Fighting Climate Change and Providing Water Access? How Solar Irrigation Pumps can become a Game Changer for Farmers and Rural Communities
Solar pumps, a potential game changing technology for the agricultural sector, are hitting the mainstream. As a viable, more environmentally focused alternative to traditional diesel and petrol fuelled water pumps and irrigation technologies, the positive economic and environmental impact and increasingly cheaper cost of production has catapulted this disruptive technology into the limelight. With the promise to increase agricultural productivity, provide improved water access for rural communities and boost small farmer incomes across emerging markets, the interest in the technology is growing from both governments and private stakeholders alike.
The value of this technology to the rural communities cannot be underestimated. With its ability to boost agricultural production by providing irrigation opportunities which improve yields, the clear environmental benefit by utilising non-carbon emitting technologies is clear. Solar Irrigation Pump also enhance water accessibility by affording the opportunity to harness previously untappable water sources that improve the quality of life and will have a transformative effect. At ThirdWay, we believe this technology can play an important role in assisting small farmers across Africa and other agrarian economies globally to achieve substantial livelihood changes.
Image 1: A farmer in Kenya waters her crops from FuturePump Source: International Water Management Institute
What are solar pumps?
Solar Pumps, or Photovoltaic (PV) Water Pumps, are an electric pump system powered by solar panels that can extract water from underground sources. They are usually set-up as a single device that is connected to a solar panel that at the push of a button can pump water directly from the ground.
In recent years, the solar pump market has developed at a fast pace due to the lowering cost of solar panels, the expanding presence of solar pump producers and the increasing awareness to the technology and its benefits. Most of the developments the industry has witnessed, have primarily stemmed from various country and local government regulations that have promoted renewable energy production to reduce dependency on fossil fuels and minimise environmental impacts.
Figure 1: Graph showcasing the decreasing cost of photovoltaic cell, source World Bank
Developments around solar panel production have also enabled the associated costs to be reduced; solar panel modules previously cost around US$ 5/Wp (watt-peak) and now, are on average less than US$ 0.75/Wp. These cost reductions have been catalytic, making larger solar pump systems possible where previously the financial burden had priced solar panels out of range. Today, the total price of a solar pump ranges between US$ 500 and US$ 1,000. Whilst this is theoretically more accessible in price for the 570 million farming households globally, there is still a substantial cost burden which needs to be addressed to enable large-scale adoption.
Complementing this are technological developments as solar pump system capacity and efficiencies have also increased. Early solar pumps had limited performance and were restricted to pumping installations with a shallow water source and a low water demand. Today, pumps are able to reach deeper wells (500 m compared to the previous 200 m) alongside being able to push larger volumes of water (1,500 m3/day, compared to the previous 500 m3/day at low head).
Where have we seen solar pumps successfully rolled out?
Solar pumps are particularly important in rural and undeveloped areas that have no electric grid infrastructure given the technology enables a reliable, safe and adequate water supply to be sourced. This demand has been harnessed by countries and governments who are also increasingly looking to shift towards lower-cost and cleaner energy sources. Solar pumping can align with these evolving policy developments but essentially has only been competitive in regions which have a high solar insolation – the total amount of heat energy received from the sun during the day – such as large swathes of Africa, South America, South Asia, and Southeast Asia.
Figure 2: Graph Showcasing Increase in Solar Pump Capacity Source: World Bank
Whilst offering exciting growth potential, and having seen increased producer and investor activity, the global solar pump market is still relatively fragmented and competitive. The industry size is projected to be worth US$ 2.17 billion by 2028 and will register a compound annual growth rate (CAGR) of 10.85% during the forecast period (2021-2028). Yet the technologies’ uptake globally still varies.
This market divide can be starkly seen when comparing India with sub-Saharan Africa. In India, the government has been proactive and launched various subsidy programs to support the expansion and roll-out of solar pumps. This has gathered a lot of attention, for good reason, as irrigation pumps comprise over 20% of the power drawn from the grid. However, the number of installations of solar pumps is still low when compared to the number of electric and diesel pump. Of the 30 million irrigation systems installed, it is estimated that 70% are electric, 29% are diesel and only 1% are solar, demonstrating the lack of uptake in leveraging solar pump technology.
A number of reasons can be deduced as to why this is the case. Not only are solar pumping systems expensive without access to subsidies for the average farmer, but there is a lack of awareness to government schemes in addition to many of the current farming practices used today in the country currently not ‘requiring’ daily irrigation. This underscores the importance for educational programmes which not only highlight the positive role of solar pump technology, but demonstrate the importance to leveraging irrigation.
