How to Keep Africa’s Minigrids from Becoming a Bridge to Nowhere

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A push is on to bring electricity to the nearly one billion people who lack it worldwide. But if you build it will they come? Apparently not, as some minigrid developers are finding in Sub-Saharan Africa.

minigrids

By Serg64/Shutterstock.com

Electricity does little good for those who have nothing to plug in. And unfortunately that’s too often the case in remote areas with new minigrids — the name used for microgrids in Africa. As much as the villagers want to use the electricity, they have no means to do so.

As a result, well-meaning rural electrification programs sometimes build a bridge to nowhere, creating only half of what’s needed for economic development when they install minigrids. The other half requires what the Rocky Mountain Institute calls ‘demand stimulation’ — giving customers, especially businesses, reason to connect to the minigrid, along with access to equipment that uses power.

RMI found that without demand stimulation, electricity can become cost-prohibitive for Africans.

“We’d run into these minigrids and distribution systems that were up and functioning but had really low capacity utilization. And because of that, power costs were high at a unit level,” said Scarlett Santana, senior associate in RMI’s electricity practice and co-author of a new paper, Closing the Circuit: Stimulating End-Use Demand For Rural Electrification.

The tailspin fall

If enough villagers do not take power from the minigrid, the project can end up in a financial tailspin. Unable to spread minigrid costs over many buyers means a small pool of users shoulder the burden. If their electricity prices are too high, they eventually disconnect from the minigrid and the project becomes unsustainable.

For example, in Uganda a minigrid meant for 350 customers drew only 60 who were left paying $2/kWh for power. Large customers disconnected “causing a downward spiral in demand and damaging the cost recovery of the system,” says the RMI paper.

No Walmart

Unfortunately, demand stimulation gets little attention in rural electrification planning — a situation that RMI hopes to change. Almost half of the nearly $4 billion the World Bank invested in energy access went into building power supply from 2000-2008, and only 0.7 percent into supporting its productive use. Today, there is 50 times more financing available in Africa to generate electricity than for promoting its consumption, according to the paper.

So what will it take to stimulate electric demand in small African villages? For North Americans or Europeans who have lived with electricity for more than a century, some of RMI’s findings may be a surprise.

For one, not all villagers understand the economic value of electricity for their homes and businesses. And even if they do, it may not be easy for them to secure appliances — there is no Best Buy or Walmart down the street.

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It is easy to find a light bulb, it’s easy to find a fan, it’s probably easy to find a television. But getting an energy efficient refrigerator may be really hard in a rural community — or a productive piece of equipment, like a grain mill,” said Sachi Graber, senior associate with RMI’s Sustainable Energy for Economic Development (SEED) program.

A different take on efficiency

Demand stimulation runs counter to the energy efficiency zeitgeist in developed countries, one which pushes for reduction in electricity use. The picture is different in Sub-Saharan Africa where lack of electricity creates inefficient economies.

“It’s about providing access to people who do not have electricity and figuring out how to do that in a smart way. A smart way is using energy efficient technology that would allow for lower cost systems and a lower cost total bill for the consumer,” said Santana.

Graber added, “You can’t make efficient the consumption that doesn’t exist.”

She also noted that stimulating electricity demand in a village does not typically mean building a bigger minigrid. This is because most of the minigrids use solar which peaks during the day, coinciding with the work periods in agriculture communities.

Low income, high costs

Like most economies, Sub-Saharan Africa’s market responds to pricing and financing. However, these factors may be even more crucial in Africa, given the large gap between family income and product costs.

Innovative payment methods — such as time-of-use pricing — can help villagers with the sometimes exorbitant electricity rates in Africa, according to the paper. For example, the paper notes that electricity runs as high as 53 cents/kWh in Nigeria. (By comparison in the US, where households have four times the disposal income as Nigerians, the average rate is 10.4 cents/kWh.)

Sub-Saharan villagers also need access to financing for equipment and appliances. A small irrigation pump with a borehole may cost tens of thousands of dollars, approaching 300 percent of the average farmer’s income.

