Private, renewables-powered mini-grids could be the cheapest way to provide electricity access to over 100 million people in Africa, where rural mini-grids have proved to be 51 per cent more reliable than grid connections.
These are some of the findings from a new R&D fund focused on testing business model innovations in sub-Saharan Africa’s mini-grid sector.
Officially launched this week by frontier markets investment firm Crossboundary and the Rockefeller Foundation, the Mini-Grid Innovation Lab aims to “provide more power, to more people, at less cost” and to “demonstrate to governments, policymakers, investors and donors that mini-grids can play a key role” in achieving energy access goals.
In a statement, Crossboundary said its research showed rural mini-grids in Tanzania had demonstrated 98 per cent reliability as opposed to 47 per cent for grid power. An analysis of smart meter data provided by developers showed average downtimes of 2 per cent for rural mini-grids during evening hours, compared to 53 per cent average downtimes for urban grid connections.
According to the Lab’s calculations, the cheapest way to provide power to at least 100 million of the 600 million people in sub-Saharan Africa who currently lack electricity access would be mini-grids. And in order to supply them, Crossboundary said $11bn in investment would be required.
But the firm noted that mini-grid deployment in the region has historically been low as “governments, policymakers and donors do not see mini-grids as a viable substitute to the main grid”.
“This deters investors, who also struggle to understand the business case.”
Indeed, the company said Africa’s top five mini-grid developers raised less than $100m between 2012 and 2017, as compared with the pay-as-you-go home solar sector which raised over $750m.
Crossboundary said the Lab is currently working with over 15 mini-grid developers across Africa on testing new business model innovations for mini-grids in Kenya and Tanzania, and will be launching soon in Nigeria and Zambia.
Its partners include the African Mini-Grid Developers Association (AMDA), Duke University, Carnegie Mellon University, the University of Massachusetts at Amherst and energy access organizations Energy4Impact and Power For All.
Gabriel Davies, head of energy access at CrossBoundary, said the project “takes a data-driven, iterative testing approach to put numbers to the questions that governments, donors, and investors need answers to. Do mini-grids deliver power to the standard of the main grid? Do mini-grid customers use energy to increase their income? How do mini-grids integrate with the main grid?
“By partnering with developers, who are closest to the daily challenges of providing power to rural customers, we can answer these questions with real world data.”
Ashvin Dayal, associate vice-president and managing director (smart power) at the Rockefeller Foundation, added: “The ultimate goal of this effort is to equip governments, investors and developers to dramatically accelerate rural electrification in an integrated manner, unlocking new economic opportunities for millions of households”.