Report on the DFID funded Green Mini-Grids in Africa

In 2016, Energyaccess.org published an update on the GMGs Africa Programme, offering an overview of the approach, the partners and the progress to date over the first year of the initiative, write’s Steven Hunt, the Senior Energy Innovation Advisor, UK Department for International Development.

A year later, they wanted to deliver another update, to show how far the programme and the sector have come – but also to highlight some of the things which still need to happen if the potential of mini-grids to accelerate energy access is to be fully unlocked.

The Green Mini-Grids (GMGs) Africa programme aims to help transform the GMGs sector in Africa into a thriving industry on track to deliver IEA’s estimate that over 40% of universal access to electricity by 2030 will be most economically delivered by mini-grids. The intention is to achieve this by enabling a critical mass of experience and evidence of success in the two leading countries of Kenya and Tanzania, coupled with improved policy and market conditions for mini-grids regionally.

The UK is providing total support of £75m from the International Climate Fund from 2014-2019, of which £60m is intended to support project preparation and leverage private investment in Green Mini-Grids in Kenya and Tanzania. The remaining £15m is supporting a regional facility for market preparation, evidence and policy development, preparing for wider scale-up of Green Mini-Grids across Africa.  The DFID-supported GMGs Africa programme is intended to be fully integrated into the SEforALL Clean Energy Mini-Grids High-Impact Opportunity and forms the UK’s main contribution to its objectives.

2016 Highlights and Milestones

In Kenya, in partnership with Agence Française de Développement (AFD), a managing entity was procured for the support facility, which has now been active since the end of September. The implementation phase has started with discussion with private developers of 5 mini-grid pilot projects selected from the original Expressions of Interest submitted in 2015. The support envisaged is technical assistance and viability gap grant funding, possibly blended with credit lines from AFD through local banks. These first projects are expected to deliver about 37,000 electricity connections.  In addition, the Technical Assistance component of the Kenya programme addresses also the Government of Kenya’s need to develop a mini-grids regulatory framework.

Future Opportunities:

The GMGs Kenya management entity is expected to launch its first full open call for proposals for support in Q1 2017.

In Tanzania, in partnership with the Swedish International Development Agency (SIDA) and the Tanzanian Rural Energy Agency (REA), the first call for expressions of interest for the Tanzania Mini-Grids Results-Based Financing (RBF) Facility was launched by REA in September. This call has received over 90 completed applications from mini-grid developers to receive results-based incentives per mini-grid connection delivered and sustained. These incentives are offered based on the quality of service delivered, based on SEforALL Tiers of Energy Access, and effectively extends the rural electrification subsidy support offered to new grid extensions to the mini-grid sector for the first time.

Future Opportunities:

It is expected that the first group of firms will be selected for RBF support in Q1 2017, with a second RBF call expected to be released soon after. Another procurement is also underway for a Technical Assistance Facility for Project Development.

The GMGs Regional Facility at the African Development Bank implemented by the Sustainable Energy Fund for Africa (SEFA) approved requests for packages of technical, policy and regulatory support from the Government of Rwanda in January, and the Government of Niger in July, to develop their mini-grids sectors. These programmes are in procurement phases, alongside the earlier approved support to the Government of Mozambique. In the coming year, 2 or 3 more countries of the 20 that submitted expressions of interest in 2015 will have similar packages of support approved, with consideration expected to be given to the potential use of auctions in establishing mini-grids markets.

In addition, under the GMGs Market Development Programme (MDP) led by the SEforALL Africa Hub, a GMGs Helpdesk opened in October for mini-grid developers, a study on Mini-Grids Market Gaps was recently released, and other studies on Financing Flows and Needs, opportunity assessment methodologies and a first country market intelligence report for Mozambique will be released shortly. An Africa Mini-Grids Strategy Document is currently in preparation for submission to the next African Union Energy Ministers meeting in Q1 2017, while a second phase of the MDP is currently in a consultation phase.

The Energy Sector Management Assistance Programme (ESMAP) at the World Bank has used GMGs Africa support to seed a Global Mini-Grids Facility, which is part of the wider ESMAP 2015-2019 Business Plan, and has also attracted a further $2.1m of support from Denmark. Major milestones in the past year included the second annual Mini-Grids Action Learning and Exchange (ALE) event, held this time in Nairobi in May, which attracted more than 200 participants from 29 countries, including 19 countries in Africa. The event also stimulated a proposed $50m World Bank mini-grids component for electrification in the north of Kenya. A field visit to a mini-grid southwest of Nairobi owned by Vulcan and operated by SteamaCo (pictured left), also highlighted the opportunities and challenges of delivering commercial mini-grid power in rural areas. Early in the year ESMAP started technical and knowledge support to World Bank operations to “learn by doing at scale” for new and ongoing mini-grids project components in Kenya, Tanzania, Nigeria, Ghana, Liberia and Mali. The first substantial externally procured piece of support on mini-grids policy and regulatory issues was awarded in January, and the consultants are mobilizing for implementation.

Future Opportunities:

Looking forward, ESMAP plans to support substantial sector research on the state of the mini-grids sector in Africa, and a marketplace for technology innovation in the sector.

The above demonstrates significant progress within the GMGs Africa programme, recognised by an ‘A’ rating in this year’s Annual Review, but of course we would have wished for even quicker progress, and the different elements of the initiative have faced a range of practical and administrative challenges in getting the planned support onto the market as quickly and impactfully as possible. Similarly, while we have seen significant steps forward in the wider sector – with substantial investments by ENEL and Caterpillar in Powerhive and first-time engagement of infrastructure players with emerging containerised mini-grid solutions, such as InfraCo Africa with Redavia –  the pace and scale of mini-grid market expansion seems to have remained slower than hoped in 2016.

There remains a challenge in finding scalable models for rapid mini-grid deployment which blend public and private capital in an optimal way, while providing increased certainty for investors, with fairness and protection for consumers. We hope that the support of the GMGs Africa programme will be instrumental in the development and proving of these models, but recognise that one programme cannot deliver this alone. If you would be interested in reading my reflections on the wider elements of a potential scalable model for mini-grids deployment, you can see my discussion paper here. Any feedback and comment is very welcome on the blog itself, on Twitter @stevenahunt or on Mini-Grids HIO members’ Yammer Thread on this topic.

Looking Forward:

The coming year will be an exciting one for the GMGs Africa programme as funds will start flowing to mini-grids implementation in both Kenya and Tanzania, while technical support will come online with governments in Rwanda, Mozambique and Niger to help develop their sectors. Mini-grid firms will benefit from Helpdesk technical support from the African Development Bank, which will help them unlock some of the financing coming into play from the GCF, private equity and others.  The first research results will be coming out of World Bank mini-grid projects, as well as from the substantial Mini-Grids Policy and Regulatory Study, while the next Action Learning and Exchange Event in Africa is planned for Mozambique in May/June. We hope that these outputs will individually have significant impacts, but also collectively add up to a substantial contribution towards accelerating clean energy access in 2017.

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This article first appeared on EnergyAccess.org website: http://energyaccess.org/news/recent-news/green-mini-grids-africa-update-on-the-dfid-supported-programme/

Author contact: S-Hunt@dfid.gov.uk

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