Demand stimulation isn’t really a new idea. And in fact, it’s no stranger to North Americans who remember the early history of their rural electrification. The report points out that the US boosted rural electrification from 10 percent in the 1930s to 96 percent in 1956, partly by  encouraging electric use. This was done with low-interest government loans to access the grid and financing for refrigerators, milking machines and other appliances.

Impact of End-Use Stimulation on Levelized Costs: RMI
RMI

Copyright 2018, Rocky Mountain Institute. From Closing the Circuit

Planning minigrids: supply plus demand

For minigrid developers and government policymakers in Africa, demand stimulation will add a new dimension to their effort, requiring they more carefully calculate potential demand and cultivate its growth through financing and appliance programs. The good news? Some are already beginning to take it on.

“We’ve seen recently a handful of developers in Africa who are starting to question whether they are seeing the expected amount of demand after they install a system and starting to dig into what sorts of solutions they can access,” said Graber.

Still, RMI sees a lot of work ahead in building the other side of the bridge. Read more in RMI’s report Closing the Circuit: Stimulating End-Use Demand For Rural Electrification, now featured in the Microgrid Knowledge white paper library.

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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.

Comments

  1. This is a reality check.
    The first question raised by many currently energy-deprived clients, when offered a small microgrid Solar PV system is; ” where do we plug in the TV and then… the fridge and perhaps a cooking appliance” – nor understanding that a small 6v DC or 12v DC system is typically not capable of providing sufficient energy to service these expectations.

    Micros systems running at 24v DC could achieve these objectives, if the DC -compliant appliances are available (at a fair and reasonable cost).

    Building on available DC appliances that were developed for the Recreational markets in USA and elsewhere leads the way and a local manufacturer in South Africa has partnered with a fridge maker to supply systems with 11v and 24v DC compressors that are compliant with their DC microgrid systems.

    Fitting an inverter to supply 220v AV is not a solution generally, because that would require expensive and technically challenging house wiring systems in an environment where no competence or house-wiring exists.

  2. Our experience at Solar Light for Africa, has always been to provide the end-use product, and not focus on the solar mini-grid or electricity supply only. What we provide is “Light” so that the demand and the supply are provided as a “systems” based product. We also provide “Cell Phone Charging” and small “Radio or TV” viewing. For our larger scale projects, we may provide “pure water” from a solar pumped, filtered and irradiated supply, or we may provide satellite learning systems from a solar powered satellite link and video system. To me this seems self evident that you would provide the service of the device (demand) and then devise the solar powered mini-grid to supply the required electricity, and not simply run electrical wires into a community and assume that the energy would be used. We have been doing this in sub-Saharan Africa for more than 20 years and it works.

    • Alan Cochran says:

      Do the communities you supply these services to pay for them? And if so, does Solar Light for Africa make a profit?

  3. Lawrence Bentley says:

    Efficiency promotes adoption and energy services demand. Does anyone in the industry believe that with old incandescent lights solar home systems would have the current adoption rates? No, because the needed amount of solar panels to power them raises the entire system cost out of wide affordability. While cooking is most likely going to be the bridge too far, there is hope that efficient, affordable (non-environmentally threatening) refrigeration could be the key here. Studies worldwide show there is a large demand for refrigeration services. Solving that problem means improving incomes and health of users, by reducing food waste, and marketability of higher value dairy products and crops, as well as boosting heath and therefore educational outcomes of children. Those benefits provide value to prospective purchasers, similar to what we have seen with LED lights and solar home systems. With declining solar PV cost and improving energy storage technologies and costs, efficient refrigeration is an obvious target to improve energy services demand. Don’t sell kWHr’s sell benefits, can mini-grid operators make that viewpoint shift?

  4. I think that Alden Hathaway’s approach is far better than that of building a grid first. An aid to interconnecting a few household solar-battery systems is the DC Transformer. Invented a few years ago, it is now in open source world wide development. The concept is simple, and designs are available for local construction. A grid that is gradually developed from household size systems, can pay for itself at every stage.

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  1. […] How to Keep Africa’s Minigrids from Becoming a Bridge to Nowhere, by Elisa Wood  in Microgrid Knowledge January 21, 2019  […]

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