Description
The development of infrastructure in Africa is an integral part of the African Union (AU) Agenda 2063. The Agenda aims to achieve inclusive socio-economic development, which requires adequate electricity infrastructure at the continental, regional, national and local levels, including rural areas. Electricity is a prerequisite for economic development, and it improves social infrastructure such as health, education and financial services.
Sixty percent of Africans live in rural areas, only about 5% of which have access to modern electricity services. The lack of service is primarily caused by sparse settlements, low economic activity, distance to an existing grid and low population density. African policies have focused on expanding grids in rural, peri-urban, and urban areas, with an emphasis on increasing national electricity grid coverage. As renewable energy generation technologies have become more affordable and efficient, mini-grids offer a viable alternative to grid expansion. They can bring electricity to millions living in rural and remote settlements with concentrated inhabitants while standalone solar home systems can be used to target areas with dispersed habitats.
Private sector companies are increasingly investing in mini-grids in Africa’s rural areas, bringing innovative technology and financing solutions, dynamic business operating tools, and energy demand stimulation to improve their revenues and grow local economies. However, mini-grids face more challenges than their larger national utility counterparts. Some of these barriers stem from imbalance in subsidy allocation, governments’ mandate for tariff parity between off-grid and on-grid power consumers, and lack of a supportive regulatory environment for mini-grid project developers.
This Unlocking Africa’s Mini-Grid Market Study was funded by Power Africa, through USAID’s Scaling Up Renewable Energy Project (SURE). It will build on the mini-grid work of the African Union Commission /Department of Infrastructure and Energy (AUC/DIE) and the European Commission (EC).
The study’s objective is to complement the AUC/DIE work by developing guidelines for policymakers and regulators around five key themes: 1) off-grid policy, strategy and regulatory framework (also covering licensing and service territory allocation), 2) mini-grids business and financing models, 3) mini-grids interconnection terms, 4) mini-grids compensation mechanisms, and 5) mini-grids gender inclusivity.
Countries define mini-grids differently in their policies, strategies and regulatory frameworks, as illustrated within this report. For the purpose of this analysis, we use the following definition: A mini-grid is any electricity supply system with generating capacity ranging from 1 kW to 10 MW (IRENA, 2016b) and can operate in isolation from the utility network’s main grid. It comprises at least a power generation unit and a local distribution network and supplies electricity to more than one consumer. A micro-grid is 1 to 20 kW and is incorporated within the definition of a mini-grid.
