Unlocking an Energy Revolution in Ethiopia With Lessons From the Black Market
“Ninety thousand solar lanterns sold last quarter,” said Mr. Li. He was sharing sales numbers for his solar appliance business in Ethiopia, and I couldn’t believe it.
To put that number in perspective, the Global Off-Grid Lighting Association pegs the average number of all solar lighting products sold in Ethiopia in a single quarter at around 250,000 units. Close to 80 percent of Ethiopians live in rural areas with little to no access to electricity. Assuming two lanterns for every household with an average five people in each, Mr. Li might have provided energy access to close to a quarter million people within months.
As far-fetched as that sounds, it is actually quite possible. The catch, however, is that Mr. Li’s sales are illegal. He sells his products on the informal market, outside of the government net, avoiding taxes and the country’s formal quality regime. As a result, his sales, though meaningful, are at risk of coming to a halt.
A rapidly growing market for solar lanterns and home kits is driving an energy revolution in Ethiopia. Like many low-income countries in Asia, Africa and Latin America, Ethiopia is a point of focus for international development and finance institutions as well as donors. Such organizations are channelizing tens of millions of dollars into Ethiopia for energy access. In order to maximize the impact of their investments, they need to have an understanding of local requirements in order to provide tailored financial flows.
Photo courtesy of Karsten Würth.