The possibility to the industry’s potential is clearly seen in sub-Saharan Africa, even though the market is relatively nascent. Of the 4% of farmers on the continent that irrigate their land, most will still use either buckets or the more common types of diesel and petrol water pumps. There are approximately 95 million small farmers in sub-Saharan Africa; however, only 0.1% are currently serviceable for solar water pumps. A number of reasons will be related to why this is the case, such as a lack of information to using solar pumps and the various benefits which they provide. The issue of access to finance is another possible contributing factor; finance is not available or affordable to everyone, especially small farmers. The initial investment costs remain high, which many small farmers, cannot afford or tolerate due to them not having the capital.
Government Policy and Regulation
What is needed to stimulate this development and uptake in usage? Governments, for one, have an important role to play in developing, modifying, and increasing the transparency of policies and regulations which will help these measures.
Today, many governments are supporting the generation of clean and renewable energy by establishing policies and regulations that promote easier environments for businesses to operate. Private companies are developing business models to deliver solar pumps to small farmers and the other communities in need, however they have endured policy and regulatory challenges. These have ranged from inconsistent interpretation of customs and tariff rules to lending policies and regulations that hinder access to finance.
Given that policy developments around the industry are still at a relatively early stage, it has meant that companies operating in the sector are still undergoing the ‘growing pains’ of developing business models which not only promote farmers’ awareness to the technology and showcase its financial benefits, but can implement models which drive profitability for the companies themselves.
This is compounded by the fact that as the market matures, these companies will scale and will subsequently need to access commercial financing. As of today, this has been a challenge due to the lack of appropriate pricing of the technology and understanding of the sector by commercial banks. Increased government intervention that aims to support the market’s efforts to scale and sustain growth will need to be increasingly developed to solve these challenges. These solutions can range from governments deciding to implement smart subsidy programs which reduce companies’ market entry costs, to removing import duties, tariffs and VAT, which can improve product affordability when such costs/savings are passed on to consumer and also reduce companies’ unit costs.
Another acute challenge companies have faced is on the logistics and supply of the solar pump systems, particularly in association to customs and tariffs. For example, a solar pump innovator in Tanzania noted that since its product extends across energy and agriculture, the applicable customs regimes it must abide by are not clearly defined. Another solar pump innovator in Kenya noted that the tax exemption process changed without warning, which subsequently caused delays in clearing shipments of solar PV panels and controllers.
These instances clearly highlight the gap between the companies and the required regulations, leading to confusion when trying to navigate these policies. A way forward will be for governments to develop tools that increase transparency and efficiency for the sector and to consider reductions and exemptions on import duties, tariffs and VAT (which will also help improve the product’s affordability). The implementation of the African Continental Free Trade Area will be a positive starting point for this.
Figure 3: Map of Investors and Financiers involved in solar pump sector in sub-Saharan Africa Source: TWP Analysis
SunCulture – an Industry Leader
Whilst an increased amount of investors and operators have been growing their activity across the industry in Africa, a key participant within the value chain we will focus on is SunCulture. The organisation is a specialist in solar power irrigation systems, having succeeded in developing a unique product that simplifies farming and increases crop yields by combining solar water pumping technology with high-efficiency drip irrigation. The company works closely with the farmers and provides consultation, installation services, training and customer support in their product packages.
SunCulture’s founders, Samir Ibrahim and Charles Nichols, developed an interest in providing clean energy powered water for East Africa’s farmers given the particularly low number of Kenyan farmers they found to be using irrigation – only 4% of farmers were irrigating in a country where 80% of land requires irrigation to be productive. Seeing this bottleneck, the founders raised around US$200,000 in seed capital and launched a pilot project in the country providing the springboard to where the business is today.
This piece has demonstrated the importance of why governments and companies in the sector need to work together and SunCulture for one has showcased how this can successfully happen through some innovative approaches to the market. In December 2020, SunCulture partnered with energy providers BBOXX, EDF and the Government of Togo to subsidise solar water pumps in the country to increase agricultural productivity and in turn improve economic opportunities.
Image 2: A plot of land irrigated by a Solar Pump Source: PEG Africa
The partnership is structured on the Government providing a 50% subsidy to halve the cost of irrigation systems for 5,000 farmers. This subsidy runs in parallel to tax exemptions on import duties and VAT of the water pumps which will increase affordability for small farmers. SunCulture’s success has led the company to close a recent US$ 14 million funding round led by Energy Access Ventures (EAV), Electricité de France (EDF), Acumen Capital Partners (ACP) and Dream Project Incubators (DPI).
