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As demonstrated through recent data from the International Renewable Energy Agency, off-grid renewable electricity has grown tremendously across the world over the last decade. Why have off-grid solutions been successful in some places and not in others?

This article first appeared in ESI Africa Edition 2, 2019. You can read the magazine's articles here or subscribe here to receive a print copy.

Two hypotheses are natural starting points to address the question around pockets of growth. Firstly, off-grid will be attractive where there is strong demand for electricity. If off-grid electricity responds to energy poverty, then it can be expected that countries with lower electrification rates will be fertile grounds for these technologies. A second explanation could be wealth. Demand might be strong in countries with scarce electricity, but these tend to be also very poor and perhaps cannot afford new technologies. Thus, perhaps wealthier countries could be first adopters of decentralised systems.

The figure below compares off-grid deployment to GDP per capita. What is striking is that off-grid seems to be most successful among middle-income countries. And this growth makes sense because wealthy countries generally have less of a need for off-grid power. While poor countries cannot afford it, it’s countries in the middle-range that both need and can invest in off-grid deployment.

These findings only start to scratch the surface of the problem, but they raise an important question: how can off-grid technology be deployed faster? International donors have limited resources. Knowing where conditions are the most ideal – or, conversely, where most public support is needed – is crucial to design good policies. Likewise, the renewable energy industry’s viability depends on finding good markets. Ultimately, off-grid technology is not deployed in a vacuum and successful cases will be emulated elsewhere.

West Africa: Nigerian case study

Green Village Electricity (GVE), a Nigeria-based renewable energy solutions provider, partnered with local and international organisations such as the Bank of Industry, Institute of Electrical Electronics Engineering, and the United States Africa Development Foundation to develop solar mini-grids for rural communities. GVE has a total installed capacity of 500kW solar mini-grids powering 5,200 households in nine rural communities across six states.

Success factors

• Community engagement: Projects are led by extensive community engagement to ensure full buy-in from all stakeholders, educate them on the benefits of the solution, and build a strong sense of ownership among locals. The company also hires maintenance officers locally, thus ensuring community involvement in the day-to-day running of the projects.

• OEM partnership: Partnership arrangements with original equipment manufacturers allows the solutions provider to source its installation materials at low prices.

• Tax breaks: The company benefits from a five-year tax holiday owing to its pioneer status.

• Corporate governance: From inception, the GVE team instituted good corporate governance structures aimed at increasing corporate accountability and mitigate the risk of corporate failure.

• Continuous learning and improvement: The company has a strong learning and improvement culture. Deliberate efforts are made to transfer lessons from past projects to future ones. For example, while the first Egbeke plant was completed in 72 weeks, other plants were subsequently completed within an average time of 4 to 6 weeks.

• Early stage funding: Low-cost long-term funding from development organisations and donor agencies enabled the company to make a reasonable profit during its formative years.

East Africa: Tanzanian case study

Tanzania has at least 109 mini-grids, with installed capacity of 157.7MW as of 2016; however, exact figures are not known because some small systems may not have registered. These schemes serve approximately 184,000 customers. The national power utility, Tanzania Electric Supply Company (TANESCO), buys some of the energy generated. Sixteen of the plants are connected to the national grid; while the remaining 93 operate as isolated mini-grids.

Mini-grid owners and operators in Tanzania include the national utility, private commercial entities, faith-based organisations, and communities. Fossil fuel mini-grids owned and run by TANESCO all operate on the utility model. The same nationwide tariffs that TANESCO charges its grid-connected customers apply to its mini-grid customers. Private entities usually sell power to TANESCO and to retail customers. Mini-grids developed by faith-based organisations have been successful operationally, but few are financially self-sufficient. Community models have had mixed success.

Operational structure

Community-based model: This operational model is being practised on 19 mini-grids, where the plants and networks are owned by the communities they serve. To ensure the success of the project and getting everyone involved, a village electricity committee is elected by consumers to be responsible for managing the network. The committee comprises a chairperson, secretary, and treasurer. The elected committee’s tenure runs for a period of three years.

Private business model: This operational model delivers the power generated to customers for a fee and is owned and operated with the intention of maximising profits (which can be distributed to owners/shareholders and/ or reinvested in the company).

Utility-based model: Tanzania’s national utility owns and runs 17 diesel mini-grids as well as two natural gas mini-grids.In addition, it owns, operates, and manages an 840kW hydro mini-grid. The power utility’s tariffs are uniform across the country and they apply to all retail consumers who purchase electricity from TANESCO whether through the main grid or its mini-grids.

Faith-based model: Faith-based mini-grids are owned by organisations such as churches, which usually subsidise their tariffs. Currently, there are at least 29 mini-grids using this model in Tanzania (all hydro). They provide electricity for themselves and sell the excess at highly subsidised prices (nearly free) to villagers. Plants and distribution networks are built using grants from donors. The maintenance of the plants is usually carried out by technicians from the organisation.

The recipe for successful deployment of distributed energy projects differs from region to region; however, due to enabling factors such as improved legislation coupled with campaigns created to get communities involved, the results are similar. Once all parties are on board, the chances of success are amplified. ESI

This article first appeared in ESI Africa Edition 2, 2019. You can read the magazine's articles here or subscribe here to receive a print copy.

References

• Power for All: Middle-Income Countries Big Winner from Off-Grid Energy. Who’s Next?

• The Nigerian Rural Electrification Agency - Impact Energy: Case Studies of Successful Off Grid Energy Businesses in Nigeria

• Accelerating Minigrid Deployment in Sub-Saharan Africa: Lessons from Tanzania

• IRENA: Renewable Capacity Statistics 2018