While Africa’s solar industry is abuzz with dynamic developments in nascent market segments such as commercial and industrial PV, mini-grids remain a backbone of African solar. Recent developments in the off-grid stronghold of Nigeria, and a promising new market in the Democratic Republic of the Congo (DRC), give testimony to the enduring importance of local, self-sufficient power networks in bringing electricity to new households and businesses.
The traditional hurdle developers in the decade-old mini-grid sector have had to overcome is how to generate solar electricity cheaply enough to supplant diesel generators whilst offering sufficient returns to attract investors.
Chris Kanani, “mini-grid veteran” and VP for business development at London-based impact investor Winch Energy Ltd, told power industry journal ESI Africa last month, solving that conundrum involved managing the expectations of policymakers.
Quoted in an interview by ESI and fellow London-based fund Camco, Kanani said African governments laying down the rules for mini-grid development should be realistic about the level of public subsidy they will have to offer.
“It is important that the level of subsidies offered by programs matches the desired tariff structures governments wish to see,” he said. “This may seem obvious but quite often I see programs which are under subsidized, leading to high tariffs that are ultimately rejected by regulators. This puts the whole project at risk. I think donors are often cautious about putting in large subsidies as they do not wish to distort the market. However, the main reason we do these projects is to provide social impact.”
Kanani was interviewed because Winch has pulled together a portfolio of 49 solar mini-grids in Sierra Leone and Uganda which will bring electricity to more than 55,000 new customers. The UK government provided the distribution equipment needed for the networks in Sierra Leone, and the Ugandan systems were backed by capital subsidies from the EU and German development agency GIZ.
The fund set up by Winch to drive the developments is backed by Camco; Dutch development body the FMO; the Sunfunder affiliate acquired by US-French asset manager Natixis in the summer; and the NEoT Off-Grid Africa fund financed by French energy firm EDF, Mitsubishi and Paris-based asset manager Meridiam.
Public subsidy is not the only way to square the mini-grid business case, however, with London off-grid brand Bboxx using telecom towers as anchor energy cutomers for its local networks and InfraCo Africa opting for agricultural bases, in both cases in the DRC.
With the DRC home to the second largest number of African citizens without electricity – behind Nigeria – Bboxx in July revealed its plan to use solar mini-grids to power telecom towers owned by French giant Orange and to provide clean power to nearby communities.
A pilot installation in the village of Bukavu is set to bring electricity to more than 600 households this year, with local business GoShop carrying out engineering, procurement and construction services. Bboxx and Orange then plan to roll out 24 more of their telecoms-anchored networks to provide electricity connections to 150,000 people within two years.
The InfraCo body funded by the governments of the Netherlands, Switzerland and the UK has similar plans in the DRC and Rwanda, where it plans to provide electricity to more than 35,000 people next year, via mini-grids on the DRC island communities of Idjwi and in southeastern Rwanda.
Rather than mobile phone masts, InfraCo’s localized power networks will have agricultural service hubs provided by Kampala-based clean power company Equatorial Power (EP) as anchor tenants, for eight mini-grids ranging in scale from 60-85 kW. The agricultural centers developed by EP under the $1.7 million program will offer solar-powered services including water purification, cold storage, fish drying and maize milling.
There will still be a subsidy element, however, with the Private Infrastructure Development Group backed by the Dutch, Swiss, UK, Australian, Swedish and German governments – plus the International Finance Corp – offering a $1.35 million grant, and the World Bank supplying $1.05 million specifically for the DRC connections.
While the DRC might appear to be at the center of a new mini-grid gold rush, the World Bank has been working towards developing off-grid power in-country since 2018. Under plans announced the by the Green Climate Fund (GCF) administered by the multilateral lender, 5-10 MW solar-plus-storage mini-grids will be installed to replace diesel generators in Isiro, Bumba and Genema, with 23,300 electrical connections expected in 2025.
Loans from the African Development Bank and the GCF will fund up to $40 million of the estimated $87 million cost of the networks, with the rest coming in the form of equity investment by successful bidders to develop the power networks, which will be tendered by the DRC’s Ministry of Energy Hydraulic Services.
While the DRC is a magnet for mini-grid investment, Nigeria remains attractive, in large part thanks to the efforts of the Nigeria Electrification Project being run under the auspices of government body the Rural Electrification Agency.
In September, Nairobi-based financial services company CrossBoundary Energy Access said it would finance and own the Nigerian mini-grids being planned by French-owned Engie Energy Access over the next four years. That $60 million investment is set to provide more than 150,000 electricity points and is backed by results-based funding from the World Bank which has previously been reported as offering $350 per new user.
A year ago, Nigerian oil and gas news site nogspeed reported Colorado-based off-grid business Husk would bank more than $350 per user under the same World Bank program, as Husk stated plans to expand the six mini-grids it had installed in Nigeria’s Nasarawa state to more than 100 such networks next year –and 500 by 2026.
And just a few weeks ago during COP27, UNDP announced the launch of a new initiative dubbed AMP – the Africa Minigrids Programs aimed at supporting the rapid development of mini-grids across 21 African countries. How this program will overcome the barriers faced by other players in the past decade has not been clarified yet. But the program, presented as UNDP’s “most ambitious energy access program to date”, which is financed by Global Environment Facility (GEF) and implemented by UNDP in partnership with national governments, RMI and the African Development Bank (AfDB) might have rallied partners with strong enough determination to bring change in this segment. Results should be expected soon as this program has already started operating in Nigeria and eSwatini, and is expected to continue throughout 2027.
Winch Energy’s Kanani said mini-grids can form the basis of the provision of further services, such as household appliances, internet access, electric vehicles and water pumping and can function as regional planning tools as a result. With such a potentially crucial role to play in service provision for Africa’s off-grid communities and heavy-weights of the African solar eco-system continuing to bet on this solution, the reasons for the perennial popularity of the mini-grid business model across the continent become clear.