The Environmental & Agricultural Impact - Fighting Climate Change
Overall, solar pumps provide key climate related benefits and can be important tools in reducing global greenhouse gas emissions. With the agricultural sector being directly responsible for around 8.5% of total emissions, transformative climate focused technology within the sector will be influential to driving longstanding change. The Food and Agricultural Organisation (FAO) conducted a cost-benefit analysis of 11,00 solar pumps in Kenya and found several advantages for the technology when compared to diesel-pumps. At the household level, replacing diesel water pumps avoided US$ 82 in fuel costs and freed 113 hours per year. Across the value chain, 387 skilled labour jobs were generated, and importantly, approximately, 2,000 metric tons of carbon dioxide equivalent per year were abated (or US$ 420,000 per year). One of the most acute problems small farmers in Africa face is food insecurity due to the lack of stable growing conditions caused by unpredictable weather which has only been accelerated by climate change.
Small farmers require sustainable practices and technologies to increase agricultural productivity. Solar pumping allows farmers to irrigate crops outside of the rainy season, which will significantly increase farm profits when compared to grass fed agriculture. Furthermore, the use of solar pumps can provide farmers access to deeper water sources, helping to guard against drought and preserve water for both crops and livestock.
Image 3: Farmer with a solar water pump, Source: FuturePumps
Further to this, solar pumps allow communities to handle and control their own water supply. The use of solar pumps helps farmers to become institutionalised by owning land and water rights; this has a direct impact to improving their livelihoods. Additionally, the use of solar pumps in rural areas has changed the fortunes of women as well. In many traditional African communities, women are tasked with the role of fetching water; a strenuous undertaking if the water source is far away given its implications on health, safety and hygiene. The adequate water supply provided by water pumps not only improves the personal hygiene of women, but also allows them to allocate more of their time to other activities, such as education or food production.
The challenges preventing the industry scaling rapidly
Even though solar pumps are a better alternative and have many economic and environmental benefits, there are still a few issues which persist, creating further bottle necks to the technology’s adoption in rural communities. Initially, the installation of the pumps themselves given the heavy cost of installation and concerns around land ownership has prevented widespread adoption.
Aside from the initial cost, there is also the issue of accessibility. Companies are selective of who their customers are. With criteria such as credibility and credit worthiness, most farmers are not eligible due to challenges faced in being a part of the formal working economy and being ‘banked’. Small farmers often face considerable difficulties accessing credit, as banks are unwilling to lend to them because of poor collateral and lack of information, especially female farmers who are at a greater disadvantage due to less access to assets, social capital and market information.
In addition, small farmers are likely to receive their income once or twice a year, and many will not be able to afford to buy a solar pump system outright. Companies need to take this into consideration and look at creating innovative financing schemes which are suited for the small farmers. There has been an increase in private companies combining pumps with financial models which are structured on “pay-as-you-go” systems that allow farmers to use irrigation equipment whilst making regular payments until the total cost of the pump is paid off. This also presents future opportunities to leverage impact through its ability to offer financial services and capture key data points.
How are we utilising this technology and the ‘Bottom Line’
The TWA Rural Development Corporation (RDC), ThirdWay Partner’s sustainable agricultural platform, has studied the energy consumption on our agricultural portfolio and we are currently implementing technological developments which can ensure we not only secure our energy from sustainable sources, but can support our small farmer community in having better access to irrigation and clean energy too.
A key pillar to this strategy has been the development of our Winter Irrigation program that we are looking to transition towards being 100% solar. The RDC is planning to collaborate with a leading solar pumps provider, Solar Works, to offer solar home systems to our employees and the surrounding community.
Ultimately, as land desertification and water scarcity caused by unsustainable agricultural practices and climate change continues to worsen, the use of solar pumps as a technology supporting climate smart agricultural is becoming ever more important. This is compounded by the growing need of countries regionally to reduce their greenhouse gas emissions, and technological developments within the agricultural sector can provide a great starting point for this. Of course, food security is a global issue all of us need to consider and we should be supporting innovative and technology within the agricultural industry which enables the world to increase food yields, at an affordable cost, whilst being beneficial to the environment and creating highly desirable sustainable development and impact.
At ThirdWay, we believe that this technology and the impact it will bring to small farmers across the continent and globally, can be catalytic and transformative to improving the livelihoods of this group. The use of solar pumps will help communities achieve livelihood development by improving economic opportunities, improving agricultural productivity and subsequently increasing household income.