Investors Call for Results Based Financing of Minigrids in Africa

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Minigrids can help Africa achieve universal electrification, but not without better financing, said a group of energy investors in a paper released today.

Solarcentury

Photo courtesy of solar developer Solarcentury, which contributes to minigrids in Africa

With $2 billion under management and more than 100 minigrids built or in the works, the investors offered to match contributions from government or other donors. They called for funding in the form of results based financing, an approach that links financing to achievement of goals.

Definitions of minigrids vary, but they are generally viewed as complex or large microgrids with multiple customers.

A white paper released by the investors noted that rural electrification always has required subsidy. The US spent the equivalant of $18 billion in 2018 dollars on government subsidized loans for rural electrification during the Roosevelt administration, according to the paper.

Other more recent energy programs also show the effectiveness of incentives, the investors said. “In 2000, 1.3 GW of solar was operating globally, and solar PV panels cost $3 per watt. Less than 20 years later, we now have over 400 GW operating globally and modules cost less than $0.4 per watt.”

Minigrids are already often the least-cost option for off grid sites that have a relatively large cluster of people. The paper cited a finding from McKinsey that put the cost of a rural grid connection at $2,300 versus $1,000 for a minigrid serving 100 or more connections.

The investors issued the call for support at the opening of the Africa Energy Forum, a global investment meeting underway this week in Lisbon that focuses on Africa’s power, energy, infrastructure and industrial sectors.

The investors are: Acumen, Blue Haven Initiative, Ceniarth, CrossBoundary Energy Access, DOB Equity, ENGIE Powercorner, Hoegh Capital Partners, KawiSafi Ventures, Renewable Energy Performance Platform (REPP), responsAbility, SunFunder and Triodos Investment Management.

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Elisa Wood About Elisa Wood

Elisa Wood is the chief editor of MicrogridKnowledge.com. She has been writing about energy for more than two decades for top industry publications. Her work also has been picked up by CNN, the New York Times, Reuters, the Wall Street Journal Online and the Washington Post.

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