuel.

But a convergence of innovation, an accelerating global energy transition, and the increased volatility of oil and gas prices has created an opportunity to scale community solar microgrids and rooftop solar for rural commercial and industrial (C&I) businesses. 

It’s time to retire the diesel generator finally and fully embrace the era of solar-powered generation. 

In Sub-Saharan Africa, there is more spending on fuel for generators than on the entire power grid, with generators consuming $13 billion worth of fossil fuels annually. In fact, according to a recent report, at least 17 countries in Sub-Saharan Africa have more distributed diesel generation capacity than grid-connected power generation capacity.

Strong fiscal solidal, environmental and social reasons support this transition, and the shift is underway, starting in India.

 The Government of India, for example, which is several years ahead of Sub-Saharan Africa in scaling solar energy and, therefore, a good bellwether, earlier this year announced plans to eradicate the use of diesel from its farming sector by 2024. Agriculture is the second largest consumer of diesel in India, a country that imports 85% of its crude oil. This decision, even if not achieved within the ambitious timeframe put forward, is a massive signal to the global diesel market and has implications not only for irrigation but also agro-processing and cold storage. Other emerging economies can be expected to follow India’s lead. 

Even before the recent spike in diesel prices (they’ve more than doubled this year in Nigeria, for example), the European Commission’s Joint Research Center found that solar microgrids were the “no-regret option” for the provision of electricity to 177 million people when compared to diesel generation and that microgrids were competitive with diesel for another 266 million people. With volatility the new norm for fossil fuels, this dynamic has only been strengthened in favour of solar microgrids.

At the ground level, companies like Husk Power are taking large numbers of diesel generators offline, deploying microgrids, and scaling its rural C&I business with customers like tiny factories, hospitals, farmers and other customers that want a standalone solar solution. In Nigeria, around 30% of diesel generators in the off-grid communities where Husk operates have been made redundant within the first several months after commissioning. Businesses that switched from diesel to solar also see at least 30% savings on their monthly energy bills. Similarly, in India, a weak grid and unreliable, poor quality from state-run distribution companies are driving many MSMEs to solar microgrids for savings and better service.

In early 2022, Husk became the first community solar microgrid company to sign a UN Energy Compact, in which it committed to displacing 700 million gallons of diesel by 2030. The company was the first in the industry to monetise avoided carbon in India by replacing diesel generators. It will soon be doing the same for its operations in Sub-Saharan Africa.

But the story is not just one of climate mitigation and energy transition.

Microgrids are also emerging as an essential contributor to climate adaptation and resilience, which cannot be undervalued in India and Sub-Saharan Africa, two of the most climate-vulnerable regions in the world. Although not yet fully quantified, microgrids – compared to centralised grids and the diesel generation economy – are proving more resilient to climate shocks such as heat stress, drought, extreme storms and flooding. The husk and Smart Power India is working to create a baseline for the adaptation benefits of microgrids.

And the health implications are also significant for transitioning away from diesel. In Sub-Saharan Africa, gas emissions account for 15% of all nitrogen oxide emitted in the region, and PM2.5 emissions from generators equal 35% of emissions from all motor vehicles.

The pros of replacing diesel with solar generation are multiple: 

1.Governments save money by doing away with the need for diesel fuel subsidies and by tapping into private sector capital to install and manage clean, reliable and affordable rural energy infrastructure. 

2.Small businesses and farmers save money on energy costs that can be invested in expansion and new employment and also contribute to local GDP growth; 

3. Communities become healthier by removing poisonous and harmful substances from the air and gaining access to electricity infrastructure that can withstand climate change while ensuring cooling, irrigation, drinking water and other essential services amid a fast-changing environment.

The World Bank and International Energy Agency have stated clearly that microgrids are the most cost-effective path to rural electrification for the hundreds of millions of people still living without electricity and the many times more who live with unreliable power. At the same time, the United Nations leadership has called for half of all climate finance to go to adaptation while prioritising infrastructure in developing countries. This must include community solar microgrids and rural C&I.

But it will take up to $200 billion to scale solar microgrids by 2030 and create a world free of expensive, polluting diesel generators. 

Now is the time for governments and their funders to recognise that the diesel generation era has ended. Solar microgrids have arrived, and it is their time to shine.